author: O’Brien, J.

text:
    John W. Truesdell, as Administrator, etc., Resp’t, v. Hannie. L. Bourke, as Executrix, etc., App’lt.

      (Court of Appeals,

      Filed March 19, 1895.)

    1. Fraud—Recovery.
    Where fraud is alleged as the basis of the action, it must be proved; the law will not permit a recovery by proof of a right of action upon contract or of some other character, even though facts maybe stated or may appear which in proper form might sustain such an action.
    2. Same.
    Where, in an action under the act of 1858 by an administrator whose-intestate died insolvent, to disaffirm a transfer of property alleged to have been made by the intestate in fraud of creditors, it appears that the money in question was paid by a third person to the defendant’s testator, who-was the pastor and treasurer of the church, to be used for church purposes in performance of a promise made by said testator, and that the money was paid by such testator upon a mortgage upon a church property, and the complaint alleges and the answer admits a demand by plaintiff for the money, such demand should be accompanied with information as to the facts ; and where it does not appear that at the time of the demand the testator was informed of the facts upon which plaintiff basis his-claim, the demand is insufficient to charge the testator with notice.
    3. Same.
    ' If such money came to the possession of a third person through a disposition by gift or other transfer made by the insolvent in his life time, valid between themselves, though void as to creditors, then the possession of such third person is not wrongful, at least until the transfer is disaffirmed, and the defendant will not be personally liable for receiving the money in ignorance of any fraud after he has paid it into the treasury of the church in good faith.
    4. Same.
    But, if the third person simply abstracts the money from the effects of the insolvent, then the possession of such third person is wrongful and he can give no title to another receiving it without legal consideration, though an innocent agent through whose hands it passes may be protected.
    Appeal from, judgment of the general term of the supreme court in the fourth judicial department, entered upon an order, which affirmed a judgment in favor of plaintiff entered upon a verdict,, and also affirmed an order denying a motion for a new trial.

      Louis Marshall, for app’lt;

      C. G. Baldwin, for resp’t.

      Rev’g 61 St. Rep. 600.

   O’Brien, J.

This action was commenced in May, 1885. The original defendant was William J. Bourke, a Catholic priest, and the pastor of the church of St. John the Baptist in Syracuse, who died in April, 1887, and the present defendant is the executrix of his will, having been substituted as defendant after the death of her testator and after the action had been pending for more than two years. The parties seem to agree that the action is brought under chap. 314 of the Laws of 1858, which gave a new remedy to the administrator of a person who died insolvent by permitting him to disaffirm, treat as void and resist all acts done, tranfers or agreements made in fraud of the rights of any creditor. This, of course refers to transfers of property made by the deceased in his lifetime, and the administrator- is authorized to question them or to set them aside in behalf of creditors, though they mav have been binding upon the decsased himself. It is quite clear that the complaint states a case within the • statute. It alleges that one John Fitzgerald died intestate and insolvent on the 28th of Febuary, 1882, and then, after stating that the plaintiff was appointed his administrator on April 11, 1882, and that deceased at the time of his death owed debts in a large amount which he was unable to pay, it proceeds to aver and state the actionable facts as follows: That being so indebted, and with intent to hinder, delay, cheat and defraud his said creditors, and being then the owner of and in possession of about $8,000 in money, the said John Fitzgerald deposited it in a bank in Syracuse, in the name of one Kate Fitzgerald, keeping in his possession and under his control the bank book representing said deposit. * * * The plaintiff further alleges that said Kate Fitzgerald, shortly after the death of said John Fitzgerald, discovered said bank book among the effects of said deceased, and wrongfully and unlawfully took the same and drew out said money from said bank and appropriated the same to her own use with the intent to cheat and defraud the creditors of said John Fitzgerald out of the same, and without any claim or right, title or interest therein.

It then avers that in March, 1882, the defendant received from Kate Fitzgerald the sum of $1,000 so deposited in bad faith with intent to hinder, delay and defraud creditors, and with knowledge of all the facts..

There can be no doubt with respect to the character and scope of the action. It is based upon allegations of actual fraud perpetrated first by Fitzgerald in depositing the money to the credit of his niece Kate, then by her in procuring the 'bank book and drawing it out, and finally, by Father Bourke in receiving it from her in bad faith with knowledge of all the facts, and with the intent to defraud creditors.

All these allegations of the complaint were put in issue by the .answer, and the fundamental objection to the judgment, which the plaintiff has recovered, is that the complaint is unproved not in some particular or particulars only, but in its entire scope and meaning, and hence it is not a mere variance but a failure of proof. Code, § 541. There is not the slightest proof in the case that the deceased debtor ever deposited any money in any bank to the credit of his niece or any one else, or that he ever saw the pass book, or that she ever had it or drew any money from any bank, or that either she or Father Bourke had any knowledge that the deceased owed any one a dollar at the time of his death. It was shown that the debts of the deceased existed in judgments of longstanding which has been docketed in the clerk’s office,, and that all the parties to the fraud alleged lived in the same ward and attended the same church, but surely this could not be either actual or constructive notice of the facts constituting the fraud. There is, indeed, proof of two facts in support of the complaint. One is that the deceased debtor was insolvent, and the other is that Father Bourke received from Kate, the niece of the deceased about a month after his death, the sum of $1,000 in performance of a promise which the uncle had made to him some months before, to contribute that sum in aid of the building of a parochial schoolhouse upon the church property, but that was only one step in the direction of establishing the allegations of the complaint.

It appeared that the deceased clergyman -paid this money upon a mortgage which a savings bank held against the church property on the 8th of July, 1882. The learned trial judge, under the objection and exception of counsel for the defendant, submitted two questions to the jury: First, whether Father Bourke, when he received the money, was a party to the alleged fraud, of which, as we have seen, there was no evidence upon which that fact could have been found. Secondly, whether, though innocent of any fraud or wrong when he received it, he had not received notice of the fact constituting the alleged fraud before he paid the money upon the mortgage, and if he had then he was' liable. There was no proof of any actual notice to him of the fact at any time or in any form. The-complaint alleged and the answer admitted that before the commencement of the action, which was on May 28, 1885, the plaintiff demanded the money. This it should be observed was nothing more than a bare demand ^without any information as to the facts upon which the plaintiff’s right was founded. The defendant was the treasurer of the church, and if he received it in good faith he was guilty of no wrong in paying it over, unless, at the time, he knew that some other person had a better right to it in law or equity. In such cases it would seem to be reasonable that a demand should be accompanied with information as to the facts. Gillett v. Roberts, 57 N. Y. 28. The learned judge, following the theory of the complaint, instructed the jury that if at the time the payment was made upon the mortgage the original defendant had no knowledge of any fraud on the part of the deceased debtor, or his niece, then there could be no recovery in the case. There were but two items of evidence on this point. Ono was the statement of a witness that Father Bourke had admitted to him that he had received the money, but might have to pay it bach. It would be quite difficult to say that this expression imputed knowledge on the part of the person who used it of any fraud whatever, but if it was used after the money had been paid out on the mortgage, it was obviously of no significance. When the witness was pressed to fix the th.e time when the demand was made his testimony was quite indefinite, and to say the least was just as consistent with a time subsequent to July 8th as a date before, and hence could not sustain a finding of knowledge before payment. The other piece of evidence was a provision in the will of Father Bourke made in 1887, more than- five years after he had received the money and two years after the commencement of this action. This provision is to the effect that there was then deposited in a bank $1,000 which belonged to' the school unless a judgment was rendered against him in this-action is which event it was to be applied in satisfaction thereof.

The jury were permitted to inquire whether this was not an admission that he then had the money in question, and also, whether it did not tend to contradict or impeach his testimony that he had paid it on the mortgage five years before. The language does not warrant any such inference. Its meaning and purpose is quite obvious and it is entirely consistent with the testimony. The testator had' received this money, and as he said, had applied it upon the mortgage when it was intended for the school. The will simply provided that it should be replaced by a like sum, then on deposit, unless he or his estate was compelled to restore it. It is not an admission that he then had the money which had been paid to him by' the niece of the deceased debtor, nor did it tend, in the slightest decree, to contradict or impeach his testimony. So that upon the question of knowledge of the alleged fraud, prior to the time that the money was paid upon the mortgage, there was really no evidence upon which to base a finding by the jury.

It is quite clear that this action has been projected and tried upon an erroneous theory. The learned counsel for the plaintiff has abandoned it in his argument in this court, and he now suggests quite a different state of facts upon which to uphold the judgment. He ignores entirely any such thing as a disposition by gift or transfer on the part of the debtor in his lifetime, but on the contrary, assumes that he owned and was in possession of the money at the time of his death, and that afterwards, in some way, it came to the hands of his niece, who was induced by the priest to give to him $1,000 of it upon the claim that the uncle had promised him that sum. If it could be said that these facts were pleaded and found this judgment would clearly have a more substantial basis to sustain it. • It would not be necessary then for the plaintiff to call to his aid any of the provisions of the act of 1858.

The title to money or other personal property which a deceased person owns at the time of his death passes to his administrator, in case of intestacy, when appointed, as of the time of the death. Rattoon v. Overacker, 8 Johns. 126; Priest v. Watkins, 2 Hill, 225; Stuber v. McEntee, 142 N. Y. 203; 55 St. Rep. 455. If, intermediate the death and the granting of letters, a stranger or any third party, without authority,* collects, receives or appropriates any of the assets, they become liable to account for the same as administrators de son tort to the true personal representatives of the deceased. This I conceive to have been the law from the earliest times. 1 Williams on Ex. 296 (6th Am. ed); Schouler on Ex. § 184; Thorp v. Amos, 1 Sandf. Ch. 26; Scoville v. Post. 3 Edw. Ch. 203; Van Horn v. Fonda, 5 Johns. Ch. 388; Campbell v. Tousey, 7 Cow. 64. The principle was long ago embodied in a statute (2 E. S. 81, § 60) and is now section' 2706 of the Code, which reads as follows: Every person becoming possessed of property of a testator or intestate, without being thereto duly authorized as' executor or administrator, is liable to account for the full value of such property to any person entitled thereto, and shall not be allowed to retain or deduct therefrom any debt due him. An action for money had and received or to account upon the special facts or for a tort if warranted by the facts, is all that is essential in such a case. It is plain that such is not the action which the plaintiff brought. This action is based upon fraud, and the plaintiff, before he can recover, must prove the complaint or substitate another in its place. Salisbury v. Howe, 87 N. Y. 128 Where fraud is alleged as the basis of the action it must be proved. The law will not permit a recovery by proof of a right of action upon contract or of some other character, and this though facts may be stated or may appear which in proper form might sustain such an action. De Graw v. Elmore, 50 N. Y. 1; Ross v. Mather, 51 id. 108; Barnes v. Quigley, 59 id. 265. It was the theory of the action, disclosed by the complaint, that the learned trial judge submitted to the jury. The fact, which is undisputed, that Father Bourke received from the debtor’s nieoe, after his death, $1,000 in fulfillment of his promise to donate that amount for the school would, in a proper form of action, go far to make him liable to account for it, but that fact alone would not be sufficient. Other facts should appear which are not contained in this record. There is no proof that the deceased debtor had any money at the time of his death, and none to show how the money which his niece gave to Father Bourke came to her posesssion. If it came to her possession through a disposition by gift or other transfer made by her uncle in his lifetime, valid between themselves, though void as to creditors, then her possession was not wrongful, at least until the transaction was disaffirmed, and the priest would not be personally liable for receiving the money in ignorance of any fraud after he had paid it into the treasury of the church in good faith. On the other hand, if the niece simply abstracted the money from the effects left by her uncle, then her possession was wrongful and she could give no title to another receiving it without legal consideration, though an innocent agent though whose hands it passed might be protected. In such a case, when the property consists of current money, the ultimate beneficiary, without consideration, would be liable. Spraights v. Hawley, 39 N. Y. 441. What the real facts are as bearing upon the nature of the possession by the niece it is impossible even to conjecture. If we look at the complaint, sworn to by the plaintiff after full opportunity to ascertain all the facts, the transaction is plain enough, but all we can learn from the proofs is that she had this money either in specie or in a check and gave it to the clergyman for the purposes stated.

It is plain that we cannot affirm this judgment without disregarding the complaint entirely and then assuming certain facts upon another theory of the case, which are not conclusively established, and were not submitted to or passed upon by the jury Moreover, even if we had the power to thus change the whole scope and theory of the action, it would be manifestly unjust to burden the defense with the costs of a litigation which, thus far, has proceeded upon a mistaken theory, or at least upon a theory which has not been sustained, and so we think that the fairest course is to remit the case for a new trial.

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

All concur, except Gray and Bartlett, JJ., dissenting.

Judgment reversed.


source: Caselaw Access Project

license: Public Domain

text:
    T. Scott Thacher, as Executor, etc., App’lt v. Hope Cemetery Association, Resp’t.

      (Court of Appeals,

      Filed May 21, 1895.)

    Appeal—Court op appeals.
    A judgment in an action for balance due, is not reviewable in the court of appeals, where the amount in controversy before the general term is less than $500.
    Appeal from judgment of the general term of the supreme •court in the fifth judicial department, entered upon an order, which affirmed a judgment in favor of defendant entered upon the report of a referee dismissing the complaint.

      Wesley Brown, for app’lt;

      J. H. Stevens, for resp’t.

       See 61 St. Rep. 317.,

   O’Brien, J.

On the trial which resulted in the judgment now under review, the referee held that the plaintiff’s entire claim was barred by the six years’ statute of limitations, and dismissed the complaint. The question now argued by the learned counsel for the plaintiff is whether the method of computation adopted and the rule for the application of payments were correct or in accordance with the terms of the contract. The trial proceeded upon the principle that, under the decision in the case when it was here on a former appeal (126 N. Y. 510; 38 St. Rep. 510), at least a considerable portion of the claim was barred. He asked the referee to find that there became due, subsequent to July 1, 1887, which was more than six years prior to the commencement of the action, the sum of $242.49, and that this sum, with interest, was still unaffected by the statute of limitations. That was the amount that the plaintiff claimed to recover. It was conceded that the balance of the claim became due before that date. The referee found, at the plaintiff’s request, that the principal and interest upon the face of the instrument, "on July 1, 1877, was $571.25, and that the action was commenced October 5, 1883. Of this sum, it was the plaintiff’s contention that $328.76 became due prior to July 1, 1877, and the referee was so requested to find. So that the amount in controversy at the 'trial was $242.49, with interest from July 1. 1877. The referee’s report is dated January 14, 1893, and on the plaintiff’s contention the amount he was entitled to recover was less than $500, exclusive of costs. That is the amount that was in controversy at the general term. The plaintiff’s counsel has presented on his brief three methods of computation, some one of which he asks us to adopt. The largest sum that remained unbarred by the statute of limitations, according to those figures, when the action was brought, is $242.49, and the lowest is $90.28. By the construction which the referee gave to the certificate and the manner in which he applied, payments or receipts for lots, the whole claim was barred. We have not attempted to examine the legal questions presented by the plaintiff’s counsel, since we have concluded that we have no power to entertain the appeal. The judgment is not reviewable for the reason that the amount in controversy before the referee and at the general term was less than $500. King v. Galvin, 62 N. Y. 238 Brown v. Sigourney, 72 id. 122. Davidson v. Alfaro, 80 id. 660 ; Knapp v. Deyo, 108 id. 518; 13 St. Rep. ,823; Schench v. Marxr 125 N. Y. 703; 34 St. Rep. 607.

The appeal must, therefore, be dismissed, with costs.

All concur, except Haight, J., not sitting.

Appeal dismissed.


author: MAYHAM, P. J.

text:
    Remy Lafort, Resp’t, v. James H. Carpenter et al, App’lts.

      (Supreme Court, General Term, Third Department,

      Filed December 3, 1895.)

    1. Assignment for benefit of creditors—Assets.
    Money collected by an agent is a trust fund in his hands, and does not pass to his assignee for benefit of creditors.
    2. Same.
    In such case, thb assignee takes the money impressed with the trust -un der which it is hold and cannot be treated as a bona fide holder of the money for value, as against the claim of the cestui que trust and owner of the same.
    3. Trust—Following funds.
    Where a collecting agent deposits the money of his principal in a bank with his own and afterward assigns to the benefit of creditors, the principal may follow and establish a lien upon any balance remaining in the bank to the agent’s credit when the assignment was made.
    Appeal from a judgment in favor of plaintiff.
    Douglas & Heaton (Edward W. Douglas, of counsel), for app’lts;
    James B. Egan, for resp’t.
   MAYHAM, P. J.

On the 29th of April, 1893, the plaintiff in this action and respondent on this appeal delivered to the defendant James H. Carpenter a debenture bond, stated to be of the value of $1,030, with instructions to Carpenter to collect the money on such bond. Carpenter, through his agent, Bridges, received, said bond, and agreed to collect the same." On the 12th of May the bond was collected and converted into cash, and the proceeds sent to the First Hational Bank of New York city for collection on May 13th, where they remained on deposit to the credit of the defendant Carpenter until after the 15th of May, on which day Carpenter made a general assignment for the benefit of his creditors to the defendant Bridges. In addition to the amount reaR ized on the bond, Bridges, as assignee, drew from the bank $800.-90, and there was also transferred to Mm by the assignment the sum of $5,787.85, cash on hand. The case discloses that during a period of about ten years prior to the time of the delivery of the bond in question the plaintiff and the firm of Heher & Carpenter, and Carpenter as the successor in business of such firm, had business dealings with the plaintiff, and that firm had collected securities for the plaintiff, and the proceeds of some of such collections had been deposited with Carpenter’s firm, which was carrying on the business of individual bankers. And the defendant Bridge's swears that during that time the character of the business which, plaintiff did with Carpenter’s firm was depositing checks, cash, securities, bonds, etc., and keeping a regular bank account. In speaking of the transaction in controversy in this action, the witness used this language:

“Shortly after the 1st of May, Mr. Lafort came in with a debenture of the Minneapolis Debenture Loan Co., due May 1, 1983, $1,000, and interest, $30.00,—$1,030. Í asked him, Do you want to reinvest the debenture?’ He said, Mo, I am going to use the money for something else.’ I said, Very well, we will send it over to Boston with other bonds.’ ”

The plaintiff, in his testimony, characterizes that transaction as follows:

“I brought this bond to Bridges, who is the cashier of this house, and asked him to collect that bond for me. He told me it would take some days to collect the money. He had to send to Boston, for collection. Then Bridges asked me this question: If I wanted to buy other bonds of the Minneapolis firm for that money? which, as I understood, he would have sold me then and there. I told him I did not want to buy a bond. Then Mr. Bridges asked me some question to the effect what I would do with the money. I told him I did not know; that I wanted the money, and would, tell him when I got the money; that is, in a few days, if I could. That was all that took place.”

This is the substance of the evidence bearing upon the question as to what the real character of the transaction between Carpenter and the plaintiff was at the time of the receipt of this bond. On the part of the plaintiff it is insisted that this transaction created only an agency on the part of Carpenter for the plaintiff for the collection of this bond. On the part of the defendant it is insisted that this transaction, taken in connection with other previous transactions between the plaintiff and Carpenter’s firm, showed a deposit of this bond, or its proceeds, with Carpenter, in his capacity as a banker, and that the fund arising from the collection of this bond could be properly credited to the plaintiff on account, and that the proceeds thereof became a part of the assets of Carpenter, and passed as such to his assignee on his general assignment for the benefit of creditors. It is manifest that the transaction alone which occurred at the time of the delivery of this bond to Bridges, as cashier of Carpenter, was simply a deposit of the bond for collection only, and that that transaction, disassociated from any other transaction between the plaintiff and Carpenter, could not be treated as a deposit of this fund to the credit of the plaintiff. Mor does the evidence show that there was such a uniform custom on the part of the defendant Carpenter in receiving of the plaintiff bonds for collecting and depositing their proceeds to the credit of the plaintiff on the bank account as would change the character of this transaction, and make it a deposit of this bond or its proceeds, and relieve the defendant from the manifest agency that he assumed when he received this bond for collection. The title to the fund, therefore, which was realized on this bond, passed to the defendant, and the fund was, therefore, only in his hands as the agent of the°plaintiff, and not as owner, and was a trust fund to which the assignee acquired no title, and in which the creditors of Carpenter had no legal or equitable interest.

The referee found that on or about the 29th day of April, 1893, the plaintiff-delivered said bond to the defendant W. ft. Bridges, and instructed him to collect the sum of money mentioned therein of the makers thereof, and also at the same time informed him, the said Bridges, that he desired the money when the same was collected. The referee also found:

“That at the time of the delivery of said bond to the defendant Bridges as aforesaid, he, the said Bridges, was the agent of the defendant James H. Carpenter, and as such agent said Bridges received and accepted said bond from the plaintiff at the time of its delivery to him, and on behalf of said Carpenter promised and agreed to collect the amount thereof, and to pay to this plaintiff, on his making demand therefor, the proceeds of such collection.”

■ We think the finding of the referee is fully sustained by the evidence. We are referred by the learned counsel for the appellants to People v. Merchants & Mechanics’ Bank of Troy, 78 N. Y. 269, as an authority that this bond, and its proceeds, became, on the receipt of the bond by Carpenter, ihe assets of Carpenter’s estate, and that the plaintiff from that time sustained the relation of creditor of the Carpenter firm for that amount. The case to which we are referred is not an authority for that contention. In that case the C. H. Bank, having received from a customer of the W. & M. Bank a check upon that bank, sent it to the drawee for payment. The M. & M. Bank charged the check to the drawer, whose account was then good for the amount, and returned the check to the drawer as paid. It sent to the C. H. Bank a draft on a Hew York bank for the amount of the check. Two days after, the M. & M. Bank closed its doors, and a receiver of its assets was apnointed, and the draft was not paid. On application by the C. H. •Bank for an order requiring the receiver to pay the amount of the check on the ground that the assets came to the hands of the receiver impressed with a trust in favor of the O. H. Bank, it was held that the order was properly denied. It will be seen that the facts of the last-cited case are ciuite unlike those of the ease at bar. The delivery of the bond by the plaintiff to the defendant under the circumstances of this case would not have authorized the plaintiff to draw on Carpenter against the proceeds of the bond, and his draft, if drawn under such circumstances, would not furnish a cause of action in favor of his drawee against Carpenter. The bond and the fund realized on the same in the hands of Carpenter, or of his agent or assignee, was clearly impressed with a trust which arises between the agent charged with the duty of collecting funds and his principal in relation to funds so collected. The agent received and held the bonds, or the proceeds thereof, in a fiduciary capacity, and not as owner.

B

In Importers & T.’s Nat. Bank v. Peters, 123 N. Y. 278; 83 St. Rep. 182, it was held that where money held by a person in a fiduciary capacity has been deposited by him in his general account at a bank, the party for whom the money is held can follow it, and has a charge on the balance in the bank’s hands, and O’Brien, J., in discussing that question, uses this language: “When money held by a person in fiduciary capacity has been paid or deposited by him in his general account at a bank, the party for whom the money is held can follow it, and has a charge on the balance in the bank's hands; and if a person holding the money in a fiduciary capacity pays it to his account at his bank, and mixes it with his own money, and afterwards draws out some by checks generally, and in the ordinary manner, the drawer of the check must be taken to have drawn out his own in preference to the trust funds.”

See, also, Baker v. Bank, 100 N. Y. 34.

Applying the rule in the cases cited to the case at bar, it will be found that at the time of the assignment of Carpenter to Bridges there was standing to the credit of Carpenter & Co. in the First National Bank of New York, $1,830.90, which must, under the rules referred to, have represented the $1,030 which were the proceeds of the sale of the plaintiff's debenture bond. The defendant Bridges, the assignee of Carpenter, took this money impressed with the trust under which it was held, and cannot be treated as a bona fide holder of this money for value, as against the claim of the cestui que trust and owner of the same. “The character of the trust fund was not lost by mingling it with other moneys.” People v. City Bank of Rochester, 96 N. Y. 32.

In Dows v. Kidder, 84 N. Y. 121, it was held:

“If any property, in its original state and form, is covered with a trust in favor of the principal, no change of that state and form can divest it of such trust, or give the agent or trustee converting it, or those who represent him in right, * * * any more valid claim in respect to it than they respectively had before such change. * * * The plaintiff may follow the property, however it may change form, or in whosoever hands it may be found, until his rights be divested by his own act or authority.”

In Baker v. Bank, 100 N. Y. 31, the court, say:

“The relation between an agent for the sale of goods and his principal is fiduciary. The proceeds of goods sold, whether in form of money or notes or other security, belong, to the principal. The relation is not that of debtor and creditor; and in case of the insolvency of the agent the proceeds would not go to the assignee, but would be subject to the paramount claim of the principal.”

And in People v. Bank of Dansville, 39 Hun, 187, it was held that:

. “If the identical money collected by the bank did not pass into the hands of the receiver, it makes no difference, for in some shape or form they went to swell the assets which came into his hands.”

"We think the well-settled rules established in the above cases, and in other cases to which reference might be had, make it clear, it seems to us, that the defendant Carpenter, before the assignment, and his assignee subsequently thereto, became chargeable with the proceeds of this bond in their fiduciary capacity as agents or the plaintiff, and that the referee was right in holding that the plaintiff might recover; and that the judgment recovered in this action was properly declared to be a first lien upon the funds in the hands of the defendant Carpenter, and that the judgment must be affirmed.

Judgment affirmed, with costs.

PUTNAM, J., concurs; HERRICK, J., concurs in result.


author: HERRICK, J.

text:
    In the Matter of Amos Knapp, as Highway Commissioner.

      (Supreme Court, General Term, Third Department,

      Filed December 3, 1895.)

    Highways—Establishment.
    A person, liable to be assessed for highway labor in one town, can initiate proceedings to lay out a highway which is partly in that and partly in another town.
    Certiorari to review an order of the county court of Fulton county, confirming the report of commissioners appointed by said court in proceedings to lay out a highway.
    R. P. Aníbal, for petitioner;
    Clarence W. Smith, for resp’ts.
   HERRICK, J.

This is a proceeding to review, by certiorari, an order made by the county court of Fulton county confirming the report of the commissioners appointed by said court, who proceeded to lay out a highway partly in the town of Perth and partly in the town of Mayfield, in Fulton county. - On the 23d day of J"une, 1892, one Yosburgh presented a petition to the» county court of Fulton county, in which he alleged that he was a person liablé for highway labor in the town of Perth, in the county of Fulton, and that, on the 25th day of May preceding, he presented an application in writing to the commissioners of highways of the town of Perth and of the Town of Mayfield, a copy of which application is attached to the petition, and further alleged that the relief prayed for in such application to the commissioners of highways had not been granted, that such' application was made in good faith, and asked the court to appoint three commissioners to determine upon the necessity of such proposed highway. The copy application attached to such petition sets forth that the petitioner is an inhabitant of, and liable to be assesssed for highway labor in, the town of Perth, in the county of Fulton, and makes application for the laying out of a highway in said towns of Perth and May-field. Such application described the place of such proposed highway, the direction in which it should run, through whose property it would go until it intersected another highway, and described the point of intersection with such highway. The application is addressed to the commissioners of highways of the towns of Perth and Mayfield, in the county of Fulton. The court thereupon made an order appointing three persons, all of the town of Johnstown, Fulton county, as commissioners “to examine the said proposed route and highway, hear any reasons that may be offered for or against the laying out of said highway, and assess all damages by reason thereof.” The commissioners so appointed proceeded under such order to lay out the highway and assess damages, and their report was cbnfirmed by the county court. The highway commissioner of the town of Mayfield objected to the proceedings upon the ground that the proceedings are not authorized by statute, and that no notice of the application for the appointment of commissioners was given to the commissioners of highways; that the petitioner for the laying out of such highway is not a resident or a taxpayer in the town of Mayfield, or liable for highway labor in said town, and therefore had no autlim itv to institute proceedings to lay out a highway in the'town of Mayfield. The proceedings of the commissioners themselves in laying out the highway, and their assessment of damages, do not appear to be questioned.

The principal question argued before us was as to whether a person liable to be assessed for highway labor in one town could initiate proceedings to lay out a highway which was partly in two or more towns. The proceedings in question were taken under chapter 568 of the Laws of 1890. Section 82 of said act provides that any person or corporation assessable for highway labor may make a written application, to the commisssioners of highways of the town in which he or it shall reside or be assessable, to lay out a new highway. Section 83 provides that, whenever the land is not dedicated to the town for highway purposes, the applicant shall, within thirty days after presenting the application to the commissioners of highways, by verified petition, showing the applicant’s right to so present the same, applv to the county court of the county where such highway shall be for the appointment of three commissioners to determine uuon the necessity of such highway proposed to be laid out, and to assess the damages by reason of the laying out of such highway. Section 8-f provides that, upon the presentation of such petition, the county court shall appoint three disinterested freeholders, who shall be residents of the town wherein the highway is located, to determine the questions mentioned in section 83. Section 96 provides that, when application is made to lay out a highway located in two- or more towns, all notices of proceedings required to be served upon the commissioners of highways shall be served upon the commissioners of highways of each town. It will be observed that section 96 provides for just such a case as this. This seems to have been overlooked by the relator in these proceedings. The petitioner having complied with all the requirements of the statute, the county court was authorized to appoint the commissioners.

The writ of ■ certiorari should therefore be quashed, and the-order of the county court affirmed, with $50 costs and disbursements.

All concur.


text:
    Henry C. Nevitt, as Temporary Receiver, etc., App’lt, v. First National Bank of Albany, Resp’t.

      (Supreme Court, General Term, Third Department,

      Filed December 3, 1895.)

    1. Judgment—Fraud—Vacation.
    „ A judgment, even though based on a fraudulent cause of action, cannot, be attacked collaterally, in the absence of proof of fraud in its procurement.
    8 Corporations—Receivers—Fraudulent conveyances.
    Where, in an action by the receiver of an insolvent corporation to recover property alleged to have been received by a bank, in fraud of the-creditors of the corporation, it appears that its president, who was also a director of the bank, executes to the bank notes of the corporation for tile-debts of a partnership of which such president was a member, and deposits the property as collateral security, and the other officers of the corporation, are ignorant of the transaction, and on hearing of it, refuse to ratify it, the receiver is entitled to recover, though the bank has obtained a judgment against the corporation on the notes.
    3. Same—Estoppel.
    In such case, the receiver is not estopped from assailing transfers of the-corporate property made by officers in fraud of the rights of creditors.
    Appeal from a judgment dismissing the complaint on the merits.
    Waldegrave Harlock (Edwin Countryman, of counsel), for app’lt;
    John M. Bailey (J. Newton Fiero, of counsel), for resp’t.
   MAYHAM, P. J.

This action was brought by the appellant, as temporary receiver of the George C. Treadwell Company, a-corporation' organized under the laws of the state of ¡New Jersey, to set aside a judgment rendered upon the report of a referee in an action wherein the respondent was plaintiff, and the George C. Treadwell Company defendant, for. the amount of four several promissory notes purporting to have been made by the George G. Treadwell Company, and discounted by said bank, and also for the same amount claimed to have been loaned and advanced by the said hank to the George 0. Treadwell Company, on the ground that such judgment was obtained collusively by fraudulent connivance between said bank and one George H. Treadwell, assuming to act on behalf of the George C. Treadwell Company, as its president. The record discloses that George H. Treadwell was a member of the firm composed of himself and Henry Treadwell, known as Treadwell & Co., and, as such firm, became indebted to the First National Bank in the sum of $20,000, evidenced hy four promisssory notes of $5,000 each, signed by said company, and indorsed by George H. Treadwell; and that, after the making of said notes, George H. Treadwell deposited with the bank, collateral to the same, $20,000 preferred stock and $20,000 common stock of the George C. Treadwell Company, also other collaterals, consisting of merchandise and stocks of various corporations, aggregating $17,000; that George H. Tread-well was, at the time of the making and indorsing of these notes and depositing the collaterals, a stockholder and director in the First National Bank; that the notes held by the bank were made and dated in the fall of 1892, and, remaining unpaid, the bank, by its officers, in May, 1893, requested payment of the notes held by it against Treadwell & Co.; that several letters urging payment to the members of the firm of Treadwell & Co. were written by the bank, and in August, 1893, at a meeting of the directors of the bank, at which George H. Treadwell was present as one of the number, negotiations were opened for the substitution of the notes of the Georrge C. Treadwell Company for the notes held by the bank against Treadwell & Co.; that a committee of the directors of the bank was authorized by it to carry on and perfect negotiations for payment of the Treadwell Company’s notes, and-, in the progress of the negotiation, it was first agreed that the bank would take individual notes of George H. Treadwell in substitution for and payment of the Treadwell & Co.’s notes, hut, before such agreement was consummated, the committee declined to carry out that arrangement, and insisted upon George H. Tread-well’s giving to said bank the notes of the George C. Treadwell Company, and indorsed by himself, as additional security, giving and pledging to the bank collaterals, consisting of personal property; that, after some hesitation, George H. Treadwell accepted such proposition, and, in carrying out the same, executed notes of the George C. Treadwell Company to the amount of $20,000, signing the same as president of that company, and took, of the stock and merchandise of the- George C. Treadwell Company, goods inventoried at the price of $26,000, depositing them in the Albany Safe-Deposit Company, of which he was at the time president, and taking a receipt of the deposit company in his own name, which he transferred to the bank as collateral to the payment of the George C. Treadwell Company’s note; that thereupon the cashier of the bank, acting for the bank, requested him pany of $20,000 of said bank upon the notes of the said George, 0. Treadwell Company, and that such application .should- be made on paper with the letter head of the George O. Treadwell Company; that pursuant to that request, George H. Treadwell procured a letter sheet with the letter head of the George C. Treadwell Company, and wrote an application for a loan, as requested by the bank officer, and delivered it, together with the receipt of the deposit company, assigned to the bank, as collateral to the $20,000 note. This $20,000 was represented by four separate notes, of $5,000 each, in the ordinary form ..of a promissory note; and, in addition, each note pledged the stock of goods which had been deposited in the Albany Safe-Deposit Company, to which we have before referred. The case shows that this transaction was without the authority or consent of the George C. Treadwell Company; that by the by-laws of 'that company, a copy of which was in the possession of the First National' Bank, it was provided that the treasurer “shall; together, with the president or secretary, accept and indorse drafts and .sign and indorse promissory notes for the purpose of the company.” Upon the deposit of these notes, the cashier gave Georgó H. Treadwell figures showing the amount due upon the notes of the Treadwell Company, which, at that time, was $20,163.66; and a draft was thereupon drawn on the National Commercial Bank of Albany, in which the George C. Treadwell Company kept its account, payable to the order of George H. Treadwell, and by him presented to the National Commercial Bank', which, was certified, and by him returned to the Commercial Bank, in payment of the amount of Treadwell & Co.’s notes. George IT. Treadwell thereupon requested the delivery to him of the notes.so paid, which was refused by the National Bank, upon the ground, in substance, that he had no authority for signing the notes and executing the collateral from the George C. Treadwell Company, and he was required by the bank to have those acts df his ratified by the George C. Treadwell Company, before the notes of Treadwell & Company could be surrendered.

The case shows that George H. Treadwell, subsequent to this transaction, endeavored to procure the ratification of the George C. Treadwell Company of his acts, and the signature of the treasurer of that company to the notes which he had given; but the company refused to ratify, and the treasurer refused to sign the notes, and, for his violation of the by-laws in attempting -.to execute the notes, he was subsequently removed from the office as president of the George C. Treadwell Company by-the directors of that company. Failing to procure such ratification and signature, . an action was brought by the respondent against the George O. Treadwell Company on the four notes executed by George H. Treadwell to the bank, as president of the George C. Treadwell Company. The summons in that action was served on Curtis Treadwell, a son of George H. Treadwell, acting as to apply for a loan in the name of the George 0. Treadwell Corn-secretary of the George C. Treadwell Company, but does not appear to have been served on George H. Treadwell or the president of the company. Curtis C. Treadwell, as such secretary, employed counsel to defend that action, and a defense was interposed of a general denial, and the issue was immediately referred by stipulation to a referree to hear and determine; and a speedy trial was had thereon, upon which trial the referee reported in favor of the bank for the amount of the notes and interest, and on that report judgment was entered. This action is brought, in part, to set aside that judgment.

The learned trial judge in this case, as we think, correctly held that there was not sufficient evidence of a fraudulent conspiracy between the bank and the persons representing the George 0. Treadwell Company in the action tried before the referee to authorize the setting aside of that judgment in this collateral action.

While it is quite clear that, by chapter 314 of the Laws of 1858, a receiver, acting for creditors of an insolvent corporation, may maintain an action to set aside a judgment fraudulently obtained, in fraud of the rights of creditors of such insolvent corporation, yet it may well be doubted whether there was sufficient proof of such fraudulent conspiracy in prosecuting and maintaining the action as would justify the setting aside of the judgment obtained by the bank against the George 0. Treadwell Company, on the ground of fraudulent conspiracy in the prosecution of that action.

Section 2 of the act above referred to provides as follows:

“That every person who shall, in fraud of the rights of creditors and others, have received, taken, or in any manner interfered with, the estate, property or effects of any * * * insolvent corporation, * * * shall be liable in the proper action, to the executors, administrators, receivers, or other trustees of such estate or property, for the same, or the value of any property or effects so received or taken, and for all damages caused by such acts to any such trust estate.”

This section is, doubtless, broad enough to authorize an action by a receiver to set aside a judgment obtained against the corporation which he represents by the fraudulent collusion between an officer of a corporation and a person or corporation prosecuting such action, provided the conspiracy to prosecute and maintain the action is clearly proved. But, in the case at bar, the proof, as appears from the evidence of the attorney who defended the action tried before the referee, as well as the, other proof in that action, fails to show any conspiracy; but, so far" as appears from the records and the proof, the action was defended in good faith by the attorney, and to the best of his ability, with the testimony at that time available and attainable by him. Had the case on that trial disclosed fully the facts as they appear on this, it is quite difficult to see how the plaintiff in that action could have recovered; but this court cannot, in this collateral action, review the proceedings of that court upon the merits. The judgment in that case, as was said by the learned trial judge in the case, imports absolute verity, and cannot be set aside in this action, except for fraud or fraudulent conspiracy in obtaining it. Yor can this, court, on this appeal, review the correctness of the judgment in the trial before the referee as to the merits of the action tried by him. That could ouly be done by a direct proceeding on an appeal from that judgment.

The fraud for which a judgment will be set aside must be in the procurement of the judgment. Judgments are impeachable only for those frauds which are extrinsic to the merits. Ereem. Judgm. § 489. To vacate a judgment there must be fraud in obtaining it. A judgment will not be vacated as a means for the court to review or revise its own final judgment, or to correct any error of law into which it may have fallen. Black, Judgm. § 329. Error or mistake in a judgment is not ground for setting it aside by action. Story, Eq. Jur. § 1572; Dobson v. Pearce, 12 N. Y. 165.

The doctrine governing the powers of the court of equity is well stated by Earls, J., in Ward v. Town of Southfield, 102 N. Y. 292, where the learned judge says:

“Courts of equity have general jurisdiction to grant relief against fraud, and to set aside all deeds, contracts, or other instruments obtained by fraudulent practices; and the jurisdiction of the court to grant such relief extends not only to voluntary contracts inter partes, but also to judgments and decrees of courts; but solemn judgments of a court should not lightly be interfered with. It is for the interests of the public, as well as of individuals, that there should be an end of litigation; and where parties have been lawfully brought into court, having jurisdiction of their persons and the subject of litigation, have had an opportunity to prosecute their claims and to defend their rights, and judgment has been regularly pronounced, while such judgment is not vacated or reversed, it concludes the parties thereto; and a matter thus litigated and adjudicated cannot again bn brought into question. Such are the general rules, which should not easily be evaded.”

Tested by these rales, we think the trial judge in the case at bar was right in refusing to set aside and vacate the judgment sought to be set aside in this action.

But this action is not prosecuted for the sole and only purpose of setting aside this judgment. The complaint also alleges that, at the time of the making and delivering of the notes on which that judgment was obtained, the goods and other securities and property of the George 0. Treadwell Company were fraudulently transferred by George H. Treadwell to the defendant, and fraudulently received and retained by it, and also prays for an injunction restraining the defendant, from disnosing of the same, and asks judgment that the defendant deliver them to the plaintiff, or account for and pay over to the plaintiff the proceeds and value of the same. At the conclusion of the evidence offered in this case, the plaintiff’s counsel asked the court to hold and decide that this transfer of property was not affected by the judgment, hut was independent of the same, and was fraudulent and void, as against the receiver who represented the creditors of the George C. Treadwell Company. The court refused so to hold and decide, on the ground that the judgment has absolute vbrity in the eyes of the law, and that the bank shows title in the judgment, and, until the judgment is set aside, the title of the bank is superior to that of the receiver. In this ruling we think the learned trial court erred. It will be born in mind that the action prosecuted by the bank against the George 0. Treadwell Company was an action at law on the notes to recover money had and received, and was in no sense a proceeding in rem against, or to recover title to, the property of the George C. Treadwell Company, alleged to have been fraudulently transferred by George H. Treadwell to the bank as collateral security on these notes. The judgment did not therefore affect the title of the defendant to the property so assigned, and the same was not and is not claimed or held by the defendant under or by virtue of any lien created by such judgment. And the case discloses that the defendant never undertook to assert title to the property so assigned to it as collateral under any power or authority conferred by that judgment. If, therefore, the original transaction between George H. Treadwell, as president of the George C. Tread-well Company, in transferring the property of the company to this bank in payment of his own individual debt or the debt of Treadwell & Co., was fraudulent as against the George C. Tread-well Company, or its creditors, then the defendant got no valid .title which it can assert as against the receiver of the George 0. Treadwell Company, who represents the claims, not only of the George C. Treadwell Company, but of the creditors of that eompany._

It is insisted by the learned counsel for the defendant that the receiver who took title of the George C. Treadwell Company, by virtue of his receivership, took it subject to all the disabilities that existed against the George 0. Treadwell Company, and that as that company had, through its president, transferred its property to the defendant, the plaintiff is estopped from assailing the transfer. This would undoubtedly be true if George H. Tread-well was in court seeking to set aside that transfer. He would be in pari delicto with the defendant, and would be estopped from alleging his own fraudulent act as a ground of relief. But the rule is quite otherwise where the receiver who'represents not only the George 0. Treadwell Company, but creditors of that company, is assailing that transfer.

By the express provisions of section 2 of chapter 314 of the Laws of 1858, it is provided, as we have seen:

“That every person who shall, in fraud of the rights of creditors and others, have received, taken, on in any manner interfered with, the estate, property, or affects of any * * * insolvent corporation, * * * shall be liable in the proper action to the executors, administrators, receivers or other trusees of such estate or property, for the same, or the value of any property or effects so received or taken, and for all damages caused by such acts to any such trust estate.”

And the learned counsel for the defendant concedes:

“That this act, chapter 314, above referred to, authorizes a receiver of a corporation to disaffirm, and treat as void, and resist, all acts done, transfers and agreements made, in fraud of the rights of any creditor interested in the property belonging to such corporation.”

It will hardly be denied that, upon the evidence in this case,— the action of George H. Treadwell in giving the notes of the George 0. Treadwell Company, without authority, to the bank, and the bank receiving them with the knowledge of such want of authority, as appears by the conduct of the bank in refusing to deliver the old notes until such authority was given, and the new notes signed by the treasurer of the George 0. Treadwell Company, and being in possession of the by-laws of the George 0. Treadwell Company, which expressly provide that the president of that company cannot alone make a valid note,—such transaction can be upheld as fraudulent against the creditors of the George 0. Treadwell Company, especially as the proceeds of that note never went upon the books or into the assets of the George 0. Treadwell Company, and were solely used in payment of the note of Treadwell & Co., upon which the George 0. Treadwell Company was in no way liable. Such a transaction, if it could be upheld against the creditors of the George 0. Treadwell Company, would justify the president of any corporation, with the knowledge and consent of his personal creditors, to appropriate the property of the corporation to the payment of the individual debts of the president, and, if upheld, would put the creditors of the corporation of which he was the president at defiance. The bare statement of such a proposition would seem to carry upon its face the evidence of its fraudulent and illegal character.

There is another badsce of fraud which appears in the transaction between George H. Treadwell, acting as-president of the George C. Treadwell Company, and this- bank, and that is that at the time of this transfer of property to the bank as collateral, and. at the time of making these notes, and having them discounted for his own benefit, to furnish means to pay his own indebtedness to the bank of which he was director, he was acting in a double capacity,— as a director of the bank, negotiating with himself, as the president of the George 0. Treadwell Company, to pay his debt to the bank of which he was a stockholder and director, with the property of the George 0. Tréadwell Company. It would seem to require no citation of authority, although authorities are abundant, to prove that no such transaction could be upheld as against the creditors of the George C. Treadwell Company.

I am therefore clearly of the opinion, upon the evidence in this case, that the plaintiff was entitled to judgment declaring the transfer of these collaterals void as against the creditors of the George C. Treadwell Company, and that the plaintiff should have had judgment for the recovery of the possession of such merchandise and collateral, or an accounting for their value, and a recovery for the same.

Judgment reversed, and a new trial granted; costs to abide the event.

PUTNAM. J., concurs in result; HERRICK, J., not acting.


author: Per Curiam.

text:
    George H. H. Butler, App’lt, v. Frederick C. Prentiss, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed December 18, 1895.)

    Contract—Rescission.
    The rule that, wherever an agreement or other like transaction has been procured by means of a material, fraudulent misrepresentation by one of the parties, even though it relates only to a portion of the contract, it furnishes a complete defense to an enforcement of the whole agreement, is-not applicable to a case where the evidence expressly negatives a finding of any fraudulent misrepresentation.
    Appeal from an interlocutory final judgment in favor of defendant.
    J. Hampden Dougherty, for app’lt;
    John L. Hill, for resp’t.
   Per Curiam.

Had the referee concluded that the agreement of January, 1889, which sprang out of the Sherwood House interview, was procured by fraudulent misrepresentation, then, though such related only to a portion of the agreement, the plaintiff would be right in his contention that, as a matter of law, the whole agreement should be set aside. At the interview out of which the agreement sprang, the defendant declined to go on with the business unless the plaintiff should relinquish his depreciation account, make a reduction in the rent of the factory, and bear half the losses of the business; and it was then stated by Hathawav, in the presence of the plaintiff and defendant, that the plaintiff’s depreciation account gave eleven per cent, upon his capital. While holding plaintiff to so much of this agreement as he did understand, the referee relieved him from so much as was apparently based on the statement as to the eleven per cent., which he finds was a misleading one, and which the plaintiff would not have made “had he fully understood and appreciated the effect upon, his rights.” That the referee did not, however, regard it, or find it to be a fraudulent misrepresentation, clearly appears from his findings and from his opinion. In the latter he says:

“I repeat what I have already said, that I do not wish to be understood as finding that the defendant deliberately intended to deceive the plaintiff, or to take an unfair advantage of him; but I think the effect of what he did was to mislead the plaintiff, and that he did not comply with the strict rules requiring full disclosure as between partners, one of whom stands in a position of superiority to the other in knowledge of the affairs of the firm. It does not appear that the defendant ever explained to the plaintiff the nature of the capital and depreciation accounts, or that he ever stated to him fully what was the original agreement between himself and Mr. Butler, Sr.”

Now, the referee has found, and the evidence supports it, that plaintiff uderstood fully what he was about in consenting to a reduction of the rent, and in assuming fifty per cent, of the loss, and there was ample consideration for such promise on his part, because the defendant refused to go on further with the business ' unless he should make such modifications in their partnership agreement. There was consideration, also, for his promise to waive the fixed percentage for depreciation on machinery; but the referee, as we have seen, reached the conclusion that he did not understand that, and that it became a part' of the agreement without a full appreciation of the situation on Butler’s part. We think that, in this latter conclusion, the referee took a view of the testimony most favorable to the plaintiff; for, independently of whatever the defendant or Hathaway may have said at the time on the subject, it was made to appear that, prior to the Sherwood House interview, the plaintiff had announced his determination to give up his right to the depreciation account. Having, however, drawn the inference most favorable to the plaintiff, which expressly negatives a finding of any fraudulent misrepresentation, the rule which the plaintiff would invoke—that“wherever an agreement or other like transaction has been procured by means of a material, fraudulent misrepresentation by one of the parties, * * * even though it relates only to a portion of the contract, it furnishes a complete defense to an enforcement of the whole agreement”—is not applicable.

In addition, however to the concession obtained from the plaintiff as to the depreciation account in 1889, the defendant, prior thereto, and in 1885, persuaded plaintiff to waive all depreciation on new machinery for 1885, and to accept two per cent, depreciation for 1886, and three per cent, for 1887. The referee having found that the plaintiff did not understand the depreciation account, which the defendant was bound to explain to him, and that a contract to reduce it, made in 1889, could not be sustained, and that five per cent, was a low rate of depreciation, both for new and old machinery, which fact was not made known to the plaintiff, we think that, to make the judgment consistent and logical, so much of the agreement of 1885 as involved a reduction in the rate of depreciation upon new machinery should also have been set aside. The crediting of the plaintiff, however, with such amount, which is ascertainable, does not require a new trial, but the amount can be deducted from the judgment.

The other questions are mainly of fact, and have not only been disposed of in elaborate findings, but in a full and able opinion by the referee, with whose conclusions we see no reason to differ.

The judgment, as modified, should be affirmed, without costs.


author: FOLLETT, J.

text:
    Mark Davis, Resp’t, v. Julius Zimmerman et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed December 18, 1895.)

    1. Injunction—Interference with business.
    The business of a person, conducted according to law, is a property right.
    2. Same.
    A court of equity has jurisdiction to restrain by injunction a carrying on of a conspiracy to destroy or injure property, and the court is not deprived of its power because the acts are criminal.
    3. Same.
    Where some of the plaintiff’s property is destroyed, his employes attacked, and the persons who seeks his employment are threatened or menaced, an injunction restraining the commission of such acts is an appropriate remedy.
    4. Same—Equities dented.
    The rule that, when all of the equities of a complaint are denied in the answer, an injunction will not be granted pendente lite or, if granted, will , be vacated, is not applicable to a case where the defendant does not assert the right to do any of the acts which he is restrained from doing..
    Appeal from an order denying an injunction pendente lite.
    Moses H. Grossman, for app’lts;
    Leonard Bronner, for resp’t.
   FOLLETT, J.

This action was begun June 21, 1895, to restrain the defendants (1) from inducing the plaintiff’s employees to leave his service by force, threats or intimidation; (2) from preventing persons from entering plaintiff’s service by force, threats or intimidation; (3) from destroying plaintiff’s property. This is the gist of the relief sought by the action and granted by the temporary injunction, issued June 21, 1895, and continued by an order of the special term, entered August 26, 1895.

The plaintiff now is, and for fifteen years last past has been, a manufacturer of hats and caps at the city of ¡New York, employing a large amount of capital and about seventy-five employees, known as “hat and cap operators,” who are members of the “Cloth Hat and Gap Operator’s Union,” a society the members of which reside in or near the city of Hew York. ' It is alleged in the complaint, that, on the 8th of June, 1895, the plaintiff’s employees and other members of said union demanded that the plaintiff should enter into certain contracts with his employee^ relating to the conduct of his business, and that in default thereof said employees threatened to quit work, and cause the suspension of business in the plaintiff’s factory, until such time as the demands of the union should be acceded to. The plaintiff refused to execute the contracts, and thereupon a strike was ordered, and plaintiff’s employees left his service. It is also alleged that the defendants entered into a conspiracy to destroy plaintiff’s business, and to prevent him from carrying it on, and to carry out the conspiracy the defendants stationed a large number of persons, called “pickets” and patrollers,” in front of and near the plaintiff’s factory, who, by threats and personal violence, intimidated other persons from entering plaintiff’s service. It is further alleged that many of the defendants, in furtherance’ of their conspiracy, have violently assaulted and injured the new employees of the plaintiff. It is alleged that the plaintiff, by the defendant’s acts, has been compelled to establish factories in other towns; that he had one at Rutherford, H. J.; and that, on June 18, 1895, several of the defendants, at the instigation and upon the order of said union, destroyed the plaintiff’s machinery and. property at that place, of the value of $500, and by force, threats, and violence, induced the hands there employed to leave their work. The complaint contains other allegations of like nature, not necessary to be described particularly. It is alleged that the damages to his business occasioned by these acts are great and irreparable, that they cannot be ascertained and recovered in an action at law, and that the defendants are unable to respond in damages. The defendants, in their answer, deny the existence of the conspiracy and the acts of violence alleged, but they admit that they have stationed pickets and patrollers near the plaintiff’s factories, have tried to prevent, by persuasion and argument, persons from entering the plaintiff’s service, and also that some of plaintiff’s property has been destroyed, but aver that they believe the plaintiff procured the destruction of Ms own property for the purpose of charging the act on the defendants. ' The defendants also allege that the plaintiff and other persons engaged in the same business have entered into a conspiracy unjustly to reduce the wages of employees and to refuse to employ members of the union, and they ask for a judgment restraining the execution of such alleged conspiracy.

Protection to property is guaranteed by the constitution of the United States and the state of Hew York, and it is the duty of the courts to enforce those guarantees. • The business of a person, conducted according to law, is a property right. People v. Barondess, 61 Hun, 571; 41 St. Rep. 659. In that case, Hr. Justice Daniels held that a loss resulting from a suspension or interruption of a lawful business was an injury to property, and bis opinion was adopted by the court of appeals. Id., 133 N. Y. 649; 45 St. Rep. 248; State v. Stewart, 59 Vt. 273; Barr v. Trades Council (N. J. Ch.) 30 Atl. 881. A court of equity has jurisdiction to restrain by injunction the carrying on of a conspiracy to destroy or injure property, and the court is not deprived of its power because the acts are criminal. Cranford v. Tyrrell, 128 N. Y. 341; 40 St. Rep. 414; In re Debs, 158 U. S. 564-593.

Many of the acts which, it is alleged, the defendants committed and threatened to commit, are not only violations of the rights of property guaranteed by the constitution and the laws of the state, but are violations of the criminal laws of- the state. A conspiracy to injure a person’s business by preventing persons from entering' his employment,, by threats and intimidation, is a crime at common law. People v. Melvin, Yates’ Sel. Cas. 112; 2 Wheeler, Cr. Cas. 262. «See, also, Wright, Or. Cons. (1st Am. Ed.) chap. 3, and eases there cited. Such a conspiracy is now a crime by statute. Pen. Code, § 168. Some of the plaintiff’s property was destroyed, his employes were attacked, and the persons who sought his employment was threatened and menaced. For these acts the perpetrators are liable in damages; but they being, as it is alleged, irresponsible, a judgment for damages would be unavailing, would not suppress the wrongs, and would necessitate a multitude of actions. Besides this, the damages which arise from the destruction of a business, with a loss of contracts, cannot be ascertained even approximately. In such cases an injunction restraining the commission of such acts is an appropriate remedy. It is urged that there is no precedent in this state which sustains an injunction in such a case. To this it may be answered that there is no case denying the power of this court to grant such relief, and there are many cases in other jurisdictions where the exercise of this power has been sustained. In re Debs, 158 U. S. 564; Casey v. Typographical Union, 45 Fed. 135; Coeur D’Alene Consolidated Min. Co. v. Miners’ Union of Wardner, 51 id. 260; Blindell v. Hagan, 54 id. 40; Id., affirmed, 6 C. C. A. 86; 56 Fed. 696; 13 U. S. App. 354; Toledo, A. A. & N. M. R. Co. v. Pennsylvania Co., 54 Fed. 730, 746; U. S. v. Workingmen’s Amalgamated Council of New Orleans, id. 994; Farmers’ Loan & Trust Co. v. Northern Pac. R. Co., 60 id. 803; Railway Co. v. Bailey, 61 Council of New Orleans, id. 994; Farmers’ Loan & Trust Co. v. Northern Pac. R. Co., 60 Fed. 803; Railway Co. v. Bailey, 61 id. 494; U. S. v. Agler, 62 id. 824; Arthur v. Oakes, 63 id. 310; 11 C. C. A. 209; U. S. v. Elliott, 64 Fed. 27; Sherry v. Perkins, 147 Mass. 212; Murdock v. Walker, 152 Pa. St. 595; China Co. v. Brown, 164 id. 449; Barr v. Trades Council (N. J. Ch.), 30 Atl. 881; McCandless v. O’Brien, 2 Pittsb. Leg. J. (N. S.) 435; Railroad Co. v. Wenger, 17 Wkly. Law Bull. 306; 24 Abb. N. C. 267.

In Harvester Co. v. Meinhardt, 60 How. Prac. 168; 9 Abb. N. C. 393; affirmed, 24 Hun, 489, an injunction was refused, on the ground that “there is no fact shown which would, in any legal sense, amount to an intimidation of the persons who are actually in, or were about to enter, the employ of the plaintiff, and no facts showing acts of the defendants which would, in any legal sense, amount to a coercion of any such persons.” Reynolds v. Everett, 144 N. Y. 189; 63 St. Rep. 89; affirming, Id., 67 Hun, 294; 50 St. Rep. 889; which affirmed Id., sub. nom. Rogers v. Evarts, 17 N. Y. Supp. 264, was brought to restrain striking cigar makers, in which an injunction pendente lite was granted and continued until the action was tried. On the trial the complaint was dismisssed, without costs, on the ground that the strike had ceased, and there was no occasion for a permanent injunction restraining defendants, and also on the ground that the defendants had committed no acts of violence against persons or property, but had. simply persuaded laborers not to remain in the plaintiff’s employ, and had persuaded others not to enter their employ. In Sinsheimer v. Garment Workers, 77 Hun, 215; 59 St. Rep. 503; reversing Id., 5 Misc. Rep. 448, the temporary injunction was vacated on the ground that “there is no proof of any acts of violence upon the part of the defendants, or of any injury to property, or of any threats or intimidation.” The defendants in that case had simply mailed circulars to the plaintiff’s customers requesting them not to deal with the plaintiffs until the difference between them and the defendants should be settled.

The supreme court of this state has original and general jurisdiction of all cases in law and equity (Const, art. 6), with unlimited power to protect the rights of persons and property by adopting and enforcing all of the remedies afforded by an enlightened jurisprudence which are not inconsistent with the constitution of the state; and it is its privilege and duty to mold and expand its processes so as to afford adequate protection to the rights of all citizens. It is far better for employers and employes, and for the peace and safety of the state, that such relief be exercised by the courts, where parties can be heard, than to permit such violations of law to go unrestrained until force is arrayed against force, and the strong arm of the executive is compelled to intervene with troops to prevent disorder and the destruction of property. The defendants invoice the general rule that, when all of the equities of a complaint are denied in the answer, an injunction will not be granted pendente lite, or, if granted, will be vacated. This rule applies when the litigants claim adversely in respect to property, or the right to do some act in connection therewith; and, the plaintiff’s asserted right being doubtful, an injunction will not be granted. But this rule is not applicable to the case at bar, for the defendants do not assert the right to do any of these acts which they are restrained from doing. They do not assert that they have a right to intimidate, by threats or by violence, persons in the employment of the plaintiff, or those who seek his employment, nor do they claim that they have a right to destroy the plaintiff’s property; and it is only from doing and conspiring to do such acts that they are restrained.

The order should be affirmed, with costs.

VAN BRUNT, P. J., concurs in result; O’BRIEN, J., concurs.


text:
    Peter Nugent, Resp’t, v. Jules Breuchard et al., App’lts.

      (Supreme Court, General Term, Third Department,

      Filed December 3, 1895.)

    1. Master and Servant—Appliances.
    It is the duty of an employer to furnish reasonably safe place of employ* ment and appliances for the use of his employes.
    2. Same—Contributory negligence.
    The employe must show, on the trial for injuries claimed to have resulted to him from the negligence of his employer, that he in no way by his own negligence contributed to the injury
    3. Same—Question of fact.
    Where the negligence, either of the employer or employe, are the subjects of controversy, about which men of ordinary intelligence might differ upon the facts disclosed, they become enimently questions of fact for the consideration of the jury.
    4 Evidence—Res gestae.
    In an action for personal injuries, caused by the breaking of a derrick guy rope, alleged to have been so worn by use as to have become of insufficient strength, the question, “ What was done with this line after it parted ? ” is admissible as part of .the res gestae, if limited to the time of accident.
    5. Trial—Charge.
    In such action, a statement in the charge that the servant “was not informed—it was for you to say whether he was or not — that he must not work in the place where he was” at the time of the accident, does not assert as a fact that the servant was not informed, but submits such question to the jury.
    Appeal from a judgment entered on a verdict in favor of plaintiff, and from an order denying a motion for a new trial, made on the minutes.
    P. & C. F. Cantine (Charles F. Cantine, of counsel) for app’lts;
    John G. Van Etten, for resp’t.
   MAYHAM, P. J.

This action was prosecuted by the plaintiff, Bugent, against the defendants, for injuries suffered by the plaintiff to his person by reason of the alleged negligence of the defendants in furnishing unsafe and improper implements, by reason of which the plaintiff was injured while engaged in the service of the defendants. The defendants were engaged in the construction of the Otis Elevated Railroad, running from Palenville to the top of the Oatskill Mountains, and were excavating a deep rock cut on the line of said road. The cut was twenty feet wide and twenty feet deep, with perpendicular rock walls on either side. The plaintiff was engaged in the cut, barring out and loading stones into a bucket, which had to be hoisted from the bottom of the cut to the surface, and high enough above the surface to be swung on the arm of a derrick and dump. The derrick was located on the surface on one side of the cut, and was so adjusted that when stones were elevated in the bucket they would swing around by their own gravity over the dump, and to keep the arm of the derrick from swinging before the bucket was elevated above the surface there was attached to it a guy rope, which was held or managed by a man located upon the surface, who wrapped the guy rope around the stump of a tree, so as to enable him to bold it sufficiently tight to prevent the swinging of the arms of the derrick. On this occasion of the injury the plaintiff was in the bottom of the cut, handling stone with a bar, and as the tub was being elevated by the machinery of the derrick the guy rope broke, and allowed the arm of .the derrick to swing around, and the stones in the bucket were precipitated against or upon the plaintiff, breaking one of his legs, and in other respects injuring him. The contention on the part of the plaintiff was that the defendants were negligent in not furnishing a guy rope sufficiently strong to hold the derrick arm in position, and that by reason of the defective rope the injury occurred. On the part of the defendants it is insisted that the plaintiff was negligent in not being at the proper place to which it was claimed he was assigned by his employers, and that his negligence contributed to the injury which he suffered. There was some proof given in the case that the guy rope was old, and very much worn, and that some of the strands were broken, and that it was consequently a defective appliance, and not suitable for the purpose for which it was being used; and that by reason of its defects this injury occurred.

The contention on both sides had the semblance of support upon the .evidence offered by the respective parties, so that it clearly became a question of fact—First, whether the defendants were negligent in not furnishing safe implements and appliances for their employes, by reason of which this injury occurred; second, whether the plaintiff himself used the care and diligence which the dangerous nature of his employment required, to relieve himself from the imputation of contributory negligence. These questions, we think, were proper for the consideration of the jury, and were, under a careful charge by the learned judge, submitted to them for their consideration. We think they were proper questions for the jury, and, the jury having passed upon them, and reached a conclusion in favor of the plaintiff, their determination should not be disturbed, unless there was some error committed by the learned trial judge, which affected their verdict. ' The duty of an employer to furnish a reasonably safe place of employment and appliances for the use of his employes is a question too well settled to need any citation of authority. And, on the other hand, the duty of the employed to show on a trial for injuries claimed to have resulted to him from the negligence of his employer that he in no way by his own negligence contributed to the injury, is also too well settled to require citation of authorities; and where the negligence, either of the employer or employed, are the subjects of controversy, about which men of ordinary intelligence might differ upon the facts disclosed, they become eminently questions of fact for the consideration of the jmy-

It is insisted by the learned counsel for the appellant that this judgment should be reversed for alleged errors committed by the trial judge in the admisssion of testimony and in his charge to the jury. On the trial the question was asked by plaintiff’s counsel of the plaintiff as a witness, “What was done with this line after it parted?” This was objected to as immaterial and irrelevant by the defendant* to which the court responded, “What was done on the same occasion may be proved as a part of the res gestae.” The answer was: “To the best of my opinion, it was put into use again; tied up. I won’t swear positively.” This evidence the defendants moved to strike out. The court thereupon propounded this interrogatory: “Q. Done right away do you mean? A. Yes, sir. Q. And its use .resumed? A. Yes, sir. The Court: I think that will do.” We do not think that the ruling of the learned judge, when taken in connection "with the answers given by the witness, was error for which this judgment should be reversed. It does not seem to contravene the principle laid down in Clapper v. Town of Waterford, 131 N. Y. 390; 43 St. Hep. 316. In that case the evidence which was objected to, and the reception of which was held error, was quite unlike that offered in this case. In that case the plaintiff was permitted to prove, as against the defendant’s objection and exception, that the commissioner of highways of the town was seen repairing the alleged defective walk several days subsequent to the accident; and it was held error, for the reason that the jury might construe it as evidence of the knowledge or admission of the commissioner of highways that the defect in the sidewalk complained of really existed and needed repair. In this case no such inference can be drawn from the question, answer, and ruling of the learned trial judge, and it does not seem that any harm could have resulted to the defendants from the reception of the evidence; and particularly as it was confined by the learned trial judge to the time of the accident.

Nor do we see any error in the charge of the learned trial judge which would justify a reversal of this judgment. The part of the charge urged as objectionable, to which attention is called, is as fellows:

“If you find the defendants have been at fault in this respect, the next question is whether the plaintiff has been neglectful. He had a right to be in this place. He was not informed—it is for you to say whether he was or not—that he must not work in the place where he was at work at the time this accident happened. Did he' do anything that he ought not to have done? Did he omit anything that he ought to have done, that a man commonly prudent and careful himself, while employed in a - dangerous situation, would have done?”

Taking these statements of the learned judge as a whole, we fail to s.ee that they enunciate any improper rule of’law. The language of the judge, “that he had a right to he in this place,” when fairly and liberally interpreted, means in the rock cut in which he was employed. The statement of the judge, “'he was not informed,” followed immediately by the qualifying words, “it is for you to say whether he was or not,” submits the question of information to the consideration of the jury, and is not-such an assertion of a fact as would make the statement of the judge erroneous for that reason. On the whole case, we see no error for which this judgment should be reversed.

Judgment affirmed, with costs.

All concur.