author: Barker, J.: Daniels, J.

text:
    OLIVER P. C. BILLINGS, as Receiver, etc., Appellant, v. GEORGE C. ROBINSON, Respondent.

      Manufacturing cwporation — right of its receiver to enforce payment of the amount due from its stockholders — when a stockholder’s liability ceases upon the sale of his sha/res —■ what acts of the company release him from liability upon his original subscription agreement.

    A receiver of an insolvent manufacturing corporation cannot maintain an action against one who was formerly a stockholder thereof to collect the amount unpaid upon.'the shares of stock sold and transferred hy him, unless the corporation itself could have maintained such an action if it had been brought prior to the time when the receiver was appointed.
    Although all the provisions of the statute relating to the sale and transfer of the shares of stock in a corporation have been complied with, the stockholder will still be liable to the creditors of the company and the other stockholders for the-amount unpaid thereou, unless it appears that he sold the stock in good faith, and with the intent and purpose of disposing of his entire interest in the shares and surrendering all dominion over them.
    The defendant and others signed a paper by which, among other things, they agreed with the trustees of the Marshall Packing Company, and with each .other, that they would take the number of shares of capital stock of the said company set opposite to their respective names and pay for the same at the par value of $100 per share, twenty per cent on or before a date fixed and the balance as called for thereafter by the trustees. Subsequently the company was formed and fifty shares of stock were-issued to the defendant. The scrip stated that it was “ transferable on the books of the company, in person or by attorney, on the surrender of this certificate.” The defendant, after having made certain payments upon the shares, sold and transferred the same, at a time when there were no calls unpaid thereon, to another person, who surrendered the same to the company and received new certificates therefor.

      Held, that as the assignee of the shares of stock was, under the statute, liable for the balance unpaid thereon, and as the company had assented to the transfer by entering it upon its books, it had thereby released the defendant from the liability imposed upon him by the original subscription papers, and could not, nor could its receiver, maintain an action to enforce the same. (Daniels, J., dissenting.)
    ' Appeal from a judgment in favor of tbe plaintiff, entered upon the report o.f a referee.
    The Marshall Packing Company was incorporated in the summer of 1877, under the general act authorizing the formation of corporations for manufacturing purposes. (Laws 1848, chap. 40.) Its place of business was the city and county of New York. The capital stock was fixed at $250,000, divided into 2,500 shares, of $100 each. The defendant was a subscriber for fifty shares of the capital stock of the company, amounting to $5,000, for which a'certificate was issued to him dated November 10, 1877, the body of .which was in thp following words:
    “ This certifies that George C. Robinson is entitled to fifty shares of the capital stock of the Marshall Packing Company, of New York city, transferable on the books of the company, in person or by attorney, on the surrender of this certificate.”

      I Upon which shares he had paid $3,750. He also became the owner of fifty other shares, for which a certificate was issued to-him dated November thirtieth, in the same form, upon which he had paid the like sum of $3,750. The balance of these shares have never been paid, into tbe treasury of the company. Prior to the 17tli day of March, 1879, a judgment was recovered against the company in favor of Jeremiah P. Robinson and others, and on the last named day, the plaintiff was appointed receiver in that action, under the provisions of the statute for winding up insolvent corporations. There was no statement in the papers before the court stating when this judgment was rendered, the amount thereof, or the time when the debt was contracted upon which the judgment was rendered. But no question was made upon the argument but that tl e receiver’s appointment was regular and complete in all respects, so as to authorize him to maintain actions of this character. This action is prosecuted for the purpose of collecting the unpaid balance due upon the shares mentioned in the certificates issued to the defendant. The issues were referred to Hamilton Odell, Esq., to hear, try and determine.
    On the 24th day of July, 1878, the defendant sold and transferred the shares which he then held to William 0. Marshall, and the same were, oh the following day, entered upon the stock-book of the company, as transferred from the said defendant to the said purchaser. The receiver's appointment was after this transaction, and he made a demand upon the defendant to pay him, as such receiver, the balance due upon each of these shares which the defendant declined to pay, and this action was then commenced to enforce collection. The referee reported in favor of the defendant upon the ground that he was not liable to make any contribution towards the unpaid balances, and the plaintiffs claim is, that a report should have been made in his favor for $2,500, being the entire balance due upon all the shares covered by both certificates, or at least he should have recovered $1,250, being the sum due upon the shares for which the defendant was an original subscriber.
    The facts and circumstances connected with the negotiations for the sale of these shares, and the mode and manner of the transfer, are more fully given in the opinion.

      James L. Bishop, for the appellant.

      Lemuel II. Arnold, Jr., for the respondent.
   Barker, J.:

Upon the facts, as reported by the referee, the plaintiff failed to maintain a right of action against the defendant.

The plaintiff’s claim is..this: That at the time of his appointment the defendant was a shareholder in the corporation of which he was receiver, and that there is an unpaid balance due on such shares which the defendant should pay to him, as the representative of the corporation, its creditors and its shareholders.

The defendant disputes this claim of liability to make any further payments on the shares of stock, at one time owned by him, for the reason that before the receiver was appointed he had, in good faith, sold and transferred the same to another person, without any intent to injure or defraud any one interested in the question of the ownership of such shares. That when such sale was made and completed, all prior calls on these shares were paid up and the transfer was in all respects in full compliance with the requirements of the statutes, imposing conditions upon shareholders which must be observed-in.making the transfer, if the then owner and seller of the shares wishes to escape liability for future calls on the unpaid balance of the stock.

It is important to observe and keep in mind the exact nature of this action, in considering the questions which must necessarily be determined in disposing of this appeal. This is an action at law, brought against the defendant as shareholder, based upon the defendant’s promises, and the statutory obligations and liabilities imposed upon shareholders to pay up in full, on such shares of which they may be the owner.

The receiver in this action represents the corporation and its shareholders. In some respects he also represents the general creditors of the'corporation, for the debts due the corporation, which he may collect, will constitute a fund out of which their claims can be satisfied, in full or in part.

But, in no sense is this action to enforce any statutory obligations which the defendant may be under to the creditors of the company, by reason of the provision of the statute placing stockholders under a direct legal obligation to them to pay their debts against the corporation. So it becomes necessary to consider how far the receiver, in his capacity as such, in this action, represents the general creditors •of the corporation.

If, upon the facts of this case, the corporation could not, in its own name and behalf, have maintained an action against the-defendant, before its effects were sequestrated, then the receiver was properly ■defeated in making the demand upon the defendant.

By the provisions of the enabling act, authorizing the formation ■of manufacturing companies, the shares of stock issued-by the corporation are declared to be personal property, and the quality of ■transferability is given them, and it allows the shareholder the privilege of transferring the same to other parties, and when this is done with due observance of the conditions of the act regulating the mode and manner of'transfer, and the same is entered into in good faith, the liability to pay future calls ceases, and the obligation to pay unpaid balances is shifted from the assignor to the assignee.

It' is obvious that it was one off the purposes of the act to permit the shareholders to terminate their membership in the corporation before the company should call in- its entire capital stock, for the right of the company to demand payment of the unpaid balances is limited to such persons as may stand in the relation of shareholders to the corporation.' With this privilege given to a shareholder, he could, at any time, upon observing the conditions of the •statute relating to transfers of stock, terminate his membership and make his estate, vested in the shares, available to himself and .avoid the obligation of investing more money in the corporate ■enterprise.

It is one of the features of business corporations, that the membership will be continually changing and the liabilities which the .-statute imposes upon shareholders will he constantly shifting from -one person to another; and all persons who deal with such corporations must be aware of the fact, and the provisions of the statute and the rules of law applicable to transfers, seek only to protect the public from colorable and dishonest transactions.

- The act, in terms, imposes only two conditions necessary to be observed, to make a valid sale and transfer. By section 8 (chap. 40 of 1848), all transfers are prohibited until all previous calls thereon .are paid up in full or the shares shall have been declared forfeited for non-payment of calls made thereon. When these transfers were made by the defendant to Marshall, all calls theretofore made were paid and satisfied and no forfeiture had been declared by the company.

The act also provides that no transfer shall be valid for any purpose whatever, except to render the person to whom the transfer is made, liable for the debts of the company, until the transfer shall have been entered on the books of the company, as required by section 25, showing by whom and to whom the transfer is made.

The referee finds the facts as to the mode and manner of the transfer, and the time when the same .was- completed, and the character of the entries which were made in the stock-book concerning the same, and it is thus made to appear that the statute in this respect was fully complied with.

A careful perusal of the evidence 'shows that it was sufficient to justify and uphold his conclusions on this subject.

The company opened a stock-book in which an account was kept with the defendant as stockholder, giving his name and place of residence, the number of shares issued to him and when.

On the sale being made, the defendant indorsed the certificates and delivered them over to Marshall, who caused them to be returned to the company and an entry made in the defendant’s account on the following day, stating from whom, when and to whom the transfer was made, and the original certificates were surrendered up to the company and attached to the stubs from which they were taken.

This record was sufficiently complete and fully answered the demands of the statute, and the plaintiff’s argument that the entry in the books of the company is defective in essential particulars is not well taken. From the books of the company as thus kept all persons could, on every day. from the time the certificates were first issued to the defendant until the entry was made recording the sale to Marshall, ascertain, who were the owners and holders of these shares of stock and when they became such owners. The object and purpose of the statute is to give notice to all persons who should be interested in knowing who were the stockholders and when they became such.

Although the provisions of the statute have been literally complied with, the transfer made by the defendant will not be available to him as a protection against liability to the company, its stockholders and creditors, to pay the balance due on the shares which he held unless the transaction was an honest one, entered into in entire good faith, with the intent and purpose of disposing of his entire interest in the shares and surrendering all dominion over them. (Veiller v. Brown, 18 Hun, 571; Sanger v. Upton, 91 U. S. Sup. Ct., 56; National Bank v. Case, 99 id., 628; Sawyer v. Hoag, 17 Wall., 619.)

This proposition is founded upon an equitable construction of the statute and the general rule of law that all transactions are void and unavailable, as against interested parties, which are not honest and entered into in good 'faith.

The referee, in the eighteenth finding of fact, has found that the defendant sold the shares of stock held by him to Marshall in good faith and for a good consideration, and that it was intended to be and was an absolute and unqualified transfer. If this conclusion of the referee is supported by the evidence then the judgment entered upon his report should be affirmed. The rights of the parties altogether hinges on the correctness of this finding.

There are very many facts and circumstances in the history of the organization of this company, the manner in which it conducted its business, the action of its shareholders and officers, and in the mode and manner in which this sale and transfer took place which bear upon each side of this question, and which demand a careful examination, with a view of ascertaining whether the balance of the evidence be with the findings of the referee.

We are of the opinion that the conclusion of fact, reached by the referee is the correct one, in view of all the facts and circumstances disclosed by the evidence, and that the creditors of' the company and the shareholders who would be benefited by upholding a recovery, have no just claim in law or equity upon the defendant.

No reasonable doubt can be entertained but that the defendant himself acted in entire good faith, and that his conduct was honorable and just towards all the members of the company and its then existing creditors. Nor can it be doubted but that he then knew that if the affairs of the company were then wound up it would prove to be insolvent in fact, and that he would be exposed to the liability of making further contributions on his capital stock to satisfy the just claims of creditors. It is also equally plain that, if the other stockholders of the company had discharged all their obligations to him and the company, that he would be exempt from making further contributions on his capital stock, and if the affairs of the company had then been wound up, he would have been entitled to a large return upon the payment he had already made.

The negotiations which were had between the defendant and Marshall extended over a considerable period of time, and, while they were pending, it became known to the officers of the company that he was about to transfer his stock to Marshall, and it was completed in presence of the board of trustees, while they were in actual session. That he believed there was value in his stock equal to the amount which the buyer agreed to pay is altogether manifest and bears on the question of his good faith. Marshall, the purchaser, was the owner and patentee of the patent which this company was organized to operate and he was one of its largest shareholders and the general superintendent of the corporation.

The company, at the time of the sale, had some assets, the amount of which is not directly disclosed, and its mercantile indebtedness amounted to about $13,000.

From the evidence and the report of the referee, it is understood that this means obligations due to persons who were not members of the corporation.

Before the defendant would consent to complete the transactions, he exacted from Marshall that funds should be realized by the company equal to this indebtedness, and used in extinguishing the same, and the friends of Marshall to whom the transfer was made did come forward and loan the company this sum, and it was used to pay off this class of indebtedness.

As also bearing upon the question of the defendant’s honesty and good faith, and that the sale was not intended to be a sham, it may be mentioned that, at the time of this transaction,. $85,000 of the capital stock of the company had been subscribed for, aside from the large amount which was given to Marshall for his patent, and the business which he had established and the property connected therewith, which were transferred to the corporation.

Upon these subscriptions of 'stock only $27,000 had been paid in. Of this the defendant himself had contributed $7,500 upon 100 shares held for him. Some of the other shareholders, Lowry and Trask, who each subscribed for $50,000, had made proportionate contributions upon their stock, and they, at the same time and upon the same ■ terms, sold out their shares to Marshall, the remaining shareholders being chiefly the promoters of the company.

It affirmatively appears, that at least twelve of the other subscribers to the capital stock of the company whose subscriptions in the aggregate amounted to some $60,000, most of whom were the officers and trustees of the company, had made no'payments whatever upon their stock, nor received certificates therefor.

A recovery from the defendant for the unpaid balances due upon the shares of stock which were transferred, would be for the benefit of the creditors of the company, and its shareholders. If an inspection of the evidence discloses that, those ^who are now the creditors and shareholders of the company have no just claim in equity upon- the defendant as a shareholder, it will be a circumstance to be applied with great force in upholding the conclusión that the defendant acted in good faith. It satisfactorily appears, if it cannot be said to be conclusively proven, from the record before us, that none of the -creditors of the company, now existing, held their obligations at the time of this transaction. There is no proof in the case whatever as to the amount of the judgment in the action in which the plaintiff was appointed receiver, or when the debt for which it was rendered was created.

In view of the inquiry made by the defendant through his agents and attorneys when the sale was made to Marshall, as to the indebtedness of the company then existing, and the requirement that it should be paid, it may be fairly presumed that this judgment was not rendered upon any indebtedness then existing. At least it is but a fair demand to make of the receiver that he should show when the debt was created for the judgment in the suit in which he was appointed, before he be allowed to recover from the defendant.

As to one of the demands now existing against the company, there is proof as to when it was created, and in whose favor, reference being made to the judgment existing against the company in •favor of Edward A. Price, Williahi H. Palmer, and George E. Way, which was rendered on confesson on the 3d day of August, 1878, for the sum of $13,000. These persons are the individuals who advanced the moneys required by the defendant to pay off the mercantile indebtedness of $13,000, existing at the time he sold out his stock. It is quite certain that Way, who advanced $3,000 of this sum, and Palmer, the friend of Marshall, who advanced $5,000, were aware at the time the money was loaned by them, that the defendant had sold and transferred his stock to Marshall.

The papers upon their face indicate that the sale of the stock was completed on the twenty-fourth of July, and that the loan made by these gentlemen was not made until the next day, and that, as between these persons, it was understood to be a transaction, so far as the loan was concerned, subsequent to the sale of this stock. As between these judgment-creditorsfand the defendant the confession of judgment itself would seem to be conducive evidence that the loan was made after the sale, for in the body of' the confession it is stated as follows: .

“ Such judgment is confessed for money due to said plaintiffs by said defendants, and the facts out of which said debt arose are that heretofore and on or about the 25th day of July, 1878, at the city of New Y ork, said plaintiffs loaned and advanced to said defendants, at its request, said sum of thirteen thousand dolíais, and that no part of said sum has been repaid to said plaintiffs, but said defendants are justly indebted to said, plaintiffs in the said sum of thirteen thousand dollars.”

This statement is verified by Marshall, the president of the company. In the affidavits he states that the facts and statements in said confession .are true.” In the cash account kept by the company it also appears that the $1$,000 was received oh different days, and all after the twenty-fourth of July, and the checks which were given by Palmer and W ay both passed into the hands of the defendant, and were held by him until he was satisfied that the avails would be applied in paying the then existing mercantile indebtedness. There is no room for contending that so far as this debt is concerned that it existed previous to the transfer. It also appears from the history of the transaction that the sale was made with the approval of the officers of the company. .

Some of the persons who made sale of stock to Marshall at the same time the defendant sold out, were trustees of the company, and upon completing the sale they resigned and Way and others were elected to take their places on the twenty-fifth of July. The president of the company also resigned and Marshall, the defendant’s transferee, was elected in his place on the twenty-fifth, and under his directions the books of the company were written up and the .transaction between the defendant and Marshall entered upon the stock-book of the company. We are unable to detect from the proofs that any person who could claim to be a bona fide shareholder at the time of the transfer was not aware, and directly or indirectly assented to the sale made by the defendant, and desired and was willing that Marshall should become the owner.

From all the evidence these two propositions may be stated as-true; that it does not appear that any of the existing creditors of the company held their demands prior to the sale, and that it does appear that the officers and managers of the company were fully cognizant of the transaction and approved of the same, and that the stockholders, so far as their names are disclosed by the proof, also concurred therein.

For these reasons, we concur in the conclusion of fact found by the learned referee, that the transaction was an honest one, made in good faith, and that an absolute title was vested in Marshall, the purchaser.

The circumstance that the' defendant reserved the privilege, in his contract of sale, to receive and demand payment of the notes in paid-up stock of the corporation to double the amount of the notes, is not controlling that the transfer was not absolute and he ceased to have any control over the same, within the meaning of the rule which has been stated. -As between himself and Marshall, there is no difficulty in holding that the transfer was absolute and that this provision of the contract is executory in its character, being an agreement on the part of Marshall to sell back the stock for the consideration which was named in the contract.

The option was not with Marshall, who purchased and gave his note for the consideration money; and, before there could be an exact compliance with this condition of the contract, Marshall was required to secure paid-up stock ; the shares which were the subject of the sale were not; and, so far as it appears from the evidence, there was not at that time any stock fully and actually paid up, unless it was the stock which had been previously transferred to Marshal] for the rights and property which he transferred to the company. It cannot be said that Marshall held these shares as tjie trustee of the defendant, in view of the tei-ms of the contract of sale, for, if the defendant should call for stock in payment of his notes,, then Marshall would have to invest in cash $2,500 to secure an issue of the shares to be used in paying the notes.

In reaching this conclusion upon this particular proposition that the sale was in good faith, we do so in view of the particular circumstances connected with this case, and the nature and character of the contract between the defendant and Marshall, not intending to infringe upon the general legal proposition that it is essential for the seller of shares, to make the same available and to exempt himself from liability to pay future calls, that the sale should be absolute in terms, and, in fact, without any right in law or equity remaining in the transferer to demand a return of the shares from the transferee, and thus to share in the future prosperity of the corporation. The conclusion arrived at by the referee upon the real issue of fact, being concurred in, no cause of action is made out against the defendant. (Mann v. Currie, 2 Barb., 294; Cowles v. Cromwell, 25 id., 413; Cole v. Ryan, 52 id., 168; Johnson v. Underhill, 52 N. Y., 207; Isham v. Buckingham, 49 id., 216.)

The plaintiff also presents and seeks to maintain the proposition that defendant was at least liable to pay the unpaid balance upon the fifty shares of stock for which he subscribed, for the reason that in • the contract of subscription there is a direct and affirmative promise that he will pay for the stock as called for by the company.

The contract of subscription is in the following words:

“ We, the undersigned, hereby agree with the trustees of the Marshall Packing Company, and with each other, that we will take the number off shares of capital stock of said Marshall Packing Company, set opposite our respective names, and pay for the same at the par value of $100 per share, as follows, viz: Twenty per cent on or before the 10th day of August, 1877, and the balance as called for thereafter by said trustees,”

■The defendant after his subscription, and after the company was fully organized, recognized the existence of this contract by making payments upon the shares as called for by the company, and receiving a certificate for the number of shares mentioned in this contract. This created a legal liability on his part to pay the full amount of his subscription as called for by the company, and such liability continued up to thp time of the commencement of this action, unless the company has released or surrendered up its right of action. (The Phœnix Warehousing Co. v. Badger, 67 N. Y., 294, affirming the judgment of this court, reported in 6 Hun, 293; Dayton v. Borst, 31 N. Y., 435.)

But we are of the opinion that the subsequent dealings between these parties, concerning this stock, has the legal effect to relieve the defendant from his original promise, and to put him on the same footing as the other stockholders who held unpaid stock, and who have entered into no special contract for the payment of the same.

All the proyisions and conditions of the enabling act under which the company was organized, are to be read and considered as a part of the contract, the same as if they were inserted in the agreement. (Small v. Herkimer Co. Mfg. Co., 2 Comst., 330; Dayton v. Borst, supra, 437.)

As we have already stated, it was the obvious purpose of the legislature to confer upon the corporators the right and privilege to make transfers of the stock, and when made, in good faith and upon compliance with the conditions of the enabling act, to shift the promise to pay the uncalled for balance upon the transferee who assumes that liability.

The right of the company to make a demand for the unpaid balances due upon the stock is limited to stockholders as such, and the current of authority is, that when stock certificates of the character of those issued to the defendant in this case have been delivered to the subscriber for the same, he becomes a member of the company, entitled to all the rights and privileges incident to that relation, and that the original promise is merged in the new obligation. Many and onerous obligations are, by the statute, imposed upon stockholders, which are not imposed upon mere subscribers for stock who have not received certificates therefor, and this constitutes a good consideration for a release from his original undertaking.

The case of the Phœnix Warehousing Company v. Badger (supra), is not an authority in support of the plaintiff’s position. In that case, the action was based upon the original promise of the subscriber for the stock, and no stock certificate had been issued to the defendant, who was an original subscriber.

The case of Messersmith v. Sharon Savings Bank (11 Reporter, 444), cited by the plaintiff’s counsel, is not an authority which we should follow. It is a Pennsylvania case, and the provisions of the statute of that State authorizing the formation of corporations are .not before us.

Under our statute the liability of the transferee to pay the uncalled for- balance is made positive and certain. It is this provision of that statute that effects a release to the defendant from the obligation now sought to be continued, and places it upon his assignee.

Without this provision of the statute which has led us to the result stated, it would be difficult to understand upon what principle the defendant could avoid his obligation to the corporation, by transferring his property — interest in the corporation as represented by the stock — to another. But the liability on .the part of the assignee of the stock to pay the unpaid balance, and the company’s assent to the transfer by placing it upon its books, makes its clear to our minds that the company has released the defendant.

As further indicating the assent of the company to this arrangement the certificate issued by the company may be read, wherein it is stated that the stock “is transferable on the books of the company, when made in person, or by the attorney of the holder thereof.”

The company could not, in the face of the facts in this case, sue the defendant on the promise contained in the original subscription paper. By its consent, the stock which made the consideration for the promise, was transferred to another who became directly liable to the corporation to pay future calls. No other intention can be inferred, than that the company intended to ratify the sale and release the defendant from his first undertaking and from all obligations to pay any further calls on the shares transferred. (Curbs v. Cumeul, 25 Barb., 413.)

The judgment is affirmed, -with costs.

Brady, P. J., concurred.

Daniels, J.

(dissenting):

The action was prosecuted for the recovery of the sum of $2,500 unpaid upon 100 shares of the capital stock of the Marshall Packing Company of New York city, issued to the defendant. Fifty of these shares were so issued on the 10th day of November, 1877, and the remaining fifty were issued to him on the thirtieth day of the same month. These shares were all sold to William C. Marshall, by the defendant, on the 24th day of July, 1878. At that time there were no unpaid calls upon them, and.as the referee found the sale to have been made in good' faith, he directed judgment in favor of the defendant. And assuming his conclusion to have been warranted by the evidence, he was justified in giving such a direction as to the fifty shares last issued to the defendant,' for they were purchased by him without in any form incurring further liability to the corporation than that which is ordinarily to be inferred from a purchase,of corporate stock. And the rule has become reasonably well settled that a sale in good faith of such stock will discharge the vendor from further liability for the purchase-price to the company. (Mann v. Carrie, 2 Barb., 294; Cowles v. Cromwell, 25 id., 431; Cole v. Ryan, 52 id., 168; Isham v. Buckinghami, 49 N. Y., 216; Seymour v. Sturgess, 26 id., 134; Veiller v. Brown, 18 Hun, 571; Johnson v. Underhill, 52 N. Y., 203; McCullough v. Moss, 5 Denio, 567; Penobscot, etc., R. R. Co., v. Dummer, 40 Me., 172.)

But as to the fifty shares first issued to the defendant, this case is distinguishable from those to which reference has been made. For it appeared that in the summer of 1877, the defendant entered into a formal agreement under which he subscribed for those fifty shares.

.This-agreement was in the following form :

We, the undersign id, hereby agree with the trustees of the Marshall Packing Company and with each other that we will take the number of shares of capital stock of the said Marshall Backing Company set opposite our respective names, and pay for the same at the par value of $100 per share as follows, viz.: Twenty per centum on or before the 10th day of August, 1877, and the balance as called for thereafter by the said trustees. It is understood that the capital stock of the said company is $250,000, divided into 2,500 shares of $100 each.

It is also understood and agreed that the first installment of twenty per cent shall not be due and payable until 500 shares of the capital stock have been subscribed for.

It is also understood and agreed and these subscriptions are made on the condition that a committee, to be chosen by the subscribers to the capital stock from their own number, to which committee shall be added all individual subscribers who may desire to act upon it, shall, after thorough investigation, make a favorable report of the prospect of said company.

On the making of such favorable report by the said committee, these subscriptions and this agreement shall be binding and of legal force and effect, but otherwise shall be void.

And it was accepted by the corporation, and the fifty shares of stock subscribed for under it were, in accordance with its terms, awarded to the defendant. So far as the agreement was dependent upon the conditions or stipulations contained in it, they were shown to have been performed, and after the stock was issued to the defendant, he made payment upon its purchase-price. This certainly rendered the agreement a legally binding instrument upon him. (Troy Turnpike, etc., Co v. McChesney, 21 Wend., 296; Sagory v. Dubois, 3 Sandf. Ch., 509; Lake Ontario, etc., R. R. Co. v. Mason, 16 N. Y., 451; Phoenix Warehousing Co., ete., v. Badger, 67 id., 294; Buffalo and Jamestown R. R. Co. v. Clark, 22 Hun, 359; affirmed, see 87 N. Y., 632.)

The liability of the defendant for the purchase-price of the fifty shares issued under this agreement is not, therefore, dependent upon the mere fact that he became the owner of these shares of the capital stock of the company, but it is to be derived from the terms and nature of this instrument, and for that purpose it is to be construed and enforced as other express contracts are which may be entered into by one party with another. (Bucksport, ete., R. R. Co. v. Buck, 65 Me., 536; Boston, etc., R. R. Co. v. Wellingtony 113 Mass., 79.)

And, as so construed, the agreement imposed an absolute and' unqualified obligation upon the defendant to pay the par value of $100 for each of the fifty shares of stock issued to him upon his subscription. By the terms of the instrument, he unqualifiedly agreed to make such payment for these fifty shares, twenty per cent of the sum to be paid on or before the 10th day of August, 1877, and the balance as called for thereafter by the trustees. The instrument contained no stipulation whatever, either expressed or to be implied from anything contained in it, under which he could claim to be exonerated from this self-imposed liability upon the sale of the shares whose price he so obligated himself to pay. Its force and effect was in no respect less than that of a note or bond, delivered to the company upon an adequate consideration, for the payment of an equal amount of money. And, although such an instrument might be entered into to pay the purchase-price of corporate shares, the party executing it would be liable to make such payment according to the terpis of his obligation, and no good reason can exist for distinguishing the obligation expressed in this instrument from one which might be made in that manner. It was founded upon a legal consideration, and in equally as positive terms bound the defendant to pay the sum of money mentioned in it.

The statute authorizing the transfer of the stock, contains no provisions relieving its owner, after it may have been transferred, from the force or effect of such an- agreement. It merely regulates the manner in which the shares themselves may be transferred from one person to another (2 R. S. [6th ed.], 509, § 60), without containing any provision or declaration that the transfer shall produce any change' whatever in the measure of liability created by such an instrument as was subscribed by the defendant. And no provisions appear to have been contained in. the by-laws of the company which, by any possible rule of construction, can be attended with the consequence of relieving the defendant from the liability expressly incurred by him by the terms of this agreement. If the company had, in any form, entered into an agreement with the purchaser of the shares accepting his liability for their unpaid price in place of that of the defendant, the case would have been different, but it did- not. The sole agency it had in the transaction was to permit the shares issued to the defendant to be surrendered, and to issue others in lieu of them to the purchaser. It did no act, and entered into no arrangement' contemplating the. release or discharge of the defendant from the obligation he had entered into by the terms of this agreement. And the result must, be under the rules of law applicable to contracts, and from which, this cannot be made an exception, that the defendant continued liable under his agreement, notwithstanding the fact that he had sold the shares which he purchased under it, for it was not in his power to relieve himself from the payments he had expressly agreed to make by simply transferring the property, the price of which he had become liable to pay, to another person. And the transaction through which the sale itself was made, indicates that to have-been the view entertained both by the seller and purchaser, for the defendant at that time was careful to take the covenant of Marshall, by which he undertook to indemnify and save him harmless “ of and from all claims, demands and liabilities existing at the time of the delivery hereof against said corporation, and for which he may be responsible by reason of his having been a stockholder therein, and also of and from all calls and assessments on said one hundred shares.”

That a transfer of the shares themselves would not relieve the defendant from this obligation, was very clearly intimated in Schenectady, etc., Plankroad Company v. Thatcher (1 Kernan, 102, 113). But as the shares .which were there the subject of consideration were transferred after the calls upon them had been made, the determination of this point was not required for the decision of the case.

In Messersmith v. Sharon Savings Bank (11 Reporter, 444), this precise point seems to have been presented to the Supreme Court of Pennsylvania, and it was held that a transfer of the shares did not discharge the vendor from his legal obligation to pay for them created by such an agreement. A principle analogous to this has also been applied to the assignments of leases and the conveyance of real property encumbered by mortgage, where the circumstance of the assignee, or grantee, having assumed the liability has never been supposed in and of itself to relieve the party who has expressly obligated bimself for the payment of the same debt. (Burr v. Beers, 24 N. Y., 178.)

This is no more than the general principle of law applicable" to the liability of contracting parties, for they are not allowed to discharge themselves merely by subjecting another person to the obligation of performing their contracts. (1 Parsons on Con. [6th ed.], 217, 221, note h.)

No authority has been found warranting the conclusions that the defendant did not remain liable according to the terms of the contract which had been executed by him. But the result of the legal principles under which agreements are enforced is that he still remained liable to the company although he had parted with the property purchased by him. If this had been property of any other description and he had sold it, taking from the purchaser his agreement to pay the debt, it would not have been contended that the transaction would discharge him from liability to pay the price, as he had previously undertaken to do it. And the principle preventing that would appear to be equally as applicable to and controlling over the present action. To the extent of the unpaid purchase-price of this stock the defendant still continued to be liable, and the receiver of the company was entitled to enforce that liability in the present action.

When the stock was transferred the company was embarrassed, owing the sum of about $13,000 over and above its available assets, and that fact appears to have been known to the defendant who was, at the time, one of its officers. The persop to whom the sale was made was not himself in solvent circumstances, unless the affairs of the company should afterwards prove to be prosperous, wdiich they did not, for it soon failed, and the adjustment of its affairs became necessary through the intervention of a receiver. But, as the defendant himself, testified that he was not aware of Marshall’s precarious financial condition when the stock was sold to hipa, the referee concluded the defendant could not be held liable in the action, although he sold his stock for fifty per cent of its par value and reserved the right to take payment upon the notes delivered to him for the purchase-price in paid-up stock of the same company at this rate. It is not necessary to consider whether ■ the referee properly concluded from this and the other circumstances in the case that this was a sale in good faith; for the reason that his conclusion as to the effect of the sale of the fifty shares obtained on the express agreement to pay for them by the defendant cannot be sustained. That, of itself, in view of the slender evidence from which the controlling inference of the referee was drawn, requires that there should be another trial of the controversy involved in this case. The judgment should, accordingly, be reversed, and a new trial ordered, with costs to abide the event.

Judgment affirmed, with costs.


source: Caselaw Access Project

author: Daniels, J.: Barker, J.

license: Public Domain

text:
    J. MONROE TAYLOR, Respondent, v. JOSEPH H. RISLEY, Appellant.

      Contract — one who prevents the performance of it cannot sue for the bi'each caused by his own act — Stipulated damages — when a sum named in the contract asa forfeit for its breach is to be treated as.

    The defendant agreed to deliver to the plaintiff at Brooklyn a certain quantity of yellow pine timber to be obtained from Fernandina, Florida, or other suitable port. In an action brought by the plaintiff to recover damages for a failure to deliver the lumber the defendant alleged in his answer that being unable to obtain the lumber from Fernandina, by reason of the prevalence of yellow fever there, he entered into negotiations with one Bacon, of Savannah, Georgia, for the purchase of the requisite lumber, and would have succeeded in purchasing and delivering it so as to have made a profit of $500 on his contact but for the interference of the plaintiff! That the plaintiff learning that the defendant was negotiating with Bacon for the lumber, for the purpose of preventing the defendant from purchasing it induced Bacon to decline and refuse to sell it to the defendant, whereby the latter was rendered unable to deliver any portion of the lumber to the plaintiff as he had agreed to do.

      Held, that the facts stated in the answer would, if proved, have defeated the action, and that the court erred in refusing to allow the defendant to prove them. (Barker, J., dissenting.)
    When a sum of money provided by a contract to be paid as a forfeit upon the breach thereof is to be considered as a penalty and when as liquidated damages, considered by Barker, J.
    Appeal from a judgment in favor of the plaintiff entered on the verdict of a jury, and from an order denying a motion for a new trial made upon the minutes of the justice before whom the action was tried.

      The action was brought upon a written contract for the sale and delivery, by the defendant to the plaintiff, at Brooklyn, of a large quantity of yellow pine timber; the pieces* to be in accordance with the schedule attached to the. contract, to be used by the plaintiff in the construction of a building for manufacturing purposes. The purpose for which the timber was to be used being clearly indicated in the contract and schedules. The plaintiff’s recovery was for the sum of $300 and interest thereon as stipulated damages. The clause in the contract relating to damages was as follows: “The party of the second part .agrees to deliver óne-half of the required amount of timber on or before the aforesaid twenty-fifth of October, and the balance as soon thereafter as practicable so as not to delay the progress of the work of the building. for which the timber is intended; and it is hereby agreed by both parties aforesaid that should the party of the second part not deliver as before called for, that he is to forfeit unto the party of the first part the sum of three hundred dollars as damages unto the party of the first part.”
    The defendant did not deliver any part of the lumber which he undertook to supply. The exact quantity of timber is not mentioned in the agreement or disclosed by the proofs, but by an inspection of the contract and the schedules it appears that the quantity was between 250,000 and 300,000 feet. The plaintiff gave proof tending to show that he jiad suffered damages from the non-delivery of the lumber, in an amount largely beyond the sum claimed as stipulated damages. Upon the trial the defendant offered to prove the facts set forth in his third defense, which is set forth in the opinion of Daniels, J.; this evidence was excluded by the court as immaterial, and the defendant excepted.

      John E. Risley, for the appellant.

      Re Witt O. Brown, for the respondent.
   Daniels, J.:

By the judgment from which the appeal has been taken the defendant has been held liable for stipulated damages fixed by a contract entered into between himself and the plaintiff. . By the terms of this contract he became obligated to deliver to the plaintiff a eertain quantity of yellow pine timber to be obtained from Fernandina, Florida, or other suitable port. He was unable to obtain it from Fernandina, because of the prevalence of yellow fever at that place, and to excuse himself from liability upon the contract, which he did not in fact perform, he proposed upon the trial to prove all the allegations contained in the third defense stated in the answer. This was objected to as incompetent, and as ^instituting no defense. The objection was sustained, and to that ruling an exception was taken on behalf of the defendant. This third answer was in the following terms:

That upon the stoppage of the mills at Fernandina, as hereinbefore set forth, he entered into negotiations with one Bacon, of Savannah, Georgia, for the purchase and delivery in Brooklyn to the order of the defendant of certain quantities and descriptions of timber and lumber, which he, the said Bacon then had, and that he would have succeeded in purchasing the same from said Bacon, but 'for the interference and acts of the plaintiff as hereinafter set forth, and that thereupon and thereby the defendant would have been enabled td deliver, and would have delivered to the plaintiff the timber and lumber in said agreement mentioned within the time therein specified, and would thereby have made a profit out of said transaction of at least $500.

That the plaintiff learning that the said Bacon had said timber and lumber on hand, and that the defendant was negotiating for the purchase of the same, to enable him, the defendant, to comply with the terms of the said agreement between plaintiff and defendant, for the purpose of preventing the defendant from suoeeeding in said negotiation, he, the ■ plaintiff, opened negotiations with said Ba-vn, and so wrought, upon said Baoon as to induce him to decline and refuse to sell said timber and lumber to defendant.

That by said acts of the plaintiff, defendant was unable to deliver any portion of said timber or lumber to the plaintiff, on or before the 25th day of October, 1877, and was thereby prevented from making a profit out of said transaction of at least $5Q0, to his damages in the sum of $500, which said sum was due to jjhe defendant at and before the commencement of this action, and which is still unpaid.

By this answer it was alleged, and the defendant proposed to prove the truth of the allegation, that the plaintiff, for the purpose of preventing him from obtaining the timber at Savannah, entered into negotiations for the purchase of it himself from the person having it, and induced him to decline and refuse to sell such timber and lumber to the defendant. By this interference of the plaintiff he prevented the defendant from performing his contract, and his acts, attended with that result, were stated to have been actuated with the intention of preventing such performance. Under the settled principle of law, which is no more than the principle of fair dealing, this excused the defendant from delivering the timber as he had agreed to by the terms of the contract in the case. The law will not permit a party who has become entitled to the performance of an agreement by another so to intervene as to prevent such performance being made, and then on the basis of such failure to claim damages against the party prevented, because of his omission to perform his agreement. (Fleming v. Gilbert, 3 Johns., 528, 531; Stewart v. Keteltas, 36 N. Y, 388, 390; Dexter v. Norton, 47 N. Y., 62; Borden v. Borden, 5 Mass., 67; Marshall v. Craig, 1 Bibb., 379,; Shaw v. Hind, 3 id., 371.)

If the proof offered to be made under this'division of the defendant’s answer had been received, it would have constituted a legal defense against the plaintifE’s claim, for it would have entitled the defendant to the full benefit of this well settled, legal principle. The judgment and order denying the motion for a new trial should, therefore, be reversed and the verdict set aside, and a new trial ordered, with costs to the defendant to abide the event.

Brady, P. J., concurred.

Barker, J.

(dissenting):

The defendant has not performed his agreement as set forth in the written contract. The plaintiff seeks to recover the damages he has sustained by reason of such non-performance. On the trial he was allowed to recover the sum of $300, as agreed upon by 'the parties, as the amount of his damages, which he might recover in case the defendant failed to keep and perform the contract on his part. The controversy is, whether the contract, in view of the language used therein on the subject of damages, together with the attending facts and circumstances, manifests the intention of the parties at the time the agreement was made and concluded, and as a part of the same, to consider and determine the same as liquidated damages.

The law permits parties to agree upon the damages beforehand, which the party in default shall pay; and when the bargain takes the form of a complete agreement, based upon a good consideration, and is free from all fraud on the part of the party who seeks to enforce the stipulation, then this part of the contract is upheld, and specifically enforced in an action at law, by permitting a recovery for the sum mentioned as damages.

Our only duty is to interpret the agreement before us and determine whether it was the intention of the parties to fix upon a sum as the plaintiff’s damages, in case the defendant did fail to carry out his agreement. The general rule of law on this subject is stated in Little et al. v. Banks (85 N. Y., 258), and we intend to adhere to the principles of construction there suggested and apply the same to this ease, and not seek to reconcile our own conclusions with many of the reported cases on this subject, as that would seem to be quite impossible.

In the case referred to the opinion states: The question presented has been the subject of frequent consideration in the courts, and considerable embarrassment has been experienced where contracts contained severe and inequitable provisions, in an effort to reconcile the principles of justice with the well settled rule, that every person has the right to make such a contract as he chooses, and that the courts are bound to enforce it. The difficulty referred to has led to the adoption of the rule that in the construction of such a provision, the actual intention of the parties, so far as it can reasonably and fairly be ascertained from the language of the contract, and from the nature of the surrounding circumstances of the case, is to be considered. (Colwell v. Lawrence, 38 N. Y., 71; Cotheal v. Talmage, 9 id., 551; Noyes v. Phillips, 60 id., 408; Lampman, v. Cochran, 16 id., 273.) This intention cannot be entirely determined by the use of the word ‘ penalty,’ or of the words liquidated damages.’ (Colwell v. Lawrence, supra; Staples v. Parker, 41 Barb., 648; Beale v. Hayes, 5 Sandf., 640.) Nor is the word ‘ forfeit ’ conclusive (Noyes v. Phillips, supra) as to such intention. It must be arrived at in view of the circumstances of each particular case.”

The Iangugage used by the parties themselves would seem to convey, to the common mind that it was their intention and purpose to agree upon a fixed sum which the defendant should pay to the plaintiff if he did not deliver the lumber at the time and place mentioned in the contract.

Their language is, “ and it is hereby agreed by both parties, that should the party of the second part not deliver, as before called for, that he is to forfeit unto the party of the first part the sum of three hundred dollars, as damages unto the party of the first part.”

This part of the contract is mutual in terms, it relates to the subject of damages, and it is difficult to resist the impression which it makes on the mind, that the defendant was to pay the sum mentioned to the plaintiff, if a breach of the contract occurred on his part. As it has been held by some of the authorities that this language is not necessarily conclusive,, as to the real intention of the parties, the 'nature and character of the contract and the circumstances under which it was to be performed, should also be considered, in seeking to ascertain the mind and purpose of the contracting parties, in inserting a clause of this character in their agreement.

The timber contracted to be delivered under this instrument was to be of particular dimensions, suitable to be rrsed in a building ' which the plaintiff was constructing. In case of non-performance on the part of the defendant, it would be difficult to ascertain by pi’oof the damages which the plaintiff would sustain. They might be, and were likely to be, much beyond the difference between the contract-price and the market value of the lumber, at the time and place fixed upon for delivery.

As the defendant knew that the timber was to be used by the plaintiff for a special purpose, and that he had made arrangements for its use in a building which he was erecting, the defendant would be liable for special damages arising to the plaintiff, by reason of a non-performance in the delivery, and it would seem that he would be interested and have a motive for having the damages stipulated, and not expose himself to the risk of paying a greater sum, if he failed to perform.

It occurs to us that there is another strong and manifest reason, which would induce the defendant to enter into a contract, fixing the measure of damages, that is the length of time that was to elapse between tbe making of the contract and its complete performance, being a period of over two months, he did thus protect himself against the rise in the market, which might have occurred in the intermediate time. The sum mentioned is so small and moderate, in view of the quantity of lumber to be delivered and the aggregate amount of the contract-price therefor, that it indicates very clearly that the parties intended to make it the measure of damages, in this instance, and that it causes no injustice or hardship in taking that view of the contract.

The plaintiff was not a merchant on the market, buying goods to resell for a profit, but a purchaser of material to be used in his own business, and was interested in the prompt and strict performance of the agreement in every particular; and it seems to us to have been a reasonable act of prudence and discretion on his part to exact from the defendant a direct and unequivocal promise that, if he failed to perform his agreement, that he should have a .certain sum of money as his indemnity, and not be subjected to the annoyance and uncertainty of producing extraneous proof of th.e market value of a particular kind of lumber. The slightest advance in the market value of the lumber would be greater than the sum stipulated as damages.

.In this case, we find that the attending facts and circumstances are of the same nature and character as those which are usually taken by the courts as indicating that the language used by the parties in the contract was with the intention of fixing and determining the damages in case of non-performance. (Little et al. v. Banks, supra; Noyes v. Phillips, Id.)

Unless it is held that the clause in relation to damages was inserted by the parties with the intention and for the purpose claimed by the plaintiff, then the provision is wholly without effect and serves no purpose as a protection to the defendant in limiting the amount of the recovery whicfi might be had against him in an action upon the contract for non-performance.

If the sum stated should be held to be a penalty only, it being inserted in an agreement between the parties themselves and relating wholly to their own obligations, the plaintiff would have a right of election, in case of non-performan ee by the defendant, as to the nature of the action he' would prosecute. He could disregard the penalty and sue for a breach of the contract, and in such an action would be at liberty to recover all the damages he could prove he had sustained, although the amount should exceed the sum named as a penalty. Parties are not released from performing their agreement by inserting a penalty for non-performance, when mentioned in an agreenxent of this character. (Noyes v. Phillips, 60 N. Y., 408; Harrison v. Wright, 13 East, 343 ; Thompson v. Rose, 8 Cow., 266.) In the latter case it was held that a party suing for damages was,not limited to the penal sum mentioned in contracts of this nature, but that the principle applied only in cases of surety and bonds conditioned for the payment of money only.

Therefore, parties having a right of action upon contracts of this character generally elect to sue for a breach of the contract 'and recover all the damages that they are entitled to by the rules of law and do not count for the penalty, for if a resort should be made to that form of action they would be limited in the amount of recovery to the penalty, and • also be required to prove the damages sustained, which could not exceed the amount of the penalty.

The defendant offered to prove that immediately after entering into the contract the defendant contracted with a party in Fernandina to manufacture the- lumber called for by the contract, and engaged suitable vessels to transport the same to the city of New York, and that after a portion of the lumber was sawed and ready for shipment yellow fever broke out in the city of Fernandina and the manufacturer and all his hands were stricken down with that disease, and work was suspended and the port of Fernandina closed so as to prevent the shipment of lumber from that port to New York until the middle of November. The evidence offered was objected to, the objection sustained and the defendant excepted. The defexxdant insists that these facts and circumstances excuse his non-performañce and is a bar to the plaintiff’s recovery.

As the conti’act was not in terms for the sale and delivery of particular lumber then in existence, but the same was to be thereafter manufactured, and the defendant was not required to furnish the same when manufactured from Fernandina, or any other particular port, the causes of non-performance suggested in the offer furnish xxo excuse to the defendant for a breach of his contract. (Booth v. Spuyten D. R. Mill Co., 60 N. Y., 487; Harmony v. Bingham, 12 id., 99; Tompkins v. Dudley, 25 id., 272.)

The defendant seeks to be relieved from a performance of his contract, because the plaintiff interfered with its execution as set forth in his third answer. It is not pretended that the plaintiff has done, or omitted to do, any act which is in violation of any of the terms of the contract, either express or implied.

In support of his argument on this question he relies on the general precept of the law, which is applicable in all cases whatever, that a promisor will be discharged from all liability when the nonperformance of his obligation is caused by the act or fault of the other contracting party. (2 Pars, on Con., 676.)

This proposition would be available to the defendant as a defense to a recovery, if the plaintiff has done any act of an unlawful or wrongful character which is actionable in and of itself, having the direct and natural effect of preventing or interfering with the performance of the contract on the part’ of the defendant, such as destroying lumber belonging to the defendant suitable to be delivered under the contract, and intended so to be, or destroying the mills at which the timber was to be manufactured, or the vessels in which it was designed to transport the same. Such acts and interferences on the part of the plaintiff would prevent him from maintaining an action based upon the defendants non-performance.

. But mere misbehavior on the part of the plaintiff, and censurable conduct, not wrongful and actionable in the eyes of the law, and which among fair-minded men is regarded as an interference in the business of others, exhibiting ill feeling and indicating an unfriendly spirit, cannot be inquired into, and made an excuse for the nonperformance of the engagements of the contracting party so disturbed and annoyed. Such we regard to be the nature and character of the plaintiff’s acts of interference as set forth in the answer, and which the defendant offered to prove. For aught that was averred, the things said and done were truthful and proper things for the plaintiff to say and do under the circumstances.

It is averred that the plaintiff did interfere with the making and concluding of a bargain between the defendant and Bacon, the lumber merchant of Savannah, with the intention on his part of preventing the defendant’s being able to execute his contract and deliver the lumber as agreed. This would not constitute a defense, .unless the act of interference was. such as could be denominated wrongful and actionable in law. For the plaintiff could, without furnishing an excuse to the defendant, for non-performing his contract, have entered the market in Savannah and negotiated with lumber merchants for the same material that the plaintiff contemplated purchasing, and conclude a bargain in his own behalf, although his intentions were to annoy and prevent the defendant • from executing the contract, yet it would not relieve him from that obligation. As the defendant limited his offer to proving the facts set up in this connection in his answer, there was no error in overruling the same.

The questions which we have considered embrace all the allegations of error set forth in the hill of exceptions.

The judgment and order appealed from should be affirmed, with costs.

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


author: Brady, P. J.:

text:
    THE PEOPLE OF THE STATE OF NEW YORK, Respondents, v. MICHAEL E. McGLOIN, Appellant.

      Bvidence — when the confession of a prisoner made to an officer is admissible against him— Code of Criminal Procedure, secs. 198, 199 and 300 — A person convicted and sentenced for a crime is a competent witness— Code of Civil Procedure, sec. 833, as amended by chapter 543 of 1879.
    An inspector of police, upon arresting one accused of murder, told him who he was; that he had seen him attempt to steal a barrel of whisky the night before, and that he knew about the pledging of the pistol with which the murder was committed. • He made no threats and held out no inducements to lead the prisoner to make a statement. The prisoner having said he would make a statement, a coroner was sent for, who informed him that he had the privilege and right either to make a statement or not. The prisoner then made a statement and confession under oath.

      Eeld, that it was properly received in evidence upon his trial, under section 395 of the Code of Criminal Procedure.
    Sections 198, 199 and 300 of the Code of Criminal Procedure apply to an examination before a magistrate for the purpose of ascertaining whether or not'a , crime has been committed, and not to any proceeding before a coroner.

      Under section 832 of tlie Code of Civil Procedure, as amended by chapter 542 of 1879, providing that a person who has been convicted of a crime or misdemeanor is, notwithstanding, a competent witness in a civil or criminal action or special proceeding, a person convicted and sentenced, as well as one convicted only, is a competent witness.
    Appeal from a judgment of the Court of General Sessions for the city and county of New York, convicting the appellant of murder in the first degree.

      William, F. Howe, for the appellant.

      John H. Fellows, for the respondent.
   Brady, P. J.:

The prisoner was indicted for the commission of the offense of murder in the first degree. There were two counts in the indict: ment. The first charged the killing of one Hanier while the prisoner with others was engaged in the perpetration of a felony; the second count charges that the prisoner with other persons having, on the 30Jh of December, 1881, made an assault upon the person of the deceased with a pistol loaded with powder and ball, and with a deliberate and premeditated attempt to kill Hanier, and in pursuance of such deliberate and premeditated intent did kill him. On the trial proof having been given tending to show the commission of the burglary in which the prisoner had participated, and of circumstances also tending to establish the fact that the prisoner while so engaged fired the fatal shot, a statement made by him before one cf the coroners of this city was offered in evidence. This statement is a confession of the crime of burglary and the shooting of the deceased by him. Its reception in evidence was objected to on his behalf upon the ground that it had been obtained by threats and improper influence, and was not in conformity to the provisions of , the statute in reference to statements made before magistrates.

It appeared in regard to it that the prisoner was arrested by Inspector Byrnes, to whom he said that he did not know what he was charged with, whereupon he was told that he was charged with the shooting of Louis Hanier. He was then asked by the inspector if he knew who he was, and was told by the latter that he was an inspector of police. The inspector then said: “ 1 told him I saw him do several things, and try to steal in South Fifth avenue the night before I arrested him. I told him I had been watching him since the shooting and saw him in company with a man. named Healy, and saw him try to steal a barrel of whisky the night before I arrested him.” He also said : “I told him-about the pledging of the pistol ” (that is, the pistol with which the shooting was done). In answer to a question by the court, “ Did you make any threats to this man?” Inspector Byrnes said, “No, I did not.” He was then asked by the recorder, “ Did you hold out any inducement to him?” and he answered, “No, sir, I did not; not any;” and, further, “You merely stated what you did?” and he replied, “Yes, sir;” and, further, “And that you were an inspector of police?,” and he replied, “Yes, sir.” The inspector then further testified: “ McGloin said he would make a statement; I said I would send for Coroner Herrman to take it.” And it appears by the statement that McGloin was informed by Coroner Herrman of the matter which was before him, and that he had the privilege and right either to make a statement or not. It also appears by his confession that the coroner called his attention to the fact that he should consider well before he made a statement as he would ask more . from him regarding the shooting of Hanier. It does not appear, however, from the statement itself that any questions whatever were asked by the coroner.

The statement which is contemplated by the statute is regulated by the provisions of the Code of Criminal Procedure, sections 198, 199 and 200. But these provisions apply to an examination before a magistrate for- the purpose of ascertaining whether or not a crime has been committed, and not to any proceeding before a coroner. The statement, therefore, cannot be declared to have been taken under or in reference to these provisions; indeed, it must be regarded as entirely extra judicial. It is -governed and controlled, therefore, in its value and effect by section 395 of the Code of Criminal Procedure, which provides that a confession of a defendant, whether in the course of judicial proceedings or to a private person, can be given in evidence against him, unless made under the influence of fear produced by threats. Whatever may have been the rule prior to the enactment of this section, the law of this State is now settled by its features because the, objection to the confession is limited, it would seem, to the proposition that it was made under the influence of fear produced by threats.

In this case it is quite evident that no threats were made and no inducements held out. Inspector Byrnes advised the prisoner that he had been watching him and knew of certain acts that he had committed, and that is all; and the prisoner before he made his statement was duly advised that he was under no obligation to make it, and that he should consider well before so doing. There seems to be no doubt that a confession under such circumstances would have been admissible prior to the enactment of the statute to which reference has been made.

It was declared in the case of Cox v. The People (80 N. Y., 515), that it was not sufficient to exclude a confession by a prisoner that he. was under arrest at the time it was made, or that it was made to the officer in whose custody he was, or in answer to questions put by him, or that it was made under hope or promise of a benefit of a collateral nature. In that case the officer who made the arrest said to Cox, “ You’re in a bad fix;” which was substantially what Inspector Byrnes said to the prisoner here, when he informed him that he had been watching him and knew of certain acts of his, including the pawning of the pistol with which the fatal shot was fired.

But the section in the Code of Criminal Procedure, in phraseology at least, limits the objection to a confession to the ground simply that it was made under the influence of fear produced by threats; and therefore no matter what may have been the rule heretofore, as already suggested if the confession was not the result of fear produced by threats, or it may be by inducements held out, if the statute should ultimately be so construed, it may ' be admitted in evidence against the prisoner. For these reasons it is considered that this objection to the reception of the confession was properly overruled.

It was also urged against the reception of the confession that it was one to which the prisoner had been sworn and which made it, it was contended, particularly objectionable under the authorities. The learned counsel for the prisoner seems to treat the. confession as a statement made by a witness upon an examination in a proceeding before a magistrate. ¥e have seen that this view cannot be sustained. It was not taken during the ordinary investigation which, takes place before a coroner as to a death and its cause, nor was the prisoner a witness. Not only that, but he knew the offense of which he was charged and made the statement after being advised of it, and voluntarily.

In the case of Teachout v. The People (41 N. Y., 7), the subject of verified statements was considered and questions relating to them determined, and it was held that tbe statement of a person advised that he was charged with an offense and made when examined as a witness, might be given in evidence against him, notwithstanding that it was made under oath and in a proceeding which related to the crime itself. If the confession, therefore, should be regarded as the .prisoner’s statement upon the stand as a witness, after having been advised, as he was, of the charge made against him, it would have been admissible on the authority of the case cited, and the exception founded on the proposition just considered is therefore unavailable. The objections to the admission of the confession thus considered were properly overruled for these reasons and the confession itself properly admitted in evidence.

' It is also urged'on behalf of the prisoner that the testimony of one Frederick Banfield, who had been convicted and sentenced for the commission of a felony and had not been pardoned, should not have been received in evidence, although no objection was made on the part of the prisoner to his examination or to the testimony which he gave. His evidence related to statements made by the prisoner to him affecting, the question of his guilt. The objection rests upon the section of the Eevised Statutes which declares that a person who is sentenced for the commission of a felony shall not be competent to testify in any cause, matter or proceeding, civil or criminal, unless he be pardoned by the governor or by the legislature, except in cases specially provided by law. (3 R S. [Banks’ 6th ed.], 994, § 43.) By chapter 448, Laws of 1876, section 832, it was declared, however, in antagonism to this section, that a person convicted of ' a crime or misdemeanor is, notwithstanding, a competent witness, but the conviction may be proved for the purpose of affecting the weight of his evidence, and a doubt having arisen as to whether the section applied to criminal prosecutions, the legislature, in 1879, in order to remove it (see chap. 542, Laws of that year), amended the section by adding after the words competent witness,” the words “ in a civil or criminal action or special proceeding.” The same provision is contained in section 714 of the Penal Code, passed in 1881.

The witness objected to had not only been convicted, but sentenced, and the counsel for the plaintiff in error thinks, because of the latter incident, the provisions of the Eevised Statutes referred to apply, and not those of the Code. He contends that the legislature not having, in express words, repealed them, intended, by leaving them thus unrepealed, to make a distinction between criminals convicted and sentenced, allowing the former to be witnesses and the latter not.

This view, assuming that the plaintiff in error has the right to-present the question involved for consideration, cannot be sustained. It is the conviction and not the sentence which creates the objectionable event in the life of the witness and is the primary cause of his disqualification. A person convicted might not be sentenced before being called as a witness, either because of delay in the performance of that ceremony, or because of the suspension of judgment. The sentence is the result of the conviction and pronounced as a punishment for the crime committed, and is therefore secondary in its nature. The greater includes the lesser. The provision of the Eevised Statutes is repealed by implication, because it and that in the Code are utterly inconsistent with each other.

It would be absurd to hold that the legislature intended to absolutely disqualify as a witness a person who was sentenced for the commission of a crime, and to preserve his qualification if only convicted. The legislation of 1876 and 1879 was designed to affect the existing rule on the subject and to abrogate it (see note to section 832 in Throop’s Code [ed. 1877]); and it -may well be, if the matter were at all considered in the respect mentioned, that the conviction was regarded as the first and most salient, and therefore controlling incident in the element of disqualification, as it certainly is. For these reasons it is thought that the evidence of Banfield was properly received.

It is further contended that there should be a new trial by reason of the refusal to grant a request to charge. The first count of the indictment, as we have already seen, charged the defendant with having committed a felony, and whilst so engaged, with having killed the deceased.

Section 895 of the Code of Criminal Procedure provides as follows : “ A confession of a defendant, whether in the course of judicial proceedings or to a private person, can be given in evidence against him unless made under the influence of fear, produced by threats, or unless made upon a stipulation of the district attorney that he shall not be prosecuted therefor ; but it is not sufficient to warrant his conviction without additional jyroof that the crime charged has been committed.”

In reference to which the prisoner’s' counsel requested the court to charge:

That in order to convict under the first count' of the indictment, the jury must be satisfied beyond reasonable doubt! 1st. A burglary or larceny was committed by the prisoner. 2. That whilst so engaged in the commission of either or both of said offenses the prisoner killed the deceased. Before the jury can consider the proposition as to killing whilst in the perpetration of a felony, they must find that there was evidence, exclusive of the confession of the prisoner, that the felony had been committed; that the prisoner’s alleged confession is not sufficient' to warrant the jury in finding affirmatively that the offense of • burglary or grand larceny, or both of said offenses, had been committed without additional proof on that subject.”

Which the court refused, and exception was taken to such refusal.

This request at first seems formidable, but upon examination it clearly appears that the refusal to charge it was correct. The proposition is that in order to convict under the first count the jury must be satisfied that a burglary or larceny was committed by the prisoner, •and whilst he was engaged in the commission of either or both, he killed the deceased.

It would have been error to charge this request, because the prisoner under the first count of the indictment might have been •convicted of manslaughter, to accomplish which it would not have been necessary to establish either burglary or larceny, of which the jury were duly advised not only in the general charge but by the request of the prisoner’s counsel to charge, which was granted. He requested the court to charge the jury that they could under the indictment convict the plaintiff in error of manslaughter in the first degree, and the request was granted. If the request considered involved the proposition that in order to convict the plaintiff in error of murder in the first degree, under the first count of the indictment, it would be necessary to establish the elements expressed, it would have been erroneous to have refused to charge it. And that this was the view taken of it by the learned recorder is very clear, from the fact that the next request to charge, and which was granted, was, that if the jury found the alleged confession of the prisoner to be the only evidence of the larceny or burglary, or both of those offenses, they could not convict of murder in the first degree under the first count of the indictment.

This was charging the law of the case as formulated by the prisoner’s counsel, and although it had been substantially charged before, was thus repeated. The jury were doubly instructed, therefore, that to justify a conviction of murder in the first degree, it was necessary, in accordance with the provisions of section 395 of the Code of Criminal Procedure (supra), to establish by sufficient proof thereof, in addition to the confession, that the crime charged had been committed, i. e., that a felony had been committed by the prisoner, and that whilst engaged in the commission of it he had killed the deceased.

The questions thus discussed are those only upon which the decision of this appeal rests, and having arrived at conclusions adverse to the plaintiff in error, the judgment of the court below must be affirmed.

Daniels, J., concurred.

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

Judgment affirmed.