text:
    Henrietta Church, Ex’rx, App’lt, v. Daniel D. Barkman, Resp’t.

      (Supreme Court, General Term, Third Department,

      Filed November 30, 1891.)

    1. Injunction—Damages—Deed—Oral reservation of personal property UPON PREMISES.
    One Becker conveyed certain mill property to one Engle,but orally reserved the personal property in and about said mill and everything he used insaid mill. Said property was of a greater value than $50. Soou after this, one Church, claiming title to said mill property, began an action against said Becker to restrain him from carrying away any of the structures, appurtenances or fixtures thereon. In tins action Becker succeeded. A referee was appointed to assess his damages resulting from an injunction obtained in said action. Held, that although the oral reservation might not as between Engle and Becker have conveyed the legal title to the personal property, Church could not set this up; that said agreement gave to Becker fit least the beneficial enjoyment of said property, which enjoyment had been interfered with by said injunction, and that for this Becker was entitled to damages.
    2. Fixtures—Depreciation during an injunction. '
    The referee allowed damages to a bulkhead and tube to convey water from said bulkhead to said mill, and for the depreciation of the machinery of the mill during the injunction, and he found all these things to be personal property. Held, correct.
    Appeal from an order of the Albany special term, confirming report of referee assessing the damages sustained upon an injunction.

      M T. Hun, for app’lt; W. G. Yeomans, for resp’t.
   Landon, J.

The injunction order restrained the original defendant Becker from committing any waste upon the premises, .and from carrying away therefrom any of the building structures, appurtenances or fixtures. The order after being in force for three years was dissolved by the final judgment of the ■court

The original plaintiff, Walter S. Church, claimed to own the premises and alleged in his complaint that the original defendant, Becker, occupied them as his tenant. When this action was commenced and the injunction served, Becker was engaged in removing the machinery, fixtures and appurtenances from a grist mill rand water power upon the premises, and placing them in a new mill and water power lower down upon the same stream upon ■other premises owned by him. By his answer he denied Church’s •title, and alleged title in himself. The referee allowed damages for the value of the bulkhead, and of the trunk or tube for conveying water from the bulkhead to the mill. The referee found they were rendered useless in consequence of the injunction; he also allowed for the depreciation in value of the machinery and .appliances in the mill, upon finding that they were injured in consequence of the injunction. He also found that all these things were personal property.

It appeared upon the hearing before the refereee that Becker ■shortly before the commencement of this action conveyed the "mill premises in question to his grand daughter Emily Engle, but reserved “the personal property in and about said mill and everything he usually used in the mill.”

At the time of his conveyance to Emily Engle it was orally agreed between them that he could take from the old mill and place in the new one whatever fixtures and machinery he wished, ■and this oral agreement was never revoked. The evidence warrants "the conclusion that but for the injunction order Becker would have removed with the full consent of Emily Engle, from the old mill to the new, all the property for which the referee has awarded damages. The plaintiff insists that such property was real estate, and that Becker because of his conveyance to Emily Engle had no title to any of it.

It is not improbable that the bulkhead and tube therefrom to the mill were fixtures or appurtenances. But grant that Becker had no legal title that would have been adjudged valid as against Emily Engle if she had chosen to assert her own title, yet as she did not choose to assert it, but on the contrary chose to allow him to take whatever he wanted, he had practically sufficient title to permit him to have the same beneficial use of the fixtures and appurtenances as if he had had a legal title to' them, and this beneficial use Church unjustifiably interfered with and thus destroyed. The question is, how much did Church’s unjustifiable interference injure Becker? And the answer must be, just the loss he actually sustained in being deprived of his privilege of removing the property. This is not to be measured upon the basis of an estimate of Becker’s title, if challenged by Emily Engle, but by an estimate of the value to him of her free consent to remove the property and make it. his own. Church stood upon his own alleged title and not upon Emily Engle’s, and it cannot help him that if she had obtained the injunction she might have maintained it.

Respecting the amount of ^he award, it is limited by the amount of the undertaking to $500 and is $337 less than the referee finds the damages actually sustained. We think the actual award is within the evidence.

Order affirmed, with ten dollars costs and disbursements.

Learned, P. J., and Mayham, J., concur.


source: Caselaw Access Project

author: Landon, J.

license: Public Domain

text:
    Andrew F. Pitts, Resp’t, v. William S. Lighthall et al., App’lts.

      (Supreme Court, General Term, Third Department,

      Filed November 30, 1891.)

    PeAUDTJLBNT TBAESBEB.
    One John W. Pitts, a dealer in phosphate, was indebted to the defendants, also dealers, in $816 for phosphate bought of them, and for which he had given them notes, due March 18. He was insolvent. He procured the notes to be extended for ninety days. His farm was mortgaged to one Morey, on which mortgage there was due for interest on April 1, $194. On that day he drew a note payable to Morey for said interest and thirty-four dollars of principal, and this he induced his son David and the plaintiff to sign. He then delivered the note to Morey. On the next day David and the plaintiff made their own note for the same amount and delivered it to Morey, who thereupon surrendered the first note. John W. Pitts, upon the theory that they had taken up his note upon which they were sureties, transferred to them said phosphate. They took possession of it. Morey did not endorse the amount of the note upon his. mortgage. The sheriff subsequently seized the phosphate and sold it on the defendant’s execution. Held, that the transaction was fraudulent, and a verdict for the plaintiff, assignee of David, was error.
    Appeal from a judgment in favor of the plaintiff, entered upon, the verdict of the jury upon the trial before the Rensselaer county court, September, 1890.

      R. A. Parmenter, for app’lts; H. A. Merritt, for resp’t.
   Landon, J.

The question upon the trial was whether the phosphate seized by the sheriff under an execution against John W. Pitts was his property or that of the plaintiff and his brother. •John W. Pitts had owned the phosphate, and he transferred it to the plaintiff and his brother. The defendants allege that the transfer was fraudulent and void because made to defraud the creditors of John W. Pitts. The case was fairly submitted to the jury by the learned county judge. The question of fraud was for the jury. Nevertheless, we think the verdict for the plaintiff is •“ contrary to the evidence.”

In March, 1889, John W. Pitts owed the defendants, who were ■dealers in phosphate at Syracuse, about $816 for phosphate, which he had bought of them. He had the phosphate stored at the rail-Toad depot in Berlin, Rensselaer county. The defendants held his notes for the amount The notes were coming due about .March 18, 1889. John W. Pitts had been dealing in phosphate •about seven years. He was insolvent Knowing his insolvency, he asked the defendants to accept a renewal of his notes for ninety days, and they did so. He owned a farm of 196 acres in Nassau, Rensselaer county, upon which he resided with his wife, daughter ■and son David. He had horses, cows and the personal property usual upon such a farm. His farm was incumbered by two mortgages,- one for $1,834, on which there was due about $194, for interest, April 1, 1889.

This was held by Roger W. Morey. A second mortgage was held by Mrs. Socrates Pitts, his wife’s step-mother, who was also his sister-in-law. He owed various unsecured debts to his relatives. He conceived the idea of so disposing of his personal property, including the phosphate, as to prevent the defendants from applying any of it upon the debt he owed them. His first step in this direction was the renewal of the notes they held. The next was to dispose of the phosphate. He explained his condition to his family, including. the plaintiff and his son David. They knew his embarrassment and consented to assist him. He drew up and signed a note, dated April 1, 1889, payable to Roger W. Morey for $228.22, being for the interest and $34 of the principal upon the mortgage held by Morey. He requested the plaintiff and David to sign the note and they did so. He delivered the note on the same day to Morey. On the next day the plaintiff and David made their own note payable to Morey for the same amount, and delivered it to Morey who thereupon surrendered to plaintiff the note of the day before. Thus plaintiff and David by their note took up their father’s note upon which they were sureties, and apparently made their father debtor to them for the amount. Then their father in order to pay them the debt thus created transferred to them the phosphate which he had stored at the depot, and gave to David an order on the depot master to deliver it to him. David drew it away and stored most of it with Morey, the purpose being to sell it and pay the note to Morey from the proceeds. Morey did not endorse the amount of the note upon the mortgage, and there is no evidence that he intended to, except as he received payment upon it. The sheriff afterwards seized most of the phosphate and sold it upon defendant's execution against John W. Pitts. David assigned his -interest in it to plaintiff. John W. Pitts between April 4 and 16, 1889, confessed judgment in favor of his relatives and others to-the amount of about $1900, and afterwards in favor of the defendants. He disposed of his personal property not exempt from execution. The second mortgage upon the farm has since been foreclosed, but John W. Pitts and his family are still residing upon it, David being the ostensible proprietor. By applying the phosphate upon the first mortgage, the liens held by 3bhn W. Pitts’ relatives upon the farm would all be strengthened, and the danger of his being removed from the farm lessened.

These facts all appear from the testimony of plaintiff’s witnesses.

It is plain that the debt from John W. Pitts to his sons, the-plaintiff and David, was created for the purpose of enabling John "W. Pitts so to dispose of the phosphate as to hinder and delay the defendants in the collection of their just demands.

While it is true that a failing debtor has the right, in good faith, to sell his property in payment of any creditor whom he prefers, in this case the plaintiff and David did not, in fact, become his creditors by the transaction recited. They advanced him no money, and really did nothing whereby the mortgage debt was then diminished. It was not intended that it should be diminished except from the proceeds of the phosphate. The notes and the sale off the phosphate were a mere cover to enable John W. Pitts to keep of his creditors until he should be able, by the help of Morey and the plaintiff and David, to turn the phosphate into money, and apply so much of it .upon the mortgage as the note called for.

The learned counsel for the plaintiff urges that the transaction was in the nature of a mortgage, and contends that if John W. Pitts had mortgaged the phosphate to Morey to secure his own note given April 1, 1889, the mortgage would have been upheld. Possibly so, but in that case Morey would have held two securities for one debt, and the defendants, with their levy upon the-phosphate, could have compelled Morey, by a tender to him of the money due upon the real estate mortgage, either to assign it to defendants or release his lien upon the phosphate. The scheme-here devised was to split the mortgage debt, which was amply secured, transfer part of it to the plaintiff and his brother, and transfer the phosphate to them as security for it. To have mortgaged the phosphate to Morey would have been to give him a security he did not want and could not keep. But by splitting the-mortgage debt and" transferring part of it to apparent creditors created for the purpose of receiving it, a place was invented where-the phosphate would apparently be free from the danger attaching to excessive securities in the hands of a single creditor. Such a transaction should not be protected. To say it was done-in good faith is a travesty upon truth. We cannot render any verdict, but we think we ought, in our discretion, to set this verdict aside as an obvious miscarriage of justice.

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

Learned, P. J., and Mayham, J., concur.


author: Daniels, J.

text:
    Foo Long, Resp’t, v. The American Surety Co. App’lt

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)

    Undertaking—Fraudulent settlement of appeal—Evidence.
    Defendant was surety on an appeal from a judgment which was reversed by the general term. Pending appeal in the court of appeals the judgment debtor, the respondent there, entered into a stipulation upon which / judgment was entered reversing the judgment of general term, and affirming absolutely the judgment below. In an action on the undertaking the court refused to allow defendant to show that other judgments were recovered against the judgment debtor pending the appeal or to go to the jury on the question of fraud and collusion. Held, error.
    Appeal from a judgment recovered on the verdict of a jury.

      Arnold & Greene, for app’lt; Joseph N. Tuttle, for resp’t
   Daniels, J.

The plaintiff, Foo Long, recovered a judgment against Chu Fong, on trial at the circuit, on the 28th of June, 1888, for the sum of $3,798.99. An appeal was taken from this judgment to the general term, and on the appeal the defendant in this action became the surety for the defendant in the judgment recovered at the circuit. The undertaking subscribed by the defendant in this action was in the form prescribed by the Code, by which it undertook and agreed that the appellant will pay all costs and damages which may be awarded against him on the appeal, not exceeding $500, and also if the judgment appealed from or any part thereof should be affirmed, or the appeal be dismissed, the appellant would pay the sum directed to be paid by the judgment or the part thereof as to which the judgment should be affirmed. After the hearing at the general term, that court by its decision reversed the judgment recovered by the plaintiff at the circuit, and ordered a new trial, with costs to the appellant in that action to abide the event. The order containing these directions was entered on the 9th of July, 1889, and in September following the plaintiff appealed to the court of appeals, and a return was made to that court and the appeal noticed for argument and placed upon the calendar, but before it was reached a stipulation was made between the parties to that action and their attorneys, by which it was consented that a judgment should be entered' reversing the judgment of the general term and affirming absolutely the judgment of the circuit

This consent was brought to the attention of the court of appeals, and on the 12th of January, 1891, that court, on reading and filing the stipulation, adjudged that the judgment of the general term of the supreme court should be, and the same was reversed, and the judgment of the court upon the verdict at the circuit should be, and the same was affirmed absolutely. The remittitur of the court of appeals was transmitted to the supreme court, where judgment was entered pursuant to these directions of the court of appeals. And after delaying further proceedings for the time required by the Code of Civil Procedure, this, action was brought against the defendant upon the undertaking given on the appeal to the general term. The defendant resisted, its liability on the ground, among others, that the agreement resulting in the judgment or order of the court of appeals and followed; by the judgment of the supreme court thereon, was fraudulent and collusive, and entered into with a design of wrongfully enforcing the undertaking on appeal against this, defendant.

Upon the trial of the issues framed in this action at the circuit, these facts were all made to appear, and the defendant further-proposed to prove that other judgments had been recovered, before this stipulation was made against Chu Fong, the defendant in the original action. The first of the judgments offered in. evidence was recovered by Seth E. Johnson against Chu Fong and others on the 9th of April, 1890, for the sum of $2,448.72. The second was recovered by Isaac Levy against Chu Fong and another on the 23d of June, 1890, for the sum of $2,890.89 and a third judgment was recovered by confession on the 12th of July, 1890, for the sum of $3,000. These three judgments-were recovered after the recovery of the judgment against Chu Fong at the circuit, and before the making of the stipulation for the reversal of the. judgment of the general term and the affirmance of the judgment recovered at the circuit by the plaintiff against Chu Fong.

Proof of these judgments was objected to by the plaintiff’s counsel as immaterial and incompetent, and the court sustained the objection, to which decision defendant’s counsel excepted-At the close of the evidence in the case the defendant’s counsel requested the court to direct a verdict in its favor. That was-refused, and the defendant then excepted.' A further request was-then made for leave to submit the case to the jury on the question of fraud and collusion. That was denied, and the defendant’s-counsel excepted, and the court then directed a verdict in favor of the plaintiff for the sum of $4,465.97, and to that an exception, was taken by the defendant; and the disposition of the appeal depends upon the correctness of these rulings by which the proof" of the judgments was excluded and the action was finally disposed of by the court.

By the terms of the undertaking, the defendant became bound' to pay the judgment recovered as well as the costs if that recovery was not brought about by the fraudulent action of the parties-to the appeal in the court of appeals. If, as a matter of law, the decision of the general term reversing the judgment recovered' at-the circuit could not be sustained, then the defendant was concluded by the stipulation entered into between the parties and their attorneys and the judgment finally entered pursuant to that, authority. But it had the right to resist this liability on the ground alleged in the answer that the agreement and the proceedings following it resulting in the judgment were fraudulent and' collusive. The burden of establishing this theory of the case-rested upon the defendant, and the facts as they were disclosed were claimed in its behalf sufficiently to maintain this theory to entitle it to have the question submitted to the jury. The case contains the evidence taken at the trial in the original action, together with the • decision and opinion of the general term, and from the decision which was there made and the opinion previously given, it appears that the judgment at the circuit was reversed because of improper rulings contained in the charge which was delivered to the jury. The presumption is that this decision was supported by the facts appearing before the court, and that presumption was not overcome by the proceedings afterwards taken in the court of appeals, for that court made no examination whatever into the merits of the appeal or the decision made by the general term. But the directions which were given by that tribunal were wholly founded upon the stipulation or agreement of the parties and their attorneys. 2STo adjudication, therefore, was in fact made by which this presumption of the correctness of the determination of the general term was in the least affected or diminished in force, but the parties and their attorneys, with that presumption existing as to the accuracy of the decision of the general term, entered into the agreement to set aside that decision and to restore the judgment on the verdict which had been reversed by it. The case in this respect accordingly differs from those in which the point has arisen whether the surety in an undertaking or bond would become liable for the payment of a judgment entered by the consent of the parties to the litigation. Where no adverse decision has been previously made, there it has been held that the parties may, in good faith, agree upon a recovery which will be binding upon the surety in the bond or undertaking affected by it. That was the condition of the case in Conner v. Reeves, 35 Hun, 507, which was affirmed in 103 N. Y., 527 ; 4 St. Rep., 216; and the facts also were similar in Steinbock v. Evans, 122 N. Y., 551; 34 St. Rep., 138. In the case of Tracy v. Maloney, 105 Mass., 90, the judgment was recovered by default, and appears to have been free from the imputation of collusion or fraud, and the judgment was equally free from suspicion in Cutter v. Evans, 115 Mass., 27, in both of which cases it was held that the surety in the bond had become liable by reason of the non-payment of these judgments by the principal. A similar ruling controlled the case of Ammons v. Whitehead, 31 Miss., 99, 104. There the action was compromised by the principal before a trial had been had in the circuit court, in which a new trial was to take place. In Bailey v. Rosenthal, 56 Mo., 385, a nonsuit was set aside and the plaintiff finally had j udgment in his favor, while in Chase v. Beraud, 29 Cal., 138, the appeal had been dismissed by consent of the attorneys for the appellant And as there appeared to be no fraud in the case, the judgment was held to be binding against the sureties in the undertaking on the appeal. These cases, as well as those decided in this state, all differ in their facts from the present controversy. There was no evidence presented in either of them which directly tended to maintain the fact to be that the consent entered into and the judgment recovered upon it were in any respect collusive or fraudulent. Neither had there been an adjudication by the court, as there was in this-instance, that a preceding judgment or decision should be set aside, and a judgment had been entered directly in conflict with such decision. These are important facts distinguishing this case from all the others which have been referred to. Here the court,, on the argument of an appeal, deliberately decided that the judgment which had been recovered, and from which the appeal had been taken, was erroneous and should be reversed, and a new trial of the issue should take place; and, as has already been stated, the presumption is that this decision of the general term was strictly accurate; and when the parties agreed, as they did,, to set it aside, and to an affirmance of the judgment recovered on the verdict, their acts afforded some grounds certainly for the.belief that they intended a fraud upon the surety in the undertaking on the appeal

At that time it appears, from the offer to give in evidence the three judgments recovered against Ohu Fong, that he probably was insolvent and could not, therefore, by legal proceedings be compelled to pay the judgment which had been recovered by the-plaintiff against him. This fact would have been fairly established, certainly so far as to render it proper for the consideration of the jury, if the judgments had been received in evidence, and they were material evidence so far as they had a tendency to prove-this to be the financial condition of Ohu Fong. And if they had been received in evidence, then the case would appear to be proper for its submission to the jury upon the issue affirming that collusion and fraud had intervened and produced the consent which was entered into and the proceedings following it. It is so remarkable and unusual for a person to surrender an advantage secured by a favorable decision of an appellate tribunal that the fact, of itself creates the suspicion that there was some motive operating, or some object to be thereby attained, not entirely consistent with good faith or fair dealing. That was the situation of this-defendant, Ohu Fong. He had a decision in his favor. Upon a further trial he might under its weight and effect be relieved entirely from liability; and yet this advantage was apparently surrendered for no consideration, and the judgment in conflict with, the decision allowed to be restored as it had been entered against. himself. And it was a fair matter of argument if these judgments had been read in evidence that the object intended to be attained was to fix the liability of the defendant upon the undertaking by which it should be obliged to pay the plaintiff the amount of his. judgmenk

The exception taken to the exclusion of the judgments as evidence seems to be well founded, and so does that to the direction of a verdict and the refusal of the court to submit the question of fraud and collusion to the jury. Those charges ordinarily depend upon indirect proof to maintain them. It is not to be expected that the parties to a fraudulent transaction will themselves-confess the accomplishment of that end to have been their object. But, when an issue of this description arises in the course of a legal controversy, circumstances are usually the most persuasive evidence attainable to maintain it Such circumstance appeared in this case, and, instead of a verdict being directed against the defendant, the issue should have been submitted to the jury. The judgment should, therefore, be reversed and a new trial ordered,, with costs to the defendant to abide the result

Yak Brunt, P. J., and Ingraham, J., concur.


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

text:
    In the Matter of the Application of Joseph W. Howe et al., Ex’rs, App’lts., for leave to sue Benjamin I. Trask, Resp’t

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)

    1. Moktgage—Leave to sue on bond.
    On the foreclosure of a mortgage the defendant’s answer of usury was stricken out and judgment entered adjudging him liable for deficiency. The premises were sold on foreclosure of prior mortgages and nothing was realized on this mortgage. On application for leave to sue on the bond, made within twenty years from its date, Held, that the judgment was a conclusive adjudication that defendant had no defense to the action and was indebted in the amount of the bond, and that leave to sue should have been granted, notwithstanding an alleged agreement that defendant, was not to be personally liable.
    (VanBkunt, P. J., dissents.)
    2. Same—Laches.
    As the statute of limitations had not run against the bond, the mere-delay in making the application did not constitute loches.
    Appeal from order denying motion for leave to bring an. action upon a bond executed by defendant

      Gerrit Smith, for app’lts; Charles Donohue, for resp’t.
   Ingraham, J.

The respondent admits having executed the bond upon which the appellant asks leave of the court to sue, and it appears that in an action to foreclose a mortgage given to secure the payment of the bond the respondent appeared and interposed an answer alleging the defense of usury, and that subsequently such answer was stricken out as sham and a judgment of foreclosure and sale entered whereupon the respondent was adjudged to pay any deficiency to plaintiff.

This judgment is a conclusive adjudication that defendant had no defense to the action and was indebted to plaintiff’s testator in the amount of the bond.

As the property covered by the mortgage was subsequently sold to satisfy a prior lien, nothing was realized in the foreclosure suit, and as the statute of limitations had not run against the bond the mere delay in making the. application is not a reason for denying the motion.

There is no rule that requires that this application should be made at any particular time, and by denying it on the ground of loches in making the motion the court in effect establishes a different time within which an action upon a bond must be brought than that established by law.

The allegation that some arrangement was made whereby the obligor and his co-obligor would be released from any personal obligation upon the bond is conclusively established to be with■out foundation by the judgment subsequently entered in the foreclosure action.

He was represented by his attorneys in that action and interposed an answer; he did not allege therein the making of the agreement now brought forward as a reason for denying this application, and the effect of the order appealed from is to reverse the adjudication of this court as to the liability of the defendant upon the mere statement of the respondent on this application, that in consequence of an agreement made before the entry of the judgment against him he was not to be personally responsible.

Upon the bond and judgment itself the petitioner is entitled to recover, and no reason is shown why they should not be alio,wed to commence the action.

The order appealed from should be reversed, with ten dollars costs and disbursements, and motion granted.

Daniels, J.

Whether a defense exists to the debts mentioned in the bonds can regularly be only determined on a trial, when the evidence will be directly produced before the court And to place the demands in the condition in which the trial can be had, the order permitting the bonds to be sued becomes necessary. To prevent the order the proof should be satisfactory that the bonds have been discharged, or satisfied. That degree of proof is in this instance wanting. And leave to sue the bonds should be given.

I therefore agree with the opinion of Mr. Justice Ingraham for a reversal of the order.

Van Brunt, P. J.

(dissenting.)—In June, 1878, one Trask and wife executed and delivered to one Clapp their two joint and several bonds for $2,500 each, secured by two second mortgages on two adjoining lots of land in New York city. In May, 1876, the mortgagors caused to be conveyed to the mortgagee certain property in Duane street, New York city, as claimed by the appellant, in part payment of said bonds, and credit was given therefor, on said bonds leaving a balance due. In November, 1877, two actions were begun by the mortgagee against Trask and. wife to foreclose the mortgages for the balance alleged to be due on the bonds, in each of which actions a defense of usury was interposed by the wife of Trask.

A motion was made to strike out such answers as sham and, upon the consent of the attorney for Mrs. Trask, an order was entered striking them out, and subsequently decrees of foreclosure were entered, on the 6th of September, 1877. A few days prior to the entry of the decrees in these actions (viz.: on September 3, 1877) judgments of foreclosure and sale were entered in actions brought upon the first mortgages and upon the' sale of the premises a deficiency resulted upon said last named mortgages. No sale was had under the decree of September 6, 1877.

The mortgagee died on September 17, 1881, leaving her husband sole executor and legatee under her will; and he died in 1884, leaving a last will and testament of which, the applicants, Joseph W. Howe and Clarence Moulton, are executors. Ho other payments having been made upon said bonds this application under § 1628 of the Code was made for leave to bring suit, thereon. This application being denied, from the order thereupon entered, this appeal is taken.

The learned court below seems to have denied this motion upon the ground of loches, nearly seventeen years having elapsed since the making of the bonds. But it is doubtful whether any lapse of time short of the statute of limitations, unless there were other considerations, would be an answer to the right to sue.

But there is one difficulty presented upon the face of these-papers which seems to justify the denial of the application

It áeems that the executor Moulton was acting as the attorney in fact of the mortgagee in connection with all these transactions; and it is alleged upon the part of the appellant Trask that the answers in the foreclosure suits were allowed to be stricken out under and in pursuance of an agreement between himself and Moulton that no personal judgment would be enforced either against himself or his wife.

And it is to be observed that Moulton verified the complaint in these foreclosure actions as the attorney of the plaintiff, who was absent from the city of Hew York. Moulton has made no affidavit or denial of these allegations. It seems to us therefore that the making of such an agreement is established, and it certainly would be inequitable to allow an action to be brought upon these bonds after the making of such an agreement by the representative and attorney of the plaintiff in those actions who had the sole charge and management of her affairs in this respect

The order should be affirmed, with ten dollars costs and disbursements.

Order reversed, with ten dollars costs and disbursements.


author: Barrett, J.

text:
    George W. McLean, Rec’r of Taxes, Resp’t, v. Abraham L. Erlanger, App’lt.

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)

    1. Taxes—Personal—Return of marshal.
    In a proceeding to enforce payment of personal taxes the defendant cannot go behind the return of the marshal and prove its falsity.
    2. Same—Affidavit.
    An affidavit of defendant denying “ any knowledge or information sufficient to form a belief of the issuance of such warrant ” is not a denial of the fact stated positively in an affidavit.
    3. Same—Costs.
    Where there has been a failure on the part of the marshal to make a demand or search for property, the defendant should be absolved from tho payment of costs of the proceeding to enforce collection.
    Appeal by Mr. Erlanger from an order of the special termT committing liim to jail until he shall pay the amount of a personal tax imposed upon him for the year 1890, together with the costs-of the proceedings. The affidavit of the defendant denied that he had neglected to pay or that any demand had been made upon him; denied any knowledge or information sufficient to form a "belief of the issuing of the warrant; alleged that the return was unfounded and false; that no search for property was made, and that if search had been made property would have been found.

      Thomas P. Wickes, for app’lt; John G. H. Meyers, for resp’t
   Barrett, J.

The question is whether the appellant can go behind the return of the marshal to whom the warraant for the collection of the personal tax imposed upon him was issued. We agree with the appellant that jurisdictional facts must be stated in the petition, and it is conceded that all such facts are herein stated. One of these facts is that a warrant for the collection of the tax was issued by the petitioner to a marshal and that that ■officer has returned such warrant unsatisfied. This statement is made positively by the affiant, and is necessarily within his personal knowledge. It is not denied by the respondent The latter merely denies “any knowledge or information sufficient to form a belief of the issuance of such warrant.” This form of denial would, under the Code, raise an issue to a complaint in an action, but it is not a denial of a fact stated positively in an affidavit. Matter of Petition of N. Y., L. & W. R. R. Co., 99 N. Y., 17; R., W. & O. T. R. R. Co. v. City of Rochester, 46 Hun, 149; 10 St. Rep., 809; The People ex rel. Carleton v. Board of Assessment, 52 How., 140; Matter of Sullivan, 55 Hun, 285; 28 St. Rep., 566. We thus have all the jurisdictional ‘ facts properly averred and conceded. For the averment that the marshal demanded payment under the warrant was superfluous, as the statute is in the ■alternative and provides for these proceedings in case of the refusal or neglect of any person to pay the tax imposed. The question is thus reduced to that suggested at the outset: can the appellant in these proceedings go behind the return of the marshal and prove its falsity ? We think not. Such a doctrine would be subversive of the entire system provided for the collection of personal taxes. And it could be inaugurated only by overturning the general rule that the returns and certificates required of a public officer in the performance of official duty are to be taken in the proceeding in which they are made as of unquestionable verity. Cooley on Taxation, 2d ed., 260, and cases there cited.

It will be observed that the marshal is not a party to this proceeding, and that the statute requires the receiver of taxes to proceed against the delinquent upon the marshal’s official act, namely, the return of the warrant unsatisfied. Cons. Act, § 859. Such a return is conclusive evidence, in the proceeding in question, of the jurisdictional fact that the person proceeded against “ neglected ” to pay the tax imposed upon him and that he had “ no goods or chattels in his possession ” (§ 857) upon which the same could be levied by distress and sale according to law. The burden of establishing this latter fact by evidence aliunde the return of the marshal is nowhere imposed upon the receiver of taxes, and if such burden were imposed upon him, the statute would become a dead letter. A public officer like the receiver of taxes, acting under statutory mandate and seeking to collect taxes for the purposes of government from a vast number of individuals, should certainly not be held to a stricter rule than that which applies to individuals with respect to their private contentions. And yet, it is well settled that although the return of an execution unsatisfied is a necessary pre-requisite to the filing of a creditor’s bill, such bill cannot be defeated by proof of the existence of personal property which might have been levied upon, unless at least there was collusion between the plaintiff and the sheriff. Stoors v. Kelsey, 2 Paige, 418 : Meyer v. Mohr, 19 Abb., 299 ; Balde v. Smith, 5 Ch. Sent., 11. The remedy in all such cases is by an action against the officer for a false return. But such a remedy is scarcely requisite in cases like the present For what damage can be done to the person taxed by a false return even if he has sufficient personal property to pay the tax ? He is only asked to pay the tax once, and whether he does this under stress of the warrant or of the order to show cause is immaterial.

He can, it is true, be mulcted the costs of contempt proceedings, but that is all. Now the court, under § 861 of the consolidation act, has ample discretion to relieve him from these costs, and while treating the marshal’s return as conclusive upon the question of jurisdiction, it would doubtless consider the failure, as matter of fact, to make a demand or to" search for property, upon the question of costs. Indeed, in the present case, upon the broad statements made by Mr. Erlanger in his affidavit and not denied in any manner, we think he should have been absolved from the costs of these proceedings.

The order appealed from should be modified accordingly so that Mr. Erlanger stand committed until he pay the tax imposed upon him, with lawful interest, but without costs either at special or general term.

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


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    James E. Nichols et al., Appl’ts, v. John F. Wellings et al., Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)
    Assignment nor creditors—Fraudulent preferences.
    An assignment for creditors preferred the wife of the assignor for money-loaned. It appeared that the assignor had given her moneys from time to time for housekeeping expenses, from the surplus of which these loans were made. No agreement on his part was shown hy which she should be entitled to such surplus, except in one instance and as to only a part thereof. Held, that such preference rendered the assignment inoperative and void as against creditors.
    Appeal from a judgment recovered on trial at the special term.

      Henry D. Hotchkiss, for app'lts; Hugo Hirsh and John H. Kemble, for resp’ts.
   Daniels, J.

The plaintiffs are judgment creditors of John F. Wellings, one of the defendants, and after the return of executions issued upon the judgments and returned unsatisfied, this action was commenced to set aside the general assignment of the judgment, debtor and also a judgment confessed by him to the defendant Jeanette F. White., The assignment was made on the 25th of June, 1889, and the judgment was confessed on the 12th of July of the-same year. The judgments upon which the executions were issued were recovered on the 23d. and 24th of July of that year. By ' the assignment the wife of the assignor was preferred for the sum of $900. Other preferences were contained in the assignment for which the judgment was confessed by the judgment debtor.

The evidence given upon the trial left no ground for dispute as to the important facts, and in support of the allegation that the assignment was made to hinder, delay or defraud the creditors of the-assignor it was proved that while he was in business he delivered to his wife the sum of ten dollars each week to provide for the expenses of the household, and their testimony is that he from time to-time borrowed money from her amounting to the estimated sum of $900, for which the preference was given to her.

There was no evidence upon the trial that the ten dollars delivered to the wife by the assignor each week was intended to be a gift of the surplus beyond the expenditures necessary for the-maintenance of the household; but the utmost which the evidence-proves is that this sum of ten dollars each week was delivered by the assignor to his wife to pay the expenses of maintaining the-family. His evidence was such as to establish the fact that the-money in this manner delivered to the wife remained the property of the assignor, for he entered into no agreement, either express or implied, that she should become the owner of the surplus, if any there should be, and, to constitute a gift, the evidence is required to establish the fact that it was intended by the donor that the title to the property alleged to be given shall be intended to vest in the donee. And that fact is required to be made out by evidence reasonably clear and tending to establish it Shuttleworth v. Winter, 55 N. Y., 624-629. And, when it is remembered,, as the court held the law to be, in Manchester v. Tibbetts, 121 N. Y., 219-222; 30 St. Rep., 721, that dealings between a husband and wife, resulting in the appropriation of his property to her, are required to be closely scrutinized, the conclusion is inevitable that there was no such agreement proved by this evidence as gave the wife the title to the surplus remaining in her hands from this-weekly allowance, but-that surplus, which formed the fund loaned to him, remained as completely the property of the assignor as though he had delivered a larger amount than was necessary to an agent for the payment of a debt, where the surplus would most unquestionably belong to the debtor. There is also reason for believing that this was considered to be the result of these dealings, for the wife returned to her husband the money which she had on hand as that was requested by him, and, apparently, in no more than one instance did he acknowledge himself to be her debtor on account of the receipt of that money, and then it is stated that a note was made by him to her for the sum of $200, which, however, was not produced upon the trial.

It is not necessary to inquire whether so much of the transactio’.i as was included within the note constituted a valid claim against the assignor, for, even though the residue of the preference, amounting to the sum of $700, is unfounded, that of itself is sufficient to annul the assignment Russell v. Winne, 37 N. Y., 591. And that so much of the preference was unfounded clearly results from this state of the evidence, and the effect of making that preference by the assignment would necessarily be to hinder, delay or defraud the creditors of the assignor; and where such an intention exists, there the law, under the express mandate of the statute, declares the entire instrument to be inoperative and void as against creditors.

The judgment confessed to the defendant Jeanette F. White for the benefit of herself and as the assignee of other preferred creditors was entered to secure them against the contingency that the assignment itself should not be maintained, and that fact indicates the belief on the part of the preferred creditors that there was danger from some cause that the assignment might be declared invalid; and, to the same extent as the preference contained in the assignment was unfounded, this judgment is also attended with the same infirmity, for it has certainly been confessed for too large an amount so far as it represents the preference given to the wife of the judgment debtor, and that of itself, without any actual intent to defraud the creditors, would require the judgment to be reduced by deducting so much of its amount as represents the unlawful preference given to the wife of the assignor. And if there were an actual intent to defraud the creditors by the assignment and this confession of judgment, or by the confession of the j udgment alone, it would require to be entirely vacated and set aside for that reason. But, whether the judgment may be maintained in part, so far as it is dependent upon actual pre-existing debts, it is not necessary should be now decided, for it is sufficient to entitle the plaintiff to another trial of the action that the assignment itself cannot under this state of the evidence be sustained.

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

Van Brunt, P. J., concurs.


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    William L. Genin, Resp’t, v. Samuel K. Schwenk, App’lt.

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)

    Fraud—Pleading.
    The complaint in an action to recover damages for procuring a loan of money by fraudulent representations alleged the loan of the money and that plaintiff received therefor the note of a third person endorsed by defendant. Held, that it was not necessary that the complaint should set forth a cause of action sufficient to bind the defendant as endorser.
    Appeal from an order denying the defendant’s motion to vacate an order of arrest

      Samuel Keeler, for app’lt; Culver & Anthony, for resp’t.
   Barrett, J.

The motion was made upon the papers upon which the order of arrest was granted, and proceeds mainly upon the theory that the complaint fails to state facts sufficient to constitute a cause of action. The action is for damages alleged to have been sustained by reason of certain false representations made by the-defendant, in reliance upon which the plaintiff loaned and advanced to him the sum of $1,500. The representations are clearly set forth, also their falsity and the damages. We may add that, the averments of the complaint are fully supported by the affidavits, and that a plain case for an order of arrest has been made out unless the defendant’s point with regard to the complaint is-well taken.

That point seems to be that as the defendant, when he obtained the loan, delivered to the plaintiff a promissory note for $1,500 made by one Moyer and endorsed by him (the defendant), the-complaint should have set forth a cause of action sufficient to bind. the defendant as endorser. In our judgment, this- point is untenable. The action is not against the defendant as endorser of the note, but as a fraudulent borrower of money. The complaint-does not even aver a purchase of the note. It sets forth that the plaintiff agreed to and did loan and advance to the defendant the sum of $1,500, and “therefor received” from the defendant a promissory.note made by Moyer to the order of the defendant and duly endorsed, to the plaintiff.

This, in effect, alleges a loan of $1,500, with the note as security therefor. But even if it were treated as a purchase, the plaintiff could either rescind the contract or do as he has done here, sue for damages by reason of the fraud. Bowen v. Mandeville, 95 N. Y., 237. He was not bound to sue upon the note, nor in his action for damages to make allegations which would have been requisite had he sued upon it. The action for damages is sufficiently supported by apt averments that the money was obtained by false and fraudulent representations upon which the plaintiff relied, whereby he sustained specified damages. He has sustained those damages whether the defendant is liable upon the note or not, for such damages have resulted directly from the obtaining of the sum loaned, and the non-payment of the note is but an additional incident emphasizing his loss. The defendant’s error is in supposing that the plaintiff should have alleged in his complaint the value of the note, or that it was worthless. That is matter of evidence, not of pleading, and the worthlessness of the note and the insolvency of both Moyer and' the defendant are abundantly established by the affidavits. The plaintiff has thus shown that his damages are the sum fraudulently obtained from .him; namely, $1,500.

The order should, therefore, be affirmed, with costs.

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


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    Stevens Voisin, Resp’t, v. The Commercial Mutual Ins. Co., App’lt.

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)
    1. Insurance (Marine)—Insurable interest—Parties.
    A partner has an insurable interest in the properly of the firm, and may insure the same on account of whom it may concern, loss payable to himself; and in case of loss may bring action in his own name.
    2. Samp.—Barratry.
    A master of a ship, who is also a part owner, can commit the crime of barratry.
    3. Same—Cargo—Evidence.
    The master, who stated that he had conspired to abandon the vessel, testified that the cargo stated to have been laden on the vessel had not in fact been placed on board, but that worthless material had been substituted. The condition of the cargo when removed corroborated his testimony. Reid, that this evidence was competent to establish the commission of a fraud on the insurer.
    4. Same.
    Testimony as to the articles forming the cargo given by a witness who has no knowledge thereof except from Ms observation and acquaintance with receipts and bills of lading, is inadmissible.
    5. Same—Seaworthiness op vessel.
    Where it appeared that the vessel had been in a port where the water was infested with worms and that it had no copper sheatMng or paint on its bottom, evidence of a witness who rowed around her in a boat, but made no examination below the water line, as to her seaworthiness, is inadmissible.
    6. Same—Expert testimony.
    Whether the delay of a vessel in a foreign port was extraordinary in the usual course of trade, is not a subject for expert evidence. The facts should be stated to the jury and they may draw the necessary inference.
    Appeal from a judgment recovered on the verdict of a jury, and from an order denying motion for a new trial.

      Treadwell Cleveland, for app’lt; F. R. Coudert and William Mitchell, for resp’t
   Daniels, J.

The verdict was recovered for the amount of insurance made by the defendant upon the cargo of the bark L. E. Oann. The cargo was laden on board of the bark at Yera Cruz and Tecolutla, in Mexico. The bark left Yera Cruz about the 1st of February, and in five or six days thereafter arrived at Tecolutla, where she remained until the last of March, when she commenced her voyage for the city of Hew York, and was abandoned by the master and crew as in a sinking condition on the 27th of April following. A considerable part of the cargo was laden on board the bark at Yera Cruz for the witness Constanseau, who received bills of lading for the same, and on the 13th of February, 1882, assigned these bills for value received unto Stevens Yoisin, the plaintiff. The portion of the cargo mentioned in one of the bills is stated to have been insured for the sum of $7,500, and the portion mentioned in the other bill to have been in like manner insured for the sum of $8,000, and it was on the 10th day of March, 1882, that the plaintiff took out the policy in question from the defendant. By this policy, Stevens Yoisin was insured upon the cargo for the account of whom it might concern, and in case of loss the insurance was to be paid to him in funds current in the city" of Hew York. By the policy the goods and merchandise insured, including the premium, were valued at the sum of $29,500, and the issuing of the policy in this manner to the plaintiff was admitted by the answer to the complaint. It was objected, however, as the fact was proved that the plaintiff, at the time when the policy was taken, was a partner in business with Paul Mares, and the consignments belonged to the firm, that the action could not be maintained in his name. There was no defense set forth by the answer alleging the non-joinder of the other partner as a plaintiff in the action, and it did not appear on the face of the complaint, and the objection was, therefore waived under § 499 of the Code of Civil Procedure.

But, as a partner in the firm which did its business under the plaintiff’s name, he possessed an insurable interest in the property, for, in his capacity of a partner, and his relation to the Business, he was liable to be subjected to damage by the loss of the property, and that was sufficient to vest him with an insurable interest and to entitle him to- take and receive the policy in the form in which it was made. Riggs v. The Commercial Ins. Co., 125 N. Y., 7; 34 St. Rep., 465. This subject was considered also in Sturm v. Atlantic Ins. Co., 63 N. Y., 77, where it was held by the court that a person who has the control of property, either as owner, consignee or agent, may effect an insurance upon it in his own name, and on account of whom it may concern, making the loss payable to himself, and if a loss occurs, he may maintain an action upon the policy. And the facts of the present case are sufficient to bring it within the application of that rule, for the assignments of the bills of lading were to the plaintiff, and there is evidence that it was intended by the assignments to vest the title in the firm, and by their force and effect, as they were taken by the plaintiff as a member of the firm, he held the property mentioned in the bills as a trustee for the firm. And in taking out the "policy from the defendant, it was issued by the company upon no other understanding, or basis, than that the 23laintiff himself had an insurable interest in the property, and that in case of loss he should collect the amount for the benefit of himself and whoever else it might concern. The application for the insurance conforms to this construction and understanding, for it is stated in it that insurance .was wanted by the plaintiff for "account of whom, etc., loss, if any, payable to him, for $3,500 on merchandise aboard bark L. E. Gann, and to be valued, at $29,500. The import as well as the effect of the insurance obtained in this manner was to make it individually with the plaintiff, and to' insure to him the payment of any loss for whoever it might concern; and, having himself an insurable interest in the property, he was authorized by this form of the contract to maintain the action for the benefit of himself and his copartner for the recovery of the loss.

The court, for these reasons, could not at the trial dismiss the complaint, as it was asked to do, on account of any infirmity in the right of the plaintiff to maintain the action. Neither could the complaint be dismissed on account of any informality in the statement of the cause of action. For it sufficiently set forth the plaintiff’s case, and if it was defective in any respect, that defect was supplied by the answer. Neither could there be any well-founded objection to the right to maintain the action for the want of proof of interest or loss of the cargo, for the fact was stated in the complaint and admitted by the answer that such proofs had been supplied to the defendant

Evidence was given by the master that he had entered into a conspiracy with three other persons at Yera Cruz, prior to the lading of cargo on board the bark, that it should consist in part of refuse or worthless articles, which were to be shipped in the form and under the description of valuable articles of cargo; and that insurance should be obtained upon the cargo and the vessel after-wards should be sunk by the captain to defraud the insurance companies under their policies. He states himself to have become a party to this conspiracy, and that in the lading placed upon the vessel, dirt and other worthless substances were made portions of the cargo for which the bills of lading were afterwards issued and subscribed by himself; and that the cargo as it was taken on board was worth no more than forty per cent, of that which was so reprensented to have been shipped on the bark. This evidence exhibited the master to be a desperate, unscrupulous criminal, and standing by itself would be of little value in the determination of the rights of parties before either a court or a jury. But it was confirmed by the condition of the cargo as it was removed from the bark, after she had been found abandoned and taken to Norfolk in the state of Virginia. For it appeared by the statement of cargo taken from the bark, which was stipulated to be correct, that there was 186 cases of dirt removed from the vessel, which had been laden upon it as a part of its cargo. This was an unequivocal circumstance indicating the truth of the evidence given by the master that he had become a party to such a conspiracy. He stated that he had abandoned the confederation into which he had entered after his arrival at Tecolutla, and for that reason had removed a large part of the sand ballast from her while lying at that port; but it is not probable that he stated the truth in this respect, or, if he did, he changed his mind before the bark was abandoned, in what was stated to be a sinking condition. She was then off the coast of South Carolina on her way to the city of New York, and had encountered some severity of weather, but no more than might ordinarily be experienced in the course of the voyage. It was after the storm, described by himself and also by the first officer, had partially subsided, that the bark was found to be in a leaking condition; and the statement of the master is that the pumps were tried and more water was found in the hold than they were capable of relieving, and that the conclusion was then arrived at to abandon the bark. But before doing so augur holes were bored in the hull to increase the inward flowage of the water and more surely cause the bark to sink. This he says he did with the understanding that it was the English law or custom to put the vessel out of the way when she was in a condition requiring her abandonment. But no such law or custom was proved otherwise than by his own statement, and it is not probable that any law or custom of that description had come into existence under the sanction of the English authorities. It is much more probable that the master at this time intended by his acts to fulfil the agreement stated to have been entered into by Mm for the destruction of the vessel, for which he was to receive the sum of $6,500, a portion of which had already been paid. The jury certainly were at liberty to adopt that view of the effect of the evidence. But after she had filled with water she did not sink below her decks, and she was afterwards found in that condition by a steamer sent in search of her by the insurance companies having risks affected by her condition. She was then towed to Norfolk, in the state of Virginia, where, upon being taken out of the water, these augur holes were found in the hull and below the water line, and when these facts came to the knowledge of the master it was very natural for him to resort to an excuse, improbable even as the one assigned by him was, for his conduct in requiring and procuring these holes to be bored in the hull of the vessel expecting thereby to secure her disappearance beyond a contingency.

His acts were those of a criminal, and he intended by them to put this bark with her cargo out of the way, to carry out his nefarious bargain and subject the insurance companies to the payment of their risks. That constituted what is known in marine insurance as the offense of barratry. It was a crime against the owners of the cargo as well as the underwriters. This subject was fully examined in Atkinson v. Great Western Ins. Co., 65 N. Y., 531, and, as the offense of barratry was there described, it clearly included what was done by the master of this bark 'in this instance. But as he was himself the owner of a sixteenth interest in the bark, it was objected on that ground that he could not be guilty of the crime of barratry. And the rule is undoubtedly well settled that the owner of the ship cannot commit this offense against himself or against the owners of the cargo which he may have in charge. But the cases in which that principle has been maintained were those where the master sustained, for the time being, the relation of sole owner to the vessel. Marcardier v. Chesapeake Ins. Co., 8 Cranch, 39; Hallet v. Columbian Ins. Co., 8 Johns., 272; Cook v. Commercial Ins. Co., 11 id., 40. And the principle was generally stated, as it has been contended by the defendant’s counsel, that the crime of barratry could not be committed by the master who at the time was either the owner, or part owner, of the vessel. 1 Phillips on Ins., 3d ed., 612, § 1082, and so the law was also considered in Wilson v. General Mut. Ins. Co., 12 Cush., 362. But no other authority has been found sanctioning the position that the master, when no more than a part owner of the ship, cannot commit the offense of barratry. TMs subject was considered in Jones v. Nicholson, 10 Exchequer, 28; 26 Eng. Law & Eq., 542, and there it was concluded without dissent, the court of exchequer, that the master being also at the same time a part owner of the ship, could commit the crime of barratry. And it was so held also upon an examination of the cases in Phœnix Ins. Co. v. Moog, 78 Ala., 284, 304-5, and in Hutchins v. Ford, 82 Me., 363, 368-9. And the reason as well as good sense of the principle are clearly with these authorities, and sustain the conclusion adopted at the trial, that the master did commit the crime of barratry if in pursuance of an unlawful conspiracy when he endeavored to sink the ship at the time of her abandonment And that was a loss within the language of the policy in controversy, for among the risks which the defendant took upon itself was that of barratry of the master and mariners of the bark.

The court, therefore, was right in refusing to charge the propositions presented by the defendant’s counsel upon this subject, and in the charge that if the jury found that the vessel was abandoned in consequence of the barratry of the captain that it was one of the risks insured against by the policy.

The defendant’s answer set forth by way of defense that the cargo stated to have been laden upon the bark had not, in fact, been placed on board, and evidence was given by the master to the effect that no more than about forty per cent, of that which was stated had been placed on board the vessel, and the truth of this statement, coming as it did from this depraved witness, was to a material extent corroborated by the condition of the cargo as it was removed from the vessel at Norfolk. And while the policy contained a valuation of the property insured, which would ordinarily be binding upon the insurer, this evidence was competent and it was received without objection, to establish the commission of a fraud upon the insurers. And, while it was stated in Sturm v. Atlantic Co., 63 N. Y., 77, that the valuation in the policy was ordinarily conclusive upon the insurer, the rule was declared subject to the qualification that the binding effect would be destroyed in case of the existence of fraud, Id., 81; and so the law was also generally stated in 1 Phillips on Ins., 3d ed., 1183, and ini Arnould on Ins., 2ded., 314, and note; and in Ocean Ins Co. v. Fields, 2 Story C. C., 59, where it 'was said that “ a fraudulent over-valuation and misrepresentation of the value of the subject-matter of insurance will avoid a policy of insurance.” Id., 77. And it was apparently to invalidate this valuation that this evidence was given upon the trial. But, to meet and avoid the effect of this defense, evidence was given on behalf of the plaintiff to prove the fact to be that the merchandise as it was claimed in his behalf was actually placed on board the vessel and formed part of her cargo. To prove that to be the case, the deposition of the witness, Malpica, was read, who was a lighter-man engaged in transferring the cargo to the bark at Yera Cruz. He was asked to state particularly what merchandise, and the quantity of each kind, was shipped on the bark. But it was objected that his answer should not be received because of other answers given by him to the effect that he had 2no personal knowledge of tíre articles or their quantity which were placed upon the vessel. This appeared more fully from answers to cross-interrogatories propounded to the witness, but the objection was overruled and the counsel for the defendant excepted, and the answer of the witness was received.

This ruling cannot be justified because of any informality in the statement of the objection, for the deposition was all before the court and the answers were readily referable to which maintained the objection. And when an objection in this manner is made, it is also to be presumed for the purposes of the ruling that it is capable of being sustained by the facts. Kerr v. Hays, 35 N. Y., 331, 337. And there was no question made at the time when the objection was presented that it was not sustained by the answers to which reference was made. But the court without qualification overruled the objection and permitted the answer to be read, and the witness therein stated that he did not recollect the items, but seeing a bill presented which was marked “F," he could declare that the goods named in that bill were shipped on board the L. E. Gann. A motion was then made to strike out the answer for the same reasons, and that was denied by the court. And his answer to another interrogatory was permitted to be afterwards read, in which he stated in detail the articles which had been shipped, but this statement in like manner was made from the bill marked “F” and another marked “F 1.” This bill marked “ F ” the witness stated was true and correct in all respects, but he did not appear to have that knowledge, nor that the bill had been made by him or any other person in his presence. And it was on the strength of this bill, together with the other, that his answers were given that these articles were placed upon the bark as a portion of her cargo. Similar answers were obtained from the witness Hoffman, but they were objected to, for the reason that it appeared by the interrogatories that this witness had no knowledge of the articles which had been placed upon the bark, but answered wholly from his observation and acquaintance with the receipts and the bills of lading, and an exception was taken to the ruling of the court permitting his evidence to be received. And as his answers which were taken wholly depended upon the receipts and bills of lading, they were, under the authority of Palmer v. Great Western Ins. Co., 116 N. Y., 599; 27 St. Rep., 675, inadmissible as evidence, and so likewise were the answers obtained from the other witness, Malpica. For the statements which he made were those contained in the accounts of papers referred to by him, the accuracy of which appears not to have been within his knowledge. This evidence affected a material part of the case, that which depended upon the existence of a fraud in the lading of the cargo upon the bark.

A further defense set forth by the answer was that the bark was in an unseaworthy condition at the time when she left Tecolutla, and the mate, whose deposition was read as part of the plaintiff's case to disprove this defense, had his attention directed to the condition of the bark while she lay at Yera Cruz. She was there from the last of November or first of December until she left in February for Tecolutla, where she remained from the first of March until the last of that month. And the evidence proved the fact to be that the waters of the Gulf of Mexico at these points were infested with worms, and that this vessel was neither coppered nor painted with copper paint, and that in that condition, during the time she lay at these ports, she was liable to be seriously injured, and her seaworthy condition reduced or destroyed by the action of these worms upon the hull. And that this evidence was reliable further appeared from the condition in which the hull was found when the bark was taken out of water at Norfolk. And that probability was indicated also by the fact that the bark was found to be in a leaking condition after no severe stress of weather, before her abandoment. This witness stated that he, together with another person, made an inspection or observation of the hull at Vera Cruz when she was not less than eight nor more than twelve feet in the water. What he states to have been done by himself and the other mate was that they went in a boat around the vessel several times and examined it and found two places that looked as though they might leak where the plank came together, and another where a butt was found alongside of a tree-nail, and he discovered no other defect in the hull of the boat, and these places he testified they caulked and plugged. It is clear from his testimony as well as the answers afterwards given by him that no observation was, or could be made by him of the hull of the vessel below the water line, and none appeared to have been made by him or the other person with him of the inside of the bark. And in this state of his evidence he was asked : “ What was the condition of the ship with respect to her stanchions, her hull, manning and general equipment ”

This was objected to, but tne witness was permitted to answer, and an exception was taken to the ruling. And his answer was that she was in good condition. He was then asked, “ What was the condition of the L. E. Gann with respect to seaworthiness at the time she left Tecolutla ?” Between the time of the inspection which was made at Vera Cruz, which was after the cargo carried by her there had been discharged, and her departure from Tecolutla, no examination of the bark appears to have been made in any respect by the witness, and it was objected to his answering this question, as it had been to the other, that he had not seen the vessel below the water line, and liad not examined her inside, and did not go over the side at Tecolutla. But the court overruled the objection, to which the defendant excepted, and the witness answered, she was seaworthy. He further added in answer to an additional question, to which the same objection and exception were taken, that he considered her seaworthy in every respect or he wouldn’t have gone to sea in her. This evidence had a material bearing upon the fact required to be established, that the bark was seaworthy after the policy had been issued and before she proceeded finally upon her voyage, and it may have had an important effect upon the minds of the jurors in the verdict to which they agreed. But from the observation or knowledge of the witness he was not sufficiently acquainted with the condition of the ship where she was liable to have been injured by the worms to express this opinion or judgment. All that it was competent for him to do was to state wliat he had seen in the course of the observations made by him. Avery v. N. Y. Central, etc., 121 N. Y., 31, 43; 30 St. Rep., 471. His answers beyond that were strictly the expression of his opinion, based upon no facts, even if his opinion would otherwise have been admissible. This evidence consequently was erroneously received, and the extent to which it may have been accepted as proof of the seaworthy condition of the bark can be no otherwise conjectured than by the fact that the jury must have found her to be in a seaworthy condition.

A further defense interposed in answer to the complaint was that of deviation by reason of an inexcusable delay at the port of Tecolutla, and to avoid that a witness, who had been engaged in trade at the ports of the Gulf of Mexico, was asked the question, taking the usual condition of weather there prevailing from the first of January until the first of April, would he consider it extraordinary on the face of things that a vessel was delayed by the usual course of trade as much as a month or six weeks at any one of those ports. The objection was taken to this evidence that the witness' opinion was incompetent and irrelevant. This was overruled by the court and the witness answered: “ I should think that she got good dispatch, rather better than ordinary, in six weeks of time,” and then the witness added, in answer to another question, his reasons for this conclusion. This was not a matter that was dependent upon the opinion of the witness. The facts themselves were those which could be fully described and stated by the witness and thoroughly understood and comprehended by the jury, and it was their province rather than that of the witness to draw such an inference from those facts as they should be considered capable of sustaining. That duty, instead of being placed upon the jury, was ascribed to the witness, and he was permitted to give his opinion, when that opinion, in view of the facts, was not admissible as evidence.

While, therefore, the plaintiff sustained such a relation to the controversy as enabled him, under the policy issued by the defendant,' to prosecute the action in his own name, if a recovery could justly be had in it, and the master was chargeable with the crime of barratry, although he was a part owner in the bark, yet, on account of the answers taken from these witnesses as to the seaworthy condition of the bark, and the cargo laden upon her, and her delay at the port of Tecolutla, which were erroneously permitted to be given, the judgment and the order should be reversed, and a new trial directed, with costs to the defendant to abide the event.

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


text:
    James Moore, App’lt, v. Arthur D. Williams, Rec’r, Impl’d, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed November 30, 1891.)

    Corporations—Implied trust.
    The officers of a corporation sold stock to plaintiffs assignors and others who were stockholders, on the representation that the money received therefor was to he used in obtaining a disclosure of the secret of a process of manufacture which the company was organized to carry on, and which process ultimately turned out to he a fraud. The money received for the stock was not used for that purpose, hut was deposited and minded with other funds, and a portion sent to another state as security to a surety on attachment bonds given in actions brought hv the company. Tlnon discovering the fraud, plaintiff’s assignors rescinded the sale and demanded back their money. Held, that the representations and agreement made by the officers created a trust for the disposition, of the proceeds and that plaintiff could maintain an action against the receiver of the company to recover back at least the amount of money which was used as security for the surety, and so came into the hands of the receiver.
    Appeal from a judgment dismissing the complaint of the plaintiff, so far as the action was against the receiver, and from an order denying a motion made for a reargument of that part of the decision of the justice presiding at the trial.

      Everett P. Wheeler, for app’lt; R. Burnham Moffat, for resp’t
   Daniels, J.

The defendant, in whose favor the action of the plaintiff was dismissed, is the receiver of the Electric Sugar Refining Co., a corporation formed under the laws of this state in the year 1884. And the defendants, who were sued with him, were the president and secretary of the corporation. The business for which the company was incorporated was the refining of sugar by a process claimed to have been invented or discovered by Henry C. Friend, and to which, upon his decease, it was claimed .that his wife had succeeded. Shares of stock of the company were issued and exchanged for the process or invention represented to have been made. And 4,750 shares of such stock had become the property of the defendants, Robertson and Cotterill, prior to the 1st of December, 1888.

What this process was did not become known, either to these officers or to any of the shareholders of the stock of the corporation, until early in the year 1889, when it was discovered to be an entire imposition without any possible foundation to rest upon. The organization of the company and the issuing of the stock was what may be properly designated as a complete and unqualified fraud. But before this became known, and in December 1888, it was proposed by the two defendants already named, to make sale of one hundred shares of the stock of the company to obtain money to be paid for the disclosure of the process represented to have been -invented for the electrical refining of sugar. And a proposal was made by them, through an agent in Liverpool, to make the sale of such shares in the market at that city, for the price of sixty pounds, English currency, per share. He brought this proposal to the attention of persons residing in or near Liverpool who were stockholders in the company, and they agreed to purchase the one •hundred shares offered for sale, which were to be divided among these individuals in certain proportions, by which each person agreed to take a specified number of the shares. Five of these individuals agreed to take in all fifty-seven shares of the stock in this manner offered for sale, three of them each agreeing to take ten shares, one of them seven, and the other twenty, and also ten additional shares which never were paid for and need no special consideration in the examination of this case. When the fraud was discovered these person.: severally elected to rescind the purchases which they had made of these shares of stock. And the two defendants from whom they 'were purchase "1 were at once notified of that election, and the money which 1 : W then been paid for the shares was denunded, but its return w::- v-iv-sed by sin defendants. And after that, these individuals assigned their claims and rights of action arising out of their purchase of these shares and the existence and discovery of this fraud to the plaintiff in this suit. And he brought it to set aside the purchases of the-shares made by these individuals, and for the restoration to him as their assignee of the moneys which they had parted with in thefulfilment of their agreement to purchase the shares. Upon the-trial the action was sustained against the two defendants who were the president and treasxirer of the corporation, but it was dismissed as to the receiver. And whether that dismissal of the action -was justified under the circumstances is the question presented by this-appeal, which has been taken from the judgment record containing the decision, and the exceptions to it, and the requests and refusals to find other matters than those contained in the decision.

It appears by the findings in the decision that the object intended to be secured by the sale of the 100 shares of stock in Liverpool was to raise the money required to be supplied to obtain a knowledge or disclosure of the secret or process which it was claimed had been invented for the refining of .sugar by electricity. And information of this purpose was disclosed to the persons who were applied to for the purchase of these shares. Bach of the persons concerned in the offer, sale and purchase of the shares had full faith in the existence and genuineness of this alleged process. And no means had been afforded to either of them at that time for discovering that the representations concerning the process were false and the process itself did not exist. To induce these purchasers, and others who agreed to take the residue of the 100 shares, to receive and pay for them, it was represented to them that about $80,000 were required to complete the-necessary funds to obtain immediate possession of the knowledge-of this secret process. It was further represented, by these officers-of the corporation and defendants in the action, through their agent in Liverpool, that a special arrangement was completed for-insuring the speedy patenting of the process, and that the money to be raised by the sale of these shares would enable these two defendants to close the contract with Mrs. Friend and that the money would be paid to her in exchange for the specifications of this process. And it was agreed between them and the purchasers of the shares that the moneys to be paid by them should be handed to Mrs. Friend in exchange for the documents containing this-secret process. And these two defendants also represented to the-assignors of the plaintiff in this manner that the only purpose the money was required for was the payment to be made to Mrs.. Friend to obtain the possession of the knowledge of this process. And the purchasers of the shares were induced to buy and pay for the stock by means of these representations, and relied upon them when they contracted to buy their shares.

These facts are all distinctly found by the court in the decision-which was made after the.trial, and they were sufficient to create the obligation on the part of the defendants, Robei’tson and Cotterill, to use the money paid for the shares only in this manner. And the fact that- the money was also paid as the price of the-.shares to these two defendants did not relieve them from the •existence of that obligation and the duty to use and apply this money in that manner. For the persons who purchased the shares under these representations and promises did so for a two-fold consideration. The one was to acquire the title to the shares themselves, and the other to obtain a knowledge of the process alleged to have been discovered, and to secure to the corporation the exclusive right to use that process by virtue of a patent to be issued for its protection. Without the disclosure and patenting of the process, the company was not in a condition profitably to carry on its business and secure its protection against the rivalry or competition of other parties in case the process really had. any existence. And a controlling object of the purchasers of the shares, in taking and paying for them as they did, was to obtain the advantages expected to be derived from the disclosure and patenting of this alleged process. And when the two defendants, Eobertson and Cotterill, obtained the money under these representations and promises, they became obligated to use' that money to secure this result Sales under .similar circumstances and upon like representations of other shares of the stock were made to other persons, by which the 100 shares were agreed to be disposed of, and were in fact disposed of, with the exception of four of these shares. There was, in this manner, realized from the sale of the shares the sum •of 5,760 pounds. That money passed into the hands of the defendants Eobertson and Cotterill as the vendors of the shares, and also as the officers of this corporation. And on the 31st of December, 1888, they charged themselves in the books of the company for the sum of $28,108.80, which was the equivalent in American currency of the sum of 5,760 pounds English currency. And on the same day a credit was made in the loan account of the company to one of these persons, who was the treasurer, for the same sum, representing it to be the proceeds of ninety-six •.shares of the electric sugar stock sold by him upon the Liverpool market between the 21st and 24th of December, 1888. And in December, 1888, and before this credit had, in this manner, been made, Eobertson, the treasurer of the company, deposited this sum to his credit in the National City Bank of the city of New York, where he mingled it with his own funds, but he made no payments on account of the company until after the discovery of the fraud.

In January, 1889, the sum of $10,000 was drawn against this credit in favor of the company and sent by it to the state of Michigan, where it was deposited as security for a person who had become surety on the issuing of attachments against the personal property claimed to belong to Mrs. Friend and another person, and as security for costs for suits commenced and to be •commenced in behalf of the company, or of these two defend•ants, and which money was to be returned when all such liabilities should cease. The residue of the $28,108.80 was drawn from the bank for different objects, with the exception of the payment of a balance owing to the bank itself. Arid in tho¡¡ manner the entire proceeds derived from the purchase of the ninety-six shares of stock were disposed of. And that reduced necessarily the claim of the plaintiff to this sum of $10,000, so far as the identity and following of the fund has been presented by the case.

That the representations and agreement made by these two defendants with the persons who purchased these shares created a trust for the disposition of the proceeds of their sales, or at least imposed upon these individuals a fiduciary obligation to fulfil their representations and agreement, seems to be reasonably the result of what is shown to have taken place. For without the assurance on their part that this money would be used and employed to obtain the process alleged to have been discovered for the refining of sugar by electricity, it is clear that these purchasers would not have parted with their money, or taken the title to these shares. And under this state of the case, the defendants, who obtained the money in this manner became obligated so to use it. What they represented and agreed to do were sufficient to create this obligation. For, as it was said in Day v. Roth, 18 N. Y., 448 : “ A written agreement is not necessary to create a trust in money or personal estate. Any declaration, however informal, evincing the intention with sufficient clearness will have that effect. Such declarations stand on somewhat peculiar grounds. They are not to be regarded as admissions merely of some antecedent fact in relation to the subject, but are to be looked upon and received as constituting the very trust which they acknowledge. The doctrine of equity is, that by their own force they impress the fund with a peculiar character, and hence they are receivable on the same grounds as a precise and formal agreement. A person in the legal possession of money or property, acknowledging a trust, becomes from that time a trustee, if the acknowledgment is founded on a valuable or meritorious consideration.” Id., 453. And the obligation which was incurred by these two defendants through their representations and agreement was founded upon a meritorious consideration. For without that there is not the least reason to suppose that this money would have been parted with by the persons who took these shares, and so speedily, upon the discovery of the fraud, endeavored to rescind their purchases and secure a return of their money.

It has been supposed, inasmuch as this money, the proceeds of the sales, was deposited in the bank by the treasurer of the corporation with other moneys standing there to its credit, that the power of following it was thereby extinguished. And upon an examination of the cases, In re West of England, etc., Bk., L. R., 11 Ch. Div., 772, that was considered to be the law upon a review of the antecedent authorities where no actual trust attached itself to the fund, but at most the obligation was one of a fiduciary character. But this decision upon a further examination was overruled in the case of Hallett’s Estate, L. R., 13 Ch. Div., 696. And it was held in substance that there was no solid distinction, so far as the right to follow the fund should be in controversy, between the case of a technical trust and the existence of a fiduciary obligation. And that has been considered to be a true exposition of the law as it .has been administered in this state, and also in the supreme court of the United States. Bank v. Peters, 123 N. Y., 272, 276-9; 33 St. Rep., 182; Bank v. Insurance Co., 104 U. S., 54, 67-9. And the correctness of this principle was fully held and enforced in Newton v. Porter, 69 N. Y., 133, 139, and in Ferris v. Van Vechten, 73 id., 113, and Barker v. N. Y., etc., Exchange Bk., 100 id., 31.

That the money obtained from the sale of the fifty-seven shares, now in suit went into the account of Bobertson and Cotterill on the books of the company, and to the credit given to Bobertson as its treasurer, and into the New York City ¡National Bank, and was then in part, and to. the extent of $10,000, drawn out and sent to the state of Michigan for the purposes already mentioned, where it now remains in that manner, are facts clearly found and declared by the decision of the court. And that certainly entitled the plaintiff, as the assignee of these purchasers, to follow at least so much of their money as went into this sum of $10,000. That it was made up to over six-tenths of the amount by their funds appears to be free from very substantial controversy. And to that, extent the plaintiff is entitled to reimbursement out of this sum of $10,000. And they should at least have been permitted so far to maintain their action against the receiver of the company. For neither the company nor the receiver parted with any consideration whatever for the money received by it, and which has been deposited to the extent of $10,000 in the state of Michigan. And under the case of Bank v. Peters, supra, it may very well be held, inasmuch as the other persons who purchased the residue of the ninety-six shares have taken no measures to rescind their purchases ; that this entire sum of $10,000, subject to the obligations to which it has been subjected as security in the state of Michigan, should be recovered by the plaintiff in this action.

The facts upon which that right depends have all been found in the decision of the court And they not only warrant, but require, a judgment to this extent to be ordered in favor of this plaintiff. It is not necessary, therefore, to consider the appeal from the order denying the plaintiff’s motion for a re-argument. For upon the case, as it is presented, the plaintiff is entitled to maintain this action for the recovery of this money. As to its identity, there is no possible ground of doubt And the judgment should, therefore, be reversed, and judgment ordered for the plaintiff, with costs of the action and costs of this appeal, to be settled as to its terms upon notice to the counsel for the receiver. And the appeal from the order should be dismissed.

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