text:
    Edward S. Stokes, Resp’t, v. John W. Mackay et al., App’lts.

      (Court of Appeals,

      Filed October 8, 1895.)

    1. Trial—Motion for direction of verdict.
    In an action by the vendor, upon a partly executed contract for the transfer of stocks and bonds, to recover the unpaid balance of the stipulated price, a motion to direct a verdict in favor of defendant on the ground that there had been no delivery or tender and no excuse for nondelivery of some of the bonds, but that such bonds had been pledged by the plaintiff, does not raise the objection that plaintiff was unable to perform by a delivery of the bonds at the time, when he offered to tender them and the tender was refused.
    2. Same.
    If, in such case, the defendant believed and intended to make the. point that the plaintiff was actually incapable of delivering the balance of the bonds, it should have been distinctly stated.
    3. Same.
    Where the defendant refuses to be bound by the terms of such contract or to recognize that any rights had accrued to the plaintiff by reason of the transactions between them, the plaintiff is not called upon to establish the fact that, if the defendant had not waived a tender and a tender had been necessary, he possessed ways and means to produce and present the bonds for acceptance or refusal.

      4. Contract—Tender.
    An express repudiation of the contract by a party dispenses with the necessity of a tender by the other party as a condition precedent to . the maintenance of an action by him for the breach.
    5. Same—Waiver.
    If, after the commencement of the action, the delivery of the bonds becomes impossible to the plaintiff, the defendant has the right to compel him to account for what he cannot deliver, but nothing, which may happen to the bonds after the right of action has vested and is availed of, can divest such right of action.
    Appeal from judgment of the general term of the supreme court in the first judicial department, entered upon an order, which, affirmed a judgment in favor of plaintiff entered upon a verdict of a jury, and also affirmed an order denying defendants’ motion for a new trial.

      This action was brought to recover the sum of $100,000, less a payment of $25,000, with interest from the 26th day of February, 1889.
    The plaintiff alleged in his complaint that prior to the 26th day of December, 1888, he owned and possessed certain bonds and stocks of telegraph companies, for convenience called telegraph properties, and at that time an agreement was entered into between him and the defendants whereby they agreed to purchase the telegraph properties and pay therefor the sum of $100,000 upon the assignment and delivery of such properties to them by him; that he thereafter assigned and transferred the properties to the defendants and performed the agreement on his part; that thereafter, on 6r about the 25th day of February, 1889, they paid him the sum of $25,000 as a partial payment, and that the balance, $75,000, remained due to him, and he prayed judgment for that sum with interest. <
    The defendants answered separately, denying the allegations of the complaint and making certain affirmative allegations against the plaintiff’s right to recover.
    The first trial of the action resulted in a judgment in favor of the plaintiff upon a verdict directed by the court, which judgment was reversed by this court and a new trial granted on the ground that certain questions of fact should have been submitted to the jury. (See 140 N. Y. 640; 55 St. Rep. 815).
    Upon the second trial, now under review, all such questions were decided in favor of plaintiff.

      Joseph Larocque, for app’lt; JEsek Cowan and Joseph H. Choate, for resp’t.

      Affirming 64 St. Rep. 403.

   Gray, J.

When this case was reviewed by us upon the prior appeal (140 N. Y. 640; 55 St. Rep. 815), it was decided that there were certain questions of fact, upon the evidence, which should have been submitted to the jury, and, because thet rial judge had refused to do so and had directed a verdict for the plaintiff, the judgment recovered was reversed and a new trial was ordered. There was a sharp difference in opinion as to the effect of the evidence. It was'thought by some of the members of the court that the proof was such as to establish a complete adoption by Mackay of the contract, which De Castro, as his representative or agent, had made for him with Stokes and which provided for the sale and transfer by the latter to Mackay of the bonds and stocks of the United Lines Telegraph Company held by him, or to which he might be entitled, in consideration of the payment of $100,000 and the cancellation of an existing indebtedness. A general outline of the facts may be briefly given. The telegraph interests and properties had been acquired and created by Stokes as the result of a joint venture with Mackay, undertaken in 1884, with moneys furnished by the latter. It had commenced with the acquisition by Stokes of the Bankers’ and Merchants’ Telegraph Company’s properties and franchises, at a receiver’s sale thereof. He reorganized the same into the United Lines Telegraph Company; became its president; received $2,880,000 of the $3,000,000 of capital stock and held, or controlled, the $1,200,000 of first mortgage bonds and added to the company's property by building or purchasing additional telegraph lines. It was the purpose, eventually, when the scheme was ripe, to consolidate this company with the Postal Telegraph Company, of which Mackay was practically the owner, and for the benefit of which the other properties had been acquired and developed. Either in the securities of the new company to be so formed, or in the profits of the joint enterprise, (it was a question which), Stokes had an interest.

Meanwhile, everything stood in Stokes’ name and was in his possession and control. After about four years, Mackay desired to obtain these telegraph bonds and stocks and instructed his agent, De Castro, tp procure their transfer by Stokes. Stokes was not unwilling to turn them over; but insisted upon some agreement being made, which should recognize and provide for his interest in the telegraph properties or in the profits of the enterprise." The contract in question was then made and signed by Stokes and De Castro on December 24th, 1888; Stokes delivering to Ingersoll, as a condition of De Castro’s signature, a large number of the bonds of the United Lines Company, to be held until Mackay was heard from, in approval, or otherwise, of what his agent had done. The day when the contract was so made, De Castro sent a telegram to Mackay,, stating that Stokes had “ turned over to Ingersoll $935,000 of bonds and other securities” and had “signed also an agreement which is forwarded and which leaves him out ’’ and that “Ingersoll will turn over to E. C. Platt these securities for custody; this, the only way it could be done and I hope it will be satisfactory.” Platt, the representative of the Nevada Bank and the financial agent of Mackay here, also, on the same day, telegraphed to him about Stokes having deposited the bonds with Ingersoll and that “$1,600,000 stock will be assigned and all judgments turned over on your order as soon as agreement forwarded to-day is signed by you.” Mackay did not wait to see the contract, but immediately telegraphed to De Castro : “ All right and satisfactory, I want you to tell Ingersoll to do nothing "in this case except what he knows to be correct and legal, I do not want trouble for what has been dofie in the past, nor in the future.” And to Platt he, also, at once telegraphed:. “All right. You take whatever securities Ingersoll gives you, as Ingersoll understands this matter fully. Stokes had not been shown the telegram sent by De Castro on December 24th; but was only told by him that he had telegraphed Mackay about the arrangement. On December 26th, upon De Castro’s informing him of Mackny’s telegram that it was “ all right and satisfactory,” Stokes went. to the company’s office and made a transfer in blank of the 23,800 shares of stock which he held and delivered the same to Townsend for Mackay. The same day De Castro receipted upon the contract as for the bonds previously delivered to and held by Ingersoll. The latter then wrote Mackay a letter on December 26th, informing him of the delivery by Stokes of the bonds and the stock and enclosing the contract. To this letter Mackay answered, to the effect that “on looking over the agreement he saw no necessity for signing it. Some portions of it are wrongthat the claim against Read & Co. (Stokes’ firm) “ had nothing whatever to do with the telegraph business” and that “ there is no necessity to make any change at present except to place the securities with Mr. Platt for safe-keeping.” Subsequently, there were two significant occurrences. In the first place, the certificate for the 23,800 shares of stock was filled up with Mackay’s name ; thus making the transfer of the stock absolute. Then a loan of $25,000, secured by Stokes from a bank upon the collateral security of $100,000 of the United Lines bonds, was paid off by money obtained from Mackay and the bonds were taken up and delivered to Platt for Mackay. With this sum of $25,000 Stokes has credited Mackay, as in part payment of the $100,000 mentioned in the contract. In March, 1889, Mackay arrived in New York from California and had interviews with Stokes; in which he refused to recognize, or to be bound by, the contract of December and repudiated the transaction, demanding that plaintiff account to him with respect to their past financial transactions. But, instead of restoring the securities, which Stokes had turned over upon the faith of the contract of December, he insisted upon his right to them and, that Ingersoll should deliver to him what he held. Mackay claimed that an arrangement was made, by which Stokes agreed that the securities might be turned over; that he would account to him as to their past financial transactions and that he would rely upon Mackay’s generosity as to any compensation for his interest in the telegraph properties. That was the position taken by Mackay ; while it was claimed by Stokes that a contract had been entered into by Mackay in December, which was binding upon the latter and which had been mostly executed on his part by a delivery of the bonds and of the controlling interest in the capital stock. In brief, Stokes occupied the position of Mackay’s having become obligated to him under the December contract; either by reason of the telegrams sent in response to the communications of his agents in relation to the arrangement with Stokes, or by force of his subsequent conduct in adoption of that arrangement, by the retention and ultimate acceptance of its benefits. The proof is that Stokes had turned over, piiactically, all of the great property in his possession and that Mackay had received it; and the verdict establishes that it was in pursuance of the agreement between them, which obligated the latter to pay a certain consideration and canceled the existing indebtedness referred to.

The evidence upon the last trial does not, essentially, differ from that given upon the first trial and the jury have now decided in plaintiff’s favor all the questions of fact, which were deemed, in the prevailing opinion rendered in this court, to arise upon the evidence. They were, in substance, whether the meaning of Mackay’s telegram was that he would be bound by the December contract; whether he had ratified and adopted it; whether Stokes had agreed to abandon it and to rely solely upon Mackay’s generosity for his compensation. It was said in the former opinion, “the ultimate issue to be determined is whether Mackay became bound as a party to the agreement signed by Stokes and De Castro by ratification, adoption, or estoppel and all the-evidence bearing upon that issue should be fairly submitted to the jury for their determination.” In view of the opinion of this court and of the decisive character of the verdict of the jury, in settling the questions upon which the parties were in conflict, the controversy should be considered as having ended with the result of the trial and the error must be both serious and plain, which should influence us to reverse the judgment, which the plaintiff has again recovered, and to direct a further trial of the issue.

The appellants insist that several errors were committed in rulings made by the learned trial judge upon questions of evidence and in his instructions to the jury. We think it only necessary to refer to the contention that the plaintiff failed to make any tender of certain of the United Lines Company’s bonds prior to the commencement of his action and that he did not show that he was actually to deliver them to Mackay had the latter been willing to accept a delivery. These propositions have reference to the fact that Stokes had pledged some of the bonds to secure loans of moneys and the argument is, assuming that the evidence justified the jury in believing their tender to have been waived, nevertheless, that it was incumbent upon Stokes, affirmatively, to establish the fact that he was in a position to redeem the bonds and able actually to deliver them to Mackay, upon the latter’s paying the balance of $75,000 claimed by Stokes as due upon the contract. This phase of the contention between the parties is claimed to have been made to appear by the motion of the defendants to dismiss the complaint and to direct a verdict The motion to dismiss was made upon the general ground that the plaintiff had failed to establish his alleged cause of action and it did not specify, or call to the attention of the court, that or any other particular point. It was, therefore, an insufficient basis upon which to predicate error with respect to some feature of the trial, not necessarily suggested by the language used. The motion to direct a verdict was based upon these grounds; two only of which have relation to the present point. They were that there had been no delivery and no tender and no sufficient evidence of a waiver of a tender of the $115,000 of the United Lines Telegraph bonds, which were shown to have been pledged with the Chemical Bank: that those bonds as appeared by the evidence had to a considerable amount been subjected by the plaintiff to further and different liabilities, and by the plaintiff’s voluntary act passed from his control.

“Third.—Upon the ground that there had been no delivery and no tender and no excuse for non-delivery of the bonds which had been, according to the testimony in the Madison Square Bank. On the contrary, it appeared from the evidence that after the time it is alleged that the contract sued upon was made, the plaintiff himself was borrowing money and creating a burden upon these bonds for the payment of his own obligations, and that if any tender had been in point of fact made or proposed, the same had not been kept good as required by law.”

While the effect of the motion was to raise the question of tender and of the sufficiency of the evidence to justify a finding that a tender had been waived, it does not suggest the point that the plaintiff was unable to perform by a delivery, at the time when tender was offered to be made and when the same was waived. The fact that the bonds were pledged to secure liabilities of the plaintiff was in no wise inconsistent with plaintiff’s ability to redeem, or .to procure them for delivery to the defendants. If the defendants believed, and intended to make the point, that the plaintiff.was actually incapable of delivering the small balance remaining of the bonds, it should have been distinctly stated. The plaintiff having given evidence of his willingness to turn over the remaining bonds, if defendants would pay the $75,000 due by the contract, and that their formal tender was waived, he had, prima facie, established the breach by the defendants of the contract relied upon and that it was owing, not to some default on his part, but to Mackay’s refusal to be bound by the terms of the contract, or to recognize that any rights had accrued to the plaintiff by reason of the transactions between them. Manifestly, in that attitude of the parties, the plaintiff was not called upon to establish the fact that had the defendants not waived a tender and a tender had been necessary, he possessed ways and means to produce and present the bonds for acceptance or refusal. Whatever was the real condition of his finances, there was nothing to warrant the inference of an inability to redeem the bonds and if presumptions were to be indulged in, the presumption of plaintiff’s ability to perform his agreement and to have the means to do so obtained, until overcome by evidence to the contrary. It is very clear, under the circumstances disclosed, if at all essential, that it was incumbent upon the defendants to make out the fact, which they wholly failed to establish, that the plaintiff was incapable of redeeming the bonds for delivery. It is equally clear that they did not entertain a notion, which was not suggested upon the trial either by motion, or by a request for an instruction to the jury, or in any other manner.

The only point suggested by the motion to direct a verdict was that there had been no tender of the bonds and that defendants had not waived a tender and, as bearing upon the efficacy of the tender to relieve the’plaintiff of the duty resting upon him, it was stated that the bonds were pledged to secure liabilities of the plaintiff and had thus passed from his control The defendants claim that there was $165,000, par value, of those bonds, which, at the time of the commencement of the action, had not been delivered by the plaintiff. According to the plaintiff’s evidence, between the time when he was given to understand that Mackay approved of his agent’s negotiation and contract, in December, 1888, and when in March, 1889, Mackay carne on to New York, all the telegraph properties had been turned over which were in his possession, except $115,000 of the bonds. $50,000 of the bonds had been loaned to De Castro and he had pledged them in October, 1888, to the Madison Square Bank, to secure a loan to himself. On December 26th, 1888, Stokes gave De Castro an order on the bank to deliver the bonds to him, De Castro, when his loan was paid. As one of the vendees named in the contract of December 24th, 1888, and as the agent or intermediary of Mackay, this was-a sufficient and the only possible delivery and divested Stokes’ title to the bonds in favor of De Castro, as Mackay’s agent. As to the $115,000 of bonds, they were under pledge to secure a loan to Stokes from the Chemical Bank and Mackay’s position towards Stokes and his declarations to him after his arrival in New York made it unnecessary to do anything about getting them up. He refused to recognize the contract as binding upon him, and simply claimed all the telegraph properties to be his. His attitude was one of distinct repudiation of any obligations towards Stokes. The latter was in the position of having turned over substantially all the property in his possession and then of hearing Mackay disavow the contract upon the faith of which he had acted. He had divested himself of the control of the telegraph company and of the great bulk of the securities and properties, of which he had become possessed, and stood ready to fulfill every condition; while Mackay, who had seen him give up everything, refused to pay the cash consideration named in the contract. His course was plain. There was a breach of the contract. He had lost the control of the telegraph company and had delivered most of the property called for by the contract. He could elect to rely upon the responsibility of the vendees and sue them upon the contract for what remained to be paid by them of the consideration moneys. This he did and his offer to make a tender of the bonds yet undelivered, before suit, was expressly waived by De Castro as useless. Indeed, in view of Mackay’s express repudiation of the contract, it would have been an unnecessary and meaningless ceremony for Stokes to go through the form of tendering the remaining bonds and no tender was called for. Cornwell v. Haight, 21 N. Y. 462; Shaw v. Republic Ins. Co., 69 id. 286. In the latter case the English rule deducidle from the cases was adverted to, that “ the positive, absolute refusal by one party to carry out the contract is in itself an immediate complete breach of it on his part and dispenses the other party from the useless formality of tendering performance of the condition precedent and gives immediate right of action,” and it was held that while our decisions may not have gone so far as those of the English courts yet that where a party has repudiated all obligation, and so declares, it would be “ a useless act” after that to make an offer to perform. The law does not compel a man to do a vain and fruitless act

The situation of the parties was sharply defined. Stokes claimed that a contract had been made with De óastro and Mackay, under which he had substantially performed what was required of him, and that Mackay had become bound, either by his telegrams or by subsequent adoption and ratification. Mackay, on the other hand, repudiated any obligation under the contract; claimed the telegraph properties were his without any payment and that Stokes had given up all his interests, relying upon his, Mackay’s, generosity as to compensation. Stokes, therefore elected tb sue him upon the contract and in affirmance thereof, to recover that portion of the cash consideration which remained unpaid. That-fixed the rights of the parties and presented distinct issues for trial; which would result, either in a decision that Mackav was not bound in any way by the contract and that Stokes had gained no rights thereunder, or had abandoned them ; or that a contract had been validly made, by the terms of which Mackay had become obligated and that Stokes had done everything on his part which entitled him to enforce that obligation and to recover the moneys demanded. The evidence was such as, in the former judgment of this court, to require the submission of the case to a jury, and they have decided the contention by their verdict in favor of Stokes; and all questions of fact essential to Stokes’ recovery will be deemed to have been passed upon favorably.

No acts done by the plaintiff after the commencement of the action could affect the cause of action ; for the right of action had become vested upon the breach of the contract. That breach consisted in the repudiation of a contract, then substantially executed, and in the refusal to pay the contract price, while retaining practically all the property sold and delivered under the contract. The plaintiff’s subsequent acts could only create a cause of action in favor of the defendants. Under the allegations of the complaint, the defendants, might, at any time, after the action was commenced, have demanded the bonds yet • undelivered, upon offering to pay the $75,000 claimed from them. If their delivery had become impossible to the plaintiff, the defendants would have had the right to compel him to account for what he could not deliver ; but nothing which might happen to the bonds after the right of action had vested, and was availed of, could divest such right of action. Westfall v. Peacock, 63 Barb. 209. That some bonds remained pledged to others to secure liabilities of the plaintiff proves nothing against the right of recovery. If he -could not redeem them, he could be compelled to account for .the moneys received for them. 'If any had been converted and passed beyond his control, after the commencement of the action and without feult on his part, at most, if at all under the circumstances, he could be compelled to account for their actual value. The rule is not questioned that by the election to sue upon the contract for the price, the plaintiff has kept alive all his own obligations under it. He recognized them by offering to make tender of what bonds he had not yet delivered and by keeping the tender open in his complaint. The defendants have at all times been entitled upon offering to pay the $75,000 to have the bonds. Their payment of this judgment will leave them still entitled to demand them and a failure to comply will create a cause of action in their favor for their value.

We have considered the main question on this appeal with great care, and we think that neither in the rulings upon which it arose, nor in any other of the rulings referred to, was there any ■error committed which would justify us in ordering a new trial ■of the action.

The judgment should be affirmed, with costs.

All concur.

Judgment affirmed.


source: Caselaw Access Project

author: Bartlett, J.

license: Public Domain

text:
    Jacob W. Feeter, Resp’t, v. Eliza J. Arkenburgh, App’lt.

      (Court of Appeals,

      Filed October 15, 1895.)

    .Reference—Compulsory.
    A Lili of items for services rendered by an attorney for a client while the latter was acting as an executor of an estate, which consists of separate charges for consultations, writing of letters, attendance on court during the executorial accounting and for money paid, laid out and expended, is not a long account within the meaning of section 1013 of the Code.
    Appeal from an order of the general term of the supreme court in the first judicial department, which affirmed an order of special term directing a reference to hear and determine.

      Charles K Souther, for app’lt; Jacob F. Miller and August Reymert, for resp’t.
   Bartlett, J.

The plaintiff, as an attorney and counselor at law, sued the defendant to recover $2,259.84 and interest for services rendered upon her retainer in drawing, copying and engrossing various instruments, examining accounts of certain executors and attending the accounting of the executors before surrogate, and in counseling and advising the defendant concerning her rights, duties and obligations as an executrix, and for divers journeys and other attendances in and about the business of defendant at her request, and for money paid, laid out and expended by the plaintiff at her request in and about her business.

The complaint refers to and makes a part thereof, a bill of items annexed, which covers some sixteen pages of the printed ¡record.

The answer .denies the allegations of the complaint.

The plaintiff moved for an order of reference on the ground that the trial of the issues involved the examination of a long account.

The motion was opposed, but the special term of the supreme court in the city of New York granted an order of reference and the general term affirmed.

This court held, Randall v. Sherman, 131 N. Y. 669; 43 St. Rep. 923, that in an action by an attorney to recover for his services in defending a certain suit upon a retainer be was not entitled to an order of reference for the reason he had rendered an account or bill itemizing his services.

It was pointed out that this cause of action was single as his contract was entire, although it required distinct items of service on his part before his duty was fully discharged to his client.

In the case at bar the learned judge at special term was of opinion that while the plaintiff’s services were rendered in one estate yet they were so connected with different matters in which the estate was interested as to give the bill of items the character of a long account within the statute requiring the plaintiff to prove specifically services in disconnected matters.

The general term followed this reasoning, writing no opinion.

We cannot agree with the court below, and are of opinion that this case is not referable.

The complaint avers a retainer of plaintiff by defendant, and the bill of items shows that plaintiff’s services were confined mainly to looking after the interests of defendant as executrix of Robert H. Arkenburgh’s estate and one or two personal matters.

A very large part of the bill of one hundred and fifty items is made up of charges for consultations with the defendant and others connected with the estate and for writing nearly one hundred letters, each of which is represented by a separate item.

The balance of the bill, with the exception of a very few items, is made up of the usual professional services incident to attending before the surrogate in an executorial accounting.

The other principal items were attending a sale by executors of real estate at Rahway, New Jersey; attending a like sale of 98th street lots in the city of New York and attending and closing purchase of 127 and 129 West 75th street by defendant.

This bill is not a long account within the meaning of section 1013 of the Code of Civil Procedure, and proof of plaintiff's claim can be readily made under a few general items and within the reasonable limits of a jury trial.

, We do not mean to intimate that the relation of attorney and client may not, under certain special circumstances, involve a long account, but we hold that this is not such a case.

The orders of the special and general terms should be reversed, with costs.

All concur. Orders reversed.


author: O’Brien, J.

text:
    Henry W. Sage et al., Resp’ts, v. Andrew R. Culver et al., App’lts.

      (Court of Appeals,

      Filed October 15, 1895.)

    1. Pleading—Demurrer.
    When a complaint is met by demurrer on the ground of insufficiency, the question always is whether, assuming every fact alleged to bétrue, enough has been well stated to constitute any cause of action whatever.
    2. Same. '
    A pleading will be held to state all facts that can be implied from the allegations by reasonable and fair intendment, and facts so impliedly averred are traversable in the same manner as though directly stated.
    3. Same—Stale claim.
    Where a claim or cause of action is barred by lapse of time, such defense must be presented by answer, and the mere fact that it is old is not an objection that can ordinarily be presented by demurrer.
    4. Corporation—Directors—Action bt stockholders.
    Where a corporation is exclusively under the control of the trustees and officers whose acts and management are questioned, a demand that the corporation bring an action for an accounting would be idle and fruitless, and, in such case, equity permits the stockholder to bring the action in his own name.
    5. Same—Pleading—Complaint—Sufficiency. -
    When it can be fairly gathered from all the allegations of a complaint that the officers and directors of a corporation have made use of relations of trust and confidence in order to secure of promote some selfish interest, enough is then averred to set a court of equity in motion and to require an answer from such officers in regard to the facts.

      Appeal from an interlocutory judgment of the general term of the supreme court in the second judicial department, entered upon an order, which reversed an order of the special term and the interlocutory judgment entered thereon sustaining defendants’ demurrer to plaintiffs’ complaint, and overruled said demurrer.

      George W. Wingate, for app’lts; William C. De Witt, for resp’ts.

       1Affirming 54 St. Rep. 297.

   O’Brien, J.

While the complaint in this action is open to criticism as lacking in the clearness and fullness of statement essential to good pleading, yet we think that the decision of the general term overruling the defendants’ demurrer was correct. When a complaint is met by a demurrer on the ground of insufficiency, the question always is whether, assuming every fact alleged to be true, enough has been well stated to constitute any cause of action whatever, The complaint will be deemed to be sufficient whenever the requisite allegations can be fairly gathered from all the averments, though the statement of them may be argumentative and the pleading deficient in logical order and in technical language. The pleading will be held to state all facts that can be implied from the allegations by reasonable and fair intendment, and facts so impliedly averred are traversable in the same manner as though directly stated. Zabriskie v. Smith, 13 N. Y. 330; Marie v. Garrison, 83 id. 14, 23; Sanders v. Souter, 126 id. 193; 37 St. Rep. 1.

The complaint in this case was not^ we think, so deficient in the statement oi facts to warrant the defendants in assailing it by demurrer.

The defendants own a very large majority of the stock of the railroad which is joined with them as defendant, and they are its trustees, and practically, by reason of their ownership of nearly all the stock, the sole directors and managers. The plaintiffs own a small amount of the stock and some of the bonds of the road, and to the extent of their holdings are interested in the management of the property. They bring this action as such stockholders against the defendants as directors and ask the court to adjudge that the defendants account to them or to the corporation concerning certain transactions in regard to the management of the affairs of the corporation which are stated in the complaint. It is the sufficiency of these allegations as the basis of an action that is challenged by the demurrer. The complaint contains proper allegations to warrant the plaintiffs as stockholders in bringing the action, instead of the corporation itself, and there is no difficulty on that ground, if the allegations are otherwise sufficient. Where the corporation is exclusively under the control of the trustees and officers whose acts and management are questioned a demand that the corporation bring the action would be idle and fruitless and in such eases equity permits the stockholder to bring the action in his own name. Brinckerhoff v. Bostwick, 88 N. Y. 52; Hawes v. Oakland, 104 U. S. 450; Leslie v. Lorillard 110 N. Y. 519; 18 St. Rep. 520.

There are, we think, at least two facts stated in the complaint, or which are fairly to be gathered or implied from the allegations, which are sufficient to require the defendants to answer : (1) It is alleged in substance that the defendants, as officers and trustees of the defendant railroad, took from’themselves, as trustees and officers of another railroad, a lease of the latter, which they practically owned and managed, to the defendant corporation at an exorbitant rent, which arrangement has the effect to unlawfully deplete the funds and earnings of the defendant corporation and to injure the plaintiffs as stockholders therein. (2) It is also averred in substance that the defendants, as offiicrs and trustees of the defendant railroad, have taken from its treasury-large sums of money and paid the same to themselves as individuals on account of alleged loans or advances made by them to the corporation of which the plaintiffs are stockholders. That they have concealed the origin and nature of this debt from the plaintiffs, and have made false statements in regard to the same.

When a trustee or the officer or director of a corporation deals-with himself as an individual, or in the character of trustee, director or officer of another corporation, with respect to the funds, securities or property of the corporation, the transaction is at least open to question by the corporation, or, in a proper case, by its stockholders, and the trustee is bound to explain the transaction and show that the same was fair and that no undue advantage has-been taken by him of his position for his own advantage or the-advantage of some other corporation in which he has an interest.

When it can fairly be gathered from all the allegations of a complaint that the officers and directors of a corporation have made use of relations of trust and confidence in order tó secure or promote some selfish interest, enough is then averred to set a court of equity in motion and to require an answer from the defendants in regard to the facts. ' When it appears that the trustee or officer has violated the moral obligation to refrain from placing himself in relations which ordinarily produce a conflict between self-interest and integrity, there is in equity a presumption against the transaction, which he is required to explain. Cowee v. Cornell, 75 N. Y. 100; Crowe v. Ballard, 1 Vesey, 221, note 2; Gibson v. Jeyes, 6 id. 278; Michaud v. Girod, 4 How. (U. S.) 553; Butts v. Wood, 37 N. Y. 317; Ogden v. Murray, 39 id. 207; Gardner v. Ogden, 22 id. 332.

Parties holding relations of trust and confidence towards others, such as these defendants occupy towards the plaintiffs, cannot ordinarily afford to admit, by a demurrer, charges, though quite indefinite and uncertain, that they have made profit for themselves-, by means of transactions such as are fairly to. be gathered from the averments of the complaint.

It is also urged that since the complaint shows upon its face that the transactions stated were had many years ago, the plaintiffs are chargeable with such loches, and their cause of action, if any, is so stale that equity will decline to interfere. The answer to this-point is, that if the claim or cause of action is barred by lapse of time, that defense must be presented by answer, and the mere fact that it is old is not an objection that can ordinarily be presented by demurrer. Zebley v. F. L. & T. Co., 139 N. Y. 461; 54 St. Rep. 721.

The order of the general term overruling the demurrer should be affirmed, with costs, with leave to the defendants to answer within twenty days from service of the order, upon payment of costs.

All concur.

Ordered accordingly.


author: Gray, J.

text:
    Betsey Sully, Resp’t, v. Henry Schmidt, App’lt.

      (Court of Appeals,

      Filed October 15, 1895.)

    1. Landlord and tenant—Rent—Eviction.
    A physical eviction is not necessary to exonerate the tenant from the payment of rent. A sufficient eviction arises for the purpose, where the landlord’s acts, though not amounting to a physical expulsion, are of so pronounced and offensive a character as to create a nuisance, which, by preventing the reasonable use of the premises by the tenant, will affect the consideration of the contract between them.
    2. Same—Covenants.
    Covenants in a lease, on the part of the tenant, to maintain the demised premises in good repair and a cleanly condition, do not extend to a nuisance created by a stench arising from sewage upon the landlord's adjacent premises and by reason of his neglect, nor preclude the tenant from abandoning said premises where the landlord rendered the premises uninhabitable by repeatedly filling up an open sewer underneath said premises, after the tenant had frequently cleaned the same.
    3. Evidence—Rent—Abandonment.
    Under, the defense of abandonment and surrender of the demised premises, upon the ground that they were untenantable and dangerous to life and health, interposed in an action for rent, evidence that, during the tenant’s occupation, the landlord was guilty of affirmative acts, which caused a nuisance of a nature dangerous to life or health, and against which the tenant was remediless by the performance of any acts called for by his own covenants, is admissible. It is not necessary that the tenant should have been induced to enter into the lease by the misrepresentation or fraud of the landlord.
    4. Easement—Landlord and tenant.
    The right, which a landlord has, in the nature of a easement, to continue the use of a sewer running from premises occupied by him to and under adjacent premises leased by him to another, does not permit him, by an abuse of it, to affect the tenant’s possession so injuriously as to make it impossible or unsafe for the tenant to continue in possession.
    Appeal from judgment of the general term of the supreme court of the city of Buffalo, entered upon an order, which directed judgment for plaintiff upon a verdict directed at a trial term on exceptions ordered to be heard in the first instance at general term.
    ■ Seward A. Simons, for app’lt; AdeTbert Mott, for resp’t.

       Reversing 33 St. Rep. 873.

   Gray, J.

This was an action to recover rent due to the plaintiff by the terms of a written lease made between her and the defendant, and the defense was that the premises were untenantable and dangerous to life and health and that defendant had abandoned them and had surrendered the same to the plaintiff.

After the plaintiff had proved the making of the lease and an occupation and a payment of the stipulated rent for two years of the term, by the defendant, the latter undertook to prove that, after the execution of the lease and after he went into possession, he discovered the presence of an open sewer under the leased premises, which was filled with filth and dirt from the plaintiff’s hotel, of which his premises were a portion; that the sewer was insufficient in size to carry away the deposit from the hotel closets; that the hotel sewer, instead of being connected with this open sewer, simply dropped its contents into it; that the plaintiff continued to use her sewer in this way during the time of his occupation, and no change was made in its construction; that he, from time to time, cleaned out the sewer under his premises, but it was immediately refilled by the use made by plaintiff of her adjacent premises; that from this open sewer came a stench, which was a nuisance and disagreeable and which rendered the occupancy of the premises by the defendant dangerous to life. Evidence of these facts was excluded by the trial court, upon the plaintiff’s objection; as was, also, evidence to show various other facts, namely: that the plaintiff represented to the defendant, before he took possession, that there was no cellar underneath the leased premises; that there was no opportunity for the examination of the premises before the execution of the lease and that the defendant had no knowledge of ttieir condition before, or at the time, when he entered into possession. There was conflicting evidence upon the subject of whether the plaintiff had accepted a surrender of the leased premises from the defendant and the defendant asked to go to the jury upon the proposition that there had been such a surrender and an acceptance ; but the request was denied and the defendant excepted. A verdict was directed for the plaintiff.

The lease was for a term of three years and described a front room on the ground floor of the Fillmore House, in the city of Buffalo, which had formerly been the dining room of that hotel. It contained among other provisions, unimportant to be mentioned, the agreements of the lessee to keep the premises in good repair; to prevent them from being injured by fire or otherwise and to keep the premises hereby leased * * * in a cleanly and healthful condition.” It was shown that the premises were leased for a bar room. They consisted of one room, with no windows or openings, except a door opening upon the street. The floor covered the entire room, with no aperture, or access, to a cellar beneath. Some four months after the defendant took possession, he was allowed to malee use of the space underneath the floor, for the purpose of storing liquors and jugs, and then first became acquainted with its nature and condition.

The case presented seems to be one as to which there should be no doubt with respect to the propriety of permitting the defendant to prove the facts set up in his defense and contained in his offer of proof. If the evidence, which he was not allowed to give, should establish the existence of such a state of things as was set forth in the answer and the offer and the abortiveness of his efforts to remedy it, through the continuance of acts by his landlord which rendered it possible, there was an eviction at law, which warranted the "abandonment of the premises and exonerated the tenant from the payment of rent thereafter. There was neither any express, nor any implied warranty that the premises were fit for habitation when leased, or for any purpose for which leased; but the landlord could not be instrumental in rendering them uninhabitable to hold his tenant to bis agreement to pay rent. If they became untenantable through her default and wrongful acts, then she did that which obstructed their beneficial enjoyment and justified the tenant in abandoning them. It is a long established and perfectly familiar rule that a physical eviction is not necessary to exonerate the tenant from the payment of rent. The landlord’s •acts, though not amounting to a physical expulsion, may, nevertheless, be of so pronounced and offensive a character as to create a nuisance ; which, by preventing the reasonable use by the tenant of the premises, would affect directly the consideration of the contract between them. Dyett v. Pendleton, 8 Cowen, 727; Edgerton v. Page, 20 N. Y. 281; Boreel v. Lawton, 90 id. 293. Applying the rule to the present case, if the plaintiff’s evidence had been received it would have shown, or tended to show, that when he discovered the state of things underneath his room and endeavored to remedy it by cleaning out the sewer, the landlord not only made no change in its construction, but continued to maintain it in a disagreeable and, possibly dangerous, certainly offensive, condition, by suffering the contents of her hotel sewer to flow into and re-fill the open sewer as often at the tenant would clean it. The neglect of the landlord would seem to be monstrous and to amount to the creation and continuance of a nuisance upon the adjacent premises. Certainly it would be for the jury to say whether the evidence made out such a state of facts as exhibited the landlord in the attitude of continuing in the performance of acts, which amounted to the maintenance of a nuisance and through which her tenant’s premises were rendered unfit for reasonable use and occupation.

The tenant’s covenants in the lease obligated him with respect to the maintenance of his own premises in good repair and in a cleanly condition; but the nuisance from the stench arose upon the landlord’s property and because of her repeated neglect The tenant’s covenants did not bear upon such a condition of things and went no further than to oblige him to do what lay in his power towards keeping his premises in good repair and in a cleanly state.

The verdict would turn upon the question, whether the defendant had neglected anything which he was able and might reasonably be required to do under his lease and, if he was not at fault, whether the premises, through the wrongful acts of the landlord, were rendered unfit for occupation; in consequence of which the tenant was justified in abandoning and did, in fact, abandon their possession. It was not necessary that the defendant should have been induced to enter into the lease by the misrepresentation or fraud of the plaintiff. If he was able to show that, during his occupation, his landlord was guilty of affirmative acts, which caused a nuisance, of a nature dangerous to life or health and against which, the tenant was remediless by the performance of any acts called for by his own covenants, the evidence should have been received.

It is argued for the respondent that she has a right, in the nature of an easement, to continue the use of the sewer. While that is true as a general proposition, as applied to the facts of this ease it fails as a defense, if the use made of it amounted to an abuse of the right and so injuriously affected the tenant’s possession as to make it impossible, or unsafe, for the latter to continue in occupation. The point is, not that the landlord did not have' the right to make use of this sewer for his house; but that by its defective construction it became a source of offense and possible danger, and the efforts which the tenant made to beep it in clean and reasonably fit condition were nullified by the refusal of the landlord to remedy the defects in construction ; the result whereof was that the stench and offense were constantly renewed by the refilling of the sewer with the filth and waste from the hotel.

Upon the question, also, of whether the plaintiff had accepted the defendant’s surrender of possession, there was evidence given by the latter which, if believed by the jury, would have supported a verdict to that effect

For the errors adverted to there should be a reversal of the judgment below anda new trial ordered; with costs to abide the event.

All concur.

Judgment reversed.


author: Andrews, Ch. J.

text:
    Frank S. Gray, App’lt, v. Augustus D. Shepard et al., as as Executors of Elliot F. Shepard, Deceased, Resp’t.

      (Court of Appeals,

      Filed October 8, 1895.)

    1. Evidence—Parol.
    The largeness of the meaning of a term, used in a contract, is no reason for limiting its interpretation, nor furnish any reason for permitting paroi evidence in explanation.
    2. Master and servant—Discharge.
    The refusal by a servant to deliver to the master a memorandum, relating to the current business which was intrusted to him by, and belongs to, the master, is a breach of duty and good cause for his discharge.
    3. Same—Retention.
    The retaining by the master of the servant in his employment, after knowledge of violations of duty, is not such a condonation of these offenses as to prevent their use thereafter as grounds for discharge, where such violations were committed from time to time, continuing until the discharge.
    Appeal from judgment of the general term of the supreme court in the first judicial department, entered upon an order, which affirmed a judgment in favor of the original defendant, Elliott F. Shepard, entered upon a verdict, and also approved an order denying plaintiff’s motion for a new trial.

      The original defendant died while the appeal to the general term was pending, and his executors were thereupon substituted in his stead.

      A. J. Ditlenhoefer and David Gerber, for app’lt; Noah Davis and A. L. Pincoffs, for resp’ts.

      Affirming 61 St. Rep. 452.

   Andrews, Ch. J.

This action was brought to recover damages alleged to have been sustained by the plaintiff in consequence of his wrongful discharge by the original defendant Shepard from his employment on the Mail and JSxpress, a newspaper in the city of New York. The employment was under a written contract dated April 18, 1888. By the contract the plaintiff undertook to devote his whole time (Sundays excepted), and all his energies and talents, “ to pushing the publication, subscription, circulation, advertising, influence and all the interests of said newspaper, and in every method he may devise, or be advised or directed, to be approved by Mr. Shepard, and in no way against Mr. Shepard or his successor’s interest.” The contract was to continue for five years, and the plaintiff was to receive as compensation for his services $6,000 a year, and in addition, during each of the last three years, was to be credited $5,000 towards the purchase of an interest in the paper. The contract provided that, “ for any dishonesty, incapacity, incompatibility or breach of the agreement,” on the part of the plaintiff, Mr. Shepard should be at liberty to annul and cancel it. On the 4th day of January, 1890, Mr. Shepard notified the plaintiff, in writing, that under the option in the contract he annulled it for the plaintiff’s “ dishonesty, incapacity, incompatibility and breaches of the agreement.” The answer alleged that the discharge was justified by the conduct of the plaintiff, the unfaithfulness, dishonesty and incompetency, and because his habits and manners were such as to produce incompatibility between him and the employer and other persons connected with the business. The jury rendered a verdict for the defendant, and the only questions before us arise on exceptions taken upon the trial.

The plaintiff offered to prove a conversation between himself and Mr. Shepard when the contract was presented to him and before its execution, in which Mr. Shepard, in reply to an inquiry made by the plaintiff as to the meaning of the word “incompatibility ” in the contract, said that “ it meant that he should have the right to discharge you if at any time you were unsuited to newspaper work, or tired of newspaper work, and that is all it meant.” The judge excluded the evidence and the plaintiff excepted. This ruling was proper. The plaintiff, by the evidence offered, sought to limit the meaning of a word in common use, the only indefiniteness of meaning consisting in its wide application, and which, for that very reason, as may be inferred, was introduced into the contract. The elements and qualities which may create incompatibility between persons elude exact definition, so varied are the circumstances and so dependent is such a state of feeling upon education, habits of thought and peculiarities of character. It must be assumed that the parties understood the wide signification of the word and used it understandingly. The service to be rendered involved mutual confidence between the parties and intimate personal association. Want of harmony between them for any cause would be likely to interfere with the newspaper enterprise and made the insertion of this ground for discharge natural and reasonable. The word is not a word of art, or of technical or local meaning, or having two distinct meanings, circumstances which have been held to justify paroi evidence of tne meaning of a word used in a written contract. Green, on Ev. § 295. The largeness of the meaning of the term used in the contract is no reason for limiting its interpretation, nor does it furnish any reason for permitting paroi evidence in explanation. Whether there w.as incompatibility which justified the discharge was a question for the jury upon the evidence. The employer could not allege in- ■ compatibility as a pretense for discharging the plaintiff. The incompatibility must have existed in fact to justify a discharge under this term of the contract.

The defendant, among other things, sought to justify the discharge of the plaintiff by reason of his conduct in respect to a memorandum sent by him from Bar Harbor July 28, 1888, and one of the exceptions relied upon by the plaintiff is to the charge of the "judge upon that subject. On the 28th of July, 1888, the defendant being at Bar Harbor, sent by mail to the plaintiff in New York a pencil memorandum without date or signature, relating to the subject of procuring for the “Mail and Express" certain public printing which was controlled by the police commissioners of the city of New York. The memorandum was inclosed in a letter envelope with the defendant’s check for $5,000, payable to the order of the plaintiff. The memorandum referred to the subject of commissions to be paid for the printing contract. The printing was given to some other paper. In August, 1888, the defendant having returned from Bar Harbor, asked the plaintiff for the check and memorandum. The plaintiff returned the money but told the defendant he had destroyed the memorandum. Subsequently differences arose between the parties, and the defendant desired to' dissolve the relation between them. The defendant testified in substance that when these latter differences arose, the plaintiff threatened that the defendant would not dare to discharge him because of the memorandum, which he then said he had not destroyed, and he refused on request of the defendant to give it to him. In fact the plaintiff had not destroyed the memorandum and it was produced on the trial. He testified: “I have kept it all the time in the safe deposit vault of the National Park Bank.” It was. claimed on the part of the plaintiff that the check of $5,000 was sent to be used to influence the police commissioners to award the printing contract to the “Mail and Express,” and that the memorandum confirmed this view. The defendant on the trial denied under oath that the check was sent for the purpose claimed, and explained the allusions in the memorandum consistently with an honest purpose. The jury found the version of the transaction given by him and were authorized to find that the plaintiff preserved the memorandum, to be used as a means of coercing the defendant to retain him in his employment. It appeared that it was the custom of the defendant to give directions to his employees by informal written' memoranda in pencil, without date or signature, in the same form as the one in question. The judge, in his charge to the jury, referring to the transaction alluded to, said : “According to Mr. Gray’s testimony, the paper was given to him by the defendant as .his manager. Whatever its contents or whatever its purpose, it was given in the course of his employment, and the master would have the right afterwards to demand that or any other paper which he had intrusted to his employee, and he would have no right to refuse it. That which the master had a right to demand, if it shall be refused by the employee, is necessarily a breach of the agreement existing between them.” He further charged: “If you come to the conclusion that there was a breach of the contract with reference to the matters I have submitted to you, I charge you as matter of law it is your duty to render a verdict for the defendant.” The plaintiff’s counsel excepted to the charge in the following language: “ I accept to that portion of the charge where the court said in substance that the master would have a right to demand from the servant the return of the letter concerning the advertisement sought to be procured from the police department for the “Mail and Express,” and that what the master has the right to demand, which shall be refused, is nccesssarily a breach of the contract of service.” It will be observed that no question was made as to the "correctness of the assumptions of fact in the charge that the memorandum was given by the defendant to the plaintiff as the manager, and that it was a paper intrusted to the plaintiff by his employer. The plaintiff seeks to apply to the case the rule that an agent has the right to retain letters written to him by the master relating to his agency, which may be necessary for his protection. The case in question does not come within the rule. The memorandum was like any other order relating to the current business, which, when it had served its purpose, belonged to the defendant. The plaintiff had no interest to protect in keeping it. He had returned the money, and that was an end of his responsibility. He made no claim that the retention of the memorandum was necessary for any laudable or honest purpose. On the contrary, he informed the defendant at the first interview that he had destroyed it. We think the judge correctly charged, in view of the circumstances, that the plaintiff’s refusal "to deliver the memorandum to the defendant was a breach of duty and was good cause for his discharge.

The claim that the defendant, by retaining the plaintiff in his employment after knowledge of violations of duty, thereby condoned these offenses, and that they could not thereafter be used as grounds for discharge, is without force in view of the fact that his violations were committed from time to time, continuing until the discharge. The master may overlook breaches of duty in the servant, hoping for reformation; but, if he is disappointed and the servant continues his course of unfaithfulness, he may act, in view of his whole course of conduct, in determining whether the contract of employ met. t should be terminated.

We find no error in the record, and the judgment should be affirmed.

All concur.

Judgment affirmed.


author: Finch, J.

text:
    Mary D. Hatch et al., as Executors, etc., App’lts, v. The Fourth National Bank of the City of New York et al., Resp’ts, and James H. Fay, App’lt.

      (Court of Appeals,

      Filed October 8, 1895.)

    1. Banks—Liens on deposits.
    Where the plaintiff deposits a stock certificate with a firm who unlawfully uses it as collateral security and deposits the money borrowed thereon, which is in form of a check, to its credit in the defendant bank, to which it was indebted and which was authorized to apply to the payment of such indebtedness any moneys on deposit to the credit of said firm, the defendant, as against the plaintiff, has the right to apply the money collected on the check to the firm’s indebtedness, even though, at the time of such application, it knew that the firm had made a general assignment for the benefit of creditors.
    3. Same.
    Where said firm also deposits with the defendant stock belonging to another person as collateral to secure its indebtedness to defendant, and defendant, after applying the moneys on deposit to said indebtedness, sold the collateral to satisfy the balance remaining due, the amount realized on the sale in excess of the balance due to the defendant belongs to the owner of said collateral, and not to plaintiff.
    Appeal 'by the plaintiffs and defendant Fay from judgment of the general term of the supreme court in the first judicial department, entered upon an order, which affirmed a judgment in favor of defendants entered upon a decision of the court dismissing the complaint upon the merits, on trial as special term.
    This action was originally brought by Mary D. Sanford, since deceased, and revived in the name of her executors, to recover from the defendant, the Fourth National Bank of the city of New York, a portion of the sum of $20,000 alleged to have been the proceeds of a negotiable stock certificate belonging to plaintiff, unlawfully converted by the firm of Mills, Robeson & Smith to its own use, and deposited to its credit in said bank, and also to have determined the rights of other parties to the balance of said sum.
    The firm of Mills, Robeson & Smith was a customer of the Fourth National Bank, from which on April 17,1890, it borrowed $50,000, giving a note therefor secured by collaterals. This note provided that the bank should have a lien for the loan, and for all other liabilities of the maker to it, upon any securities left with it by the maker, and upon any balance of its deposit account with the bank, and further authorized the bank at any time to apply to the payment of any liability of the maker any moneys at any time on deposit to its credit, and also the proceeds realized from the sale of such collateral securities. Thereafter the said firm borrowed from the bank a further sum of $5,000, giving therefor a note secured by collaterals and containing similar provisions. On November 14, 1890, plaintiffs’ testatrix delivered to said firm for safekeeping a certificate of Adams Express Company stock, then worth $15,000. One of the members of the firm unlawfully took this certificate and obtained upon the same, together with other securities which had been forged, a loan of $20,000 from the defendants Ferris & Kimball. The check given by them for the sum thus borrowed was deposited to the credit of said firm in the said bank.
    The defendant James H. Fay, on July 2, 1890, also left with said firm for safe-keeping a negotiable railroad bond, and on N overnber 15, 1890, a check for $400, to be collected for his account.
    On November 14, 1890, said firm borrowed from Hotchkiss & Co. $10,000, giving its note therefor and depositing certain securities as collateral, among them Fay’s bond; the check received therefor was also deposited in said bank and credited to its account. On November 15, 1890, said firm wrongfully deposited Fay’s check in said bank, which was also credited to its account and paid to the bank after the assignment hereinafter referred to.
    On November 7, 1890, Fay left with said firm another negotiable bond, which on that day it fraudulently pledged with said bank as collateral to said loans.
    Prior thereto the defendant Gfeorginia L. Orabb left with said firm for safe-keeping one hundred shares of stock, and five bonds, which, on November 7, 1890, it also wrongfully pledged with said bank as collateral to said loans.
    November 15, 1890, the said firm made a general assignment, having in said bank on that day, with a check afterwards.collected, a balance of $16,520.77.
    On or before November 17, 1890, the bank demanded payment of the aforesaid loans, and in default thereof charged the amount due on them to Mills, Eobeson & Smith. This was done before the bank had notice or knowledge that any of the parties to this action, other than the firm and its assignee, claimed to have any interest in the securities or in the amount to the credit of the firm.
    The bank afterwards sold all the collaterals, pledged as security for said notes, except the bond owned by defendant Fay ; the amount realized from the sale, together with the cash balance to the credit of the firm, after deducting its indebtedness to the bank, produced a surplus of $2,334.19.
    Among the securities sold by the bank were those belonging to the defendant Orabb, and by the judgment she was awarded said surplus.
    The judgment also awarded to the defendant and appellant Fay the bond in possession of the bank remaining unsold.
    It was also adjudged that, as against the bank, the plaintiff was not entitled to recover any sum.

      George W. Wingate, for app’lts; David Willcox, for Fourth National Bank, resp’t; Henry H. Man, for def’t Orabb, resp’t.
   Finch, J.

We ought to affirm this judgment upon a single ground, which rests upon facts not at all controverted or in dispute. For that purpose we may assume, as true, the plaintiff’s version of what actually occurred, without criticism at doubtful points of the way. She was the owner of a certificate of stock of the Adams Express Company, of the par value of fifteen thousand dollars. That certificate, in a negotiable form and capable of transfer by delivery, she intrusted to the temporary custody of Mills, Robeson & Smith. Her son and agent, E. S. Sanford, placed it in a sealed envelope, marking it on the outside with his name, and left it with the firm to be placed in their safe until the following Monday. On the day of that deposit, the firm, acting through Smith, borrowed of Ferris & Kimball the sum of twenty thousand dollars, giving the note of the partnership therefor, and depositing as collateral the certificate which the plaintiff had committed to the care of the firm, and which Smith converted to its use. - We may admit that his act was, in substance, a larceny, and the certificate in his hands stolen property but, nevertheless, the title of Ferris & Kimball to the pledged certificate which they sold upon default in the payment of the loan, and to the proceeds of such sale, is not here and now questioned or assailed. The plaintiff’s certificate was but a part of the collateral which stood as security for the note. It is found'that eight shares of Chicago, Cincinnati, Cleveland and St. Louis preferred stock, raised by a forgery to eighty shares, aud two Union Pacific first mortgage bonds of one thousand dollars each, also formed part of the collateral. The lenders gave their check for the twenty thousand dollars thus borrowed to Mills, Robeson "& Smith, and they indorsed it and deposited it to their own credit in the Fourth National Bank. That bank held the deposit upon an express contract with his customer, which gave to it rights beyond those flowing from the ordinary relation, and outside of the mere banker’s lien. The deposit was made on the afternoon of November 14,1890. Previous to that date Mills, Robeson & Smith had borrowed of the bank, first the sum of fifty thousand dollars, and next the sum of five thousand dollars,, giving in each case their note, payable on demand, and certain collateral securities. The special agreement between the parties added to such collateral any balance of the customer’s deposit accounts standing-to their credit on the books of the bank, and contained the following explicit provision: The undersigned do hereby authorize and empower the said bank at its option, at any time, to appropriate and apply to the payment of the above-named obligations or liabilities, whether now existing or hereafter contracted, any and all moneys now or hereafter in the hands of the said bank, on deposit or otherwise, to the credit of or belonging to the undersigned, whether the said obligations or liabilities are due or not.” On November 15, 1890, the balance standing to the credit of the firm was a little more than sixteen thousand dollars. On that day Mills, Robeson & Smith failed and made a general assignment. On November 17th, which was the next business day thereafter, the bank demanded payment of the loan, and in default thereof applied the credit balance of the firm to the payment of its debt, thereby so far canceling and extinguishing that liability. This act the plaintiffs resist, contending that the sixteen thousand dollars was her money as proceeds of her stock stolen from her by Smith, and which proceeds she was able to trace into the thief’s deposit account and sufficiently identify as her own property. There is more or less of difficulty in that identification, and the subject has occasioned a large part of the argument addressed to us, but need not now be discussed. For the purposes of the decision, at least until we reach the case of Mrs. Crabb, we may concede that the credit balance was proceeds of the stolen stock and sufficiently identified, and yet the opinion of the general term will remain intact and unanswered.

If Mills, Robeson & Smith, on receiving the check of Ferris & Kimball, had at once collected it and turned it into money, and then had paid that money to the bank in discharge of their debt to it, and the bank had accepted that payment in ignorance of the source from which the money had been derived, and had surrendered the notes and discharged their debtors’ liability in entire good faith, the owner of the stolen money would have had no right of recovery against the bank. Justh v. Bank, 56 N. Y. 478; Stephens v. Board of Education, 79 id. 183. Tins doctrine goes upon the ground that money has no earmark; that in general it cannot be identified as chattels may be, and that to permit in .every case o£ the payment of a debt an inquiry as to the source from which the debtor derived the money and a recovery if shown to have been dishonestly acquired, would disorganize all business operations and entail an amount of risk and uncertainty which no enterprise could bear. The rule is founded upon a sound general policy as well as upon that principle of justice which determines as between innocent parties upon whom the loss should fall under the existing circumstances. If, therefore, Smith had come with the money, and with it had paid his debt over the counter, the amount could not have been recovered by the plaintiff, although admitted to have been actual proceeds of the stolen certificate. I think the situation was • not at all changed because the debtor came with Ferris & Kimball’s check which the bank collected. If Smith had brought that and the bank had accepted it as cash or conditionally, upon its proving good, the result would have been the same. The debt would have been paid and the money become the absolute property of the bank. In Goshen National Bank v. The State, 141 N. Y. 379; 57 St. Rep. 597, it was a draft which paid the debt and which the comptroller received and collected. Nor does it change the result that Smith deposited the check and did not at the moment direct its application upon the liability of the firm. He made the deposit under an existing specific contract by which Mills, Robeson & Smith consented and agreed that the bank might at any time apply it upon the existing liability. When it did so on the 17th of the month it acted with the written consent and authority of the firm as completely effectual and operative as if the debtors on that day had personally directed the application to be made. The contract was a continuing direction, a daily consent, an agreed permission. The loan was a call loan, payment of which could be demanded on any day, and the option to make that demand and apply the credit balance was a part of the written agreement, and an essential and material stipulation of the contract of loan. I think the application of the deposit account upon the debt, resting upon that continuing consent, had the same effect as if Mills, Eobeson & Smith, without an assignment, had personally on that day directed the application, and so paid the debt. As against them and as against their assignee the application was in all respects lawful and effectual.

The recent case of American Sugar Refining Co. v. Fancher, 145 N. Y. 552; 65 St. Rep. 506, which is pressed upon our attention, does not at all determine the present question. There the proceeds of the sugars obtained by fraud, remained in the hands of the insolvent’s assignee without having been applied to the payment of debts. If the insolvent himself had applied. those proceeds to some existing liability, or his assignee innocently and without notice had so paid them out, and the fund was sought to be wrested from the hands of the creditor paid, a very different question would have been raised, and one requiring a different solution.

Nor does the case of Van Alen v. American Nat. Bank, 52 N. Y. 1, govern the.one before us. There was there no claim by the bank upon the fund deposited. Ooncededly, they were bound to pay it over to the proper party, and the only question involved was who that proper party in truth was. The depositor was an agent, the deposit the money of his principal, impressed with a trust in favor of that principal; and the inquiry addressed to the court was whether the principal, for lack of privity, could -enforce payment of the deposit to himself.

The rule we have applied is further resisted upon the ground that the application of the credit balance was made after the •debtor’s failure and assignment, and with knowledge of that fact on the part of the bank. The inference sought to be drawn is that the payment was not in good faith, but under circumstances sufficient at least to put the bank cn inquiry. But business embarrassment or a general assignment does not warrant or suggest a presumption of fraud ; and certainly not of a theft producing moneys on deposit. The fact, of the failure undoubtedly led to a ■call of the luán and a resort to the contract right. It was just . such an emergency that the agreement was framed to meet and against which it was to serve as a protection. The fact of the failure had not the least tendency to indicate that the deposit balance was the product of a larceny.

The further question in this case is over' the right of Mrs. •Crabb, which has been sustained. After the failure the whole •credit balance of Mills, Eobeson & Smith was first applied to the debt due the bank. It was not enough to pay that debt. When it was wholly exhausted, so that no surplus was left, there still remained a sum due to the bank. Thereupon it resorted to its •collateral, as it had a right to do. Among the securities pledged by the debtor firm were some belonging to Mrs. Grabb, which .-she had deposited for safe-keeping, and which Smith had approprinted for collateral. To these pledged securities the bank resorted, and sold most of them after the failure and after the credit balance had been fully exhausted. The result of that sale produced a surplus after completed payment of the bank’s debt. The proceeds were credited by the bank after payment of their debt in full to the deposit account, and that surplus has been awarded to Mrs. Crabb. Obviously, no part of it could be said to be proceeds of plaintiff’s stock. Those proceeds had been previously applied in payment of the bank debt and utterly exhausted. What remained was the collateral, and that produced the surplus, and such surplus was clearly the product of Mrs. Crabb’s bonds, together with what is conceded to hava been Fay’s.

The judgment should be affirmed, with costs.

All concur.

Judgment affirmed.

       Affirming 64 St. Rep. 307.


text:
    John Hennessey, Resp’t, v. Martin Paulsen et al., App’lt.

      (Court of Appeals,

      Filed October 15, 1895.)

    1. Ejectment—-Parties.
    In an action of ejectment, it is not necessary that all the occupants of the premises be made parties defendant.
    3. Same—Pleading—Demurrer.
    An answer in ejectment, which alleges that there is a defect of parties defendant, without showing that such parties held adversely to plaintiff, is demurrable.
    Appeal from an interlocutory judgment of the general term of fhe superior court of the city of Hew York, entered upon an order, which reversed a judgment of the special term overruling plaintiff’s demurrer to the answer herein.

      Charles Q. Sanders, for app’lt; John Townshend, for resp’t.

      Affirming 67 St. Rep. 343.

   Gray, J.

This action was for ejectment on a tax lease and the ■complaint is, in our judgment, sufficient. The answer, as a separate defense, alleges, “that there is a defect of parties defendant herein, in that at the time of the commencement of this action one John Mulhall was, and now is, an occupant of a part of the premises described in the complaint, as a tenant of one Rachel Duffy, who was, and still is, the legal owner and in possession of the whole of said premises, and neither of said persons has been made party defendant herein.” To that defense the plaintiff demurred as being insufficient in law and his demurrer was overruled at the special term. Upon appeal the general term reversed the decision of the special term and sustained the demurrer.

That such a defense is insufficient in law cannot be doubted. So far as the facts are therein alleged, it does not appear that Mulhall, however an occupant of a part of the premises, holds adversely to the plaintiff and it may well be, for all that appears, that he acknowledges the rights of the plaintiff. Though Rachel Duffy may be the legal owner and in possession of the whole of the premises, that allegation is not equivalent to an allegation that she is in occupation thereof and her ownership and possession may be in subordination to plaintiff’s title; as Mulhall’s occupation of the premises may be without any hostility to the claim of the plaintiff under his tax lease.

Passing" over what seems to be defective in the allegations constituting this defense in the answer to the complaint, the question arises whether the plaintiff in ejectment is obliged to make all those who may be occupants of the premises described parties defendant. Section 1502 of the Code of Civil Procedure provides that, “if the property is actually occupied, the occupant thereof must be made defendant in the action.” That language is hardly open to the reading that all the occupants must be sued in one action. Undoubtedly the plaintiff may make every occupant a defendant in his action; but I do not think that he is obliged to do so by the Code. We may read the words in section 1502, “the occupant thereof,” as meaning an occupant and not all the occupants. It is difficult to perceive any good reason for permitting these defendants to object to the non-joinder of another defendant, when such joinder could in no wise benefit them nor be necessary for the determination of their rights. We can see how Mulhall as an omitted party might claim the right to be made a party to the action, if he deemed his interest in the real property to be imperil-led; but how the defendants, who are alleged to be wrongdoers with respect to the plaintiff’s property rights, have any interest which the law will recognize, in having another or other wrongdoers joined with them as defendants, "we do not perceive.

In whatever light we look at the nature of this defense, which the defendants have interposed to the complaint, we think it insufficient in law and, therefore, we agree with the general term below that the demurrer should have been sustained aud then-judgment should be affirmed, with costs.

All concur. Judgment affirmed.


text:
    Adolfo Casola, Resp’t, v. Francisco Vasquez, Impleaded, etc., App’lt.

      (Court of Appeals,

      Filed October 15, 1895.)

    1. Attachment—Fraud.
    To authorize an attachment under subd, 3, section 636 of the Code, there must be actual or intended fraud upon creditors.
    3. Same.
    The violation of the Limited Partnership Act by the preferential payment of an honest debt by a solvent limited partnership, organized un der such act, does not establish that the debtor has “assigned, disposed of or secreted his property” with intent to defraud his creditors, within the attachment law.
    Appeal from order of general term of the supreme court in the first judicial department, which affirmed an order of the special term entered December 3', 1894, denying defendant’s motion to vacate a warrant of attachment.

      William H. Blymer and Jones & Covin, for app’lt; Louis Marshall and Charles W. Bennett, for resp’t.

       Reversing 65 St. Rep. 840.

   Andrews, Ch. J.

The application for - the warrant of attachment was based on the ground that the defendants “ had assigned, disposed of or secreted their property with intent to defraud their creditors.” The affidavits wholly failed to establish a case within this clause of the statute. They show simply that the firm of Kugelmann & Co., in violation of the Maryland statute regulating the formation of limited partnerships, being insolvent, sold and transferred to the defendant, Francisco Vasquez, or to the firm of Francisco Vasquez & Sons, effects of the firm in payment of a valid debt owing by the firm to Vasquez or Vasquez & Sons, with intent to give a preference to such creditor or firm. The honafides of the debt is not questioned, nor it it claimed that the effects transferred exceeded in value the amount of the debt. The Maryland statute declares (§ 15, art. 73 of the Public General Laws of Maryland) that a transfer made by a limited partnership under such circumstance, “ shall be void as against the «creditors of such partnership.” Vasquez having been at the time of the transfer a special partner in the firm of Kugelmann & Co., became, as is claimed, by accepting this transfer, liable under the 17th section of the act as general partner. The sale and transfer, although in violation of the limited partnership act, did not bring the case within the attachment law. It was void, but solely by force of the partnership statute. It was not a fraud at common law, under which preferential payments by an insolvent debtor are permitted. The transaction could be set aside for the benefit of the body of creditors of Kugelmann & Co., because the statute of Maryland declared it to be void, and Vasquez, by assenting to the transfer in violation of the act, may-have subjected himself to liability as a general partner. But to authorize an attachment under subdivision 2 of section 636 of the Code, there must be actual or intended fraud upon creditors ; such fraud as was contemplated by the statute of Elizabeth, and similar statutes. The violation of the limited partnership act by the preferential payment of an honest debt does not show that the debtor has assigned, disposed of or secreted his property ” with intent to defraud his creditors, within the attachment law.

The orders of the general and special terms should be reversed, and the attachment vacated, with costs.

All concur. Orders reversed.


author: Haight, J.

text:
    Nassau Bank, App’lt, v. Joseph Campbell et al., as Executors, etc., Resp’ts.

      (Court of Appeals,

      Filed October 8, 1895.)

    Bills and Notes—Discharge op indorser.
    The question, decided by the trial court and the general term, that the plaintiff failed to establish a cause of action for the reason that the defendant’s testator, as indorser, had the right to depend largely upon the value of the securities pledged for the payment of the notes, and that the subsequent postponing of the bonds pledged as security to the payment of other bonds diminished their value and operated to relieve the surety, was held not to have been presented by the evidence.
    Appeal from a judgment of the general term of the first department of the supreme court, affirming a judgment entered on a nonsuit.

      Aaron P. Whitehead, for app’lt; William H. Arnoux, for resp’ts.

       Reversing, 57 St. Rep. 202.

   Haight, J.

This action was brought to recover the amount of two promissory notes, dated April 12, 1886, one for $5,000.00 and the other for $4,810.00, drawn by Phyfe & Campbell to the order of William Campbell, payable on demand, with interest, and indorsed by the defendants’ testator. The five thousand dollar note contained the following clause at the end thereof: “Having deposited with this note as collateral security, with authority to sell the same at public or private sale on the non-performance of this promise without notice, five Fifth avenue plaza bonds for one thousand dollars each with accrued interest on the same from October 1st, 1884.” The other note contained the same clause, with the exception that four bonds only were mentioned instead of five.

The trial court and the general term appear to have reached the-conclusion that the plaintiff failed to establish a cause of action for the reason that the defendants’ testator, as indorser, had the right to depend largely upon the value of the securities pledged for the payment of the notes, and that the subsequent postponing of the bonds pledged as security to the payment of other bonds diminish their value and operated to relieve surety. Nassau Bank v. Campbell, 63 Hun, 129; 44 St. Rep. 191.

We have carefully read and re-read the evidence, and have failed to find any such question presented. The evidence is exceedingly meagre and the meaning of the witness is not in every instance made clear, but the facts disclosed, as we understand them, are substantially as follows: Phyfe & Campbell were owners of what is known as the Plaza Hotel property, and at the time of the making of the notes in question,were engaged in the construction of that building. They had already mortgaged the property to the Hew York Life Insurance Company for the sum of $660,-000.00, and again by second mortgage, running to Charles A. Peabody, Jr., as trustee, for $200,000.00, upon which bonds had been issued, secured by the mortgage. Twenty-two of these bonds had been issued to one Jacob F. Wyckoff, some of which, if not all, had by him been pledged to the plaintiff as security for a loam made to him. Phyfe & Campbell were desirous of procuring another loan upon the property, and the Hew York Life Insurance Company had offered to make a further loan of $200,000.00, provided the bondholder of the second mortgage would consent to have their bonds postponed and made a subsequent lien to the new loan. Most of the bondholders had consented but Wyckoff having pledged his bonds to the Hassau Bank for money loaned, was unable to procure them to have them indorsed or stamped as postponed and made a subsequent lien to the new loan. To accomplish this it was arranged that Phyfe & Campbell should made the notes in suit and procure the indorsement thereof of William Campbell; that such notes should be delivered to Wyckoff, who should take them to the bank and procure the surrender of the bonds held by it as collateral for his loan. The notes were accordingly executed, taken to William Campbell, who indorsed them, and then they were delivered to Wyckoff. What he did with the notes does not clearly appear. Two days later we find him at the office of the attorney for the insurance company stating that he could not get the bonds out of the bank without paying nine thousand dollars, and that for that sum he would get the bonds and have them stamped. It does not appear whether any one agreed to pay him that sum or not, but that he then said he was going to the Nassau Bank to get the bonds and thereafter returned with nine, thousand dollar bonds, which he delivered up in lieu of notes, and at that time he received a check from Mr. Peabody for the notes. Whether Peabody purchased the notes on his own account or whether he advanced the money for Phyfe & Campbell does not appear. The notes upon the trial was produced by the plaintiff. At the time the notes were indorsed and delivered to Wyckoff there were no bonds or securities attached to or accompanying them. It does not appear that any bonds had ever been deposited in any place as collateral security for their payment. They describe five and four ‘Fifth Avenue Plaza bonds for one thousand dollars each,’ making nine in all. There were two hundred like bonds that had been issued. The general term appears to have been of the impression that the bonds held by the plaintiff were the ones that were intended to be pledged as security for the payment of the notes, but they say there were fifteen of these bonds and they were held bv the banlqas collateral for the payment of Wyckoff’s notes. They were his bonds, pledged.by him, and not bonds owned by or under the control and management of Phyfe & Campbell, so that they could be pledged by them for the payment of their debts. It will thus be seen that the evidence fails to establish the defense alluded to.

It is further urged that the notes had been paid. The only evidence upon that subject is the response made by Mr. Phyfe in answer to the question as to whether any demand was made on him ‘after the payment of the notes in the lifetime of William Campbell.’ His answer was ‘that there was not except on the date of the stamping of the bonds. They demanded payment then and we paid them.’ By referring back to the time alluded we find that Peabody delivered his check to Wyckoff for the notes. This evidence has already been referred to and attention called to the fact that the nature of that transation is not disclosed. Under the circumstances the court could not hold as matter of law that the notes had been paid. The most that could be claimed for the evidence was that it presented a question of fact for the jury. No other question is presented that requires consideration here.

The judgment should be reversed and a new trial ordered, with costs to abide the event.