author: Brady, J. Daniels, J.

text:
    Max Frankel, Resp’t, v. John B. Wathen et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed December 29, 1890.)

    I. Partnership—Dissolution-Notice.
    The dissolution of a firm, its discontinuance, or any change in its character will not afiect persons dealing with it unless actual notice be given.
    3. Account stated.
    While an account stated is prima facie evidence and will be deemed conclusive between the parties, if fraud, mistake, omission or inaccuracy be shown, the account loses its conclusive character and is subject to reexamination.
    3. Principal and agent—Commissions.
    Where an agent takes commissions from both sides the presumption is that he has not acted towards his principal in good faith, and, while such a case might occur and such taking of commissions be justified, the knowledge of the duplicate character of the agent cannot be established by mere inference, but must rest upon a full disclosure or positive proof of knowledge in the buyer and in the seller; otherwise the' agent cannot recover commissions from his principal.
    Appeal from judgment on referee’s report.

      J. L. Bennett, for appl’ts; Ferdinand Kurzman, for resp’t.
   Brady, J.

This action was brought to recover commissions -earned by the sale of whiskies, and also for services in superintending a farm belonging to the defendants, and for various sums of money laid out and disbursed for them, and loaned and advanced to them, all of which they promised to pay. The plaintiff also alleged that from time to time he had rendered an account to the defendants, copies of which are annexed to the complaint, upon which the defendants made various payments. He also alleges that the items charged in the account are true and correct ,in all respects.

The defendants denied any knowledge or information sufficient to form a belief that any of the work, labor or services were rendered for J. B. Wathen & Bro., or for the defendants in this action, or that any of the sums disbursed were expended, other than as alleged or mentioned in the answer for the defendants, or for J. B. Wathen Bros. & Go., or J. B. Wathen & Bro., but on the contrary alleged on information and belief that the liquors men-' tioned in the complaint were the property of and belonged to a corporation duly organized under the laws of the state of Kentucky, and known by the corporate name of The J. B. Wathen & Bro. Co., and that all the services rendered by the plaintiff mentioned or referred to in the complaint were done or performed for the corporation; and that all the moneys expended by the plaintiff were expended for and in doing business for the said corporation, and not otherwise, as the plaintiff at all times well knew; but whether all the services for which charge is made, or what part thereof were rendered, or whether or what part of the disbursements therein were charges, the defendants denied any knowledge or information sufficient to form a belief. The defendants further answering alleged as a separate defense, on information and belief, that the claims and demands of the plaintiff, and all of them, set out in the complaint against the defendants and against the corporation had been fully paid. The defendants further answering set up counterclaims, on information and belief, arising from money advanced to the plaintiff, and for property of the defendants in the hands of the plaintiff; and the whole answer from supposed inconsistencies is criticized by the learned counsel for the respondent as an old device suggestive of the hunter so aiming his rifle as to hit the animal in the bushes if it was a deer, and to miss it if it was a calf.

The question presented in limine, however, is whether the services were rendered to the firm of John B. Wathen & Bro., or the corporation named John B. Wathen & Bro. Co. It is conceded that there was a firm in Louisville designated J. B. Wathen & Bro., which began business in 1875 and which was continued until 1885, when it is insisted it was merged in a corporation under the Laws of the state of Kentucky known by the corporate name of The J. B, Wathen & Bro. Co.

There does not seem to be any doubt that the asserted change took place, but the firm and the corporation nevertheless seem to have gone along pasi passu together, so far at least as the plaintiff is concerned, a circumstance which arose doubtless in part at least from the fact that J. B. Wathen was the president of the company, inasmuch as he was not advised of the merger asserted, and which it may be said actually took place. His contract was made with the firm and not with the corporation and was so continued, the evidence to establish which is abundant, and therefore justifies the finding of the referee, although there are some facts and circumstances, perhaps, bearing upon the asserted knowledge of the plaintiff that this change had taken place, but not at all sufficient to overcome the correspondence and other facts and circumstances proven and employed for the purpose of establishing the plaintiff’s ignorance of the change. And it may be said that a perusal of the testimony creates the impression _ that the affairs of the corporation were so conducted, Mr. J. B. Wathen being the principal active person in both, that the firm was continued as a distinct organization in its relations with the plaintiff.

The referee has so found and invoked on behalf of the plaintiff the proposition, well established by authority, that the dissolution of a firm, its discontinuance, or any change in its character, will not affect persons dealing with the copartnership unless actual notice be given. See Bates on Partnership, §§ 890 and 611; Nat. Shoe & Leather Bank v. Herz, 89 N. Y., 629; American Linen Thread Co. v. Wortendyke, 24 id., 550.

On this subject the referee, in speaking of certain letters that -were signed J. B. Wathen & Bro. Co., and which he justly says refers to a corporation of that name, observed as follows: “ The striking fact also appeal’s that throughout this long correspondence the defendant, John B. Wathen, gave no distinct notice to the plaintiff of the organization of a corporation or of any change in his business, a direction of any kind to charge any other concern or corporation, except what might be inferred from the signing of letters, and, in May, 1887, the denial that Mr. Bond was vice president of the company. There was, in other words, no such proof on the subject as would necessarily require the plaintiff to look upon his employers as others than the members of the firm, and thus by a proper legal notification be required to sever his connection with it.

The referee further says: “ It must be found as a matter of fact that the defendant Wathen represented himself to be engaged in business under a firm name; that such representation was made in such a manner as to induce the plaintiff to rely upon it; the plaintiff did rely upon it and as a conclusion from the facts it must be held that he is estopped from denying the copartnership.” This, however, is a mere reiteration of the fact in a different form that the plaintiff was not aware of the change which was made, had received no legal notice of it, and therefore was not concluded by it, or his right in any way affected by it to the compensation for the services rendered to the firm, as he understood it to exist.

The defendants have made a gallant struggle against the effect of the evidence and the rule of law suggested, but in vain. On that issue the referee must be sustained.

The general liability of the defendants having been thus established, the referee proceeded to examine the claims of the plaintiff which were disputed, namely, the commission for’ the sale of 2,500 barrels of whiskey to Cook & Bernheimer in exchange for a clay farm owned by them, the alleged sales of “ Criterion” whiskey in Philadelphia by the plaintiff, the compensation for his services in managing the farm mentioned, and commissions for the sale of 1,000 barrels of whiskey to Cook & Bernheimer in exchange for the yacht “Sea Witch.”

As to the first, namely, the sale of 2,500 barrels of whiskey in exchange for a farm, it appears that the plaintiff, while acting as the general agent of the defendants for the sale of their brands of whiskeys within the limits prescribed, was requested by Cook & Bernheimer to negotiate the exchange of a clay farm owned by them for whiskey. He called the attention of the defendants to the farm and the exchange was finally effected through his agency. The whiskey was thereupon delivered and the defendants agreed to allow the plaintiff $1,000 for his commission in this transaction, which amount was charged on the plaintiff’s books to the defendant’s firm and included in an account rendered by him and which was received without objection by the defendants, and the amount thereof paid to the plaintiff by the remittance made prior to November 1, 1886. The correctness of the item was not disputed until the trial of .the action, although .the defendant insisted that the corporation of J. B. Wathen & Bro. Co., and not he, was subject to the liability, if any. It was disputed upon the ground that the plaintiff had obtained a commission of $250 from Cook & Bernheimer for selling the farm, a fact which he concealed, and was therefore guilty of such misconduct and fraud as to forfeit his rights to any commission from the defendant who thus even if there was an account stated, established his right to open it.

It is true that an account stated is prima facie evidence and will be deemed conclusive between the parties unless some fraud, mistake, omission, or inaccuracy is shown; but the converse of the rule is equally well established, namely, that if fraud be shown the account loses its conclusive character and is subject to re-examination and a contest.

The learned referee, however, arrived at the conclusion that the defendant knew whilst the transaction was going on in reference to the farm that the plaintiff was also acting as the agent of the vendors, and was therefore not subject to the rule clearly stated in the case of Gardner v. Ogden, 22 N. Y., 347, that where a person stands in the inconsistent relations of both buyer and seller, there are dangers, and it is not relevant to say that it is impossible there could be any in a particular case. And, as said by Lord Cranworth, and quoted in that case: “ An agent has duties to-discharge of a fiduciary character towards his principal, and it is a rule of universal application that no one having such duties to discharge shall be allowed to enter into engagements in which he has or can have personal interests conflicting, or which possibly may conflict with the interests of those whom he is hound to protect. So strictly is this rule adhered to that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into.” And, further: “ It may sometimes happen that the terms on which a trustee has dealt, or attempted to deal, with the estate or interests of those for whom he is a trustee, have been as good as could have' been obtained from any other person; they may even at the time have been better. But still, so inflexible is the rule, that no inquiry on that subject is permitted.”

In the case of Claflin v. The Farmers & Citizens' Bank, 25 N. Y., 297, Judge Smith says: “The rule is applicable to all persons standing in a trust relation. The principal is entitled to the exercise in his behalf of all the skill and industry of his agent and to his intensest fidelity to his trust.” The same question was discussed in Murray v. Beard, 102 N. Y., 508; 2 N. Y. State Rep., 466, by Justice Ruger, who, in the course of his opinion, said: “ An agent is held to uberrima fides in his dealings with his principal, and if he acts adversely to his employer in any part of the transaction, or omits to disclose any interest which would naturally influence his conduct in dealing with the subject of employment, it amounts to such a fraud upon the principal as to forfeit any right to compensation for services.” The question in such cases does not, therefore, turn upon the point of whether there is any intention to cheat or not, but upon the obligation arising from the fiduciary relations of the parties to make a frank and full disclosure. Story’s Eq. Jur., § 316. See, also, Martin v. Bliss, 57 Hun, 157; 32 N. Y. State Rep., 930, a distinctive case on the subject.

The rule governing the subject suggested is therefore so strict and so vigorous, so sensible and so just, that when the person is acting in the double capacity of representing'two persons for each of whom he is expected to do his best, a knowledge of the duplicate character should be established, not upon mere inference, but upon a full disclosure or positive proof of knowledge, so that the seller or the buyer, as the case may be, may be advised of the exact relation of the agent to the parties conducting the negotiation. There is no such evidence in this case. At most there is a mere suggestion that Cook & Bernheimer relied upon the plaintiff’s judgment as to the selection of the whiskey which was to be given for the farm. “ This,” said the learned referee, “ is some evidence of the fact that Mr. Frankel was employed by Mr. Cook to negotiate the exchange, and that Cook & Bernheimer relied upon his judgment and skill in the transaction.” There is no pretense that there is anything more than an intimation inferentially arising that the defendants knew that Cook & Bernheimer were to compensate the plaintiff for his services in securing the exchange. For these reasons it is thought that the referee was in error in all his views affecting the commission of a thousand dollars, which was to have been paid the plaintiff for the exchange which has just been considered. It should have been rejected in every aspect in which it may be legally considered.

An examination of the case has resulted in the conclusion that the commission on the sales of “ Criterion ” whiskeys in Philadelphia, the facts and circumstances relating to which were elaborately considered by the referee, should be allowed as found by him.

The third disputed item, namely, the claim for services in managing the farm, was found against the plaintiff, and therefore requires no consideration.

The last item in dispute, namely, the commissions for the sale of 1,000 barrels of whiskey to Cook & Bernheimer, in exchange for the yacht “Sea Witch,” allowance of which was made by the referee, had not been earned at the time this action was commenced? On the subject of this exchange, which embraced not only the yacht mentioned but southern lands, a correspondence had taken place between the parties, which resulted in Mr. Wathen’s writing a letter to the plaintiff in relation thereto, and in which he said: “ If you make a trade ón the basis of a thousand barrels we should expect you to wait for your commissions until we can realize something on the yacht” That letter was dated the 15th of November, 1886, and written from Louisville, Kentucky. On the 18th of November the plaintiff wrote to the defendant Wathen, stating: “Yours of the 15th to hand and noted,” and it contains a statement of the proposition as it then stood, and further refers to the special arrangement in reference to the commissions, saying: “ In your letter you say in case the trade is consummated for only one thousand barrels, you will expect me to wait for my commission until the yacht is disposed of. Now you know very well that I am not very particular. It was not until sometime after the completion of last year’s contracts that I commenced drawing on account of my commission, and in fact have not drawn it all yet, although on several occasions I required the money in my business ; but I certainly hold that my commissions are due me immediately on the completion of contracts, although I may not always wish to draw on you for same at once, especially when you require funds yourself.”

The learned referee, in dealing with this question, says the minds of the parties did not meet. And he therefore fails to find that the sale was effected on the express condition that the payment of ■commission should be deferred until the yacht was disposed of. It does not appear that the sale which was made was authorized by the defendants in any other mode than that suggested by the letter of November 15, and which in the ordinary course of mail would have reached New York on the 17th of November, two days after it was written, and which was in fact received by the plaintiff before the sale took place.

The testimony in regard to the transaction presents some features perhaps worthy of comment, but which it is not needful here to indulge in, the referee having placed his decision upon the proposition, as suggested, that the minds of the parties did not meet The mind of the defendant must prevail here, and the letter containing the condition, having been received prior to the sale, controls the claim of the plaintiff and limits his right of action for the commissions to the time of the sale of the Sea Witch” or other disposition of her was made. His right of action did not accrue until that event occurred, unless the defendant acted collusively, or designedly delayed the salé or disposition of the vessel beyond a reasonable time.

The result of this review is, therefore, that the judgment appealed from must be modified by striking out the recoveries of the commissions allowed for selling the farm and the “Sea Witch,” and affirmed for the balance, without costs to either party.

Daniels, J.

I concur, except in the result There should be a new trial unless the plaintiff shall stipulate to deduct the items concluded to have been erroneously allowed by the referee. And in case of the service of such stipulation, then the judgment as thereby modified should be affirmed, without costs of the ap. peal.

Van Brunt, P. J., concurs in modification.


source: Caselaw Access Project

author: Daniels, J. Van Brunt, P. J.

license: Public Domain

text:
    The Bank of British North America, Resp’t, v. Richard Delafield, App’lt.

      (Supreme Court, General Term, First Department,

      Filed December 29, 1890.)

    Partnership—Loan to partner—Assignment op claim por.
    The defendant, a member of the firm of C. & Co., desired to form a partnership with others and requested help from C., who, by the partnership articles.of C. & Co., had sole control of their business. By these articles the drafts of defendant on the firm profits were confined to his living expenses. C. replied to defendant that he would lend him the money if he could raise it without interfering with the firm needs and regular business. Defendant soon after drew the money out of the firm account in bank and so far as appears did not attempt to get a loancfrom any one. C. & Co. gave plaintiff an order on defendant for the amount thus obtained by him. Held, that the right of C. & Co. to recover this sum was assignable; that the order, assigning the whole sum, was valid and transferred the demand; that the matter being no part of the partnership accounts or business the other partners were entitled to enforce a recovery and that the defendant was hable for the loan.
    Appeal from, a judgment recovered on trial before the court.

      S. F. Rawson, for app’lt; Hugh S. Cole, for resp’t
   Daniels, J.

The action is upon, and the judgment has been recovered for the amount of an order drawn by the firm of Wm. T. Coleman & Co. upon the defendant This order is in the words and figures following:

“ Wm. T. Coleman & Co., $25,000.
“San Francisco, April 26, 1888.
At sight pay to the order of the Bank of British North America twenty-five thousand dollars, value received, and charge the same to account of our loan to you December 12, 1887, as per our advices this date.
“ Wm. T. Coleman & Co.
To Richard Delafield, Esq., 71 Hudson Street, N. Y.”

It was delivered by the firm to the agent of the plaintiff and. afterwards presented for payment to the defendant at the city of New York, and payment was by him refused.

To establish the right of the firm to draw the order, and of the plaintiff to maintain an action upon it, evidence was given showing that the defendant was a member of the firm of Wm. T.. Coleman & Co. up to and including the last day of December, 1887, when he withdrew from it, and the business was afterwards carried on under the same name by the other three members, until the 7th of May, 1888, when they made a general assignment for the benefit of their creditors. The entire capital of the-firm was contributed by William T. Coleman. It was formed by written articles executed by each partner on the 81st of December, 1883, and to continue for one year, and thereafter from year to year, unless one of the partners should wish to withdraw, or' desire a change in the terms. Neither partner did withdraw until the time when the defendant .did so. And the partnership articles for that reason remained binding as they had been made, until the end of the year 1887.

By the sixth subdivision oí the articles it was agreed that the defendant might draw not exceeding $800 per month, and if on balancing the books for each year a greater sum was found to his credit then “the balance shall remain- on the books and in the business of the concern as their working capital, and not to be drawn out without the consent of all the others in interest.

The defendant had charge specially of that part of the business which was carried on at the city of New York, and contemplated becoming a member of another firm at that place, when, or before, he withdrew from this firm. And to embark in that business he required the sum of $25,000, to place there as his capital. And to obtain that money he telegraphed from Chicago on the 11th of December, 1887, to Wm. T. Coleman, saying to him:

“ Have arranged everything; new partnership, but one point which prejudices its consummation; they insist on my putting in twenty-five thousand, having fifteen thousand at my credit with you, and certainly more than ten thousand for this year. Please telegraph immediately if I may draw this amount in New York. i
“(Signed) Richard Delafield.”

To which the following answer was returned on the 12th day of the same month:

“San F’co, Dec. 12th, 1887.
“Richard Delafield, 91 Michigan Ave., Chicago:
“Will not consent any party drawing one dollar beyond necessities of living until after liabilities liquidáted, but will lend you the money if you can negotiate it without interfering with our needs and regular business ; our payables precede any other consideration.
“(Signed) Wm. T. Coleman.”

And after that and on December 13, 1887, a letter was written by Wm. T. Coleman to the defendant recapitulating these dispatches, and in plain language declining to consent to the money being drawn from the firm. And that letter was received by the defendant before he proceeded, as he afterwards did, to draw the money.

The proposal made in the dispatch sent to the defendant to make a loan of the money, if he could negotiate it without interfering with the needs of the regular business, was at no time acted upon. But on the last day of December, 1887, and without any further correspondence with the firm, or any member of ' it, he drew the sum of $25,000 of the money of the firm, by a check made by himself in the name of the firm, from the Bank of the National Banking Association, at the city of New York. At that time there was nothing to his credit in that part of the business. carried on by the firm at the city of New York. This plainly appeared from the statement of the accounts of that business proved and produced at the trial. Nor was there in the accounts of the business at the city of San Francisco, where it was principally carried on by the firm.

It was agreed by the tenth subdivision of the partnership articles that there should be had and kept true and just books of account, containing and setting forth all the transactions of the business, which books and accounts should be used in common by the copartners and free access had to them. And it was proved by the witness McGill, whose evidence was taken at San Francisco under a commission, that such books were in fact kept them He was an accountant and general adjuster of the books, and had been so in the employment of the firm from January, 1885. He testified that he was familiar with the defendant’s accounts, and that there was an account with him in the ledger produced before the commissioner, when his evidence was taken. He also testified that he could produce a copy of that account as it existed on the 11th of December, 1887. And the pages of the ledger account with the defendant were then offered as evidence, as they were identified by the witness. This was objected to by his counsel on the ground that it appeared by the testimony of the witness that they were not the statement of the account prior to this time, but were made up since the transaction in suit, since the drawing of the draft on the defendant The objections were overruled and the pages received in evidence, to which the defendant’s counsel excepted. A plain answer to the objections consists in the fact that it had not then appeared that the account was made up since the order had been drawn. And, as a matter of fact, a part of the account was antecedent to that, and in the years 1885 and 1886 and the preceding part of 1887. That was surely admissible, and as the objections were to all the account, they were too broad and could not for that reason be sustained. But if the objections had been pointed to so much only of the accounts as had been made up after the order had been drawn, the grounds for the objections would have been removed, for it was afterwards stated by the witness that the entries were “ all taken from advices received from the New York office, and made at their request.!’

Entries were made of the defendant’s proportion of the final result of the year’s business, and charging a like part of the over estimate of profits, and the 'witness then added: “Of which Mr. Delafield was duly advised.” And that was sufficient to allow the books to be received, especially as it also appeared on the trial, from the testimony which the defendant gave in his own behalf, that he was in San Francisco in November, or possibly in December, when he saw Mr. Coleman concerning the separation, which afforded him an opportunity for any examination of the books he might have been inclined to make. And if he did not then become familiar with the entries; it was owing to his indisposition to examine them. Besides that, the evidence related to the state of the accounts as it was on the 11th of December, 1887, and the entries affecting that had been made from the results of preceding transactions, whose accuracy was attested by this, witness, so far as they were made after the close of the year 1887. His testimony was that they could only be entered after the accounts of them were received, which would extend as far as May of the following year. And that when the entries were made they were correctly re-, corded. This evidence, together with the fact that part of the entries were prior to the last of the year 1887, and that they had. been made from advices proceeding from the part of the business under the direct management of the defendant, made these pages legal evidence against him. Those preceding his last presence in. San Francisco, which he testified was possibly in December, 1887,. were admissible as partnership accounts kept pursuant to the articles. For such accounts are evidence against each partner having-the ability to consult and acquaint himself with them. Heartt v. Corning, 3 Paige, 566, 572; Caldwell v. Leiber, 7 id., 483, 507; Allen v. Coit, 6 Hill, 318, 321-2. And the direct evidence of the; witness sustained the later entries.

The witness was then asked what was the condition of Mr. Delafield’s account after the adjustment of the business of 1887. This was objected to on the ground that it called for a conclusion, and opinion, on transactions occurring after the retirement of the defendant, and upon an adjustment made by the witness without, his knowledge or consent

This was overruled, and the defendant excepted, And the-, witness answered: “ I will give the figures from the book, that is in answer to- the question which is now asked, his account showed, a debit of $1,634.44.” This answer was not improperly received, for the witness was not asked for his conclusion, or opinion, but to answer concerning a strict matter of fact; nor was his answer based upon transactions occurring after the retirement of the defendant, and as long as the account produced was shown to be correct the fact that the adjustment was made without the knowledge or consent of the defendant was in no wise important. Other objections were made to questions asked of this witness-which are plainly without merit, and require no consideration, as they were correctly disposed of when the answers to which they related were received.

The evidence disclosed the fact that the defendant had no credit, in his accounts with the firm permitting him to draw this money from its finances. He was a debtor both in Hew York and San Francisco. He did produce statements setting forth large profits-in the business for the years 1884-5 and 6. But they were not-definite, or final as they appeared, and even if they had been, they seem to have been absorbed by changes before the defendant drew this money. This, if it was important at all, was at most a question of fact for the court as it was presented by this evidence, and that was ruled against the defendant, as it very well could be from the-evidence of the accountant The monthly intalments of the defendant had all been drawn by him, and he had no valid claim remaining against the firm of anything when the check was made- and paid. And consequently there was no fund in his favor from which he could draw this money for his own personal use.

But without making the action dependent on this fact, which might not be sufficient to support it, there was a direct violation of the defendant’s obligation created by the articles in taking this-money, and so there was of Mr. Coleman’s refusal to permit it to "be done. These restraints were well established, and must have been known to and understood by the defendant. The request itself which he made for the money disclosed his knowledge of this disability under the articles. And as it was obtained only by a violation of these obligations, it was a wrongful appropriation of that amount of the- money of the firm, which it was his duty to refund to it. The money obtained in this manner did not enter into the partnership accounts as a part of them, although entered in his New York books, for it was its property taken by the defendant without authority, and he remained legally liable to refund it from the time he received it In this condition of the affairs the firm, as it was continued by the other members, could affirm this as a loan, or charge the defendant with the conversion of the money which he had obtained. For where money has been obtained by the wrong of the person procuring it, the parties to whom it belongs are permitted to waive the wrong and recover it as advanced upon contract. McGoldrick v. Willits, 52 N. Y., 612, 620; Comstock v. Hier, 73 id., 269, 275. And both the order and the letter to the defendant, following it on the next day, evince the intention of the members of the firm to have been to regard this draft of the money as the loan for which the defendant was to to be allowed to negotiate, if that could be done, without interfering with the needs of the business. The letter, as well as the order, affirm the transaction as a loan, as the members of the firm were at liberty to regard it. And as it was in fact no part of the partnership accounts or business, they were entitled to enforce the repayment of the amount by an action at law for money loaned or had and received to the use of the firm. And the complaint was adapted to that theory of the case. For one partner may sue another on a cause of action distinct from the partnership, not involving a consideration of the partnership accounts. Ferguson v. Baker, 116 N. Y., 257, 261; 26 N. Y. State Rep., 626; Howard v. France, 43 N. Y., 593, 596; Crater v. Bininger, 45 id., 545.

And this money created such a cause of action irrespective of the condition of his accounts with the firm, inasmuch as it was drawn-in violation of the articles prohibiting the defendant from drawing anything beyond his monthly salary, and also of the refusal of Wm. T. Coleman to permit it, who by paragraph four of the articles retained “ the majority interest in the concern, and the sole and absolute control of the business in all its details.”

The defendant, therefore, became a debtor for this money, even if no reliance is to be placed upon the fact that his own individual accounts had at the time been overdrawn. In this respect the case differs very conspicuously from what was held in Muller v. Cox, 15 N. Y. State Rep., 393.

The right of the firm to recover this money from the defendant was the subject of assignment And the order drawn by it was an assignment of it, for it was drawn against the amount loaned to the defendant In this respect this case differs from those of Harris v. Dolmetch, 12 N. Y. State Rep., 456, and Heuertematte v. Morris, 101 N. Y., 63, where the instruments were bills of exchange, without any qualification, while in this case it was no more than an unnegotiable order, which operated as an assignment of the demand, as it was drawn not for a part, but the whole of it. Mandeville v. Welch, 5 Wheat, 277, 286. The authorities are abundant which sustain such an instrument as an assignment, without an acceptance by the drawee, but upon its presentment to him. Shaver v. Western Union, etc., 57 N. Y., 459; People v. Comptroller, 77 id., 45, 48; Brill v. Tuttle, 81 id., 454. And the intention that the instrument in suit should operate as a transfer of the demand to the plaintiff was clearly made to appear by the letter to the defendant, on the day after it was. drawn, for in that letter it was said:

“ Eeferring to our draft upon you yesterday for $25,000 and our cashier’s letter No. 328 of the same date, we wish to recite what we should have added to the letter above mentioned.

Previous to the formation of your firm and in order not to prejudice the formation of your partnership with Mr. Morgan and Mr. Kissel and to facilitate you in every way possible, Mr. Coleman was willing to aid you to the extent mentioned in his telegram of December 12th, so long as it did not interefere with our needs and regular business (our payables preceding every other consideration). You acceded to the terms of Mr. Coleman’s dispatch of December 12th and accepted this money as a loan. Now that we require the money and as you have had ample opportunity to turn yourself and realize upon your securities, we trust that you will appreciate thoroughly and understand our position in valuing upon you as per our cashier’s letter, above mentioned.

“ Yours very truly,
“/.(Signed) Wm. T. Coleman & Co.”

And that letter was competent evidence to be received and acted upon in support of this intention. Throop, etc., Co. v. Smyth,. 110 N. Y., 83; 16 N. Y. State Rep., 831.

There is no well founded objection against this judgment, or the rulings made during the trial But the controversy in the case seems to have been rightly decided, and the judgment should be affirmed.

Van Brunt, P. J.

I concur in the last ground stated by Mr. Justice Daniels, without expressing any opinion as to the admissibility of the accounts, which does not seem to be necessary. The money being loaned, as it undoubtedly was, the defendant was bound to show a right to retain it It was not for the plaintiff to' show that he had no such right.

Brady, J., concurs.


author: Daniels, J.

text:
    James B. Titman, Adm’r, et al., Resp’ts, v. The Twelfth Ward Bank et al., App’lts.

      (Supreme Court, General Term, First Department,

      Filed December 29, 1890.)

    1. Partnership—Survivor cannot pledge assets for individual liability.
    The surviving partner pf a firm, has no right to pledge firm assets for his individual liabilities. What the law requires of him is to devote such assets solely to the advancement of the interests and to the extinguishment of the liabilities of himself as surviving partner.

      2. Municipal cobpobations—Contbact—Assignments—Tbial.
    Where certain parties had had a contract with the city of New York, in whose hands were moneys still due thereon, and an action was .brought therefor by and between parties claiming the same fund under different assignments by the contractors, and a part of the relief demanded, and by the judgment granted, was that the city be enjoined from paying over any part of the fund to this defendant, H Id, that the action was so far equitable in its nature that it was properly triable by the court.
    Appeal from a judgment recovered on trial at the special term.

      Wheeler H. Peckham, for app’lts; L. Laflin Kellogg, for resp’ts.
   Daniels, J.

On or about the 16th of December, 1884, Thomas J. Allen and Thomas OMaley, who were engaged in business as partners and contractors, received a contract from the city of New Y ork for regulating and grading the F ort W ashington Ridge road, for which they were to receive the sum of $164,934.95. They jointly commenced and proceeded with the performance of the work until on or about the 21st of January, 1887, when O’Maley departed this life intestate. The survivor, Thomas J. Allen, continued in the performance of the work, and in or about the early part of May, 1887, applied to the president of the Twelfth Ward Bank for the advancement of money to be used' in the continuance of the performance of the agreement. After a short delay the bank by its officers agreed to aid the surviving contractor in this manner, and on the 18th pi May, 1887, he, as surviving partner of the firm, assigned 'and set over to the bank the sum of $40,837.20, being the amount of thirty per cent, retained by the city upon the contract This assignment was absolute in form, containing no reference to what was stated to be the object of the dealings with the bank. But in support of the action by the plaintiffs, as the personal representatives of the estate of O’Maley, and finally as assignees of Allen himself, it has been alleged that the assignment was made only to secure an advance to Allen, as the surviving partner, not exceeding the sum of $10,000, and that no more than the sum of $8,475.24, including interest, was owing to the bank for advances made to Allen upon the security of this assignment This, however, was controverted on the part of the bank, which claimed the right to hold the assignment and resort to the proceeds of the contract to reimburse itself for advances which had been made by way of discounting notes for Allen himself individually, and amounting to near the sum of $12,000. Allen became insolvent, and on the 31st of January, 1888, he assigned all moneys due, or to grow due by virtue of the contract, to Hugh Allen and James B. Titman. This was declared in the assignment to be subject to the preceding assignment to the bank to secure the payment of a loan of $10,000, of which about $8,000 had been received. These assignees, for the purpose of obtaining money to proceed with the performance of the contract, on the 19th of June, 1888, executed and delivered a further assignment to the bank, which was in like manner absolute in its form, but which, as a matter of fact, was to ■ be by way of security only for the moneys which the bank should advance to these assignees to enable them to proceed with the performance of the contract. The officers of the bank contested this view, claiming the assignment to have been received by it with the agreement that the preceding advances made by it to Allen individually should be added to the amount loaned to him as surviving partner, and should in like manner be secured by his assignment. After that and in April, 1889, Thomas J. Allen, as surviving partner, James B. Titman and Hugh Allen severally executed and delivered a still further assignment to James B. Titman and Sarah O’Maley, assigning all their right, title and interest in the contract and to any claims existing against the bank. This assignment has no date, but it is stated to have been acknowledged on the 4th of April, 1889. And from that circumstance it is apparent that it preceded the commencement of the action, for the summons bears date upon the next day.

There was no dispute as to the amount of money which had been paid for the services performed under the contract, nor as to the amount which the bank had advanced to Allen as the surviving partner of the firm, nor concerning the amounts which it advanced to Titman & Allen, nor as to the amount still remaining unpaid from the city upon the contract, neither was there concerning the sums which had been loaned to Allen on the paper discounted for him individually. If the bank was entitled to charge these discounts against the assignment made to it by Allen, then it was not indebted to the plaintiffs, and they had no right to maintain this action against it. But if the bank was not entitled to charge the discounts made for Allen individually, then it was indebted, as the fact has been found by the court, over and above its advances to Allen and Titman & Allen for the continuance and completion of this work, in the sum of $7,947.36, and there still remained unpaid by the city upon the contract the sum of $6,363.75.

The controversy, therefore, upon which the determination of the action depended was whether the bank had the right to charge the advances or discounts made to Allen individually against the money it received from the city upon the contract by virtue of the assignments made to it. It was alleged in the complaint that the bank received the assignment from Allen as security only for the moneys to be advanced to him to proceed with the performance of the contract with the city. But this was denied by the bank in its answer, which alleged that it was agreed with 'Allen and with Titman & Allen that it should also hold these moneys and apply them to the satisfaction of Allen’s individual account. And which of these parties were correct under the issue was the paramount dispute to the development of which evidence was given upon the trial. Allen -himself testified that he applied to the bank to loan money upon the contract to supply him with funds to proceed with the work, and that this was the extent to which it was-proposed to assign the contract fcc the bank, and that no agreement was entered into between himself and the bank by which it was to hold the proceeds of the contract in any manner for the satisfaction of his individual account. Mr. Titman gave substantially similar evidence relative to what took place prior to and at the time when Titman & Allen made their assignment of the contract to the bank, and that the object of making it was to secure the bank for such advances of money as should be made for the completion of this work. Upon these subjects their evidence was quite explicit and direct, and the testimony of Allen was, to say the least, to a slight extent corroborated by the fact that the bank opened two accounts with him, one individually and the other for the firm. And it also appeared that the first discount obtained by him individually was for the sum of $6,899.96 on the 14th of May, 1887, which was four days before the assignment executed by him of the contract The president of the bank, and also its attorney, each testified that it was agreed with Allen, as well as with Titman & Allen, that the bank should reimburse itself out of the moneys received upon the contract to the extent of its account against Allen individually.

In answer to this evidence Hugh Allen, Thomas J. Allen and James B. Titman directly contradicted these witnesses, stating that no agreement or understanding was entered into under which the bank should be at liberty to apply the praceeds of the contract to the satisfaction of Allen’s individual account. And the testimony finally was that no claim of this nature was presented on behalf of the bank until the 23d of March, 1889, and that then it was declined and a suit threatened to prevent this diversion of the funds which had been received. There was some further evidence tending to confirm the correctness of that given by the witnesses examined on behalf of the plaintiffs, for it was stated that Titman & Allen were requested to acknowledge in writing this right on the part of the bank, but which they omitted to do. So it was stated in the assignment from the surviving contractor to Allen and Titman that the preceding advances of the bank amounted to about the sum of $8,000, and this had been brought to the attention of the bank. But without placing any substantial weight upon these collateral matters, it is sufficient to say that the evidence as to the agreement made between Allen and the bank, and between Titman & Allen and the bank, presented a question of fact to be determined by the court before which these witnesses had been examined and gave their testimony. And after considering the evidence of the witnesses, the judge presiding at the trial found, as a matter of fact, that no agreement at any time was made by either of these parties that the bank should be at liberty to use the proceeds of this contract for the satisfaction of the individual account or liability of Allen. But that the agreements made were that the bank should hold these respective assignments only as security for its advances, and a means of reimbursing the amounts loaned by it for the work of completing this contract, and that there was no agreement at any time that the loans or discounts made to Allen upon what has been called the De Forest paper, brought by him to the bank, should be paid out of the proceeds of the work.

It has been stated in the points by the counsel that there was no evidence which tended to show that every dollar obtained from the bank had not been used for the benefit of this estate. But in that statement the counsel is very manifestly in error, for Allen testified upon his redirect-examination. that “ there was not a dollar of this money obtained on these De Forest notes that were discounted ever used in Allen and O’Maley’s works, or any of their works.” The point was, therefore, directly presented to the court by the evidence whether this individual account as an individual debt of Allen should be allowed to the bank or not. And in rejecting its claim, which depended wholly upon the agreements alleged to have been made in the answer, it was sustained by the evidence given upon the trial; and in the absence of the existence of the agreements alleged by the defendant it had no right or authority to apply any portion of the moneys to the extinguishment of Allen’s individual account. Wyckoff v. Anthony, 90 N. Y., 442.

When it failed to establish these agreements it necessarily failed in the defense relied upon for its right to make this use of so much of the money received from the city upon .the agreement with it.

A further obstacle also stood in the way of that application, arising out of the fact that the assignment made by Allen to the bank disclosed the facts, of the contract with the city having been made with the firm of Allen & O’Maley, and that he himself acted in making the assignment as the surviving partner of this firm, and as such surviving partner he had no authority, if he had been so disposed, to appropriate these moneys to the payment of his individual account. What the law required of him was to devote the proceeds of the agreement solely to the advancement of the interests and the extinguishment of the liabilities of himself as surviving partner of this firm. Sage v. Woodin, 66 N. Y., 578.

And as much as that was fully conceded by the court in deciding the case of Williams v. Whedon, 109 N. Y., 333; 15 N. Y. State Rep., 265. And in the cases referred to where the action of the surviving partner in transferring the property of the firm was sustained, it was done for the benefit of the firm itself, or for his benefit necessarily as surviving partner. Haynes v. Brooks, 42 Hun, 528; 4 N. Y. State Rep., 587; Emerson v. Senior, 118 U. S., 3.

It is not necessary, however, to pursue this subject, for as long as the bank received each of these assignments as security only for the money- advanced in the first instance to Allen, as surviving partner, and to Titman & Allen afterwards, as his assignees, it had no right or authority to use any part of the proceeds of the contract with 'the city for the satisfaction of Allen’s individual account

At the commencement of the trial the objection was taken, which, however, has not been insisted upon in the argument, that the action was one for trial by a jury. But this objection is deprived of support by the fact that the city was made a party, and a portion of the relief required was that it should be enjoined from paying over to the bank any part of the balance of the money still owing upon the agreement. And, as a matter of fact, it appeared that the city held this money for the benefit of either contestant who should be finally adjudged entitled to receive it. The plain tiffs have obtained that judgment, and this was so much an object of equitable jurisdiction as entitled the plaintiffs to^ry the action before the court instead of before a jury.

There is no ground upon which this judgment can be disturbed, ft may have proceeded further than the plaintiffs strictly had the right to go, in- directing the cancellation and restoration of the two assignments to the bank. They were its vouchers under which its business with these parties had been earned on, and which it was entitled to retain as a part, át least, of the foundation of the business. But as to this no objection has been raised by the counsel in the case, and the judgment should be affirmed, with costs.

Van Brunt, P. J., and Brady, J., concur.


text:
    Timothy J. Brown, Ex’r, App’lt, v. The Mechanics & Traders’ Nat. Bank, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed December 29, 1890.)

    Banes—Power of president—Purchase op land to protect debt.
    Plaintiff’s testator, B., was president of defendant in the fall of 1874. G-. was then a debtor of defendant but not of B. G. had previously mortgaged his property and it was 'to be sold on foreclosure. G. applied to B. for help, upon the day of sale, and said “ that if there was any benefit to be derived from that property I (he) wanted the defendant to get the benefit. ” On the sale B. bought the property, taking a deed to the discount clerk of defendant, who conveyed to B. the same day. The money was practically furnished by the defendant, the clerk paying nothing and B.’s check on the sale being charged to the cashier’s account, i. e., the bank. Later in 1874 B. executed a mortgage on the property to W. and the consideration went to defendant. An account relating to the property, interest, rents, etc., was opened in defendant’s books, and continued for some years. In 1878, in consideration of one dollar, B. conveyed the property to defendant. Subsequently the mortgage of B. to W. was foreclosed and a deficiency resulted. This action was brought to have defendant protect B. or his estate from the deficiency. Held, that although plaintiff made no formal proof that this matter was brought to the notice of defendant’s directors, its appearance on the books of the defendant for five years created a presumption that it was understood and approved by them, or if this were not so it was a fiscal matter within the authority of the president and within his power, in an attempt to save defendant’s debt by a purchase of the property.
    Appeal from judgment on the report of a referee.

      Geo. W Stephens, for app’lt; Thos. J. McKee, for resp’t.
   Daniels, J.

This action has been brought to recover the amount of a deficiency remaining ' after the sale ' of mortgaged premises, upon the foreclosure of a mortgage executed by the testator to secure his bond. He was the president of the defendant, and the theory of the action is that he gave the bond and mortgage for the use and benefit of the defendant, land that "the defendant is equitably bound to pay this deficiency. The plaintiff gave evidence tending to prove these facts, ana requested the referee to find them to have been proven, but he refused to do so, and to his refusals the plaintiff excepted. Included within these refusals are the requests to find that the defendant paid the larger portion of the purchase price of the land when the title to it was obtained; that the testator at no time held the title otherwise than nominally, and in trust for the defendant, that the title was conveyed to him to enable him to mortgage the land and borrow the money secured for the defendant, and in making the bond and in incurring the debt he acted for and in the interest of the defendant and as its agent.

If these facts, excluding the object of the conveyance, had been found in the plaintiff’s favor, then the question would have arisen, whether the testator had not incurred this liability so far in the nature of a surety for the defendant as to obligate it to protect his estate by satisfying this deficiency. For it is the duty of the principal for whom a legal liability may be incurred to save not only the surety, but also persons substantially in the attitude of a surety, from losses, or the liability for losses arising out of that relation. It, therefore, becomes necessary to examine the evidence to discover whether this was, in fact, the position of the testator. So far as the evidence proceeded there was no conflict presented, and the plaintiff was entitled to its reasonable effect in his favor, in the disposition of the action.

The title to the land incumbered by the mortgage was previously vested in Michael Gravin. He had given a mortgage upon it to secure the payment of $16,000 to the Emigrant Industrial Savings Bank. This mortgage was in process of foreclosure, and Gravin was at the same time indebted to the defendant, but not to the testator. And on the day of the sale he applied to the latter for assistance, stating to him “ that if there was any benefit to be derived from that property I wanted them (that is the bank) to get the benefit.” And after that interview his testimony is, that Mr. Brown went with him, and attended the sale and" bought the property. But the deed was not taken to himself, as it is to be presumed it would have been if he had made the purchase for himself, but it was taken to Fernando Baltes, who was then discount clerk, and at the time of the trial was cashier of the bank. And this grantee, on the same day, by another deed, conveyed the land to the testator. Each of these deeds expressed the consideration of $22,500. But Baltes neither paid nor, received any part of such consideration. It, on the contrary, . was paid to the extent of $20,000 by the check of the ^testator,' payable to the order ©f and endorsed by the referee who made" that sale^This check was paid by the defendant, and charged, to the" cashier’s account, which was the account of the bank itself. This took"place in .October, 1874. And on the 9th of December,, in the same year, the testator executed the bond and mortgage, now more especially involved in this action, to James B. Warden, also ^since^deceased, to secure the payment of the sum of $16,500, receiving from.him on the. 30th of the month, his check for $16,000. This check was drawn upon the defendant, to the order of, and endorsed by the testator, and the amount was credited to the same account as the check to the referee had been charged to. In that manner the defendant had the full benefit of this loan, and there was certainly no violation of its corporate powers involved in receiving these proceeds. And after that, and in June, 1875, an account was opened in the books of the defendant with the Thirty-eighth street real estate, which was the land conveyed and mortgaged in the manner already mentioned.

Mr. Gavin testified that he remained in possession of the property after its sale and conveyance and paid part of the rent to the bank, and asked the privilege of using some of the money; and the plaintiff, who seems to be uninterested in the action, testified that he insured the property, from 1874 to February, 1879, in the name of Gavin, and sent the bills to the bank, where they .-were paid.

The mortgage to Warden was payable with seven per cent interest, and it appeared from the books of the bank that the sum of $560, which was the amount of the interest accruing every six months on this sum of $16,000, had been paid by it, from time to time, from July 1, 1875, to the 22d of January, 1880. In two instances it is stated to have been for six months’ interest to J. B. Warden, and it was also admitted that the mortgage the interest was paid upon was this mortgage.' The land was conveyed by the testator and his wife to the bank on the 1st of January, 1878, for the nominal consideration of one dollar, subject to this mortgage and the interest, which completely vested the bank with the full benefit and advantage of the property. While the testator held the title it is clear that he did so for the bank, and the bank received its profits and bore its burthens; so far as the evidence has disclosed the facts the testator derived no benefit whatever from the property. He obtained it at the suggestion of the debtor of the bank, taking the title to Baltes and then to himself, for the avowed reason that the bank could not hold it; and all that he afterwards did with the land was not for himself, but for and on account of the bank. And the same management preceded, as well as followed, the formal conveyance of the title to the bank.

There was no formal proof that this business was brought to the notice of the directors ; but from the fact of its appearance in its different features upon the books of the bank, extending over a period of about five years, it may well be presumed to have been understood and approved by them.

But if it were not, it was one of the fiscal affairs necessarily within the authority of the president, as the testator was. A debt of considerable magnitude was owing to the bank, and no other mode of avoiding its jeopardy, or its loss, then appeared, and to promote the interests of the bank'by guarding against this danger its money was advanced and this property obtained, and it was nursed along with the expectation that profit would be derived from it, and that management of it continued after the testator left his office, and very nearly to the event of his own decease, when further payments were discontinued and the mortgage to which the land was subject was foreclosed. There was no misconduct or want of authority in these acts. Neither has any been alleged by way of defense. But they appertain so directly to the business of the bank as to be within-the province and power of this officer. As the sequel has proved it would have been more fortunate to have abandoned the debt, instead of trying, as the president did, to save it. But for this error of judgment his estate cannot consistently, or equitably, be declared to be liable for this deficiency.

The proof was abundant that the testator, in all that he did with this property, acted not for himself, but as the president of the defendant, and without any dissent on the part of either of its other officers. And the referee erred in not finding the main facts to have been proved which are included in these requests. And so he did in his conclusion that the bank never authorized, and did - not ratify or adopt, any of these transactions.

Whether the action can surely be maintained with these facts found in behalf of the plaintiff, it is not proper now to consider, for on that subject the referee has not acted. They are indispensable for the presentation of that point, and it is by no means so clear that the action cannot be sustained if these facts are found as to. justify a decision against the plaintiff. The fact that the j udgment has not been entered declaring the amount of the deficiency, and that the plaintiff has paid no part of it, subjects his action at least to doubt. But the right of the estate to indemnity underthe broad principles of equity maintaining the protection of sureties, and others standing in like relations, may prove sufficient to remove this doubt. At the present time that is not a practical question, and when it shall become such will be the time for its more careful examination.

Important errors have intervened against the plaintiff, and it is because of them, and not for want of present favorable equities, that the referee concluded the action could not be maintained. And they can be corrected only by another trial. The testator ■was held liable also upon a note endorsed by him which the bank had discounted. This note was payable to the order of ‘George W. Youle, cashier, and from the facts proved may be presumed to have been received from, and discounted for the maker. The testator’s endorsement may have been placed upon the paper to give the maker credit with the bank. But it can hardly be said to have been proved, even, by a very liberal construction of the proof. This part of the case, therefore, is not free from grave doubt. And justice seems to require that the judgment should be reversed, and a new trial ordered, with costs to the plaintiff to abide the result

Van Brunt, P. J., and Brady, J., concur.


author: Brady, J.

text:
    Alfred H. Smith et al., Resp’ts, v. Henry Clews, App’lt.

      (Supreme Court, General Term, First Department,

      Filed December 29, 1890.)

    Sale—Bona fide purchaser acquires only vendor’s title.
    Plaintiff entrusted to M., a diamond broker, some diamonds and took a receipt which stated that M. had received them “on approval” to show to his customers, the diamonds to be returned to plaintiffs on demand. It was shown that by the custom of the trade the words ‘ ‘on approval” had a particular meaning and which did not in any manner enlarge the scope of .the receipt or in themselves gave M. any title to the diamonds. M. sold the stones to defendant who bought in good faith and without notice of plaintiffs’ ownership. Held, that defendant only acquired M’s rights and as the latter had no title defendant had none. ^
    Appeal from judgment and order denying motion for a new trial.
    Action to recover possession of a pair of diamond ear knol

      Albert A. Abbott, for app’lt; Charles H. Woodbury, for resp’ts.
   Brady, J.

This case has been pending a long time and has been subjected to the vicissitudes of judicial investigation.. It is bere for the third time after three trials. It is not deemed necessary to make allusion to what has been decided on the other appeals in this or the court of appeals, except the last exposition by "the latter court and by which the case was made dependent, as the result shows, of an éffort to be made to prove that the memorandum given by the plaintiffs to the broker Miers by a general custom or usage of the trade restricted the broker’s power of sale .and preserved the title in the owner to the merchandise entrusted by him. It was as follows:

“Hew York, April 12, 1879.
“ Received from Alfred H. Smith & Co., by their representative, B. W. Plumb, a pair of single stone diamond ear knobs lomearais, of the value of fourteen hundred dollars, “on approval,” to show to my customers. Said knobs to be returned to said A. H. Smith & óo., on demand.
E. Miers.”

The proof of the usage on the part of the plaintiffs, although contested by adverse proof, was abundant to establish it as asserted, namely, that on such a paper being given and accepted the title to the goods continued in the owner until he sold them. The question was submitted to the jury on the whole evidence broadly and squarely in terms to which no exception was taken and the jury found in favor of the plaintiffs.

They thus declared that the broker Miers had no authority to sell the merchandise, and therefore under the last decision in the court of appeals (com’n) no title passed to the defendant. He could search for and find a purchaser, report him to his principal and then obtain authority to deliver. He was not at liberty even to sell or arrange a sale except for cash, eo nomine, to be paid to his principals in order to pass the title. The rights of his principals were dominant all the time. There are many details herein -which might be invoked and criticisms indulged in to enlarge the sphere of this opinion, but that would accomplish no good purpose or add strength to the result arrived at, which is • that the judgment must be affirmed. This conclusion, as already intimated, becomes imperative in virtue of the views expressed in this action when last in the court of appeals, see 114 H. Y., 190; 23 H. Y. State Rep., 166. Justice Brown said in the course of the opinion, in which all of the judges concurred except the chief justice, “ On the former appeal this court construed the contract, in the light of the evidence then before it, to confer on Miers a power of sale, and if the same evidence was now before us, we should feel constrained to follow that decision,” and the learned justice, after referring to the fact that' Miers was personally unknown to the plaintiffs until introduced by the witness Plumb, a fact which again appears herein, said: “We have therefore no-other dealings between the parties to aid us in interpreting the contract, and are confined to the single transaction out of which this action has grown. Upon the face of the contract, it does not import an authority to sell.” But it was held, nevertheless, that it must be presumed that the parties intended some meaning by the use of the words “ on approval,” and as the meaning did not appear from the context, parol evidence was admissible to enlighten the court and to show the intent of the parties. The parol evidence has been admitted in reference to the words “on approval” and their meaning ascertained by the verdict of the jury, the result of which is that no title passed to Miers, and he had therefore none to convey. This proposition, even where the seller has possesion of the article sold, and the buyer is acting innocently ana in good faith, is discussed by Justice Brown, and the defendant’s title declared to be dependent wholly on Miers’ authority to sell. It is only necessary, in reference to the exceptions taken upon the trial, to say that they chiefly relate to the reception of evidence as to what was understood on the trial by the words “ on approval,” the right to give which was expressly asserted by the commission of appeals. There is no vitality in the others. Indeed they were all presented on the brief in such a manner as to be entitled to little, if any, consideration. They have nevertheless been examined and discovered to be of no force. The trial was so admirably conducted that no errors marked its progress, and this controversy appears at length to have been so disposed of that it may rest without danger of further struggle by the contending parties.

In conclusion it is only incumbent on us to say that the factors’ act, Laws 1830, chap. 179, has no application to the transaction between Miers and plaintiffs. The merchandise, as the jury have found, was not entrusted to Miers to sell or for advances to be. made.

The judgment should be affirmed, with costs.

Van Brunt, P. J., and Daniels, J., concur.


author: Titus, J.

text:
    The Caton Business College Co., App’lt, v. George Hertel, Resp’t.

      (Superior Court of Buffalo, General Term,

      Filed February 2, 1891.)

    1. Contract—Fraud.
    To avoid a contract for fraud, it must appear that the representations were false, and known to be so by_ the party making them; that they were the cause of the other party entering into the contract, and that the latter was not guilty of carelessness, but used due diligence in determining whether the representations were false.
    3. Same.
    In an action upon a note, the defense was that it was procured from defendant in payment for a scholarship in plaintiffs college by false representations that defendant’s son had consented to go to school. The son was living at home at the time, but defendant did not inquire of him if he had made such promise, although he expressed doubts on the subject to plaintiffs agent. Meld, that under these circumstances he could not be permitted to say he was deceived, and obtain relief from his obligation on that ground.
    Appeal from judgment of the municipal court in favor of defendant.

      J. W. Russell, for app’lt; Joseph P. Schattner, for resp’t.
   Titus, J.

This action was brought in the municipal court on a promissory note given by the defendant to the plaintiff for $75.00. The answer of the defendant sets up that the note was given for the tuition of his son and was obtained by the false representations of the plaintiff’s agent that the son of the defendant had consented to go to school at the college of the plaintiff in this city. It appears that the plaintiff is a corporation conducting a business college in this city ; that it made out and delivered to the defendant a scholarship in its college to be used by Martin Hertel, the defendant’s son, for the sum of $75. The scholarship is transferable on certain conditions which are not necessary to consider in disposing of the questions here involved.

The defendant claims that the note is void for the reason that at the time the defendant signed it Mr. Plundt, the agent of the plaintiff, falsely represented that Martin, the defendant’s son, had consented to go to school. Martin Hertel the son is about sixteen years old, living at home with his father. It does not seem to me that the defendant has shown such a state of facts as warranted the court below in coming to the conclusion that the note was void for fraud.

It is well settled that to avoid a contract for fraud it must appear that the representations were false, that the party making them knew them to be false, and that the false representations were the cause of the other party entering into the contract Oberlander v. Spiess, 45 N. Y., 175.

In addition to this the party must not be guilty of carelessness, hut must use diligence in determining whether the representations are false. Babcock v. Libbey, 53 How., 255.

Assuming the representations were made as claimed by the defendant, it does not appear that he relied upon them or that he would not have purchased a scholarship without reference to what his son said to the plaintiff’s agent.

In Taylor v. Guest, 58 N. Y., 262, the court say that fraud without damages, or damages without fraud, will not sustain an action of deceit, and a false and fraudulent representation made by one party to induce a contract to be entered into by another is not actionable unless the party to whom it was made believed the representation to be true and acted upon the faith of it to his damage; “ in a legal sense a person is not damaged by a false representation by which he is not influenced.”

Applying the rule here stated to the facts in this case, it does not appear that the defendant has been damaged, or in other words, that he relied upon or was deceived by the representations made, or that he would have acted differently if nothing had been said about the willingness of his own son to attend school. The boy was living under the same roof with his father, who could have seen him at any time, he was the legal custodian and could send him to school or not as he desired; presumably it was his wish that he should go to school, and it is more than probable, in the absence of proof upon that point, that the defendant relied more upon his influence over and right of control of the boy, than upon any statement made by a stranger of what the boy would consent to do. In the absence of some fact showing that he relied upon the representations of the agent and was deceived, the defense of fraud cannot be sustained. Brackett v. Griswold, 112 N. Y., 454; 21 N. Y. State Rep., 791.

In actions of'this kind it is made the duty of a party claiming to-be defrauded that he should make some effort to protect himself. A person of ordinary intelligence, in the full possession of his faculties, must exercise some care to protect himself in his business transactions, and not blindly rely upon what another tells him, especially when he has all the means within his reach to know the exact truth. A party is bound to exercise ordinary prudence and caution to guard against imposition and fraud, otherwise the courts will not interfere. White v. Seaver, 25 Bark, 235.

In the case before us, the boy according to the testimony was at the time “ running around the street,” and the defendant could easily have learned from his own lips whether he was being deceived instead of placing implicit faith in the words of a stranger. It appears that the defendant expressed some doubt whether the-boy would consent to go to school, .and he expressed himself that he thought he would have trouble in getting him to go; yet having a knowledge of the boy’s disinclination he wholly neglected to .ask him whether he had promised to go to school; he made not the slightest effort to find out whether his doubts were well founded and whether he was being imposed upon by strangers, but while expressing doubts, gave full credence to the statement of the stranger agent, and entered into a contract whereby he became liable to pay the amount of the note.

I cannot believe that he relied upon what was told him; it does not accord with our experience and knowledge of men; he undoubtedly JropedJk£h¿?y would take advantage of the opportu-' nity offered and believed he would, but his reliance was placed more upon his supposed influence over his son than upon the words of a mere stranger but if he foolishly accepted as truth all that was said to him without resorting to the means within his reach to determine its truthfulness, he is not now permitted to say he was deceived, and obtain relief from the court. Davis v. Sim, Hill & D., 234; Long v. Warren, 68 N. Y., 426; Tallmans. Green, 3 Sand., 437.

The judgment of the municipal court must, therefore, be reversed.

Beckwith, Ch. J., and Hatch, J., concur.


author: Beckwith, Ch. J.

text:
    Frederick Kelver, Resp’t, v. The New York, Chicago & St. Louis Railroad Company, App’lt.

      (Superior Court of Buffalo, General Term,

      Filed February 2, 1891.)

    Railroads—Fences—Injury to animals.
    The right of action vested in the owner of animals killed on a railroad where fences have not been erected and maintained, does not originate in any degree from negligence, hut from the violation of the statute, and does not involve the inquiry whether the adjoining lands are farming lands or lands upon which it would not he expected that cattle or animals would he allowed to run.
    ppeal from judgment in favor of plaintiff.
    This actión was brought to recover the value of two heifers which were killed on the defendant’s railroad in the city of Buffalo by being struck by an engine. There was judgment for the plaintiff. It was alleged and proved that the company failed to erect and maintain fences on the sides of its railroad. At the point where ■the heifers were killed, there were the tracks of five different railroads contiguous to one another, that of the defendant being a middle one.

      John G. Milburn, for app’lt; Close & Fleischman, for resp’t
   Beckwith, Ch. J.

The statute, according to the construction it has received from the court of appeals, does not allow an inquiry whether the lands adjoining the railroad are farming lands, or lands upon which it might be expected that cattle or other animals would not be allowed to run; and there is not often a case where it would be proper to leave it to a jury to say that a fence was or was not necessary, Shepard v. Buffalo, N. Y. & Erie R. R. Co., 35 N. Y., 641; Corwin v. N. Y. & Erie R. Co., 13 id., 42; Brace v. N. Y. C. R. Co., 27 id., 269; Tracy v. The Troy & Boston R. Co., 38 id., 433; Bradley v. Buffalo, N. Y. & Erie R. Co. 34 id., 427. To the same effect, Crawford v. N. Y. C. & H. R. R. R. Co., 18 Hun, 108.

The right of action vested in the owner of cattle killed on a railroad does not originate in any degree from negligence as the cause of the killing, nor from the act of killing. It is wholly the creation of the statute. The statute enjoins the duty of building fences, and, out of disobedience of its command, raises a right of action. It declares that if fences are not .erected the owner of cattle killed may recover the value, and if fences are maintained the owner of cattle killed shall recover nothing. The owner of the cattle killed is often more blamable for the straying, of .animals than the railroad for the killing; but the violation of the statute is the source of the right of recovery and the criterion of the existence of the right. The statute, by its general intendment, relates to the physical barrier that must exist upon the “ sides ” of the road “ to prevent horses, cattle, sheep and hogs from getting onto the track of the railroad from the lands adjoining the same.” That is pretty plainly the effect of the decision in Shepard v. Buffalo, N. Y. & Erie R. R. Co., and the recent case of Dolan v. N. D. & C. R. R. Co., 120 N. Y., 571; 31 N. Y. State Rep., 852, does not limit or qualify the decision in that respect. The difference of opinion in the latter case, in this particular, was upon the question whether the mill, itself a sufficient barrier, was on “the side” of the railroad; some of the judges thinking that it was on the side “ near enough for all practical purposes,” and near enough to meet the proviso of the statute, and others of the judges thinking that it'was not Cattle guards at highway crossings and fences on the sides of the road, except where other physical “ protection ” of and against animals exists, is the policy of the statute. It is not necessary to say that that protection could not possibly exist in other than physical means.

The sum of the matter seems to be that, by the statute, the legislature has said to the railroads of the state that they must maintain fences or suffer the liability, and the courts have been given no power of dispensation. The judgment should be affirmed.

Hatch, J., concurs; Titus, J., did not sit