author: Beady, J.:

text:
    (No. 1.)
    (No. 2.)
    RUFUS A. WILLS and others, Appellants, v. HENRY SIMMONDS and others, Appellants. RUFUS A. WILLS and others, Respondents, v. HENRY SIMMONDS and others, Appellants.

      Partners — Action by one against another, but not against all — when maintainable— Gont/ract — refusal to perform — creates present breach of.

    Although the partnership relation may exist between parties, the court has jurisdiction to entertain a suit at law, brought by one against only one of the several other partners for damages, where the action involves an inquiry only with respect to the damages which the plaintiff has sustained solely because of an alleged breach of the partnership agreement by the defendant.

      Where the particular controversy can be completely determined without prejudice to the rights of the parties not made defendants, they are not necessary parties thereto.
    Where parties who were bound by an agreement to accept certain bills of exchange to pay for goods purchased, declare in advance that they will not do so, such declaration of their intention not to perform their contract, is a breach thereof, and upon the occurrence of the breach a cause of action exists at once against them, whether the goods were at hand and delivered or to arrive, the damages therefor depending upon the facts to bo established upon the trial.
    Appeals from an order made at Special Term in suit No. 1, on the part of the plaintiffs, from so mucli thereof as sustained a demurrer to the second cause of action set forth in the complaint on the part of the defendant, from so much thereof as overruled the demurrer to the first cause of action set forth in the complaint.
    Appeal by the defendant from an order made at the same Special Term in the second suit overruling a demurrer to the complaint.
    The demurrer to both causes of action in the first suit, and to the cause of action in the second, were alike, and were : 1st. That there was a defect of parties defendant, in that M. Crocker and James Lee, Jr., were necessary parties defendant, and ought to have been joined as such. 2d. That the court had no jurisdiction of the subject of the action. 3d. That the complaint did not state facts sufficient to constitute a cause.of action.
    The causes of action in both suits were based on the same agreements.
    A summons for relief was served in the first action, brought to recover damages against the defendants for refusing to comply with the terms of their contract, and directing other parties not to comply.
    A summons for money in the second action, for refusal to accept a certain bill drawn upon them in pursuance of the same contracts.
    On the 24th day of May, 1873, the plaintiffs’ firm, Wills, Edmands & Co., of Boston, entered into an agreement with the defendants’ firm, Simmonds, Hunt & Co., of London, England, in writing. M. Crocker and James Lee, Jr., were also parties to the agreement, hy which it was, among other things, agreed that M. Crocker & Co., in which name M. Crocker had theretofore carried on business in Boston as a crusher and manufacturer of linseed oil, but in which he had become embarrassed, and had become indebted to the other parties to the agreement, should go on and manufacture seed to be furnished him by the plaintiffs, upon orders given by Crocker & Co., to be filled at Calcutta by plaintiffs at regular Calcutta commissions therefor; the seed to be paid for by credits on London, furnished by plaintiffs, to meet which costs of credit and freight duties, insurance, and landing charges, and commissions thereon of two and one-half per cent gold on gross gold cost in Boston, plaintiffs should receive from Crocker, upon the arrival and entry of the ship at the custom-house, one-third, in a draft in sterling for said one-third, drawn by M. Crocker & Co. upon the defendants’ firm in London, which drafts the defendants agreed to honor, or, at the option of the plaintiffs, in the proceeds of such drafts, when sold by M. Crocker & Co., one-third in gold by note of M. Crocker & Co,, to the order of James Lee, Jr., and indorsed by him, and having ninety days to run from its date, and the remaining one-third in gold by note of M. Crocker & Co., to the order of plaintiffs, or to the order of M. Crocker & Co., at plaintiffs’ option, and by them indorsed, to run ninety days from date, interest to be charged on the amount of Crocker’s and Lee’s notes in the accounts, to be made up as theretofore made up between Crocker & Co. and plaintiffs. Plaintiffs were to insure the importations at a premium or cost to M. Crocker & Co. of three per cent, but not to assume any liability, the insurance being .effected by them as agents.
    It was also agreed that all linseed cake made in the oil mill under the agreement should be shipped to the defendants in London by Crocker & Co., to be sold in the usual manner on consignment, the account sales thereof to be handed to Crocker & Co., and at end of every two months, in case the shipments of cake should not produce an amount equal to the sums for which drafts under the agreement should have been drawn on defendants’ firm, then Crocker & Co. should remit to defendants good bills on London out of the proceeds of the manufacture of the mill, for the deficit or difference between the produce of the cake and the amount of the bills.
    Crocker & Co. were at liberty to order seed to the extent of J,000 bags and 5,000 pockets per month, which would enable them to run daytime only, but in the joint discretion of Crocker & Co. and the plaintiffs, the amount of the seed should be doubled. Plaintiffs were also at liberty to cease furnishing any supplies of seed at any time when, in their judgment, further continuance of the manufacture was injurious to the interests of the parties to the agreement.
    By the agreement the arrangement between the parties contemplated by its terms was to continue one year. At the end of the year, after paying the expenses of running the mill, including necessary repairs and insurances, Crocker should draw $6,000 for his personal expenses, which he was at liberty to draw at the rate of $500 per month. The net balance of earnings to be divided by M. Crocker & Co. in three equal parts, one of which was to be paid over to each of the parties to the agreement other than Crocker, to be applied to the reduction of the indebtedness of Crocker & Co. to said parties. It was also agreed that all proceeds of seed furnished under the agreement were to be held for the benefit of the parties other than M. Crocker & Co. equally. Afterward, and on the 24th day of May, 1874, by the agreement of the parties, the contract was extended for one other year, and until the 24th May, 1875, with some modifications, however. The modifications were, substantially, that in case the seed imported should be wholly lost by fire or perils of the sea, then plaintiffs should be entitled to hold to their own use the insurance recovered thereon, to the extent of their advances and the costs and charges of importation, and any excess should be paid to Crocker & Co., and in case the sums received from such insurance should not cover their advances and charges in Calcutta and costs of importation, Crocker & Co. should reimburse them in full such charges as should not be refunded by the insurance moneys, and in case Crocker & Co. should fail to reimburse them, said liabilities should be shared equally by the other parties to the agreement. And as to the portion of the gross gold cost of the seed to be furnished in Boston, for which Crocker & Co. should give a note, they should pay upon such note such proceeds of the sales and earnings of the mill as he might be able to do in cash, fifteen days at least before the acceptances for the cost should fall due in London. In the event that he should not be able to pay such note in full in season to meet such acceptances, then Crocker & Co. should draw a draft on the defendants at sixty days’ sight to their own order, and hand the same to plaintiffs. Such draft to be for the amount of the deficit of the note not paid in cash. And defendants agreed to honor such draft, and the drafts so honored should be provided for by Crocker & Co. by remittances of other drafts to defendants on or before the maturity of the same in London. It was further agreed that Lee should indorse or guarantee the payment of the note given by Crocker & Co. to his order, for the payment of his proportion of the cost of the seed.
    The complaint in the first action avers that the parties entered upon the performance of the contract, and that, the plaintiffs duly performed all the conditions on their part.
    That, in pursuance of the contracts, Crocker & Co. ordered and the plaintiffs furnished them, among others, the following shipments of seed:

      Mb Winona, 38,436 bushels, costing $95,509.54 in gold coin. Mb Lottie Warren, 13,973 bushels, costing $33,662.83 in gold coin. Ex Susan Gilmore, 31,263 bushels, costing $71,915.53 gold coin. That the total cost of the aforesaid shipments amounted to $201,087.90 in gold coin, as made up, under and by virtue of the terms of the aforesaid contract.
    That the said Crocker & Co. accepted, in Boston, the aforesaid shipments as a true performance by the plaintiffs of the contracts.
    The plaintiffs allege that, after the shipments were ordered and purchased, and prior to their arrival in Boston, the market value of the seed fell, and that the defendants forbade Crocker & Co. to receive the shipments, excepting only 6,000 bags thereof imported by the Winona, and refused to allow Crocker & Co. to draw bills of exchange, in compliance with the terms of the contracts, for the payment of any of the shipments, and notified Crocker & Co. that any bills so drawn would not be honored, and would be refused acceptance.
    That, in consequence of the defendants’ acts and their refusal to comply with and perform, on their part, the terms of the contracts, Crocker & Co. were unable and declined to pay for the shipments, and the plaintiffs have been and are obliged to hold and sell the seed, and to rely upon the same at its reduced value for the preservation of their lien for its cost. That, by reason of the premises and of the wrongful acts of the- defendants above stated, the plaintiffs have suffered damages in the sum of $58,515.80 and upwards in gold coin. The complaint contains a further cause of action, in substance:
    That Crocker .& Co. ordered a certain other lot of seed, to wit, 5,000 bags and about 4,000 pockets; and that the same was procured and furnished by the plaintiffs in compliance with the order of Crocker & Co., and with the terms of the contracts, and was shipped from Calcutta on board the ship Winged Hunter for Boston, on or about April 6, 1875, and which vessel was, at the time of the commencement of this action, alleged to be “ on the voyage.”
    That the defendants have forbade Crocker & Go. to receive the said shipment, and have refused to allow Crocker & Co. to take and pay for same under the contracts, or to draw bills of exchange therefor upon them in compliance with the terms of the contracts, and do declare that they will not accept or pay any such bills, and have so notified Crocker & Co.
    That since said shipment was ordered and procured the market price of such seed has fallen, and that by reason of the defendants’ acts and refusal to comply with the terms of the contracts, the plaintiffs have been, and are compelled to rely upon the shipment at its reduced value to reimburse themselves the costs thereof, and have been and are damaged in the sum of $10,000 gold coin.
    The plaintiffs demand judgment in the sum of $80,000 gold coin as their damages in the action.
    The second suit is on the refusal to accept drafts drawn by Crocker & Co. on the defendants for the alleged deficit between the notes given to the plaintiffs by Crocker & Co. for their one-third, and the amount they (Crocker & Go.) were unable to pay on such notes.
    The following is the opinion of YaN Yoest, J., referred to in opinion of Beady, J., below:
    YaN Yoest, J. The plaintiffs, the defendants, and James Lee, Jr., parties to the contracts set forth in the complaint, were creditors of Crocker, the remaining party thereto. Crocker was unable to pay his debts without sacrificing his property and destroying his business, which he desired to preserve for a time at least.
    The plaintiffs, defendants and Lee were willing to aid him in this desire, so far as they could safely do so, by waiting for the payment of their claims, and, amongst other things, they covenanted with each other not to bring suit, nor invoke process in bankruptcy on their demands for one year. They secured, as the contract of May 24, 1873, discloses, a conveyance of the real estate of Crocker, the debtor, to three trustees, who were empowered to sell within a time limited in execution of the trust; and they agreed to invest moneys for the purchase of seed to be manufactured into oil, in reality for the benefit and advantage of all the contracting parties.
    As to Crocker, if successful, the business would be preserved. As to the other parties, the profits to be realized would belong to them, and, if sufficient, would pay their claims.
    The seed to be manufactured "was to be purchased by the plaintiffs on the order of Crocker,, and was, in the first instance, to be paid for by them, through credits to be by them provided for the purpose. But, upon the arrival of the seed at Boston, plaintiffs were to receive from Crocker one-third of the costs and charges thereof by a draft on the defendants, which they were to honor and pay, one-third by Crocker’s note to the order of Lee, the payment of which was, in the end, to be guaranteed by him. The remaining third was to be secured by Crocker’s note to the plaintiffs.
    Although these notes and drafts were to be made and drawn by Crocker, yet it was within the contemplation of the parties that they should in fact be paid by him out of the proceeds of the mill. The agreements, as a whole, contemplate such result. This was clearly so with respect to the advances to be made by plaintiffs and defendants. For the agreements provide that for the third of the cost of the seed, which the defendants were to assume by accepting and honoring the drafts drawn therefor, all the cake made in the oil mills was to be shipped to them for sale; but in the event that the cake did not produce sufficient to meet the drafts for their' third of the cost of the seed, the deficiency was, in effect, to be made up to them out of the proceeds of the mill.
    With respect to the notes to be given by Crocker to plaintiffs themselves for their third of the cost of the seed, the modified agreement provides for their ultimate payment out of the proceeds and earnings of the mill.
    The effect of the agreements, therefore, was substantially that the parties other than Crocker should equally contribute to the purchase of the seed, and that they should, in any event, be reimbursed out of the proceeds of its manufacture.
    The profits of the manufacture of the seed into oil were to be received and held by the plaintiffs, defendants, and Lee, not in the proportion of their respective claims and demands against Crocker, but equally. They severally stood related to. the profits as they did to their contribution of money in the purchase and payment of the seed.
    The language of the agreement is : “ It is understood and agreed that all proceeds of seed furnished under this agreement are held for the benefit of the parties, other than Crocker, equally.”
    And again : “At the end of the year contemplated by this agreement, after paying the expenses of running the linseed oil mill, including necessary repairs and insurance, M. Crocker shall draw $6,000 for his personal expenses, which he is at liberty to draw at the rate of $500 per month during the year, the net balance of earnings shall be divided by said M. Crocker & Co. into three equal parts, one of which shall be paid over to each of the three parties hereto.”
    It was within the contemplation and' understanding of the parties that the losses incident to the business under the agreement should be borne in the same proportion. For it is provided that in case the seed imported under the order of Crocker should be wholly lost by fire or perils of the sea, the insurance should be paid to plaintiffs. Such arrangement was just, because, under the agreements of the parties, plaintiffs could not call upon the other parties to contribute to the purchase until the seed should have arrived in Boston. But if the insurance exceeded the costs and charges, the excess was to be paid to M. Crocker & Co. Such excess Crocker would doubtless receive and hold for the advantage of all the parties to the contract. But in the event that the sums received for insurance should not cover the advances and charges, plaintiffs were to be reimbursed by Crocker & Co. for the deficiency ; and should Crocker & Co. fail to pay, liability for the deficiency was to be shared equally by the contracting parties.
    The losses of the business, or its want of profitable prosecution, were, in effect, to be borne and sustained equally, at least by all the parties except Crocker. It was the net balance of the earnings which was to be paid over to the plaintiffs, defendants and Lee equally. So, if nothing was earned nothing could be received.
    It is reasonably clear that Crocker was interested pecuniarily in both profits and losses. He participated in the former to the extent of having his debts paid therefrom, and thus saving his property; and when the debts were paid in full he was entitled to a restoration of his property.
    So that in this ease we have, under the agreements, a joint contribution of capital in money, property, and services by the respective parties, a joint participation in the profits and in bearing the losses ; and these are incidents which characterize a partnership and indicate a copartnership relation between the contracting parties in the undertaking in question.
    But it is urged by the plaintiffs’ counsel that the element of agency, ever present in a partnership, is here wanting. But if the facts be closely considered, it will be seen that this is not so. Plaintiffs were agents for all the parties in ordering, receiving, and paying for the seed; they were such agents in effecting the insurance. Defendants were agents for the other parties in receiving and selling the cake, the product of the mill, and could be held by all the parties to a faithful application of the proceeds of the same, to the discharge of their proportion of the moneys paid by them on the purchase and delivery of the seed, and their accounts in the premises could have been reviewed by the others, as could plaintiffs’ account of the purchases and insurance.
    Crocker was agent, also, for the other parties in making his orders for seed, in conducting the manufacture of oil, in payment of moneys therefor, and in the appropriation of the earnings. It is true no specific duty appears to have been assigned to Lee, but he was under positive obligation to pay his proportion of the cost of the seed. He could doubtless, as a party in interest in the profits, act for the others with respect to any implied power necessarily arising under the agreements for the preservation of their joint interest.
    It is true that the intention of the parties should control; but such intention must be gathered from the contracts, through which the parties have spoken, and parties must be held to intend what their words and acts reasonably indicate.
    It must be conceded, therefore, that the relation of the parties for tbe time limited by the contracts in the prosecution of the undertaking therein indicated was a partnership one.
    In the case of Cox v. Hickman (8 House of Lords Cases, 312), an agreement between the debtor, his trustees and creditors, substantially for the continuance of the business, was held not to constitute a partnership. There was, however, a marked difference in opinion among the learned judges who considered that case. It was finally decided as above indicated. But the case now considered differs essentially from Cox v. Hickman. I do not find in that case any agreement on the part of the creditors for a joint contribution of moneys for the purchase of stock to be used; nor did the net profits in that case, as here, belong absolutely to the parties who contributed moneys for the purchase of stock. The profits or income belonged to the debtor.
    But the conclusion reached does not necessarily determine that Lee and Crocker are necessary parties to this action, or that this court has no jurisdiction to entertain this action, which is a suit at law for damages. It is a general rule that no action can be maintained at law by one partner against another which would involve an accounting of the copartnership affairs. An action to recover a balance struck and agreed upon would involve no accounting.
    As was said in the early case of Casey v. Brush (2 Caines, 293), assumpsit cannot be maintained by one partner against another for a balance due on a joint transaction, unless there be evidence of an express promise. (Townsend v. Goewey, 19 Wend., 424; Petrie v. Petrie, 7 Lans., 90.)
    In Lindley on Partnership (page 908), in his sixth rule on this subject, it is stated : “ With reference to this inquiry, it will be found useful to keep constantly in mind these questions, namely:
    “First. Is any matter of account involved in the dispute to which the action relates %

    “Second. Will the damages sought to be obtained belong, if obtained, to the firm ?
    “ Third. Will such damage have to be paid out of a fund to which the plaintiff must himself contribute ?
    “ If these three questions can be answered in the negative — that is, if the action can be properly brought and decided, wholly irrespective of the state of the accounts between the partners ; and if the damages sought will, when recovered, belong not to the firm, including the defendant in the action, but exclusively to the plaintiff ; and if he will not have to contribute to his own payment, then an action will lie, notwithstanding the parties to it are partners, and the matter relates to some partnership transaction.”
    And again (at page 911), the same author adds: “And generally an action may be brought for damages sustained by any breach of an express stipulation with his copartners, if it is so framed as to admit of an action by some, or one only, of the partners against the partner complained of, and the damages, when recovered, will not belong as much to himself as to the plaintiff.” (Brown v. Tapscott, 6 Meeson & Welsby, 119.)
    Where one person, even if he is a partner, expressly promises the other to pay for the articles furnished, or to furnish a given amount of capital, the latter may sue the former at law. (Collamer v. Foster, 26 Vt., 757.)
    And in Venning v. Leckie (13 East, 7), where the defendant agreed to take one-half of certain goods bought by plaintiffs on their joint account, and to furnish the plaintiffs with half the amount in time for the payment thereof, it was held that an action lay against the defendant for his moiety of the price, although an account might have to be taken between them as partners upon the subsequent disposal of their joint stock. (Scott v. Campbell, 30 Ala., 729.)
    The amount agreed to be invested in the partnership before it is formed may be sued for at law without disturbing the partnership. It is an agreement to launch the partnership. (Currier v. Webster, 45 N. H., 233 ; Pickering v. De Rochemont, id., 73 ; Wright v. Crapsey, 1 Penn., 112; Musier v. Trumpbour, 5 Wend., 274.)
    In the present case, under the contract of May 24, 1873, it was agreed, so far as the plaintiffs’ and defendants’ firms were concerned, that the seed to be manufactured should be imported, and, in the first instance, paid for by the plaintiffs; and to meet the cost of same, including all expenses and charges thereon, the plaintiffs, upon the arrival and entry of the ship bearing the seed at the custom-house, should receive one-third of same in a draft in sterling, drawn by Orocker & Co. upon the defendants, which drafts the defendants agreed to honor. This was an absolute undertaking on the defendants’ part with the plaintiffs.
    Now, in the event that the plaintiffs should import and pay for the seed under the agreement, the failure of the defendants to fulfill their part of the agreement, by honoring and accepting drafts for their one-third of its cost, would be a peculiar and special ground of damages to the plaintiffs, in which neither the partnership nor the members thereof, other than plaintiffs and defendants, could have any concern. The damages, when recovered, would have to be paid by defendants out of their own means, and would be received by the plaintiffs to their own separate use.
    It may be that the defendants’ breach of the agreement may have been the occasion of damage to the copartnership, but redress in that direction must be invoked in an appropriate proceeding.
    But this action involves an inquiry only with respect to the damages which the plaintiffs have solely sustained by the alleged breach of the agreement by the defendants. Suppose, for instance, that the defendants had accepted drafts for one-third of the cost of the seed, and had in the end failed to pay: the plaintiffs could, without doubt, have maintained an action against the defendants on their acceptance without joining the other parties.
    Nor is there any thing in the provisions of section 118 of the Code which makes it necessary to join Lee and Crocker, or either one of them, as defendants. That section provides that “ any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff, or who is a necessary party to a complete determination or settlement of the questions involved therein.” Neither of the persons above mentioned, for the reasons above stated, have any interest or claim in this controversy adverse to the plaintiffs in the action. They cannot be affected, however it may be decided, whether the plaintiffs shall or shall not recover damages for the defendants’ breach of his undertaking with the plaintiffs; and the question can be determined, as to the plaintiffs’ rights and the defendants’ liability, without the presence of either Lee or Crocker as a party. Nor is there any thing in section 122 of the Code which calls for the bringing in of the other parties to the agreement in this action. This particular controversy can be completely determined without prejudice to their' rights.

      The remaining question is, whether the defendants’ conduct, as disclosed in the complaint, amounts to.a breach of the contracts. This is, perhaps, a more serious question than either of the others.
    It is urged by the defendants’ counsel, that what is alleged in the complaint, on this part of the case, is, at most, a mere threat, on the defendants’ part, not to accept and honor the drafts of Crocker & Co., and that there was yet a place of repentance.
    The defendants’ conduct was more than a threat; it was a positive direction to Crocker & Co. not to receive the seed, and a refusal on their part to allow them to draw bills in compliance with the terms of the contracts, accompanied by a notification that the bills would not be honored and their acceptance would be refused.
    As already observed, the seed was to be furnished and paid for by the plaintiffs upon the order of Crocker & Co. It was agreed, on the part of the defendants, that plaintiffs should receive from Crocker & Co., upon the arrival of the ship at the custom-house, one-third in a draft sterling, drawn by Crocker & Co. upon defendants, which defendants should accept and honor.
    The agreement to accept and honor was an absolute engagement on the defendants’ part, -independent entirely of duties cast upon Crocker, save that he should order the seed. The complaint alleges that the seed was imported by order of Crocker & Co., and that plaintiffs-performed all the conditions of the contracts on their part. These allegations the demurrer admits.
    It was not necessary that the plaintiffs should allege that Crocker had performed all that was required of him, in regard to other duties cast upon him by the terms of the contracts. It was, however, requisite that it should appear that the seed was ordered, imported, and received in pursuance of the terms of the contracts, to entitle the plaintiffs to the indemnity thereby provided, so far as defendants were concerned.
    The complaint alleges that the defendants forbade Crocker & Co. to receive the seed or draw bills of exchange upon the defendants, in compliance with the terms of the contracts, for the payment of any of the shipments, excepting only 6,000 bags imported by the Winona, and notified Crocker & Co. that any bills so drawn would not be honored and would be refused acceptance; and that, in consequence, Crocker & Co. have been unable and have declined to pay for tbe seed.
    Tbe action of tbe defendants has, therefore, availed to prevent tbe drawing of tbe bills, and their declaration in advance that they would not, should be held to amount to a refusal to honor and accept. Under such circumstances a party should be held to mean precisely what he says.
    A positive declaration of their intention not to perform their contract was, under these facts, a breach of the contract. Upon the occurrence of the breach a cause of action existed at once in favor of the plaintiffs. (Hochster v. De La Tour, 2 Ellis & B., 678 ; Thompson v. Laing, 8 Bos., 482 ; Crist v. Armour, 34 Barb., 378, 387; Terwilliger v. Knapp, 2 E. D. Smith, 86.)
    It is not necessary to determine what damages the plaintiffs will be entitled to recover. That will depend upon the facts established on the trial. The breach of a valid contract imports some damages.
    So much for the first cause of action described in the complaint, ’and which has thus far been only considered.
    The second cause of action differs materially from the first,,in that it is alleged in the former that the seed was “ shipped ” on or about April 6, 1875, by the ship Winged- Hunter, and is “ now on voyage.” That is, the seed had not arrived, nor had the ship been entered at the custom-house when the action was commenced.
    I am of opinion that, as to this second cause, the action is prematurely brought. Until the merchandise had actually arrived at Boston, the plaintiffs were not entitled to the defendants’ acceptances. And it may well be that there was a locus penitentim for the defendants as to the seed afloat.
    The seed may never arrive ; it maybe destroyed by fire or perils of the sea; and such casualties were contemplated and provided for by the contracts. The plaintiffs were to recover the insurance moneys in case of loss by such causes, and, if insufficient to indemnify them, the deficiency was to be made up by the other parties to the agreement.
    As to the first cause of action, no valid ground of demurrer has been assigned, and there must be judgment for the plaintiffs thereon. As to the second cause of- action, the objection that no cause therefor is set up in the complaint is well taken, and there should be judgment for the defendants on the demurrer as to such second cause of action.

      Thomas H. Hubbard, for the plaintiffs.

      Charles M. Da Costa, for the defendants.
   Beady, J.:

The court below, having arrived at the conclusion that this action can be maintained in its present form, although the agreements between the defendants Wills and Lee constituted them copartners inter se, it is not deemed necessary to consider and determine at this stage of the controversy whether or not, on the facts set out in the complaint, that relation existed between them. The nature of the plaintiffs’ claim is such, as clearly demonstrated by Justice VAN Yoest in his opinion, that they may prosecute it without waiting until a final adjustment of partnership accounts. It is not necessary either, to consider further than he has done in his opinion, the necessity of making the other parties to the agreements parties to this action. Nor do we consider it necessary to scrutinize the question more than he has done, which originated, it wonld seem, with the case of Hochster v. De La Tour. The authorities in this State, cited by Justice YaN Yoest, have upheld the doctrine of that case, and although it has been criticised elsewhere, it is sufficiently indorsed to be controlling until the court of last resort shall reject or limit its application. The rule established by it is consonant with reason and common sense, and when we get such a result in the administration of the law, there is no particular necessity to wander into any field of speculation or inquiry for the purpose of disturbing it.

A man should be held to mean what he says. We adopt the reasoning and conclusion of Justice YaN Yoest on these subjects therefore. In reference to the second cause of action, we think he was in error. The principle which gives to the plaintiffs the right of action as to the first cause set up, cannot be withheld from the second. The positive affirmation of the defendants, that they would not comply with the agreement, has the same effect whether the goods were to arrive or at hand. The authorities cited by the defendants’ counsel, namely, Leigh v. Paterson (2 J. B. Moore, 588); Phillpotts v. Evans (5 M. & W., 475); Ripley v. McClure (4 Exch., 345), do not conflict with the case of Hochster v. De La Tour or with this view.

The right of the party to act on the notice not to perform is recognized by them.

In Frost v. Knight (L. R. [5 Exch.], 322; reversed in Exchequer Chambers, L. It. [7 Exch.], Ill), the right of the party to treat the repudiation of the contract as putting an end to it, is not only admitted but sustained by the authorities, and although the rights of thee defaulting party are in that case preserved by suggestions thereto until the time of performance has actually arrived, if the injured party delay commencing his action before that time, yet the rule suggested is a deduction merely. What would be obligatory on the party repudiating to overcome his act, is not defined. Doubtless, if the defendants changed their views on the subject of repudiation, and so advised the plaintiffs when the opportunity still existed for them to perform, that fact would be a perfect answer to the case alleged (Cases supra), but the burden of showing it rests upon them.. We are now, however, discussing the plaintiffs’ case on the complaint. When the refusal is positive, as it was in this case, the plaintiffs were under no obligation to seek the defendants again, to ascertain whether they repented and would perform, and the case is made out.

The plaintiffs had a right to act from the standpoint which the defendants had themselves created.

Men are presumed to intend the natural consequences of their acts, and when the defendants said, “ We won’t,” it meant that they “ would not,” and the consequences are theirs.

The error committed in the court below was therefore in sustaining the demurrer to the second cause of action. The appeal of the plaintiff is for these reasons sustained, and that of the defendants overruled.

Both appeals are consequently decided in favor of the plaintiffs, and the orders made affirmed, except so far as the one sustains demurrer to second cause of action in the complaint in the first action, and as to that' reversed and demurrer overruled, with ten dollars costs, and the disbursements of the appeal.

Davis, P. J., and Daotels, J., concurred.

Ordered accordingly.


source: Caselaw Access Project

license: Public Domain

text:
      In the Matter of the Petition of SARAH FRANCES SPELMAN, HENRY C. CHERRY and CYNTHIA BROWN HOYT, Petitioners, Respondents, v. EDMUND TERRY, Special Guardian, Appellant.

      Special guardian — owner of tax title to mf cunts' real estate — cannot dispose of Ms incumbrance upon estate, although it was acquired previous to such appointment.

    Where a person, had been appointed a special guardian to sell certain real estate belonging to infants, and, at the time, was himself the owner of a tax title thereto, and pending the proceedings under his appointment, sold the tax title and retained the money, claiming it as the proceeds of his individual personal property:

      Held, that having been appointed special guardian for the sale of the land while owner of, and prior to the sale of his tax title thereto, the being clothed with such office deprived him of the power of disposing of the tax title, and the sale of the same must be considered as one accruing to the infants’ advantage, and he must account to them therefor, but should be allowed his payments and expenses in reference to such tax title, with interest, up to the time of the adjustment of the balance, if any, due to the infants.
    Appeal from an order of the Special Term, ordering Edmund Terry, special guardian of Martha Celina Brown and Alice Brown, in discharge of his trust to pay over certain moneys.
    Freeman Brown, a colored man, died in 1853, possessed of a house and lot in Brooklyn, leaving two children, Martha Celina Brown and Alice Brown, infants. In the spring of 1857, Edmund Terry, an attorney, was appointed special guardian in proceedings to sell this their real estate. At the time of such appointment, Terry held a tax title to said premises, and after his appointment he made no sale in such proceedings, but during their pendency and on or about April 17, 1858, disposed of his tax title to one Hunt for $382.33. Both Martha Celina Brown and Alice Brown, the said infants, died subsequent to such sale, under the age of twenty-one .years, leaving the petitioners, Sarah Frances Spelman, Henry C. Cherry and Cynthia Brown Hoyt, their only heirs at law, next of kiñ, who, in June, 1875, made their petition in the original matter, setting forth that they were poor, and until within three years ignorant of the acts of Terry, and from want of means unable to take action upon the same and praying for a reference, and that Terry be compelled to render an account of bis proceedings as guardian for said infants, and for all moneys received by bim from tbe said property, and by bim as sucb guardian, and from tbe sale made by him, and to pay such moneys into court to be disposed of as it should deem proper.

      Henry E. Davies, for tbe appellant.

      John S. Davenport, for tbe respondents.
   Beady, J.:

On the 28th of March, 1851, the appellant became tbe owner of a lease or declaration' of sale, constituting a tax title affecting the premises known 'as 132 McKibben street, in tbe city of Brooklyn. He assigned it to one John Gr. Haight, on tbe 4th of June, 1851, and then commenced an action thereon against Freeman Brown, a colored man, who was the owner of the.fee. Brown died in 1853, leaving a widow and two infant children, the widow being their stepmother. He left a will by which he appointed Robert Brister his executor. On the 18th November, 1856, Brister paid to Mr. Terry $132 for the expenses of the action mentioned, and for the mesne profits, taking a receipt signed by Mr. Terry, as the attorney of Haight. In the receipt the suit is styled in ejectment, and the house and lot is said to have been sold for taxes, about ten years before the receipt was signed. Soon after the 1st of October, 1856, the precise date does not appear, Haight reassigned the lease or declaration of sale to Terry, and it may be that he was the owner of it when the money mentioned was paid by Brister to him. It may be because the reassignment was, as stated, soon after the 1st of October, 1856. In 1857, an application was made in the County Court of Brooklyn, for the sale of the infants’ estate, and Brister applied to Terry to conduct the proceedings therefor, and he consented to do so. He became also, on his application, the special guardian to make the sale, and filed the bond required by law. It will be perceived that when he undertook to conduct the proceedings for the sale of the infants’ real estate, and when he became special guardian, he was the owner of the lease or declaration of sale, upon which he had theretofore commenced an action against the father of the infants, ostensibly for Haight. He held, therefore, an interest adverse to the infants, and one which, if the sale contemplated by the proceedings mentioned had been accomplished, would have required from him a release, in order to remove an apparent cloud, unless, indeed, the lease or declaration of sale was void upon its face. He made no sale as special guardian, but on the 17th of April, 1858, and while be was still the attorney and special guardian as stated, he sold the lease or declaration of sale to one Joseph Hunt, and retained the money as his own, claiming it as the proceeds of his individual personal property. It further appears that the assignment of the lease in no way affected the estate, except so far as it deprived the heirs of the possession of it, because Hunt was declared to possess no title, and was ejected from the premises by the judgment of this court, rendered in Kings county. On these facts the learned justice, at Special Term, declared that Terry having prior to the sale of the land been appointed guardian, the sale must be considered one accruing to the infants’ advantage, and he was ordered to account. When the report - of the referee, appointed in the proceedings to take proof of the matters stated in the petition, was presented, a further order was made directing Terry to pay the money received on the sale from Hunt, with interest thereon, deducting therefrom the sum of twenty-three dollars and thirty-five cents, paid for redeeming the land from a tax burden, but making no deductions for commission. From that order this appeal was taken. The conduct of Mr. Terry was doubtless based upon the supposition that he could represent his wards and preserve his own interests which were adverse to theirs. The principle on which guardians are appointed is, that they shall have no interests adverse to the infants, and the same rule prevails in the selection of trustees. Mr. Terry should have revealed his possession of the lease to the court and taken the precaution to have elicited some order or opinion thereupon, to guide him in the acceptance or rejection of the contemplated trust, and thus to have protected himself from any liability, by virtue of his special character, when he undertook to perform an act decidedly in conflict with it and the principles on which it was established. There is no difference in principle between his attitude to the infants and that of a broker or agent who undertakes to serve two employers, or a trustee who accepts a trust, given by the court, on the assumption that he has no individual purpose to serve or protect, which is hostile to the whole estate of which he becomes the guardian and protector. Many of the cases on the subject of the duty of the trustee to the cestui que trust, and quite sufficient to illustrate the governing rule, will be found collected in Gardner v. Ogden (22 N. Y., 327). In the language of the lord chancellor, in Whichcote v. Lawrence, cited in 22 New York Reports (supra) : “ The real proposition, which is very plain in point of equity, and a principle of clear reasoning, is that he who undertakes to act for another in any matter, shall not in the same matter act for himself.” If Mr. Terry, when it became apparent that he could not sell the property as special guardian under the order, had asked to be discharged, he could have relieved himself from all obligation in that way, and could then have enjoyed his individual rights without error. This he did not do. The relation between attorney and client, and guardian and ward are watched with jealous care by courts of law, and it must be presumed that Mr. Terry knew of the rules prevailing in that respect.

It would not answer in the administration of justice to sanction the appointment of a special guardian with interests adverse to the infants, but when it is done, it must be attended with the surrender of such interests to the court on accepting the appointment. This is the necessary consequence of assuming to serve two masters. It may be that in cases whei-e such a rule is to be invoked, there may be circumstances destroying the responsibility involved, but there are none such in this case. The appellant’s tax title, which is not a muniment of the highest order, was one which should not have been suppressed by him, and the receipt of the money from Hunt should have been communicated to the court in some form. It was not. This court reposing great confidence in its officers, requires from them absolute good faith and cannot be censured if it is punctilious and exacting, in reference to the subject of its confidence or trust. It is said by the appellant, that he did not sell and could not do so as guardian, but this does not satisfy the conscience of the court. He was able to sell under his tax title, and it was on his own showing valueless. He could not well urge the sale under his guardianship, without consenting to abandon his tax title, and that he does not seem to have been disposed to do, and yet it was, in view of his trust, the only course for him to pursue except to ask to be relieved from bis guardianship by reason of bis conflicting interests. If bis requests were granted, bis tax title would then have been available. It is said, also, that no case can be found in which it has been held that a trustee by being clothed with office is deprived of the power of disposing of an incumbrance which he may have previously had against the estate. This may be so. Diligent search has not revealed any case, but that may arise from the fact that the courts have not been called upon to act in such a case. But the rules existing in reference to trustees, which are applicable to principal and agent, and guardian and ward (Law of Trusts and Trustees, Tiff. & Bull., 144) are comprehensive enough to embrace such a case. The general rule, said the court, stands upon our great moral obligation to refrain from placing ourselves in relations which ordinarily excite a conflict between self-interest and integrity. It restrains all agents, public and private. (Michaud v. Girod, 4 How. [U.S.], 503.) It is also said that no harm was done by the sale, inasmuch as the purchaser received no title, but it appears that he was in possession under it, and through the appellant’s instrumentality, the infants were deprived of their estate for a time. This illustrates the success of the self-interest, and the result of the conflict between the respective rights and duties, residing in the same person. It is impossible, therefore to view this case other than as one in which the guardian has rendered himself amenable to the authority of this court. Its supervisory power over the estates of infants, coupled with the fact that the appellant is an attorney and counselor of this court, leaves no room to doubt on that subject. The only real difficulty in the case is, to determine to what extent its power should be exercised. Whether to compel the payment of the whole sum received, with interest, or a part of it only. In other words, to do, equity. If it should appear that the estate or its owners were damaged by the sale to the extent of the money received and interest, it would be proper to require its payment, if not, it would not be. It is true that the appellant may be presumed to have sold his tax title as a grant in effect of the premises, but the price demanded precludes the probability of such a proposition. By the order appealed from he has been treated as the recipient of the sum paid him for the benefit of the infants, and it would appear without regard to his payments, in reference to the title, except one. Under all the circumstances, therefore, we think the order should be modified as follows:

The appellant should be allowed his payments and expenses in reference to the tax title, with interest thereon up to the time of the adjustment of the balance, if any, to the infants, and they should be allowed such balance after deducting the total of the appellant’s payments and necessaiy expenses and commissions from the amount received by him, and the interest thereon, provided the validity of the lease be not contested.

We think the appellant should also be allowed his disbursements of this appeal. If the respective counsel cannot agree as to the amount, then an order of reference will be made to Mr. Chetwood to take proof and settle the same, and to determine the validity of the lease given pursuant to the tax sale, if that be denied.

Ordered accordingly.

Davis, P. J., and DaNiels, J., concurred.

Order modified as in opinion.


author: Beady, J.: DaNIEls, J.,

text:
    FREDERICK ROLLWAGEN, Jr., LOUIS P. ROLLWAGEN and GEORGE D. ROLLWAGEN, Appellants, v. ALFRED POWELL, ALFRED S. PURDY and others, Respondents.

      Physicians’ fees —for examination, as to pregnancy of widow — quasi officers of court — • claim changed on estate, not affected by discontinuance of action— Brnro-gate — decree to pay claims charged on estate by Supreme Court — although not directly within his statutory powers — upheld.
    In an action in tie Supreme Court to set aside a will an order was made, with, the consent of all parties, appointing two physicians to inquire into the pregnancy of the widow of deceased, and directing that their compensation be allowed as a charge against the estate. After the physicians had discharged their duties, and pending a reference to ascertain the value thereof and before the report thereon, the action was discontinued without notice to the physicians, or the court being-advised of such outstanding proceedings. The referee’s report was subsequently filed awarding them $1,000, and an order made and entered awarding them such sum, with eighty dollars expenses of the reference, and directing that said sums be a lien and charge upon the estate. On petition to the surrogate an order was made by him, directing the administrator of the estate of the deceased to pay the amount of such order.

      Held, that the physicians in this case were quasi officers of the court, and it not being intended that they should he dependent upon the contingency of an action for their compensation, it was made a charge in anticipation upon the estate. That such order having beenmade with the consent of all parties, the physicians became quasi parties to the action in whose favor a decree had been entered, and the discontinuance as to them without notice of the proceedings therefor was a nullity.
    That their claim was not a debt or demand against the testator, or the executor or personal representative of the deceased; it was therefore questionable if the surrogate could decree the payment thereof; yet as the order of the surrogate was predicated on the decree of the Supreme Court, for the payment of services ordered by it, necessary in the administration of justice, which expenses should be paid out of the estate, and could, by the Supreme Court, have been directly ordered by it to be paid out of the funds in the hands of the administrator, it was proper, as matter of form, to reach the funds of the estate in the hands of the special administrator appointed by him, and would not be disturbed.
    Appeal from an order of .the surrogate of the city and county of New York, made on the Slst day of December, 1875, ordering Frederick Rollwagen, Jr., as receiver of the estate of Frederick Rollwagen, deceased, to pay Alfred Powell and Alfred S. Purdy $1,080.
    Frederick Rollwagen died in the city of New York on the 11th day of October, 1878.
    A paper was propounded to the surrogate of the city of New York, as the will of said Frederick Rollwagen, for probate.
    Upon contest by the next of kin and heirs at law, the pretended will was rejected by the surrogate, and his decision was affirmed at General Term of the Supreme Court on appeal, and also by the Court of Appeals, on appeal to that court.
    While the matter was pending before the surrogate, and still undetermined by him, Samuel S. Browning (who was a minor and an heir at law of said Frederick Rollwagen), by Malcolm Campbell, his guardian ad litem,, commenced in the Supreme Court a suit against Magdalena Rollwagen and others, to set aside the paper claimed to be a will, as a will of real estate, and to avoid the devises of real estate therein.
    After the commencement of this action, Magdalena Rollwagen, the widow of said Frederick, claimed to be pregnant, and by order made and entered in this action of Samuel S. Browning by Malcolm Oamjpbell, guardian ad litem, v. Magdalena Rollwagen and others, on or about the 14th day of November, 1873, Dr. Alfred Powell and Dr. Alfred S. Purdy were appointed physicians to attend upon and examine the said Magdalena Rollwagen, in connection with her family physician, and also to be present at the time and place of the birth of her child, if any; and it was further ordered that the compensation for said physicians be allowed as a charge against the estate of said deceased, Frederick Rollwagen.
    These physicians performed their services. No compensation was paid them, and upon their petition an order was made in said action on the 22d day of January, 1875, referring to William A. Duer, Esq., the question of the proper amount of compensation to be allowed them.
    On the 19th day of February, 1875, an order was obtained in said action (Browning, by guardian ad litem, v. Magdalena Rollwagen and others), in Supreme Court, to show cause why said action should not be discontinued. On the 3d day of March, 1875, a decision was rendered that said action be discontinued on payment of taxable costs to defendants Magdalena Rollwagen, Henry Her-mann and George Hermann. Said costs were paid, and on March 15, 1.875, an order was entered discontinuing said action, but said Powell and Purdy had no notice of such proceedings, nor was the court advised of the outstanding proceedings in reference to them.
    William A. Duer, referee, under the order of January 22d, 1875, made his report on the 20th day of March, 1875 (after the discontinuance of the action), finding, as a question of fact and conclusion of law, that each of said physicians, Drs. Powell and Purdy, recover from the estate of said deceased the sum of $500.
    The report was filed in the clerk’s office March twenty-seventh, noticed for confirmation August 25th, 1875, for the first Monday of September, 1875, and an order confirming said report, and allowing the award, with eighty dollars referee’s fees, was entered September 29th, 1875. By the terms of said order * * * “the said sum of $1,000 is allowed to them, said Powell and Purdy, for their services, together with eighty dollars for the fees of said referee on said reference, and the same hereby are adjudged to be a lien and charge upon the estate of said Frederick Rollwagen, deceased,” etc.

      On the 19th of October, 1875, Doctors Powell and Purdy made a petition to the surrogate of the city and county of New York, presented on the twenty-first of October, for an order directing the receiver of the estate of Frederick Rollwagen to pay them the sum of $1,080 out 'of the moneys collected from the real estate of deceased, and in their petition set forth, among other things, their petition to the Supreme Court, the order of reference therein, the making and filing of the referee's report, and the order of the Supreme Court thereon of September 29, 1875.
    On December 31, 1875, the surrogate made an order thereon, that said Frederick Rollwagen, Jr., the receiver, pay said Doctors Powell and Purdy the full amount of their claim, amounting “in the whole to the sum of $1,080.”
    From this order of the surrogate this appeal is taken.

      Henry L. OUnton, for the appellants.

      Lermoel Skidmore, for the respondents Powell and Purdy.
   Beady, J.:

The examination of the widow as to her condition having been necessary, and all the parties to the action having consented to an order therefoi’, Messrs. Powell and Purdy, who are physicians, were duly appointed to attend upon and examine her, in conjunction with her family physician. It was also provided by the order that their compensation should be allowed as a charge against the estate of Frederick Rollwagen, deceased. The respondents, Powell and Purdy, did what they were required to do, and in all respects complied with the order of the court appointing them. This having been done, they applied for compensation, and gave due notice of that proceeding to all the parties in the action, and to William A. Seaver, Esq., who was then the special administrator of the estate, and upon that application, by consent of all the parties to the action, the matter was referred to William A. Duer, Esq., to take the necessary proofs and report the same to the court with his opinion thereon. Due notice of the proceedings before him was given to all the parties in the action, the proofs were taken, and the report filed and confirmed after due notice to all the parties interested. It was also adjudged and decreed, by order of confirmation, that the sums named should be a lien and a charge upon the estate and paid out of it, the rents or income and profits thereof. All this was done before the 15th March, 1875, except the making and filing of the report of Mr. Duer, which bears date the 20th March, 1875. The respondents Powell and Purdy had, therefore, been selected, had discharged their duties, and their compensation, whatever it might be, had, by virtue of the order appointing them, become a charge upon the estate of Frederick Rollwagen. There was no appeal taken either from that or the subsequent order confirming the referee’s report, and the latter order, so far as it decreed the payment of the compensation out of the estate, was only a continuation of the first oi’der which declared that it should be a charge thereupon. On the 15th March, 1875, the action in which the orders were made was discontinued by order of the court, but no notice of such proceeding was given to the respondents Powell and Purdy, and it does not appear that the court was then advised of the outstanding claim of the respondents Powell and Purdy, or of the proceeding then pending to ascertain its effect. It is, on the contrary, quite evident that the matter was not revealed, and there is no'pretense that it was. The respondents Powell and Purdy having been selected, by order of this court, for an investigation in a proceeding which has for centuries formed a part of the jurisprudence of England (see Ex parte Aiscough, 2 P. Williams, 591; Ex parte Bellett, 7 Cox, 297; Coke Litt., 8 C.; also, article in Daily Register Jan. 29, 30, 31, 1874, where cases are collated), became quasi officers of the court, clothed with extraordinary powers, and invested -with duties of a high and delicate character, requiring vigilance, promptness, and ability. It was not intended that they should be dependent upon the contingency of an action for their compensation, and hence it was made a charge, in anticipation, upon the estate. This was done by consent of all the parties on which the order was founded. They became, therefore, quasi parties to the action in whose favor a decree had been entered, and the discontinuance as to them was therefore a nullity, inasmuch as they were not notified of the proceeding by which it was accomplished. It was determined in favor of the respondents Powell and Purdy that they should be paid the amount awarded, and they had a judgment therefor against the estate, its income and profits. The power of the surrogate to decree the payment of such a demand may be questionable, because it was not a debt or demand against the testator, or against the executor or personal representative, and it is over such demands only that the surrogate possesses the limited powers given by statute. Debts created by act of the testator or intestate, or his executor or administrator. (Redfield on Surrogates, pp. 21, 306, and cases cited.) The demand of the respondents Powell and Purdy was not a debt created by either of these persons, but a charge made by order of the court, which was, in effect, an appropriation of the estate pro tanto to its payment. The order of the surrogate was proper doubtless, as matter of form, to reach the funds of the estate in the hands of the special administrator appointed by him, although this court could have ordered its payment directly out of the funds in the hands of the special administrator. At all events no harm has heen done, predicated as it was of a decree of this court. The service ordered by this court, and to which it related, was necessary in the administration of justice, and one the expenses of which, like the appointment of a receiver or special administrator, should be paid out of the estate, because the result related to the whole and not to a portion of it, and was important. If the widow were, in other words, pregnant, and a child were born alive, it would increase the number of heirs and diminish the share of each. All were interested in the proceeding, therefore, and each should contribute to the expense. Assuming the respondents Powell and Purdy to be quasi officers of the court, and placing them upon the same plane with receivers, they should be paid out of the common fund, and such was the order in this case. Granting the position suggested, the discontinuance would not affect them, because the receiver could not be prejudiced by such a proceeding as to his allowances, whether the funds were in his hands or on deposit to the credit of the action.

Por these reasons the order appealed from should be affirmed, but without costs.

The questions considered are novel, and diligent search has failed to reveal adjudications in which they have been considered or passed upon. The counsel and the court have labored in vain, it would seem, on the subject.

Ordered as declared. Order to be settled by Beady, J.

Davis, P. J., concurred.

DaNIEls, J.,

concurred, except as to denial of costs to respondents.

Order affirmed, without costs.


text:
    THE PEOPLE ex rel. JOHN H. ELLIOTT, Respondent, v. THE NEW YORK COTTON EXCHANGE, Appellant.

      Corporation — Pow&t' to adjust controversies between members — Improper conduct — —appeal to court to determine right to membership is not — Repulsión of member.

    Wliere the charter of a corporation declared its purpose, among other things, to be “ to adjust controversies between its members and to establish just and equitable principles in the cotton trade,” and gave it power to make all proper and needful by-laws, not contrary to the Constitution and laws of the State of New York or of the United States; and “to admit new members and expel any member in such manner as may be provided by the by-laws; ” and the by-laws provided for expulsion for improper conduct, but did not state what should be considered as such:

      Reid, that there being in the charter or by-laws of the corporation, no express or implied authority to determine who was the owner of a right to a membership in dispute, a member was not guilty of improper conduct warranting his expulsion, for resorting to the courts to prevent the corporation from disposing of such a right claimed by him.
    That in refusing to submit to a report against his title, a member was not acting in antagonism to the corporate power of “ adjusting controversies between its members” or of “establishing just and equitable principles in the cotton trade.”
    That his right to appeal to another tribunal, if to be foreclosed, should be so by explicit contract or agreement (not shown in this case), not by mere construction of language employed in a by-law, or by implication from something contained in it; for forfeitures depend upon clear and explicit language, and are even then looked upon with disfavor, and the presumption should be against the power to expel, except for the causes recognized in the adjudged cases.
    Appeal from an order made at Special Term, sustaining a demurrer to a return to a writ of mandamus requiring the defendant, its board of officers and managers to rescind an order for the expulsion of tbe relator and restore him to his membership, or show cause, etc.
    The facts set out in the return were briefly as follows : In 1873 the relator was a member of the Cotton Exchange. John H. Valentine, also a member, was in default upon a contract, by reason of which default the by-laws provided a proceeding to dispose of his right of membership to make good the amount due upon his contracts. While the proceeding was pending, the relator appeared before the appropriate committee having the matter in charge, and made a claim that he owned the right of membership of said John H. V alen tine, by virtue of a bill of sale. The board of managers thereupon referred the claim of the relator to such right of membership to its supervisory committee, to take evidence upon oath in relation to the claim, and report thereon. Notice of the reference was given to the relator, and he appeared and was personally examined under oath, in relation to his claim. He also called the said.John H. Valentine, and caused him to be examined as a witness, to sustain his claim.
    The committee took the testimony and reported thereon to the board of managers, who declared the transfer of the membership to the relator void, and gave him notice thereof. It then continued its proceedings against the said John H. Valentine, and directed a sale of his right of membership. The relator thereupon brought an action in the Supreme Court to restrain the Cotton Exchange from selling the said right of membership, on the ground that it was his, and obtained an injunction restraining the sale. All the proceedings of the Cotton Exchange against the relator to expel him were had in pursuance of its charter, by-laws, rules and regulations. He put in an answer to the complaint made against him, had notice of the meeting of the committee in reference to the complaint, appeared before it, and admitted before it that he knew the right of membership of John H. Valentine was advertised pursuant to the resolution of the board of managers, and that the proceedings leading to the advertisement for sale, were done and had in pursuance of the provisions of the by-laws; that he knew one of the purposes of the Exchange, was to settle within itself controversies between members, and that each member bound himself on sig-nina’ the constitution to abide by all rules, by-laws and regulations of the defendant. The committee thereupon made a report, on receiving which relator was expelled by a vote of fifteen ayes to three nays.

      WilUam Traoy and William M. Fvarts, for the appellant.

      John A. Foster, for the relator.
   Beady, J.:

John H. Yalentine, a member of the appellant’s corporation, was expelled, and it was claimed as a result of that proceeding that his right of membership was forfeited, and became the subject of sale by them.

The relator asserted his ownership of that right, and the committee charged with the investigation thereof decided adversely to him.

He then commenced an action against the appellants, and obtained an injunction restraining them from selling the right. For this act he was arraigned and expelled. The committee reported on the subject, among other things, as follows:

“That John H. Elliott claims to be entitled to said seat through a bill of sale thereof, from said John H. Yalentine; that during the progress of the proceedings, which culminated in the advertisement of the seat of said John H. Yalentine for sale, the said John H. Elliott was fully and perfectly cognizant thereof; that prior to the report of your committee, which proposed the resolution directing the sale of said seat, the said John H. Elliott had an opportunity afforded him to prove his claim to said seat, which he. essayed to do, but he failed to so establish to the satisfaction of your committee.
“ That the injunction which John H. Elliott caused to be served upon the Exchange, had for its purpose to prevent a sale of the seat of John H. Yalentine, which sale had been directed by a resolution of your board, based upon proceedings to that end, done and had in strict conformity with the provisions of your by-laws.

We therefore report that, in our opinion, John H. Elliott has been guilty of improper conduct, as alleged in the complaint against him, and that in causing the aforesaid injunction to be served on the Exchange, he has acted in violation of the by-laws and charter of your Exchange, and of the obligations which he assumed when he signed the charter and by-laws, and in contravention of one of the main purposes for which this Exchange was established, ‘ to adjust controversies between its members.’

“We therefore offer the following resolution:

“Resol/oed, That John H. Elliott be, and he hereby is, expelled from membership in the New York Cotton Exchange.”

The charter of the appellants gives them power to make all proper and needful by-laws not contrary to the Constitution and laws of the State of New York or of the United States, and to expel any member in such manner as may be provided by the bylaws. The by-laws, on the subject of expulsion, contain a section which is as follows :

Section 1. If complaint of improper conduct is made against a member of the Exchange, it must be in writing, and addressed to the supervisory committee, specifying the particular act complained of, together with all the documentary evidence bearing on the case that the complainant can furnish, together with a list of the witnesses he desires to be examined on said complaint.”

And it is under this by-law only that the power of expulsion is claimed for the cause alleged. The question to be disposed of will be considered on the assumption that the by-law is authorized and in effect.

It will be perceived that it is not stated specifically, in any one or more respects in this action, what would or would not be regarded as improper conduct, and the field is open, therefore, to the consideration of such acts arid to such construction upon them, as the managers present and voting at the meeting and constituting two-thirds may think proper to investigate or adopt.

There is neither in the charter of the appellants, nor in the bylaws, however, any express authority to consider and determine who is the owner of a right of membership, which is in dispute. Whatever may be their power over matters directly connected with the business which prompted their organization, or with the adjustment of controversies between its members or the establishment of just and equitable principles in the cotton trade, or acquired by voluntary submission to them or their committees under the charter and by-laws, there is no express authority conferred upon them to pass upon the title to a seat among them; nor is there any thing in the by-laws to which our attention has been called authorizing it incidentally or by implication.

They could not, therefore, usurp the power absolutely, to pass upon the relator’s claim, and when he resorted to the courts to prevent them from disposing of his property, he was not only not guilty of improper conduct, but asserting a right secured to him by the fundamental law of the land. It may be that a member would be bound by the decision of the appellants in specified cases, which being properly the subject of a reasonable by-law, duly authorized, would be recognized as lawful within the principles governing them. (2 Kent’s Com., 296; Angell & Ames Corp., § 247, and cases cited; People ex rel. Thatcher v. The N. Y. Coml. Assn., 18 Abb. Pr., 271.) The appellant, however, on such subjects, can take nothing by implication. Forfeitures depend upon clear and explicit language, and are even then looked upon with disfavor. Expulsions from a corporation should not be accomplished by hurried and incomplete investigation.

A member of a corporation may so hedge himself in by agreement as to yield the protection which one seeks in the ordinary affairs of life, and enlarge the authority that may be used against him, but when it is said he has done so, it should appear beyond all reasonable doubt.

The presumption should be against the power to expel except for the'causes recognized by the adjudged cases (White v. Brownell, 4 Abbott’s Pr. [N. S.], 192), because it is in the nature of a forfeiture, which the law does not favor. The right to appeal to another tribunal, if to be foreclosed, should be so by explicit contract or agreement, not by mere construction of language employed in a by-law, or by implication from something contained in it; when this power is assumed, and upon either of these elements, and there is any doubt of its existence, it should be rejected in the administration of the law.

This seems to be just doctrine. The power should be unquestionable. When the relator refused to submit to the report against his title, he was not acting in antagonism to the power of the appellant of “ adjusting controversies between its members,” or of “ establishing just and equitable principles in tlie cotton trade,” nor was he rebelling against the judgment pronounced against Valentine, for which express provision was made in the by-laws.

He had no controversy with any member or officer. He said simply, you cannot sell the membership of Valentine because it belongs to me, and I do not admit your authority to dispose of my rights in regard to it. In this he was correct, and the appellant in error. In the case of the People ex rel. Thatcher v. The N. Y. Coml. Assn. (18 Abb. Pr., 271), expulsion was authorized if the member was guilty of willfully violating the charter or by-laws of the association, or guilty of fraudulent breach of contract, or other gross misconduct, and the charge was of obtaining goods by false pretenses. It bears no analogy to the case on hand. Here there is no provision in the by-laws for the trial of the title to a seat, and there is, therefore, in refusing to submit to the report, no violation of the by-laws. There is here no charge either involving moral turpitude or of fraudulent conduct of any kind.

The act complained of is one confessedly correct, unless in violation of some compact by which, the right to do it was, surrendered, which has not been shown as already suggested. The order made at Special Term was for these reasons proper. The representatives of the appellauts having the matter in charge have acted, no doubt, upon convictions conscientiously entertained both as to their power and the injurious conduct of the relator, but the best of mankind may err in judgment.

Order affirmed, with ten dollars costs, and the disbursements of this appeal.

Davis, P. J., and Daotels, J., concurred in the result.

Order affirmed, with ten dollars costs and disbursements.


author: Beady, J. :

text:
    LOUISA F. CALVO, Appellant, v. THOMAS A. DAVIES, Impleaded with others, Respondent.

      Principal and surety — •Mortgage — Agreement to extend between holder and grantee covenanting to assume, made without consent of grantor {mortgagor) — discharges mortgagor.

    Where a party by deed assumes tbe payment of a mortgage executed by his grantor, he becomes the principal debtor, and the relation created between him and his grantor is that of principal and surety. Such deed is notice to a subse- . quent holder of the mortgage of this relation, and an extension of the time of payment by such holder, even with the express understanding that the bond and mortgage shall remain, in every other respect, unaffected by said agreement, when made without the consent of such grantor, discharges him from all liability to the holder of the mortgage.
    The case of Perkins v. Bguvres (1 TsT. T. S. 0., 620), so far as it conflicts with the above, overruled.
    Appeal from an order made at Special Term, sustaining a demurrer to a complaint, on the ground that it did not state facts sufficient to constitute a cause of action.
    The action was to foreclose a mortgage on real property, executed March 8, 1869, by tbe defendant Thomas A. Davies to one Augustus F. Smith for $9,750, made payable March 8, 1872, in accordance with the terms and conditions of a bond accompanying it made by said Davies. The mortgage is now held by tbe plaintiff by virtue of a certain assignment of tbe same.
    Tbe defendant Thomas A. Davies and his wife, Maria Davies, conveyed the mortgaged premises to the defendant Charles P. Leslie, by deed, dated November. 29, 1871, subject to the lien of the mortgage ; and tbe said Charles P. Leslie by the terms of the deed covenanted and assumed to pay tbe said mortgage.
    "While Leslie was the owner of the mortgaged premises, the plaintiff, by agreement under seal, dated November 21, 1872, extended tbe time of the payment of the bond and mortgage until October 15, 1871, providing therein that it was with the express understanding that the said bond and mortgage should remain, in every other respect, unaffected by such agreement.
    Tbe defendant Davies, the original bondsman and mortgagor, was not a party to said agreement, and such extension of time was made without bis knowledge or consent.

      The plaintiff, in her action to foreclose the mortgage, sought to recover judgment against the defendant Thomas A. Davies upon his bond for any deficiency resulting from the sale of the mortgaged premises. To the complaint the defendant Davies interposed a demurrer, that it did not state facts sufficient to constitute a cause of action.

      F. R. Ooudert, for the appellant.

      Henry E. dé Julien T. Davies, for the respondent.
   Beady, J. :

The views expressed by Justice VAN BeuNT are correct. The defendant Leslie having assumed the payment of the mortgage executed by the defendant Davies, became a principal debtor, and the relation created between him and his grantor, Davies, was that of principal and surety. The record of the deed of Davies to Leslie was notice of this relation to the plaintiff herein, who holds the mortgage by assignment. It follows that the plaintiff, having extended the time of payment for Leslie, discharged Davies, the principal. (Lawrence v. Fox, 25 N. Y., 268 ; Burr v. Beers, 24 id., 178; Billington v. Wagoner, 33 id., 31, and cases cited; Smith v. Townsend, 25 id., 479; Garnsey v. Rogers, 47 id., 233.) The case of Perkins v. Squires (1 N. Y. S. C., 620), so far as it conflicts with this view, is overruled. The decision in that case, though in seeming collision with the conclusion herein expressed, in fact rests upon the proposition that it did not appear by the answer whether the extended period had expired or not. The surety cannot be affected by any reservation contained in the agreement extending the time, unless he consented to it. The rule is absolute, that there shall be no transaction with the principal debtor without acquainting the person who has a part interest in it. The proposition that the creditor can enlarge the time of payment and protect himself by reserving his rights against the surety in the agreement for the extension, cannot be sustained on principle.

Such a rule would abrogate the correlative one in favor of the surety, that his contract cannot be enlarged without his consent. It would be, if the creditor could make a private agreement with the principal debtor, and legally extend the time of payment by a reservation, without notice to the surety.

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

Davis, P. J., and Daniels, J., concurred.

Order affirmed, with ten dollars costs and disbursements.


text:
    THE BOWERY NATIONAL BANK, Appellant, v. THE MAYOR, Etc., OF THE CITY OF NEW YORK, Respondents.

      Injunction restraining city from, confirming an assessment — no defense against eon-Vractor entitled to his pay on the confirmation, unless diligence is shown to remove it.

    Where a contract with the City of New York for paving a street provided that the city would pay in cash, on the confirmation of the assessment to he laid for said work, the whole of the money accruing to the other party under the agreement; and no assessment had ever keen laid for the work, the city and the board of assessors having been enjoined by the court in an action by the property owners from confirming the assessment :

      Reid,, in an action to recover the balance due on the contract, that when the defendants were stopped by process from obtaining the funds, all they could demand was a reasonable time to remove the impediment, and the failure to do any thing to remove the injunction rendered them liable for the plaintiff’s claim.
    That it was error for the judge to leave it to the jury to find the fact, whether or not the assessment had not been confirmed because of any collusion, fraud, negligence or other improper act on the part of the defendants, for the facts being undisputed, the question of reasonable diligence was one for the court, and especially where its subject-matter, namely, a law-suit, was one of which the court could take judicial cognizance ; and the plaintiff was entitled to its request that the jury be instructed to render a verdict in its favor.
    Appeal by the plaintiff from a judgment in favor of the defendants, entered upon the verdict of a jury.

      George W. Wingate, for the appellant.

      A. J. Requier, for the respondents.
   Beady, J.:

This is the third trial of this action. On the first trial the plaintiff had judgment which was reversed by the General Term.

A new trial was then had, at which the complaint was dismissed, and the judgment thereupon was affirmed by the General Term. Their decision thereto was reversed by the Court of Appeals, and a third trial was had in which the defendant obtained a verdict, from which this appeal is taken. On the second trial it appeared that the defendants contracted with the Hamar Wood Preserved Pavement Company, of which the plaintiffs are the assignees, to regulate and pave One Hundred and Twenty-eighth street, from Second to Sixth avenue, for $65,588.40, of which they have paid $46,102.28, leaving due $19,758.12 with interest; that the usual certificate that there was no fraud in the contract was given by the commissioners under chapter 580, Laws of 1872, which was rendered necessary by reason of some irregularities in the formation of the contract. That by the contract it was stipulated, that the contractor should not be entitled to payment until the completion of the work was certified by the inspectors,'the clause relating thereto being as follows: “And by the water purveyor or other officer designated by the said commissioner of public works, whereupon the parties of the first part will pay, and hereby bind themselves and their successors to pay to the said party of the second part in cash, on the confirmation of the assessment to be laid for said work, the whole of the moneys accruing to him under this agreement.”

That the work was duly performed, and its completion certified by the inspector, December 13, 1870. That the water purveyor caused the work to be entered on his books as completed, December 10, 1870. It also appeared that on January 19,1871, a preliminary injunction was obtained by property owners, returnable January 25, 1871, restraining the defendants “from laving or confirming any assessment for paving said street, and from doing any act or thing toward making or confirming said assessment, or making the same a lien.”

That a demand was subsequently made upon the water purveyor for the certificate, who refused, stating “ that he was prevented from giving it by this injunction obtained by the property owners.”

That the assessment for this work was advertised and forwarded to the boards of revision and correction, September 11, 1871, and the matter was referred by them to the Comptroller to assess the expenses upon the property benefited, as required by chapter 580, Laws of 1872, section 5.

In addition to these facts the plaintiff proved on this trial as follows: That the papers in the injunction suit were served January 24, 1871, and were returnable January twenty-fifth. That the preliminary motion was argued March 20, 1871, but there was no record in the corporation counsel’s office of its having been decided.

That nothing further was done by defendants until October 24, 1872, when the contract having become valid by the action of the contract commissioners, an order was obtained to show cause, on October 28,1872, why a supplemental answer should not be served in that case, setting up the certificate aforesaid given under the act of 1872 (swpra), and the injunction be modified so as to allow the laying of the assessment. That this motion was not regularly argued, but permission was granted to do what was moved, for,” and such a supplemental answer was served November 23, 1872. That prior to this the injunction suit had been placed in the hands of special counsel, but nothing further was ever done to vacate the injunction or dispose of the issues, it never having been noticed for trial or placed upon the calendar, up to March 15, 1876.

That the case belonged upon the equity calendar of the Common Pleas, which was made up monthly and disposed of every term. That the corporation counsel, his two assistants and managing clerk knew nothing further about the injunction suit. That on September 24, 1875, the corporation counsel was notified that as the injunction was used as a defense to the plaintiff’s claim herein, they insisted it should be disposed of at once, and that he still took no action in regard to it.

.It also appeared that Mr. Strahan, the special counsel of the defendants in this case, refused to give his reasons why the case was not tried, because the defendant objected, and his refusal was sustained by the court.

Plaintiff also proved that it was customary among lawyers to notice a ease, and place it upon the calendar as soon as the answer was served. And that if not noticed, or put upon the calendar by the plaintiff, it could be dismissed for want of prosecution. The defendants offered no evidence except to prove that the pavement did not last, which was excluded.

It also appears that the court refused to direct a verdict for the plaintiff to wbicb an exception was taken, and left the matter to the jury to be decided as to whether or not these defendants had, prior to the commencement of this action, failed to defend the action in the Common Pleas with sufficient vigor, or had been restrained by an injunction which they could not prevent. This action was commenced March 17, 1873. The action of Tooker, in which the preliminary injunction was obtained, was commenced January 24, 1871, more than two years before this action was brought. February twenty-third, the answer was served. March eighteenth, the action was noticed for trial by the plaintiff. March twentieth, the motion for the injunction was argued. On the 24th October, 1872, the order was obtained by the defendants to show cause why the assessment should not be laid, and a supplemental answer served. November twenty-third, the supplemental answer was served, but nothing further was done. The disposition made of this last order does not precisely appear, but it was admitted by Mr. Strahan, the defendants’ counsel, that the defendants obtained what they moved for. This must mean that the motion was in all respects successful. If it were not, then the defendants did not obtain all they moved for. This motion it must also be said was predicated of the validity of the plaintiff’s claim, the payment of which was only deferred on account of the assessment not having been finished, and the funds not being in hands, therefore, to pay it. It was shown, as appears from the facts narrated, that it was within the province of the defendants to have ended the action commenced against them by Tooker, by the exercise of ordinary diligence, because it was equitable in chai’acter and such cases were disposed of each month in the court in which it was commenced.

The defendants had November, December, January, February and until the 17th of March, 1873, to remove the injunction, if it had not already been modified or dissolved, or to initiate some proceeding thereto. The view thus stated as to diligence, is independent of the effect of the motion of October twenty-fourth (sujpra), to obtain such modification of the injunction as to allow the assessment to be laid, and which seems to have been granted.

The delay.of the defendants, thus shown, not only prevented the assessment but it prevented the plaintiffs from obtaining the certificate of the water purveyor, who refused to give it, only because he was restrained by injunction, not for any other reason for aught that appears in this case. This action was tried for the third time on the 15th of March, 1876, and it must be borne in mind that the action of Tooker was then in statu quo, nothing further having been done in it. It must also be borne in mind that the plaintiffs were not a party to it, and could not control it in any way. It should not be forgotten either, that the defendants knew of the plaintiffs’ demand, because it was mentioned in the papers prepared on the 17th of September, 1872, and used on the 24th of October, 1872, and acknowledged to be a valid claim against them.

When the appeal in this case in the Court of Appeals was decided, it was substantially held, in reference to the certificate of the water purveyor, that the plaintiffs had done all they were required to do, and that the refusal to give it under the circumstances was unreasonable. The question involved on this appeal is, whether the laches of the defendants, in regard to the Tooker suit, does not deprive them of the defense, that the assessment had not been laid which was contemplated by the agreement between the plaintiffs’ assignor and them.

The learned justice presiding on the trial presented it as a question of fact to the jury on this trial, stating to them, that if, in fact, the injunction remained in full force at the time of the commencement of this action, notwithstanding the exercise of proper diligence and effort on their part to obtain its removal, they were not liable. The learned justice also suggested that the question arose as to why the assessment had not been confirmed, whether it was because of any collusion, fraud, negligence or other improper act on the part of the corporation.

The testimony on this subject, however, was all one way. There was no conflict, no doubt, and the finding of the jury that reasonable diligence characterized the defendants’ management of the Tooker suit was unwarranted by the evidence. But it must be said further, that the question of reasonable diligence is one for the court and not for the jury where the facts are undisputed, and especially where its subject-matter, namely, a law-suit, is one of which the court can take judicial cognizance. (Alexander v. Parsons, 3 Lans., 333, 337; Wakeman v. Gowdy, 10 Bos., 208, 213; Bascomb v. Buffalo and State L. R., 27 Barb., 221; Craig v. Parkins, 40 N. Y., 181; Moakley v. Riggs, 19 Johns., 72.) Where no time of performance is specified in a contract, the act to be done must be performed within a reasonable time; and what is a reasonable time is a question of law. (Parsons on Contracts, 2 vol., 173, and cases cited; Ohitty on Contracts, 625, and eases cited.) When the defendants were stopped by process from obtaining the funds, all they could demand was a reasonable time to remove the impediment. Their duty in that respect was extended only for such a period. The work having been done for the city, and properly done, and the amount charged for it having been earned, it was incumbent upon the city, in good faith to the laborer, that the impediment to its payment should be removed at an early day. It rested entirely with them. Several months elapsed after the contract was legalized before the action was commenced, and the inactivity principle was continued down to the time of this trial. The failure to do any thing since October, 1872, legitimately bears upon the question of want of diligence. It shows that the Tooker suit was either lost to view or left as a barrier to the claim herein urged. This may have arisen from mere oversight, but it matters not what was the cause ; the fact is, that the case of Tooker was not conducted with reasonable diligence. The plaintiffs were, therefore, entitled to^the request that the jury be instructed to render a verdict in their favor, which was refused, and the judgment herein should therefore be reversed.

There are no questions presented on behalf of the defendants which affect this view, and it must he adopted.

Ordered accordingly, with costs to abide event.

Davis, P. J., and Daitiels, J., concurred.

Judgment reversed, costs to abide event.