text:
    LUCAS H. WEETJEN and others, Respondents, v. THE ST. PAUL AND PACIFIC RAILROAD COMPANY and others, Appellants.

      Railroad bonds—right of bondholders to maintain an action to prevent diversion of property covered by a mortgage given to secure them — bona fide purchasers.

    This action was brought by the holders of certain railroad bonds, secured by a mortgage—which provided that all property subsequently acquired by the company should become part of the property covered thereby — to restrain the fraudulent diversion of certain iron rails (subsequently acquired by the company), under a resolution of the board of directors authorizing one of the trustees of the mortgage to sell, pledge or dispose of the same, for the purpose of raising money to meet past and future estimates for the construction account of the extension of the road. Held, that the plaintiffs were entitled to maintain the action, and that a temporary injunction was properly granted therein.
    Fart of the iron had, before the commencement of this action, been pledged with firms, of which the said trustee was a member, to secure advances made thereon to the road. Held, that the knowledge of the trustees was the knowledge of the firms, and that they could not claim to hold the iron as bona fide purchasers without notice.
    The secretary of the navy is authorized under the act of congress (14 U. S. Stat. at Large, 64, § 1), to appoint a firm in London to act as his agent in paying drafts drawn by naval officers, and he may, when necessary, exact and receive all such securities as he can obtain to protect his department against loss by reason of the apprehended insolvency of such firm.
    Appeal from orders made at the Special Term, continuing injunction orders during the pendency of the action.

      Thomas H. Hubbard, for the defendants Moorhead and others.
    Bondholders must seek their remedies through the trustees who represent them. (Coal Co. v. Blatchford, 11 Wallace, 172, 177.) The First Division Company had the right to hold and use, for the construction of the extension roads, all the property leased to it by the St. Paul Company (which included all the mortgaged property), and all the proceeds of the $15,000,000 issue of bonds, until there should be a default in paying either the principal or interest of said bonds. It also had the right, under the mortgage, to sell equipment, machinery and implements covered by the mortgage, but unlit or unnecessary for .use. By.-the laws of Minnesota, a mortgage of real estate is a mere security for and an incident to the debt; the mortgagee has no conveyable interest in the mortgaged premises until foreclosure sale, or, at least, until entry after condition broken. (Hill v. Edwards, 11 Minn., 22, 29; Greve v. Coffin, 14 id., 345, 353; Everest v. Ferris, 16 id., 26.) The Supreme Court of the United States has held that, when such is the rule of the State courts, a mortgage given by a railroad company to secure its bonds only confers upon the mortgagee or the bondholders a right to proceed against the mortgaged property upon a given contingency, but that, meantime, the mortgaged property belongs entirely to the company. (The Cleveland and Ashtabula Railroad Company v. Commonwealth of Penn., Int. Rev. Rec. of Jan. 31st, 1874, 37, 38; see, also, Pierce v. Emery, 32 N. H., 484, 514.) If the mortgage, so far as it relates to the iron, is treated as a chattel mortgage, the plaintiffs’ position would be no stronger. At best, they would then be mortgagees of chattels in possession of the mortgagor, before default, and under a mortgage reserving to the mortgagor a power of sale. (Gates v. Smith, 2 Minn., 31, 32; Chopard v. Bayard, 4 id., 533, 540, 541.)

      Samuel Boardman, for the defendants Woodruff and Robinson.

      Edmund H. Smith and George Bliss, for the defendant Cutter.
    The agents of - the government acted in good faith, and without knowledge of any alleged lien or conflicting claim upon the iron. The indicia of title, the warehouse receipts, were negotiable, and contained nothing to give the agents of the government ground for suspicion or knowledge of any irregularities in their transfer. (Laws N. Y., 1830, ch. 179, § 3; Laws N. Y., 1858, ch. 326, § 6; Rawls v. Deshler, 3 Keyes, 572 ; Dows v. Green, 24 N. Y., 638; Western Trans. Co. v. Marshall, 6 Abb. [N. S.], 280.) The deposit of public money with Jay Cooke, McCulloch & Co., to secure the safety of which the secretary obtained title to the iron, was unquestionably within the official power and duty of the executive officer of the government, and expressly provided for by the following statutes, viz.: Section 1, act of 14th June, 1866 (14 Stat. at Large, 64); section 3620, Revised Statutes United States; section 1, act of 31st January, 1823 (3 Stat. at Large, 723); section 3648, Revised Statutes United States. The secretary of the navy has supervision of and control over the disposition of the public moneys appropriated to the use of the navy department. (2 Stat. at Large, 535; 3 id., 567, 689.) The moneys being, therefore, legally deposited by the secretary for the use and advantage of the government, and being in no sense a loan to or deposit for the use or advantage of the firm of Jay Cooke, McCulloch & Co., it was undoubtedly the duty of the secretary to take all means possible to ensure its safety. (United States v. Tingey, 4 Pet., 128; see, also, Dugan v. United States, 3 Wheat., 172; United States v. Bradley, 10 Pet., 359; United States v. Linn, 15 id., 290; Dixon v. United States, 1 Brock., 177; United States v. Maurice, 2 id., 96; United States v. Admrs. of Lane, 3 McLean, 365 ; Neilson v. Lagon, 12 How. [U. S.], 98; United States v. Mynderse, 11 Blatch., 1; United States v. Hodson, 10 Wall., 395.) The title to the iron having been properly acquired by the secretary of the navy, the court cannot interfere with or restrain his disposition of it, as is indirectly, but no less practically, sought to be done by the injunction in this case. The court will not do indirectly what it cannot do directly. (State of Mississippi v. Johnson, 4 Wall., 475; McIntyre v. Wood, 7 Cranch, 504; Murbury v. Madison, 1 id., 137; McClung v. Sullivan, 2 Wheat., 369 ; Kendall v. United States, 12 Pet., 524; Decatur v. Paulding, 14 id., 497; Comr. of Patents v. Whiteley, 4 Wall., 532; and see 13 Pet., 608.) The duties of heads of departments, of whom the secretary of the treasury is one, are mainly judicial and discretionary, rather than ministerial. (Decatur
      v. Paulding, supra; Brasher v. Mason, 6 How. [U. S.], 101.)No State court has power to issue the writ of mandamus, and, by parity of reasoning, the writ of injunction, against an officer of the United States for any purpose whatever. His conduct can only be controlled by the power that created him; and because congress has not seen fit to confer the power to issue the writ upon the federal courts, it cannot be considered a reserved power of the States. (McClury v. Silliman, 6 Wheat., 518; Kendall v. United States, 12 Pet., 617; 13 id., 608; Territory v. Lockwood, 3 Wall., 239; Ladd v. Tudor, 3 Wood. & M., 332.)

      Evarts, Southmayd & Choate, for the plaintiffs.
   Daniels, J.:

This action has been brought by the owners of mortgage bonds, issued by a corporation known as the First Division of the St. Paul and Pacific Railroad Company, secured by a mortgage executed to three trustees by another corporation called The St. Paul and Pacific Railroad Company, to prevent the improper diversion and misappropriation of property asserted to have become subject to the mortgage. This property consisted of iron rails suitable for constructing the track of the railroad, and purchased and received for that purpose. That was sufficient between the company and the bondholders to render it subject to the mortgage executed for their security; for it was provided in the mortgage, that “ any and all rolling stock, equipment and materials whatsoever, which, pursuant ” to a lease executed by the St. Paul and Pacific Railroad Company to the other company, “or otherwise, shall or may be acquired or furnished for the use of the said railroads, or either of them, by the said First Division of the St. Paul and Pacific Railroad Company, shall, by the mere acquisition thereof for such use, become and be part and parcel of the property hereinbefore granted, and become and be subject in all respects to the lien and operation thereof) in the same manner and with the same effect as if such property had been acquired by the said party of the first part [which was the St. Paul and Pacific Railroad Company], for such use; ” and it gave them a clear equitable right to have these rails devoted to the purpose for which they had been purchased by the First Division Railroad Company, which would have materially enhanced the value of their security as bondholders. This iron was not applied to that object, but, under a resolution adopted by the board of directors of the company whose duty it was to appropriate it solely, to that end, William Gr. Moorhead, who seems to have been the acting man of the three trustees to whom the mortgage for the benefit and security of the bondholders was given, and who was also the construction agent of the company, was authorized to pledge, hypothecate, sell or dispose of the iron rails of the company, then in Eew York or elsewhere, or afterward to arrive, for such sums and on such terms, as were in his judgment best for the interest of the company, for the purpose of raising the money necessary to meet past and future estimates for construction account of the extensions of the railroads, and for duties, freights and advances on the same account; and Moorhead, under and pursuant to that authority, disposed of the railroad iron in controversy in the present action. This was in plain violation of the terms of the mortgage, and how far it might be excused by the urgent financial necessities of the company, when done in entire good faith, it is not necessary at the present time to inquire, for, although it is claimed in the defendants’ pleadings and affidavits, that an emergency of that nature existed, the facts are not sufficiently before the court to justify a determination on that subject in their favor. To warrant such a diversion of the property solemnly appropriated to the construction of the road, and the increase of the security of those persons who advanced'their money to build it, would certainly require the establishment of an urgent and clear necessity that could be financially provided for in no other way; and its existence has not been yet maintained by the papérs produced on the part of the defendants. The utmost good faith is required in transactions of this nature, and that can only be made to appear by a minute exhibition of all the facts and circumstances of the case, as distinguished from the general statement relied upon in support of what must be considered, under ordinary circumstances, a misappropriation of the company’s property. As these iron rails were acquired after the mortgage was made and delivered, they became a part of the security only in equity against persons buying them with notice of the facts, or without parting with value for them. To that extent the bondholders had an equitable right that they should be used only for the purpose for which they had been bought, and that was to construct the railroad track with them. That was not done; but, by the confederation and collusion of the company and the acting trustee, whose duty it certainly was to protect the security he had taken for the bondholders to the utmost of his ability, the rails were disposed of to other persons, and large amounts of money raised from their sale and hypothecation. If the company could not have raised the money to meet its pressing wants in any other way, no convincing reason exists for believing that the very large amounts obtained on the iron were needed for that purpose, and the resolution of the directors imposed no such restraint on the power given Moorhead to pledge, sell or dispose of it. He was not merely authorized to sell such as might prove absolutely necessary to meet the company’s financial wants, but he was empowered to go much further than that, and, without restraint, sell all the iron rails of the company in Hew York or elsewhere, including those afterward to arrive. The sales were chiefly made to the firms of Vibbard, Foote & Co., Jay Cooke & Co. and Jay Cooke, McCulloch & Co., and they were all made under the agency, management and authority of Moorhead, acting at the time in the double, and, perhaps, not quite consistent, capacities of construction agent for the company and trustee of the bondholders. As one of the trustees named in the mortgage given to secure the bonds, he was chargeable with, and undoubtedly had complete knowledge of, the provision, already mentioned, which was contained in it, and he consequently knew that it was the right of the bondholders to have the iron used for the sole purpose of constructing the railroad; and the facts warrant the conclusion that he must have understood that to be the case when he made the disposition which he did of the iron now in suit; and having that knowledge and understanding, it invalidated the sales made to Jay Cooke & Co., and to Jay Cooke, McCulloch & Co., because he was a member of both those firms. - The fact that he did not directly participate in the active management of the business of those firms, can make no difference in the case. He was one of the partners, and for that reason actual notice to him was constructive notice to his associates. It was his duty to communicate what he knew on these subjects to them, and if he did not, they, and not innocent third persons, must sustain the consequences resulting from the want of it. (Lindley on Partnership [3d ed.], 304, 305.) They, having such notice, acquired the rails subject to the bondholders’ equity to have them applied to the purpose for which they had been originally bought, and that was the construction of the track of the railroad. Those sold to Yibbard Foote & Co., were also subjected to the same equity, for it appeared while they took the nominal title to them, Jay Cooke & Co. actually advanced the money for them, and in the end, all that remained unsold were, by an actual transfer, turned over to the firm of Jay Cooke, McCulloch & Co. But even if the purchase by Yibbard, Foote & Go. could be, and should be, sustained, ás 'having been made in good faith and for a valuable consideration advanced, that right was lost by the sale to Jay Cooke, McCulloch & Co., because Moorhead was a partner in that firm, and his knowledge of the plaintiffs’ equity, which would be defeated only by a bona fide sale of the iron, prevented himself and the firm of which he was a member from succeeding to any bona fide title Yibbard, Foote & Co. might have innocently acquired by advancing their money for it, if they had done so in good faith, and in ignorance of that equity, for the wrongdoer is not allowed to profit by the acquisition of another bona fide title, when that has been created by his own misconduct' or breach of trust. (1 Story’s Eq.. Jur. [11th ed.], § 410; Kennedy v. Daly, 1 Schoales & Lefroy, 555, 379.) Consequently, when Jay Cooke, McCulloch & Co. received the iron Yibbard, Foote & Co. had on hand, unsold, their title to it was no better than it was to that which had been directly transferred to them by Moorhead, and also to the firm of Jay Cooke & Co. In their hands it was subject to the plaintiffs’ equity to have it applied to the construction of the railroad, requiring that it should be devoted to the construction of the road; and whether their advances wholly or partially can be properly reimbursed out of its value, must depend upon circumstances, if they exist, not now fully before the court. For the present purposes of the litigation, it must be concluded, from the knowledge Moorhead must have had, that both the firms of Jay Cooke & Co. and Jay Cooke, McCulloch & Co., held the iron in their hands subject to the equitable rights of the bondholders under the mortgage.

A portion of the iron, amounting to 1,647 tons, was transferred by Jay Cooke, McCulloch & Co. to the secretary of the navy of the United States, to secure a balance in their hands to his credit. They were the agents at London, through whom drafts were paid, which were properly drawn by naval officers in the service of the United States, in different portions of the world. There was nothing improper in the establishment of this agency. It had been maintained for many years, and was required for the convenient disbursement of funds to be used to meet the expenses of the distant operations of the naval department of the United States government; and it was clearly authorized by the provision made by an act of congress, which declared that: “ In places where there is no treasurer or assistant treasurer, the secretary of the treasury may, when he deems it essential to the public interest, specially authorize in writing the deposit of such public money in any other public depository, or in writing authorize the same to be kept in any other manner, and under such rules and regulations as he may deem most safe and effectual to facilitate the payments to public creditors.” (14 U. S. Statutes at Large, 64, § 1.) That seems to have 'been broad enough to sanction the disbursement of public moneys for the distant uses of the navy through such an agency, as appears by the affidavits produced, to have been maintained at London with the firm of Jay Cooke, McCulloch & Co. And it was not shown to have been established without the sanction or authority of the secretary of the treasury. But whether it did or not, after the public moneys had found their way for legitimate public purposes into their hands, it was entirely lawful and proper for the secretary of the navy to exact and receive all such securities as he could obtain, to protect his department against loss by reason of their apprehended insolvency. And that authorized him to receive a transfer of the 1,647 tons of the iron, and to hold it for.his reimbursement, so far as the firm had any interest in it, if any such they, may hereafter appear to have, which may prove to be paramount to the present claims of the bondholders. At the time when this transfer "was made, the money was in the hands of Jay Cooke, McCulloch & Co. on deposit. ■ It was a mere debt, therefore, due on call; and in the condition of the affairs of this firm at that time, there seems to have been nothing which the secretary of the navy or any agencies he might employ, could do, which would have resulted in the recovery of the money. He, therefore, relinquished nothing for the transfer he received of the iron. But it was taken as a mere security for a precedent debt, which gave him the same and no better title to it, than that which Jay Cooke, McCulloch & Co. then had themselves; and that, because of Moorhead’s knowledge, was subject to the plaintiffs’ equity. The other transfer made of the 4,446 tons of the iron, was for a consideration of £100,000 sterling' advanced at the time.' This was placed in their hands for the same purposes as the preceding deposits, and for that reason it was lawful in its character, although plainly injudicious, because of the financial embarrassments in which the firm of Jay Cooke, McCulloch & Co. were at the time involved. But as it was lawfully made, the secretary had the undoubted right to take a transfer of this iron as its security. And that was evidently done in good' faith, believing that Jay Cooke, McCulloch & Co. had a complete title, and a perfect right to transfer the iron. That, at the time of it, was a valid transaction, for it was without notice of the plaintiffs’ equity; and if it had been clearly made to appear that the security and debt still remained the same, the injunction should be modified so far as to allow a sale to be made of so much as would be required for the payment of the advance then made. But it was not; and as the deposit was made to meet drafts drawn on the naval department, and payable through its agency in London, the advance may have been greatly reduced, or entirely disbursed, and the right to hold this iron correspondingly diminished, or wholly extinguished. For that reason it is uncertain what interest the secretary of the navy may still retain in this iron. That can be properly ascertained upon a hearing of the cause; and the injunction should not be modified so as to permit a sale by him, until the interest he still has in it, has been legally established. The iron is now within the lawful jurisdiction, and subject to the equitable authority of this court, and that should be maintained for the purpose of securing all the equitable rights which the plaintiffs and those represented by them may be entitled to in it. The secretary himself is not subject to the jurisdiction or. authority of the court, but this iron is found in the hands of other persons who are, and who assert his interest in it for their own protection, in attempting to withhold it from the plaintiffs’ claim to it. Having jurisdiction over them, and over the property in their hands, no good reason appears why they should not be restrained from parting with it, until it can be ascertained who may be able to establish the paramount right to it. Presumptively, that is now in the plaintiffs, and that can only be overcome by proof that the advance which was made on the faith of it has not been paid, or that further advances made in good faith on its security are still outstanding. So far as this, as well as the preceding iron may be involved in the present controversy, and the unpaid balances due for iron otherwise sold, the present injunction must be maintained; the ends of justice cannot, certainly, be secured without it. But as to so much iron as was transferred to the Hew York Guaranty and Indemnity Company, the case is clearly different, for the answer and the affidavits produced in its behalf show a very plain case in its favor. . That company advanced its money in good faith, on complete evidence of Moorhead’s right to dispose of it as he did, and without either actual or constructive notice of the equity existing in the plaintiffs’ favor, and it, therefore, has a clear right to sell the iron pledged to it, for its own reimbursements, as its debt was shown to be overdue. But if any balance should remain, beyond what may be required for that purpose and the payment of interest and necessary expenses, that must be still retained subject to the injunction, until the rights of the other parties to it have been ascertained by means of a trial. That balance, whatever the amount of it may prove to be, was one of the items finally transferred to the secretary of the navy, and his right to receive it is subject to his ability, or that of those who are before the court representing his interests, to show that the moneys advanced on the faith and security of it, still continue to be unpaid.

Ho doubt can be entertained as to the plaintiffs’ right to maintain' this action on their own account and for the protection of the interests of others similarly situated. If they could not do so, their rights and interests would be wholly without protection, for the directors of the company directed the disposition which was made of the iron in violation of the plain terms of the mortgage, and it may, under the circumstances shown by the affidavits, be inferred that the other trustees acquiesced in the acts of, Moorhead, to whom the active management of the business appears to have been intrusted by them. They certainly were not shown to have dissented in any way, or to have disapproved of what he did, and it was not even claimed that they were opposed to the disposition he attempted to make of the property. It was highly probable that all were concerned in the execution of the same purpose, and intrusted it to his management to effect it; and when that is the case, the parties ultimately interested are entitled to institute proceedings in their own names for their own protection. (Watson v. Sutherland, 5 Wall., 74; Memphis City v. Dean, 8 id., 65, 73; Bate v. Graham, 1 Kern., 237; Gray v. New York and Virginia Steamship Co., 10 S. C., 383; Angeli & Ames on Corp. [4th ed.], §§ 391-393.)

The orders should be modified to the extent before suggested, with ten dollars costs, besides disbursements, to the Mew York Guaranty and Indemnity Company, and affirmed in all other respects, with ten dollars costs, besides disbursements, to the plaintiffs against the other defendants, but with leave to the defendant Cutter to renew the motion to vacate the injunction, so far as it restrained the sale of the iron, transferred to secure the advance of the £100,000 sterling, in case that or any considerable portion of the same can be shown to be still unpaid.

Davis, P. J., and Brady, J., concurred.

Ordered accordingly


source: Caselaw Access Project

author: Daniels, J.:

license: Public Domain

text:
    JOHN WIGGINS, Plaintiff in Error, v. THE PEOPLE OF THE STATE OF NEW YORK, Defendants in Error.

      Grand la/rceny — evidence of— statements made by third persons —fictitious persons—hoto shown to be — hearsay.

    On the trial of an indictment for grand larceny, alleged to have been committed by means of a trick, by which the owners of the stolen property were induced to send it to fictitious persons, in consequence of which the prisoner feloniously acquired possession of it, the statements of persons of whom a witness for the prosecution inquired as to the existence of the persons to whom such property was directed to be sent, are hearsay, and not proper evidence against the prisoner.
    Writ of error to the Court of General Sessions of the county of New York.
    .The plaintiff in error was indicted in the Court of General Sessions of New York city, for grand larceny, in October, 1874, was tried, before the city judge and a jury on the 13th of November, 1874, and was convicted and sentenced to the State prison for the term of five years.
    On or about the 6th of October, 1874, Mr. Edmund D. Bradshaw, a commission merchant and resident of Alton, Wayne county, in this State, received through the mail, in regular order, a' letter purporting to have been sent by the firm of “A. A. Greeley & Co.,” of Middletown, Connecticut, which letter requested and directed Mr. Bradshaw to forward to the firm of “ Peter Y. Clark & Co.,” of New London, Connecticut, from 600 to 1,000 pounds of butter, at a price not to exceed thirty-eight cents per pound, and to draw immediately upon “A. A. Greeley & Co.,” at sight, for the amount shipped. In obedience to. the order, and in compliance therewith, Mr. Bradshaw did ship to the firm of Peter Y. Clark & Co., New London, Connecticut, about the sixth of October, fifteen tubs and one. firkin, containing in all over 800 pounds. The butter was at once returned from New London to the city of New York, and then went into the prisoner’s possession. It was claimed by the prosecution that the prisoner had previously obtained the butter by applying for its purchase in the name of Peter Y. Clark & Co., and certain evidence was given on the trial of conversations had with a witness for the prosecution, tending to show that the firm named as purchaser of the property, and the drawee of the draft were fictitious.

      John O. Mott, for the plaintiff in error.
    The court erred in admitting the evidence of the witness Bradshaw. This evidence was mere hearsay, and was clearly inadmissible. (1 Greenl. Ev. [12th ed.], 114, § 99; 1 Phil. Ev. [4th Am. ed.], 169; Roscoe’s Crim. Ev. [6th Am. ed.], 22; Jackson ex dem. The People v. Etz, 5 Cow., 319, 320; Woodward v. Raine, 15 Johns., 493; see 1 Phil. Ev. [4th Am. ed.], 211, § 2.)

      Benj. K. Phelps, district attorney, for the people.
    The evidence was not secondary. (1 Phil. Ev. [Edw. ed.], 469, note 163; 1 Chitty Crim. Law, 567, and cases cited; Ainsworth v. Greenlee, 1 Hawks, 190; Governor v. Roberts, 2 id., 26; Executors of Schoenberger v. Hackman, 37 Penn., 87; Liebman v. Porkey, 1 Starkie, 167.) The object was not to prove the truth of the fact by this hearsay evidence, but of the fact that he made the inquiries or search, and, in such cases, it is never necessary to call the persons of whom the inquiries were made. (Key v. Shaw, 8 Bing., 320; Morgan v. Morgan, 9 id., 359 ; Bartlett v. Decreel, 4 Gray, 111; Shott v. Streatfield 1 Moody & Rob., 8; Whitehead v. Scott, id., 2; Phelps v. Foot, 1 Conn., 387; Foulks v. Sellway, 3 Esp., 236; Jones v. Perry, 2 id., 482.)
   Daniels, J.:

The prisoner was indicted, tried and convicted of the crime of grand larceny. It was committed by means of a trick or device, by which the owner of the property was induced to send it by express and steamer, from Alton, in Wayne county, to New London, in Connecticut, addressed to Peter Y. Clark & Go., and to draw a sight draft for the amount of the price on A. A. Greeley & Go., at Middletown, in the same State. The butter which was the property sent forward, soon afterward reached New London, from whence it was immediately returned to New York, where it went into the possession of the prisoner. It was the theory of the prosecution, that he procured the property by feloniously applying for its purchase in the name of Peter Y. Clark & Co., to be paid for by a sight draft on A. A. Greeley & Co., when there were no such firms as those names imported the existence of, but the names were made use of, simply for the purpose of deceiving the seller. The prosecution, to make out the people’s case, undertook to prove, as it was important it should, that the firms named as purchasers of the property and drawee of the draft, were fictitious. To prove that, Bradshaw, the complaining witness, was subjected to an extended examination. He sent the property forward to New London, early in October, 1874, and the trial was had on the thirteenth of November following. The day preceding the trial he went to Middletown and New London, and from various inquiries then made by him, ascertained that neither of these firms existed, either at that time, or when the butter was ordered of him; and the prosecution proposed and was allowed to prove these facts, by showing the inquiries which had been made, and the information received by means of them. The important circumstance to be shown in the case was, that these firms did not exist at the time when the property was ordered and sent forward, and for the purpose of establishing it, the witness was allowed to state the inquiries made by him, and the answers secured, both as to the day preceding the trial, and the time when the butter was ordered. The prisoner’s counsel objected to the questions propounded to the witness in order to elicit this proof, and a number of exceptions were taken to the rulings made upon them by the court. He finally asked the court to allow him to renew the objections previously made to the conversations between the witness and the persons he conversed with in Connecticut. The court in response stated that he should be considered as objecting and excepting to everything, and with that announcement the witness proceeded with his relation of what had transpired. In the course of it he was asked whether he limited the inquiries made at Middletown to the time of the butter transaction, and answered, that he asked if there was or had been such a firm. ' He was also asked for the result, and stated it to be, that there was no' such firm, and had not been, as A. A. Greeley & Co., at Middletown. It is unnecessary to discuss the proposition, whether an exception taken in this manner will present the point of the admissibility of the evidence given, though it probably would under the circumstances which existed when it was made. For the same point was specifically raised upon the proof which was offered and received concerning the inquiries made in New London. The witness mentioned several persons of whom he had there inquired concerning the existence of the firm of Peter Y. Clark & Co., and stated that they all gave him but one answer, which was, that there was no such firm there, and never had been, as Peter Y. Clark & Co. The court then remarked that this was admissible, and the prisoner’s counsel excepted to the decision. The question is therefore presented, whether the answers given to the questions propounded near the middle of November, could be lawfully and properly received as competent evidence to prove that either one or both of these firms did -not exist in the early part of the preceding October. The facts to be proven were that neither did exist at that time, and all the information the witness endeavored to obtain, and the statements he repeated in the evidence given by him, were in support of that conclusion. And the evidence given by the witness as proof of these facts, was not his own observations or knowledge, but simply the unsworn statements and reports of other persons, who were not before the court, and could not be examined or cross-examined to determine the accuracy of what they had related. To allow evidence of that description as proof of material facts required to be established to sustain a criminal prosecution, would be extremely unjust and dangerous to the accused. It would subject him to a trial by witnesses not confronted by him, permitted to give their evidence without even the semblance of an oath or affirmation. The important inquiry in the case was, whether what the persons stated to Bradshaw was true; not whether he truthfully repeated what they had said to him. If it was, then the fact was as the prosecution claimed it to be, and the substantial means for its determination consisted of unsworn statements made in answer to his questions. It was a trial of the accused upon what the law denominates hearsay evidence, which, though admissible for certain exceptional purposes, in controversies affecting certain notorious public interests, and in some other cases, has always been rejected as proof of material and particular facts capable of being proved by the positive evidence of persons having actual knowledge on the subject. (1 Greenl. on Ev. [12th ed.], § 99 ; Queen v. Hepburn, 7 Cranch, 290, 295; Roscoe on Crim. Ev. [6th ed.], 268; Jackson v. Etz, 5 Cowen, 314, 319, 320.)

Cases have been referred to in support of the ruling made at the trial, as at least countenancing the course there adopted. But a brief reference- to them will render it entirely manifest that they do no such thing. In Foulke v. Sellway (3 Esp., 236), the reports allowed to be shown concerned the plaintiff’s character, which the law uniformly permits to be proved substantially in that way. This forms a well established exception to the general rule. In Jones v. Perry (2 id., 482), the truth of the rumors that the dog was mad was not important. It was the fact of their existence which alone was material; and where that is the case they maybe proved like any other circumstance involved in controversy. They influenced the conduct of the party, and whether true or false the effect upon him would be the same, while in the present case the truth of the reports, and not their mere existence, was the important thing to be shown. Morgan v. Morgan (9 Bing., 359), is a case included in the same principle, and so is Bartlett v. Decreet (4 Gray, 111). The inquiry was, whether the statements in the one case, and the repute in the others, existed; not whether they were true or untrue. Neither of these authorities lends the least support to the ruling by which the evidence referred to was received in the present case, and in view of the clearly defined and well established rule on this subject, by which hearsay evidence, as proof of facts which can be otherwise readily established, is commonly rejected, there is not the least probability that' any well considered case sustaining it can be found. The accused may very well be, and probably is, guilty of obtaining the property mentioned in the indictment, by criminal means. But, even if that be the case, he can only be lawfully convicted of the offense by legal evidence. That was not done' in this case, and the judgment should therefore be reversed and a new trial ordered.

Davis, P. J., and Brady, J., concurred.

Judgment reversed, and new trial ordered.


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    GEORGE MOORE, Plaintiff, v. THE MAYOR, Etc., OF THE CITY OF NEW YORK, Defendant.

      Chap. 446, Laws of 1857—effect on contract of failure to publish resolution— notification.

    This action was brought to recover the amount due upon a contract, the resolution authorizing the making of which had not been published as required by section 7 of chapter 446, Laws of 1857, before its adoption by the common council of the city of New York. Held, that the contract was void, and that the plaintiff was not entitled to recover.
    ‘The work provided for by the contract was performed and partially paid for by the city. Held, that these acts did not constitute a ratification of the contract by the city, they were the acts of its officers alone, who could bind it only by observing the requirements of the law affecting the proceedings.
    Motion by defendant for a new trial, on exceptions ordered to be heard at the General Term in the first instance, after a verdict in favor of the plaintiff directed by the court. The action was brought upon a contract for paving, etc., in the city of New York.

      John E. Parsons, for the plaintiff.
    The failure to publish the ordinance in the Leader, one of the designated corporation papers, did not invalidate the contract. The work has been done, and has been used by the city, and there has been the most complete ratification. Ratification may be inferred from acquiescence, after knowledge of all the material facts, or from acts inconsistent with any other supposition. (Dillon on Municipal Corporations, § 385; Peterson v. The Mayor, etc., 17 N. Y., 449, 453; Hodges v. Buffalo, 2 Den., 110; People v. Flagg, 17 N. Y., 584; Brady v. The Mayor, etc., 20 id., 312.) The only limitation upon the power to ratify is, that an act that is in violation, of a direct statutory prohibition, of which the parties concerned are required to take notice, cannot be made valid by subsequent ratification. (Sprague v. Birdsall, 2 Cow., 419 ; People v. Laimbeer, 5 Den., 9; McKeen v. Delaney, 5 Cranch, 32; 1 Serg. & Rawle, 106.) All these matters were, from their nature, within the cognizance of the corporation officers; and not only is it reasonable that the corporation shall be held responsible for their neglect when it seeks to impose liability upon third persons; but the principle applies, that they who seek to take advantage of a statutory provision must show exact compliance with its requirements. (Sharp v. Speir, 4 Hill, 76 ; In re Douglas, 46 N. Y., 42; Stetson v. Kempton, 13 Mass., 272; Smith on Statutes, 789.)

      D. J. Dean, for the defendant.
   Daniels, J.:

The plaintiff recovered a verdict, by the direction of the court, for the balance unpaid upon a contract made with Robert Jardine, for regulating and paving with stone blocks, Eighth avenue from Forty-second to Fifty-eighth streets. The contract was executed by Darragh and Craven, on the part of the defendant, and it was entered into under the terms of a resolution adopted by the boards of councilmen and aldermen of the city, and approved by the mayor, on the 22d day of May, 1866. This resolution provided for the improvement, at the expense of the city, to be reimbursed by an assessment upon the property benefited by it. The work was afterward performed, and the contract for it ultimately assigned to the plaintiff, who claimed the balance appearing unpaid. Various objections were made during the progress of the trial, to his right to recover, which were overruled by the court, and the defendant duly excepted. Among them was the objection, that the resolution authorizing the improvement was not published in all the newspapers shown to be employed by the corporation, as was required by law; and for that reason it, as well as all the proceedings taken under it, were claimed to be unlawful and void.

The defendant gave evidence directly tending to prove the fact, that in the Leader, which was one of the newspapers then employed by the corporation, pursuant to section 2 of chapter 227 of the Laws of 1863, and of which notice was given in that year to the board of aldermen, the publication was not made. And to the sufficiency of such proof no objection was made. On the other hand, it was assumed, as establishing the fact, on the argument, by both the learned counsel engaged in the case, that this omission to publish the resolution had been satisfactorily shown.

The court overruled the objection taken to the validity of the contract for the want of this publication, and the counsel for the defendant duly excepted to the decision made. Ho authority beyond the resolution was either shown or asserted for making the improvement. Upon that all the subsequent proceedings were taken, and its legality would therefore seem to be essential for their validity. It was by means of its provisions alone that the work was authorized, and the city bound for the payment of the expenses. And if that were unlawful, no power appeared to exist for binding the defendant to the performance of a contract deriving its obligations solely from that source. The entire proceeding was wholly statutory; and, by a well settled rule, applicable to all such cases, it was essential that the course prescribed in the statute should be followed, in order to render it valid or effectual. (Sharp v. Speir, 4 Hill, 76; Litchfield v. Vernon, 41 N. Y., 123.)

The statute requiring the publication, provided that “ all resolutions and reports of committees which shall recommend any specific improvement involving the appropriation of public moneys, or the taxing or assessing the citizens of the city, shall be published immediately after the adjournment of the board, under the authority of the board, in all the newspapers employed by the corporation, and shall not be passed, or adopted, until after such notice has been published at least two days.” (Laws of 1857, vol. 1, 875, § 7.)

It so far restrained the powers of the board, that no resolution included within the terms used, could be lawfully adopted until after the publication required should be made. Without that no authority existed for the adoption of the resolution. And if adopted in form, the omission to publish it as the statute directed, necessarily deprived it of all the force and effect which it would otherwise possess. It would be a simple nullity, and all the proceedings based upon it inoperative. And that, in substance, was held to be the effect of such omission in the cases of Douglass (46 N. Y., 42) and Astor (50 id., 363). It is true that the decisions made in these cases did not consider the effect of a failure to publish upon a contract entered into for the improvement intended to be made under such a resolution. But they very plainly held not only the resolution adopted without publication in one of the newspapers to be void, but in addition to that the assessment under it for the p-urpose of paying the expenses of the improvement, was declared to be equally as ineffectual. And it would seem to follow logically from those conclusions, that the contract entered into and performed pursuant to, and under the exclusive authority of such a resolution, must be equally without any binding effect upon the parties formally entering into it.

The resolution is the foundation upon which the validity of the contract is necessarily dependent, and when that proves to be unlawful, the proceedings following and contemplated by it, must be affected by the same infirmity. This consequence has repeatedly been held to follow the omission to comply with other statutory provisions prescribing the manner in which contracts shall be made for the performance of public work. (Brady v. Mayor, etc., 2 Bosw., 173 ; 20 N. Y., 312 ; Haughwout v. Mayor, etc., 2 Abb. Ct. of App. Dec., 345; Donovan v. Mayor, etc., 33 N. Y., 291.)

In general terms, the principle which has been held applicable to all such cases, is, that “ if the charter or act of incorporation prescribe the mode in which the officers or agents of a corporation must act or contract, to render their acts or contracts obligatory on the corporation, that mode must be strictly pursued. The act of incorporation is an enabling act; it gives the body coi'porate all the power it possesses; it enables it to contract, and when it prescribes the mode of contracting, that mode must be observed, or the instrument no more creates a contract than if the body had never been incorporated.” (Angell & Ames on Corp. [8th ed.], 283, § 291.) And no good reason appears to exist for excluding this case from its effect.

A contract made by an agent, as the officers of a municipal corporation most surely are, to be binding on the principal, must be entered into under and by virtue of some actual authority. Where that exists, the principal may in some eases be bound, even though it may be transcended by the agent in entering into the obligation. But even in those cases the agent must at least appear to be acting under the apparent authority of the principal. If no authority whatever exists, the latter will not be bound, although the agent may succeed in inducing the belief in the mind of the other contracting party, that he possesses the power to enter into the agreement designed to be made, unless the principal has, by his own conduct, in some manner rendered himself chargeable with the consequences of the deception.

In this case the defendant did nothing to induce the belief that its officers were empowered to enter into the contract forming the foundation of the claim made by the plaintiff. They acted under specific laws providing the course they should pursue to render their acts binding upon the city. They were special agents, acting within the limits of public and well defined authority, having no power to bind the body represented by them in any other way. And persons dealing with them were bound to take notice of the restraints and disabilities imposed upon them. If they were not, the most stringent acts and provisions could be completely nullified and disregarded by persons designed to be controlled by means of them.

The restraints imposed upon the powers of the officers of the city, have been created for the public safety and protection. And this court has no right to hold their acts to be operative and valid, when they have been performed in such a manner as to violate statutory provisions defining the only course which can lawfully be. pursued to give them that character. The officers may bind themselves in favor of persons innocently acting upon the evidence of their supposed authority, but they will fail to render their acts obligatory upon the body proposed to be represented, and in no way participating in the creation or approval of the false appearances exhibited. The resolution was adopted in violation of law, and for that reason it was void, and that fact rendered the contract made for the performance of the work, equally nugatory.

But the learned counsel for the plaintiff contended, that, as the work was actually performed, and partially paid for, the city had so far ratified the contract as - to become legally liable upon it. This conclusion, however, is unwarranted by the facts it is dependent upon. For, all that has been done by way of the performance of the agreement on the part of the city, has been the acts of its officers alone. They could bind it in but one way, and that was by observing the requirements of the law affecting the proceeding. If they failed, as they certainly did, to do that, no indirect acts or proceedings of theirs, afterward bad, could lawfully supply the omission.

If the contract was not legally- made under the circumstances, the defendant’s officers could not vitalize it by ratification dependent on the partial performance of its terms. They could not accomplish indirectly what the law prohibited from being done directly. (Haughwout v. Mayor, 2 Abb. Ct. of App., 345 ; Marsh v. Fulton Co., 10 Wall., 677.)

It was also insisted that a recovery could be sustained for the reasonable value of the work performed and materials supplied, even though the contract proved not to be binding upon the defendant. But it is unnecessary to consider that position, because no such cause of action was set forth in the complaint, and no proof given in support of it upon the trial. The recovery was allowed upon the contract alone, and as that was erroneous, the exception presented to the decision allowing it was well taken. For that reason, and without considering the other exceptions taken on behalf of the defendant, the verdict should be set aside, and a new trial ordered, with costs to abide the event.

Davis, P. J., and Brady, J., concurred.

Motion for new trial granted, costs to abide event.


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    GUSTAVUS D. DOWS, Plaintiff, v. ALMON W. GRISWOLD, Defendant.

      Contract induced by fraud—obligations assumed under, cannot be disaffirmed after • the fruits of the contract home been enjoyed.

    A party alleging fraud by which he has been induced to execute obligations for the payment of money, must act promptly on discovering the fraud, if he intends to rescind the contract which he was induced to enter into by it. He cannot enjoy the fruits of the transaction and then disaffirm it as to his obligations.
    The rule is otherwise when the party seeking to rescind has received nothing of value from the other party.
    Exceptions ordered to be heard in the first instance at General Term.
    This action was upon a promissory note made by the defendant, dated March 10, 1870, payable September 15, 1870, for $2,000 in gold, given in payment for the assignment of a patent obtained by Dows, Clark & Van Winkle, in France, on the 17th day of June, 1867, for improvements in the manufacture of iced beverages. The facts are stated in the opinion.

      Sidney S. Harris, for the plaintiff.

      A. J. Vanderpoel, for the defendant.
   Daniels, J.:

This action was brought to recover the amount due upon a promissory note, made by the defendant on the 10th day of March, 1870, payable to the order of William H. Dickinson, for the sum of $2,000 in gold, on the fifteenth day of the following September, and indorsed to the plaintiff. A verdict was directed for the amount unpaid, to which direction the defendant excepted, and the exception was ordered to be first heard at the General Term, and judgment in the mean time was suspended. The consideration of the note was the sale of an interest in a French patent for the manufacture of iced beverages; and it was previously owned by the firm of Dows, Clark & Van Winkle, of which the plaintiff was a member. The laws of France provided that the transfer, in whole or in part, of a patent, could only be effected by a notarial ■ deed, after payment of the tax imposed; and that no transfer should be valid as regards a third party, before it had been registered at the secretary’s office of the prefecture of the department in which the deed had been executed. The tax imposed upqn a patent was 100 francs for each year of its continuance, for a period not exceeding fifteen years, and the patent in question was issued ' for that entire period. The law regulating the mode of transferring patents, required the payment of what was termed the whole tax, to render the transfer effectual; and it is contended on the defendant’s behalf, that as the whole of the tax for the period over which the patent could be extended by its payment, was not paid, the transfer was void, and the note given by him was without consideration. Ho authority was referred to by which it was held that the entire tax for the whole period over which the patent could be extended, was what was meant by the whole tax required to be paid as a pre-requisite to the validity of a transfer; and in view of the language used in the law, such a construction would not be well warranted by its terms. It is true that the transfer could only be made after the payment of the whole tax prescribed by the article referred to. But the payment required by that article was simply yearly installments of 100 francs each year ; and the patent was forfeited only by allowing one year to elapse without such payment. It was, substantially, a tax each year for the continued or yearly use and enjoyment of the patent; and it could not have been designed to require prepayment for every year through which the patent would be extended, as a condition to the legal validity of an assignment. The provision applied, in terms, to partial as well as entire transfer; to one for a year as well as to one for fifteen years; and the supposition would be unreasonable in the extreme, that the law designed that neither transfer could be made without the prepayment of the whole tax, payable during the entire life of the patent. It would impose an unjust restraint upon the privilege secured by another section of the law, declaring that every patentee may transfer the whole, or part of the proprietorship of his patent; and also be inconsistent with the provision requiring payment of the tax only in yearly installments of 100 francs. What the act declared should be done in this respect to render the transfer effectual, was payment of the whole tax as it was prescribed by article 4; and that was a gross tax on a patent for fifteen years, of 1,500 francs, payable in sums of 100 francs each year. It was a compliance with this article which was rendered necessary; and that could be done by making payments of the yearly installments as they matured. Payment in that manner appeared, from The evidence, to have been made by the attorney of Dows, Clark & Van Winkle before 1870, and for that year by • themselves. This was shown by Mr. Bliss, the defendant’s partner. He stated that he learned in the presence of Van Winkle that the lawyer had paid the annual tax of 100 francs up to that time ; that Dows, Clark & Van Winkle continued to pay it while' the witness was in Paris, and he understood that they paid it for the year 1870. This he stated was the information secured by him in an investigation made to ascertain whether the taxes had been paid, which were necessary, prior to the transfer of the patent, and no question was made but that it was entirely reliable and truthful. There was no foundation whatever, therefore, for the support of the objection that a compliance with this provision of the French law had not been shown in the case. The first transfer was made of the entire patent to the defendant, and William R. Bliss and William F. Fowle. It was executed by each member of the firm of Dows, Clark & Yan Winkle, the patentees, and afterward properly attested before notaries; and it seemed to conform in all respects to what was required to render it complete by the terms of the French law. For that, and certain apparatus and fixtures required for the manufacture and sale of the patented article, which had been previously transferred by the patentee to William F. Fowle, the defendant made, and Fowle & Co. indorsed, his notes for the the sum of 75,000 francs, and delivered them to Dows, Clark & Yan Winkle. The apparatus and fixtures were then transferred by Fowle to the firm of Fowle & Co., which consisted of the defendant, Bliss and Fowle, and business was commenced by that firm in Paris. After it had continued for a short time, it turned out that Fowle was insolvent, and his interest in the property was seized for the payment of his debts. For that reason, an assignment of his interest in the patent was taken by his copartners, and they surrendered the instrument, transferring the patent back to the patentees, and took from them another, by which a transfer of three undivided fourths was intended to be made, with an agreement for the transfer of the other one-fourth when they should be repaid the moneys they agreed to .advance to redeem the property of the firm from its seizure for the debts of Fowle. The instrument by which the transfer was designed to be made, was executed by Clark and Yan Winkle, and properly attested as to them before a notary. They, also, as the attorneys in fact of Dows, each subscribed his name to it. But as they were not empowered to do that by any written authority, the notarial attestation of his execution of it could not be made. In order to provide for supplying this defect, an agreement was entered into by his copartners in their own names, and in his name by them as his attorneys, that he should ratify, by his own signature and seal, the acts of his partners in making both the agreement and the transfer. These instruments were dated on the 6th of April, 1869, and for the transfer designed to be made, the defendant and Bliss were to pay 10,000 francs less than the price previously agreed upon for the patent, and they were to have the remaining fourth by reimbursing the amount required to be advanced to release the apparatus and fixtures, in paying the debts owing by Bowie, for which they had been seized. The agreement contained a further stipulation that the patentees should, within thirty days, satisfy and remove any attachment, judgment or lien upon the interest of the plaintiff in the patent. But as it appeared to be affected by nothing of that nature, it will be unnecessary to consider this clause in the disposition which should be made of the case.

In the new arrangement made with the defendant and Bliss, it was apparently understood that the old notes made by the defendant, and indorsed by Bowie & Go., in part payment of the price of the patent, as it was at first transferred, should, so far as they were outstanding, with the exception of two of them, be retired and surrendered, and new notes taken for the balance, payable to the patentees. One of the old notes was divided and afterward paid, and the other was also paid. After the two notes were given for the divided note, and about the 2d of March, 1870, the plaintiff applied to the defendant for the new notes. But he declined to give them until the plaintiff executed the assignment which his partners had made for the three-fourth interests in the patent. That, he affirmed, he had already done; and, in reliance on the truth of that statement, the defendant gave the note in suit, and three more for similar amounts, and another for over $15,000. This statement afterward turned out to be untrue, and for that reason the defendant objects that he should not be held liable for the payment of the note on which the verdict was directed. Why the plaintiff should have falsely made this statement does not appear. By the new arrangement which was consummated in consequence of it, he gained nothing. Bor he surrendered to the defendant the old notes which the new ones were made to replace, and deducted 10,000 francs from the amount of the preceding indebtedness; and his firm undertook to advance the amount necessary to relieve the apparatus and fixtures from the custody of the law, and surrender the other fourth of the patent when that should be repaid. While the statement was a fraudulent one, no substantial advantage was derived from it by either the plaintiff or his firm. The assignment of three-fourths was not operative as an actual transfer, without the execution of it by the plaintiff. But notwithstanding that, the defendant and Bliss transacted and carried on business under it, and do not seem to have been deprived of any advantage which the completion of the instrument would have secured for them. It is true they could not sell rights under the patent with only this defective transfer. But it is equally so, that no instance was mentioned in which a sale could have been made, if the instrument had been completed by the formal execution of it by the plaintiff.

The first objection urged against the recovery on the failure of the plaintiff to properly execute the transfer, is, that the right to the purchase-price was conditional on its performance. But the agreement which was made was not in that form. It contained a guarantee that the plaintiff should ratify both the assignment and the agreement by his own signature and seal, and he had no lawful right to the notes which were given until that had been done. But he did obtain them, and carried out the residue of the understanding, and the defendant and Bliss afterward continued their business under the patent. The notes imposed upon the defendant, by their form, an unconditional obligation to pay. The defendant could undoubtedly have returned what he had received, and annulled the transaction, on account of the plaintiff’s failure to execute the transfer, as soon as he discovered that to be the fact. But he did not do that; on the contrary, he availed himself of the advantages designed to be provided for his firm by the assignment, in the same manner as though its execution had been unexceptionably complete. After doing that, he could not consistently resist payment of his notes by reason of the plaintiff’s non-performance.

The second objection urged in behalf of the defendant on this part of the case is, that his obligation was fraudulently procured, and for that reason cannot be enforced by legal proceedings. But the same difficulty stands in the way of the success of this objection, which disabled him from rescinding because of the plaintiff’s failure to perform the agreement. He has voluntarily retained and enjoyed the benefits designed to be secured by means of the transaction. The consideration of the notes was the purchase-price of the interest expected to be acquired in the patent — not simply the execution of the assignment and agreement by the plaintiff—and that, the defendant and his partner enjoyed until they discontinued their business and Mr. Bliss left Paris. That was done not because the plaintiff failed to execute the instrument, but substantially because the business proved unprofitable, and appeared unpromising. His partners had offered to have the plaintiff execute the assignment upon its being sent by Mr.' Bliss to London for that purpose. He not only failed to send it, but omitted to produce it for execution when he had it in his possession, in London, where that could have been, and probably would have been, done at once, if it had been requested. Instead of endeavoring to have the execution completed, the instrument was retained, and all the business which could be done, was performed under the patent it was designed to transfer. After that, the right to rescind and resist payment of the note on account of the fraud, was extinguished. The defendant’s partner, Bliss, at all times knew of the incomplete nature of the assignment, and his conduct in the business was binding upon the defendant. The rule is well settled, which requires the innocent party to act promptly on the discovery of the fraud, where he intends to rescind, and in that way discharge himself from the obligation he may have been deceived in creating. He cannot affirm the transaction by enjoying its fruits, and disaffirm it by annulling his obligation. The law requires him to do one or the other; he cannot do both. (Cobb v. Hatfield, 46 N. Y., 533.) A different rule prevails where the party endeavoring to rescind has received nothing of value from the other party. (Nichols v. Michael, 23 N. Y., 264.) There it is sufficient to surrender any worthless instrument which may have been received from the party guilty of the fraud, at the trial. But this is not a case of that description, for the defendant and his partner not only had the use of the patent in their business, and to that extent" extinguished its existence, but in addition to that he sold an eighth interest in ■ it to General Smalley. These were things he did not and could not surrender, when, for the first time, he offered to return the interest proposed to be assigned, after the present action was commenced. It is claimed, in behalf of the defendant, that all he or his partner had received, was an instrument without the least effect upon the patent, and for that reason the offer to return it after the action was commenced, was sufficient. This position depends upon the law of France, already-referred to, requiring the transfer to be by a notarial deed; and if the defendant is entirely right in taking it, then the entire interest first assigned to himself, Bliss and Fowle, still remained the property of the firm constituted by himself and Bliss. That was transferred by a notarial deed, and no reason appears for questioning its validity. Fowle transferred his interest under it to the defendant and Bliss. But all they did to divest themselves of it was to return the assignment to the plaintiff and his partners, which was not a transfer of the patent as the law of France required it should be made. To comply with what that prescribed, a notarial deed from the defendant and Bliss was necessary; and that was never made or executed. If the second instrument was invalid for want of the plaintiff’s signature, the first surely remained in force; and that was sufficient to support the defendant’s obligation to pay the purchase-price. Even if a complete rescission of the second transaction could have been accomplished, the defendant’s condition would have been wholly unimproved; for that would have required a return of the old notes, on which a more extended liability existed against him. Evidence was given tending to show that he was induced to enter into that by means of fraudulent representations made by Fowle, and assented to and confirmed by the plaintiff. But even if that fact was proven, he had gone too far, after its discovery, to rescind it for that reason. He stated to the plaintiff that he wanted to throw up the whole thing, that he had been swindled in the matter from the very beginning, and thought him privy to Fowle’s misrepresentations, as there were many points he must certainly have known. But instead of doing it, or endeavoring to do it, he continued to hold the assignment and the patent, and carry on the business protected by it. He had his election, if he had been deceived by fraudulent representations, to surrender and return what was received through the transaction produced by it, and repudiate his obligations given upon the faith of their truth, or retain what had been delivered, and thereby affirm what had been done. He chose the latter alternative and pursued it until it was too late for him to recede; the consequence of which was that he rendered himself liable for the payment of his notes. The law did not impose that burden upon him; he assumed it by his own act; and no authority exists under which he can be relieved from its effect. The motion for a new trial should be denied, and judgment ordered on the verdict in favor of the plaintiff.

Davis, P. J., and Brady, J., concurred.

Ordered accordingly.


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    In the Matter of the Petition of LEOPOLD BOHM, Appellant, to Vacate an Assessment.

      Chapter 312, Laws of 1874—power of court to order a reference under—Distinction between power of cowrt to order reference in actions and vn special proceedings.

    In applications to vacate assessments under chapter 312, Laws of 1874, the court has power to refer the matter to a referee to take and report the testimony to the court.
    Appeal from an order of reference made at Special Term, referring it to a referee to take the proofs in the matter, and report the same to the court.

      Irving Ward, for the appellant.
    The power of reference which the. court possesses is derived from legislative enactment, and no authority to refer can exist in any statutory proceeding, unless by express affirmative direction in the statute. (Code, §§ 254, 271, 401; 2 Till. & Shearman, 519; 7 Abb., 70; 12 Abb. Pr. [N. S.], 250; 37 How., 399 ; 45 Barb., 344; 11 How., 439 [cited 26 Barb., 361] ; 6 Abb. [N. S.], 245; 8 Bosw., 701; 1 Sweeney, 352.) The sole authority which the court possesses to entertain an application of this character is derived from the legislature. This proceeding is purely statutory, and the court acquires jurisdiction solely from express statutory enactments; therefore this jurisdiction must be exercised in the exact manner pointed out by the statute. (Laws of 1858, chap. 338; Laws of 1874, chap. 312; 2 Cranch, 127; 19 Barb., 558; 1 Seld., 439; 10 N. Y., 328; 17 id., 383 ; 18 id., 412; 4 Hill, 76, 92; 2 Denio, 330; 3 id., 599; 2 Barb., 114; 6 id., 611; 15 id., 395; 52 N. Y., 527; 46 id., 42; In re Phillips, Ct. of App., Jan. 1875, MS.; 19 Barb., 649; 35 id., 474; 10 N. Y., 329; 23 id., 286; 1 Burr., 377; 7 T. R., 363; 3 Johns. Cases, 107; 7 Johns., 541; 1 Hill, 130; 2 Kern., 575; 6 Abb. Pr., 162; 3 N. Y., 401; 51 id., 610 ; 3 id., 511.)

      William Barnes, for the respondent.
   Daniels, J.:

The application made in this case was to have an assessment vacated, which had been imposed upon the petitioner’s property for the expense of a local improvement. It was by petition, and the court ordered a reference of it for the simple purpose of taking the proofs designed to be given by the parties. The proceeding was provided for by chapter 338, of the Laws of 1858, as amended by chapter 312 of the Laws of 1874. By these acts it is required to be by an application to a judge of the Supreme Court, at Special Term, or in vacation, who shall thereupon, upon due notice to the counsel to the corporation of the city in which the lands so assessed are situated, proceed forthwith to hear the proofs and allegations of the parties. (Laws of 1874, 366, § 1.) And, by section 2 of the same act, an action for that purpose was prohibited. What the law provided for, was therefore a special proceeding, as distinguished from an action. And, for that reason, the eases relied upon by the petitioner’s counsel, in which it has been held that actions cannot be referred unless some statute has provided for their reference, can have no application to the present controversy. It is claimed, however, that the act requires the proofs to be taken in open court. But that is clearly a misapprehension. It simply provides that the court shall proceed forthwith to hear the proofs and allegations of the parties, not that they shall be taken as well as heard before the court. How the proofs are to be taken the legislature has not provided. And for that reason they may .be taken as that is usually done in similar proceedings. When the petition has been properly presented, jurisdiction is acquired over the ease and the parties to it. Both become subject to its practice and authority. And for that .reason it may control the proceeding the same as it usually does those of a similar character. Under the preceding practice, applications for relief by petition were usually addressed to the Court of Chancery, and when proof was required to be taken for the purpose of considering and disposing of them, it was never done in open court, but by a reference to a master ; and upon the proof taken before him and his report, the hearing was afterward had. For those purposes this practice still continues. It is only in equity cases, as distinguished from mere summary applications, that the testimony has been required to be taken in like manner as in cases at law. (Art. 6, § 10, Const, of 1846.) And that still allows special proceedings to be controlled and disposed of as they previously had been under the well settled practice of courts of equity. The power was expressly continued by the judiciary act, passed after the adoption of the present Constitution. It provided that, on and after July, 1847, courts of record may, by an order to be entered in any suit or proceeding at law or in equity, refer any matter heretofore usually referred to any clerk, master in chancery or referee, to a clerk of the same court, or to any county judge, or local officer,” etc., “ or other suitable person, in the same manner as references have heretofore been made to any officer or person by any court, and with the same powers as have heretofore been possessed by such officer or person.” (3 R. S. [5th ed.], 291, § 49.) That clearly invested this court with all the authority the preceding Court of Chancery had to refer such an application, when it could have been made to that tribunal during its existence. And it included the power exercised over the petitioner’s application. Beyond this statutory provision, the court, by virtue of its general powers, has inherent authority to refer summary applications made to it, for the purpose of taking such proof as it may require to enable it to pronounce an intelligent judgment on their merits. It was declared, in the opinion given in Dwight v. St. John (25 N. Y., 203) that, without the Code, the court always had the right to refer, to take proofs on matters upon which it desired fuller information before proceeding (id., 205); and no dissent was expressed to the accuracy of this general proposition. The order appealed from should be affirmed, with ten dollars costs, besides disbursements.

Davis, P. J., and Brady, J., concurred.

Order affirmed, with ten dollars costs, besides disbursements.


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    MINNIE HAUCK, Appellant, v. SAMUEL CRAIGHEAD AND OTHERS, EXECUTORS, ETC., RESPONDENTS.

      Pleadings — ammdtment of-— when (Mowed — Yariance—when immaterial.

    Where reasonable diligence has been shown, and the party for the first time discovers at the trial that the cause of action or defense has been misunderstood, and for that reason improperly alleged in his pleading, an amendment should be allowed, when applied for without unnecessary delay, by way of special motion.
    Where, in an action upon contract, the complaint alleged that the plaintiff refused to enter into the contract unless one of the defendants should indorse such contract and become responsible for its performance, and upon the trial it appeared that the agreement was that the said defendant should Jem in and sign the same: held, that the variance was immaterial and should have been disregarded.
    Appeal from an order made at the Special Term, denying a motion for leave to amend the complaint.

      A. C. Fransioli, for the respondents.

      Geo. V. N. Baldwin, for the appellant.
   Daniels, J.:

This action was brought for services performed under a contract made for her employment as prima dorma assoluta for operas and concerts, and for damages for the partial, breach of such contract. It was prosecuted against Samuel N. Pike and Lafayette Harrison, as parties jointly liable for its performance. But at the trial the court excluded evidence proposed to be given to establish such liability, because it was not regarded as alleged in the complaint. A juror was thereupon allowed to be withdrawn, to afford the plaintiff an opportunity to move that her complaint should be amended in that respect, but when the motion was made, it was denied, as it is affirmed, on the authority of Gowdy v. Poullain (9 S. C. [2 Hun], 218). That ease was peculiar in its circumstances, and was not designed to establish the rule, that a pleading' could not be amended on motion, when the party applying for leave failed to discover the necessity of the amendment until the cause came on for trial. Very great laches appeared from the circumstances then before the court, and no very good reason was shown why the plaintiff failed to correctly allege his cause of action in the first instance. It was not one concerning which a party could well be mistaken, without a very great degree of inattention. Where reasonable diligence has been shown, and the party for the first time discovers at the trial that, the cause of action or defense has been misunderstood, and for that reason improperly alleged in his pleading, then the true theory of the Code contemplates that an amendment shall be allowed, when applied for without unnecessary delay, by way of special motion. And the authority referred to contains nothing in conflict with this principle. But cases frequently arise where formal and unimportant differences appear in the proof from the allegations made of the facts in the pleadings. No actual necessity for amendment exists in those cases under ordinary circupjstances; for neither party can be usually misled to his prejudice by means of such variances. When, however, the fact may be otherwise, there • the party alleging it must support it by his affidavit, and then the pleading can only be amended upon such terms as shall be just. But when no such affidavit is made, the variance may be disregarded, and the fact found according to the evidence, or an immediate amendment may be ordered. (Code, §§ 169, 170.) By the provisions made upon this subject, no variance between the allegation contained in a pleading and the proof is to be deemed material, unless it may actually mislead the' adverse party to his prejudice. This is a very broad and comprehensive provision, limited only by the restriction, that, when the cause of action or defense, as it may have been alleged, is unproved, not merely in some particular or particulars, but in its entire scope and meaning, then the case shall not be considered one of variance, but a failure of proof. (Id., § 171.) That is the only qualification to which the preceding general provision, requiring mere variances to be disregarded, has been subjected. And it does not include this case, and for that reason cannot control it; for, at most, the allegation of the plaintiff’s cause of action was unproved in only one of its particulars. That was as to the manner in which the defendant Pike became a party to the written agreement. on which the action was brought. And it was not made to appear that the defendants were in any respect misled in consequence of it.

The complaint alleged that' the plaintiff declined to enter into the agreement unless Pike should indorse and become responsible for the performance of it by the defendant Harrison, and that thereupon he promised and agreed that, if the plaintiff would enter into the agreement, he would assume such responsibility and indorse the contract. That she then entered into the agreement with Harrison, and Pike indorsed it, and thereto set his name. The evidence, as the plaintiff’s counsel regards it, tended to show that it was agreed that Pike should join in and sign the contract with Harrison, and in that way become responsible with him for its performance, and that he agreed to do so if the plaintiff would enter into the engagement. That she did enter into it, and he joined in it and thereto set his name.

The difference between the allegation and the amendment proposed to render the complaint conformable to this state of the proof, consisted in the mode in which Pike agreed to become bound. The fact that he undertook to bind himself, and the extent of the obligation he was to assume, are identical in each. And the mode he adopted to bind himself is the same in the complaint and the proposed amendment. For by both he was to become responsible for the performance of the contract by Harrison, and did so by setting his name to the contract, the difference consisting in the allegation that he indorsed the contract by setting his name to it, and joined in and signed it, as the amendment proposes it should be alleged. This was altogether too slight to be anything more than an immaterial variance, which could neither have prejudiced nor misled the defendants. The obligation alleged to have been finally assumed by Pike, is precisely the same in both instances. That is, that he undertook to become responsible for the performance of the contract by Harrison. And no difference exists in the manner in which he imposed it upon himself, which, in each case, is stated to have been by setting his name to the written agreement. The fact that he agreed to create the obligation by joining in and signing the agreement, or by indorsing it, is entirely unimportant, as long as he finally did what, in the most favorable statement of the plaintiff’s case, he was to have done, which was to set his name to the contract to bind himself for its performance by Harrison. If that rendered him liable, it was sufficient for all the purposes of the case. If it did not, the preceding agreement that he would join in and sign it, instead of that which was alleged, that he would indorse it, would not render him liable. Whether, in either event, he could be rendered liable by setting his name to the agreement for the purpose of becoming responsible for the performance of its terms by Harrison, it is not now designed to be considered or determined. The pleadings were broad enough to allow all the proof to be given, which could be received under the amendment proposed to be made. (Hart v. Hudson, 6 Duer, 294, 307; Bank of Cooperstown v. Woods, 28 N. Y., 545.) And that.is all the court can be .now required to decide.

Ho harm could have arisen out of the allowance of the amendment, but, strictly considered, there was no necessity for it. And it is much better that unimportant variances of this nature should either be disregarded entirely, or amended at the trial as the Code has provided they may be, than that the parties should be subjected to the labor and delay of a special motion in order to render the pleadings literally accurate in the statement of the cause of action or defense. The system which has been devised is neither obscure nor intricate, and it should be maintained according to its spirit and design. That was not to require a special motion to correct immaterial differences between the allegations and proofs, which cannot possibly mislead the adverse party to his prejudice. In such cases they are to be wholly disregarded, or at once amended without unnecessarily delaying the proceedings, unless it is shown by affidavit that the opposite party has been misled, and in what respect that may have been the fact.

The order appealed from should be affirmed, but, under the circumstances, it should be without costs.

Brady, J., concurred.

Order affirmed, without costs.


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    JOSEPH D. HIGGINS, Appellant, v. JOHN H. MURRAY, Respondent.

      Statute of frauds—contract for manufacture of material famished, ly manufacturer—when title to manufactured article passes.

    A contract for the manufacture of an article out of material to be supplied and furnished by the manufacturer, is not within the statute of frauds.
    When an article is manufactured, and notice of that fact is given to a party who has ordered it, it becomes the property of the party ordering it, subject to the lien of the manufacturer for the price, and a right of action at once accrues for the price.
    Appeal from a judgment in favor of defendant, recovered on a trial at the Circuit.
    On or about the 29th day of April, 1873, at the city of Brooklyn, the defendant gave to the plaintiff an order to manufacture for him a set of circus tents, materials to be furnished by the plain tiffj to be completed in three weeks’ time. This order the, plaintiff accepted, and he proceeded to manufacture said tents. Neither in the order nor in the acceptance of it, was any place of delivery of the tents specified, nor was any price, nor the time for the payment of the same mentioned. The plaintiff finished the tents on or about the 21st day of May, 1873, and notified the defendant of their completion. They were manufactured in every respect in compliance with the defendant’s directions, and were of the value of $1,395, the amount claimed in the complaint. The plaintiff held the tents subject to the defendant’s order for more than two months, to wit, until on or about the 29th day of July, 1873, when he received a letter from the defendant, in which the defendant directed him to ship “ my canvas ” to Bath, Maine, “ by freight, either by boat or by cars.” By a second letter the destination of the canvas was changed to Lewiston, Maine. The cost of transportation the defendant agreed to pay.

      Townsend & Weed, for the appellant.
    The place of delivery, in the absence of any agreement, is the premises of the manufacturer or seller, especially when the article to be delivered is bulky, as were the tents. (Terry v. Wheeler, 25 N. Y., 520; Pollen v. Leroy, 30 id., 549, 554.) The time of payment, in the absence of any agreement, is immediately upon the execution and fulfillment of the contract. (Lake O. R. R. v. Mason, 16 N. Y., 451, 454.) Upon the completion of the tents the plaintiff had in every respect fulfilled his contract, and he was entitled to payment of their price or value. (Crookshank v. Burrell, 18 Johns., 58; Muckey v. Howenstine, 3 N. Y. S. C., 28.) The plaintiff delivered the tents at the time and place specified, and notified the defendant of their completion. The delivery and notice vested the title in the defendant, certainly so far as to place the property at his risk. Nothing remained to be done by the plaintiff. (Olyphant v. Baker, 5 Denio, 382; Hayden v. Demets, 53 N. Y., 431; Bement v. Smith, 15 Wend., 493, 497; 2 Kent’s Com., [side paging] 492.) The direction of the plaintiff to the forwarder to collect the price of the tents before parting with their possession, did not operate as a reclaimer of title. (2 Kent’s Com., [side paging] 492; Hayden v. Demets, 53 N. Y., 426.)

      S. P. Freeman, for the respondent,
    cited only Baker v. Bourcicault (1 Daly, 23).
   Daniels, J.:

This action was brought to recover the price of a circus tent. The evidence tended to show that the defendant ordered the plaintiff to make him a circus tent, which he agreed to do. It was afterward, pursuant to the order, manufactured by the plaintiff) and notice given of its completion by him to the defendant. After that, the defendant directed the plaintiff to ship the tent to him, at Lewiston, in Maine, by either boat or cars. The plaintiff shipped it by boat, under a bill of lading which required the price to be paid by the defendant and collected by the carrier on the delivery of the tent to him. It did not reach Lewiston, its place of destination, but was destroyed by fire on board the steamer at Portland. The learned justice presiding at the Circuit, on evidence tending to establish these facts, nonsuited the plaintiff.

The contract which the evidence tended to prove, was not within the statute of frauds, as it was for the manufacture of an article out of material to be supplied and furnished by the plaintiff (Crookshank v. Burrell, 18 Johns., 58; Sewall v. Fitch, 8 Cow., 215, 218, 219; Hight v. Ripley, 19 Maine, 137; Robertson v. Vaughn, 5 Sandf., 1; Towers v. Osborne, Strange, 506; Grover v. Buck, 3 Maule & S., 178; Donovan v. Willson, 26 Barb., 138); and, according to its fair import, he was entitled to the price as soon as the tent was completed, and notice of that fact given to the defendant. No time was fixed for the delivery; and, by the construction which the law placed upon the agreement, the tent was to be delivered when it was finished, and notice of that fact was given by the plaintiff to the defendant. When that was done, it became the defendant’s property, subject to the plaintiff’s lien upon it for the price. And a right of action on those facts at once accrued for the recovery of the price. In Crookshank v. Burrell (18 Johns., 58), the plaintiff manufactured the wood work of a wagon for the defendant, which he was to go after and pay for in lambs at one dollar each. He did not go for the wagon, and on those facts a judgment for the price was sustained. The circumstance that the defendant there agreed to go after the wagon when the work was completed, does not distinguish the cases. For an obligation to receive and pay for the tent when it should be completed, and the defendant notified of the fact, will be implied by law from the nature of the transaction. In Adlard v. Booth (7 Carr. & Payne, 108), the plaintiff had printed books for the defendant, which were destroyed by fire while they remained in the possession of the printer. And the case was submitted to the jury on the simple question, whether the printer had completed the work before the fire occurred; and, as it was found that he had not, the defendant had the verdict. Mixer v. Howarth (21 Pick., 205), was, in its substantial features, very much like the present case. And there it was held that the plaintiff could recover the value of a carriage completed for the defendant, on notice of that fact, although no price was specified in the agreement under which the work was to be performed, and the carriage still remained in the manufacturer’s hands. Spencer v. Cone (1 Met., 283), was decided under the same principle. In Muckey v. Howenstine (3 N. Y. S. C., 28), a recovery was sustained for barrels manufactured for the defendant, and not taken by him under the agreement made for the same.

The agreement for the manufacture of the tent not being within the statute of frauds, it was valid and binding on the parties, although no note or memorandum was made of it in writing, and consequently bound the defendant to receive and pay for the tent. When it was completed and he had notice of that fact, the plaintiff’s right accrued for the recovery of the price, and from that time the property was at the risk of the defendant. That resulted from the fact that the contract was valid and had been fully performed by the plaintiff. What he afterward retained, was simply a lien for the price, which was not inconsistent with its recovery by action. And all that he did by shipping it subject to the payment of the price, was, to retain and preserve that lien as his security upon the property. By the fair import of the agreement, delivery and payment were to be simultaneous acts, and that was all which the bill of lading secured. The defendant could have his property by making that payment. And the plaintiff had the right to maintain his possession until such payment should be made, as long as no credit was to be given by the agreement.

At common law. a mere agreement to sell specified articles of personal property at once, and without delivery of actual possession, vested the title in the vendee, and the right to the price in the vendor; but the former could not take the goods without either payment or tender of the price. This principle is quite analogous to the one which governs the lights and liabilities of the parties under a contract for the manufacture of a specified article. As soon as the article has been completed and notice given to the other party of that fact, the latter becomes obligated to take it and pay the price for it. If he does not do so, a right of action accrues to the manufacturer for the recovery of the amount due to him. And that right cannot be lost by sending it according to the direction of the person for whom it has been made, merely by subjecting it to the payment which the manufacturer may insist shall be made before the property passes beyond his control.

The shipment in the manner it was made, was no more than a continuance of the previous relations existing between the parties. The plaintiff held the possession of the property as the bailee of the defendant, to be delivered over to him whenever the price was paid. And in securing the preservation of that right, while he complied with the defendant’s direction to send it to him, he did nothing more than he was entitled to insist upon. The property had been subject to the defendant’s risk from the time he had notice of its completion, and that was not transferred to the plaintiff by shipping it, as he did, conformably to the defendant’s directions and his own lien for the price of it.

The case of Baker v. Bourcicault (1 Daly, 23), is relied upon by the defendant in support of the ruling at the Circuit. But as defendant there had no notice of the completion of the cards, and only agreed to pay for them when they were received, it is distinguishable in principle from the present controversy. The agreement with the defendant, in judgment of law, bound him to take the tent and pay for it when he had notice of its completion. That he failed to do, and violated his contract. For that the plaintiff was entitled to recover, if the jury believed his evidence, even though the property was afterward destroyed, as long as it was exposed to the risk encountered by it, without his fault and in direct obedience to the orders of the defendant. The judgment should be reversed and a new trial ordered, with costs to abide the event.

Davis, P. J., and Brady, J., concurred.

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