author: Brady, P. J. :

text:
    FREDERICK C. KNOWLES, Respondent, v. WALTER B. DUFFY, Appellant.

      Might of a corporation to exchange all of its stock for property transferred to it — what must he shown to establish the liability of a stockholder, in such case, to a creditor of the company — the corporation may purchase property owned by one of the board of trustees.

    On December 24, 1883, the Morgan Sugar Skimmer Company was organized. On the same day the defendant, who was elected its president, purchased, on behalf of the corporation, of S. J. Lawrence, one of the trustees, certain patents covering an invention described as the Morgan Automatic Sugar Skimmer, and issued and delivered to him in payment therefor a certificate for the entire capital stock of the company, 4,000 shares. Immediately after the purchase the said trustee surrendered this certificate, and by his directions 2,920 shares of the stock so surrendered were issued and apportioned among his co-trustees, no one of whom subscribed or paid any money therefor, only eighty shares of the residue of the stock being taken by Lawrence and a brother, who had an ' interest in the patents."
    The referee found that these patents were valuable, and were necessary for the business of the corporation, but that they were purchased by the defendant and his associate trustees without making any estimate of their value, and that they were not worth $400,000.
    In an action brought by a judgment creditor of the company against the defendant, as a stockholder, to enforce payment of the judgment against him on the ground that the capital stock had not been fully paid in:

      Held, that the foregoing facts did not show that the purchase was made in bad faith and with an intent to evade the statute, as was necessary in order to charge the defendant with liability for the debts of the company under .the provisions of the act of 1848, as amended by chapter 333 of 1853.

      That the purchase of the property by the trustees from one of their number for the alleged benefit of the corporation, and the payment therefor of the company’s entire capital stock, was not a fraud upon the stockholders and creditors of the company.
    Appeal from a judgment in favor of the plaintiff, entered on tbe report of a referee.

      Smith dk Hulett, for the appellant.

      Valentine Marsh, for the respondent.
   Brady, P. J. :

This action was brought to enforce a supposed liability of the defendant as a stockholder in a corporation called the Morgan Sugar Skimmer Company, organized under the general manufacturing act of 1848 and the acts amendatory thereof, and on the ground that the capital stock had not all been paid in and a certificate filed, as required by sections 10 and 11 of that act; the plaintiff being a creditor of the company who had recovered judgment against it, and had issued execution thereon, which was returned unsatisfied in whole. The defendant admitted the organization of the company, denied that he was one of the incorporators, and alleged that his stock was issued in payment for property purchased, and was fully paid stock and not liable to further calls. The record presents the pleadings, the findings of fact of the referee, his conclusions of law ' and the exception taken to his report.

It appears that on the day of the organization of the company, namely, the 24th of December, 1883, the defendant was elected its president, and that on the same day it purchased of Stephen J. Lawrence, one of the trustees, certain patents covering an invention described as the Morgan Automatic Sugar Skimmer, and issued and delivered to Lawrence in payment therefor a certificate for 4 000 shares of the company’s stock, which was its entire capital stock. It also appears that these patents were valuable, and were necessary for the business of the corporation ; but the referee finds that the defendant and his associate trustees purchased them without making any estimate of their value, and that they were not worth $400,000. It also appears that Lawrence, immediately after the purchase, surrendered this certificate, and by his directions 2,920 shares of the stock so surrendered were reissued and apportioned among Ms co-trustees, no one of whom subscribed or paid any money for the stock so received, and that of the residue only eighty shares were taken by Lawrence and his brother, who had an interest in the patents.

It is contended, on behalf of the appellant, that under the Laws of 1848, to which reference has already been made, as amended by chapter 333 of the Laws of 1853, the omission to file a certificate does not create any liability on the part of a stockholder holding stock issued for property, where there is no fraud in the valuation; in other words, that to charge the holder of stock so issued, individually, for the debts of the company, it is not enough to prove that the property was purchased and paid for at an over-valuation, but it must be shown that the purchase at the price agreed upon was in had faitli and to evade the statute. And he insists that two facts must be established in order to establish the responsibility of the stockholder, namely: First, that the stock issued exceeded in amount the value of the property in exchange for which it was issued; and, second, that the trustees deliberately, and with a knowledge of the real value of the property, over-valued it and paid in stock for it an amount which they knew was in excess of its actual value.

In Boynton et al. v. Andrews (63 N. Y., 93) it was held that in actions to enforce the liability provided by the sections of the law of 1848, to which reference has already been made, as amended by the act of 1853, already alluded to, the question is whether the purchase was made in good faith or at a high valuation with a fraudulent intent to evade the provisions of the statute. And-further, that an honest over-valuation would not of itself subject the owner of the stock to personal liability. It is true the court said that where it appeared that property, the value of which was well known or understood or capable of being ascertained, was purchased at a price that was beyond its real value, a strong presumption of fraud was raised, - and unless rebutted by evidence fully explaining the apparent bad faith, the transaction was fraudulent in law and no. question of fact was presented for the jury. And in Douglass v. Ireland (73 N. Y., 100) it was held that it was not enough, in cases of this kind, to charge the holder of stock to prove that the property was purchased at an over-valuation, through a mere mistake or error in judgment on the part of the trustees, but that it must be shown that the purchase was in bad faith and to evade the statute. It is true it 'was also held in that case, as contended for by the appellant, that it was necessary, in order to establish a legal fraud which’ would take the stock issued out of the protection of the act of 1853, to prove that the stock exceeded in amount the value of the property in exchange for which it was issued, and that the trustees so issued it deliberately and with knowledge of the real value of the property.

The same doctrine seems to have been declared in the case of Drexel v. The Lake Superior Iron Company (90 N. Y., 87), in which it was held that the question was properly submitted to the jury as to whether the purchase and issue of the stock for the property was in good faith or simply a scheme to evade the statute. (See, also, Brown v. Smith, 13 Hun, 408.) The finding of the referee, that these patents were purchased without making any estimate of their value and that they were not worth the sum of $400,000, is not sufficient to meet the exigencies of the legal rule established by the adjudications cited.

The referee found that the patents were valuable and were necessary for the business of the corporation. There is no finding of any fact of which fraud can be predicted or of any attempt to evade the operation of the statute — nothing, indeed, to show that it was not made in good faith. The position contended for on behalf of the respondent, namely, that it was a fraud upon the stockholders and creditors of the company for its trustees to purchase of one of their number property for the alleged benefit of the corporation) and pay therefor the company’s entire capital stock, cannot be sustained.

In all the cases cited in the Court of Appeals it appears that the purchase was made from one or more trustees, for which the capital stock was given in whole or in part, and although the question as to the validity of the purchase from the trustee does not appear to have been expressly presented, it is not to be supposed that if the point were valuable it would not have been presented in these cases. The statute contemplates the purchase of mines and manufactures or other- property necessary for the business. This would seem to indicate that the purchase might be made of any person, provided, as also contemplated by the rule of law referred to, that the purchase was Iona fide, for a proper consideration and without any attempt to evade the statute. At all events, these cases presenting this feature, to which no exception was taken, this court would not feel disposed in the first instance to declare that such a purchase might, not be made.

For these reasons it is thought the judgment should be reversed, and a new trial ordered, with costs to abide the event.

Daniels, J., concurred.

Judgment reversed, with new trial ordered, with costs to abide event.


source: Caselaw Access Project

author: Brady, P. J.:

license: Public Domain

text:
    MARY BOWMAN, Respondent, v. THOMAS BOWE, Appellant, Impleaded, etc.

      Practice — revival of an order of arrest, after it has leen discha/rged ly a dismissal of the complaint.

    On May 3,1880, the complaint in this action was dismissed upon the trial thereof, and all the defendants who had been arrested under an order of arrest, granted on April 13, 1880, were discharged from custody. The judgment was reversed by the General Term and a new trial granted, upon which the plaintiff recovered a judgment against all the defendants except one. Thereafter, upon the-plaintiff’s motion, an order was made declaring that the order of arrest origin ally granted should be reinstated with the same force and effect as it had prior to May 3,1880, and directing the sheriff: to arrest and hold the defendants-as required by that order.

      Reid, that the original order could not be so reinstated and revived and that the-order so providing should be reversed.

      People ex rel. Roberts v. Bowe (81 N. Y., 43) followed.
    Appeal from an order reinstating an order of arrest heretofore-issued herein, and also from an order restoring therein the name-of one of the defendants to this action, which name had been-stricken therefrom without authority.

      Joseph E. Wewburger, for the appellant.

      Henry Wehle, for the respondent.
   Brady, P. J.:

It appears from the record that, on tbe 13tb of April, 1880, an order was granted bolding each of the defendants to bail in the sum of $2,000, and that all the defendants except Bowe were arrested thereunder, and that on the third of May following this action was brought to trial and the complaint dismissed, and thereupon the defendants, other than Bowe, were discharged from custody. The plaintiff, however, appealed to the General Term of this court from the judgment of dismissal and that judgment was reversed. The cause was subsequently retried and resulted in a verdict against all the defendants save Dunn. The plaintiff thereupon applied for a reinstatement of the order of arrest against these judgment debtors.

The order to show cause was dated May 4; 1885, and the motion was granted by order entered the nineteenth of May following, which declared that the order of arrest originally granted wa3 reinstated with the same force and effect as it had prior to May 3,1880, on which day the complaint, as we have seen, was dismissed and the sheriff was directed to arrest and hold the defendants as required by •that order. Subsequently, and on the twenty-fifth of May, the plaintiff’s attorney gave notice that he would apply to Justice LaweeNcb on the 26th of May, 1885, for an order that the order be declared •as in full force' against the defendant Bowe as originally granted ; and this was founded upon an affidavit in which he stated that the name of the defendant Bowe appeared to be mutilated, i. e., erased with a pen, which it was alleged was done by some person without ■authority, as the order, when originally granted, contained the name •of the defendant Bowe and a provision for his arrest, and that no •order was ever made authorizing the erasure of the same. The result was an order that the original order of arrest be restored to its condition when granted, so that the name of Thomas Bowe should .appear immediately after the words “ you are required forthwith to .arrest.” From both of these orders the defendant Bowe has taken •an appeal.

The question presented upon this appeal is whether the original order of arrest, which was in the nature of original process, can be revived on such an application as was made herein and granted. The defendants arrested were discharged from custody when the complaint was dismissed, and the result of that judgment was undoubtedly to supersede tbe order of arrest, which was swallowed up by the judgment. This rule has been declared in the case of The People ex rel. Roberts v. Bowe (81 N. Y., 43). The court said, in that case: Suppose the original judgment had been in favor of the relators, and they had been discharged, could they be retalien upon the same order? Or suppose they had given bail for the jail liberties, the same result might follow.” And further, that no authority had been cited in favor of the doctrine contended for, and it seemed to be more in accordance with the general principles applicable to process to hold that when once dead it was gone forever. But the court added: “We do not mean to intimate that a new order might not be obtained.” It may be noted here that no authority has been cited by the respondent’s counsel to sustain the doctrine contended for in this case.

There was no application made here for a new order. The facts which would be necessary to obtain it were not set forth in the affidavit. The application was to show cause why an order should not be reinstated, and all the proceedings were based upon the idea of a revival or resurrection of the original order; and, therefore, it was not an application for a now order founded upon the statement of all the facts necessary for an exposition of the character of the action and of the right of arrest.

For these reasons, and on the authority of the case cited, it is thought that the orders appealed from should be reversed, with ten dollars costs and the disbursements as to one appeal only.

Daniels, J., concurred.

Orders reversed, with ten dollars costs and disbursements of one appeal.


author: Davis, P. J.:

text:
    THE PEOPLE OF THE STATE OF NEW YORK, Respondent, v. GEORGE W. EVANS, Appellant.

      Evidence — dying declarations only admitted when the person is wholly without hope of recovery,

    TJpon the trial of the defendant for the murder of one Currie, a statement made by Currie at a hospital four days before his death was received in evidence. In answer to the question “ Do you believe that you are about to die? ” Currie replied “Yes;” and to the question “Have you any hope of recovery from the effects of the injury you have received?” he said “It is hard for me-to say.”

      Held, that the answers did not show that Currie was wholly without hope of recovery, and that the court erred in admitting the declaration.
    Appeal from a judgment of the Court of Oyer and Terminer, convicting the appellant of manslaughter in the first degree, and sentencing him to fifteen years’ imprisonment in the State prison.

      Howe (& Hummel, for the appellant.

      R. Niooll, for the respondent.
   Davis, P. J.:

The prisoner was indicted and tried for the crime of murder, but was convicted of the crime of manslaughter in the first degree» The alleged crime was committed by shooting one Thomas Currie. A statement was made by Currie at the New York Hospital, on the 1st day of Eebruary, 1885, which was four days before the death of Currie. That part of the statement upon which the question in this case arises was in these words :

City and County op New York, ss. :
Statement of Thomas Currie, now lying dangerously wounded at the New York Hospital, in the Eighteenth ward of said city and county, on the 1st day of Eebruary, 1885.
Q. What is your name ? A. Thomas Currie.
Q. Where do yon live ? A. I reside at 23 Bond street, New York city.
Q. Do yon believe that you are about to die ? A. Yes.
Q. Have you any bope of recovery from the effects of the injury you have received ? A. It is hard for me to say.

Currie then proceeded to malee a statement, which tended to show that' he was shot by the prisoner under circumstances which warranted his conviction. The only question is whether this statement was properly admitted as the dying declarations of the deceased. To render such declarations admissible, the rule as established by the authorities is in these words: “ That the declarant must not only believe that he is about to die, but must be without hope or expectation of recovery.” The statement in this case shows that Currie, the deceased, did believe that he was about to die, but was unable to say that he was without any hope of recovery. To the question, “ Have you any hope of recovery ? ” his answer was, “ It is hard for me to say,” which was not equivalent, we think, to saying that he was wholly without hope, or to give the most favorable construction, that it was hard for him to say whether he had any hope of recovery or not. In any construction it leaves the fact whether the declarant was without hope one not clearly shown by his statement. If he had hope or had no hope he could have answered the question as distinctly as he did the former one, “ Do you believe yon are about to die ? ” and failing to do that, the prerequisites which the law requires were not established. The law takes such dying declarations, where the prerequisites appear, in place of sworn testimony on the ferial of an accused party, because it regards one who believes himself about to die, and who entertains no hope whatever of recovery, is in a condition equal in solemnity to that of the witness who speaks under an oath taken in the presence of the court. But it does not deem such declarations as evidence unless that solemnity is established by proof or declaration of the two facts, to wit, that the declarant believes himself about to die, and is wholly without hope of recovery. We think in this case the declaration of the deceased failed to show enough to entitle it to be read under the rules, and for its reception in evidence the judgment must be reversed and a new trial ordered.

The evidence touching the knife found on the prisoner when arrested, an hour after the .crime, was admitted without objection. The court refused a motion afterwards made to strike it out. We lo not feel called upon to pass upon the correctness of this ruling, based as it evidently was upon the omission of the counsel to make the objection at the proper time, because it is clearly apparent that there must be a new trial of the case'upon the other exception.

The judgment should be reversed and a new trial ordered.

Beady and Daniels, JJ., concurred.

Judgment reversed, new trial ordered.


text:
    CHARLES H. PENDERGAST, as Receiver of the PRODUCE BANK of the City of New York, Respondent, v. ERNEST GREENFIELD, as Trustee, etc., and Individually, Appellant.

      Gounter-claim — when, m an action drought against one as trustee, he may set up a demand due to him, individually, from abank of which the plaintiff is the receiver.

    The defendant in this action received certain claims existing in favor of N. H. Decker & Co., arising out of a contract for the construction of Riverside drive, as assignee, in trust, to apply the proceeds of the same towards the payment of debts of Decker & Co., connected therewith.
    The plaintiff, the receiver of the Produce Bank, brought this action to compel the defendant to account for the moneys received by him under the assignment from N. H. Decker & Co., the bank having discounted certain promissory notes upon the security of the contract made by that firm for constructing the Riverside drive. By the declaration of trust given by the defendant when the contract was assigned to him by Decker & Co., he agreed to pay out of the moneys received by him upon the said contract all liens, claims, etc., growing out of it and existing against the firm, or either member thereof, by reason of it.
    The complaint alleged that the defendant, as trustee for the firm, had collected moneys under the said contract and had discharged certain of the liens or claims, including some of the notes held by the bank, and the remainder of the said notes were unpaid, and were the only outstanding liens, or claims or debts, growing out of the contract within the meaning of the declaration of trust.
    The defendant set up as a counter-claim a demand due to him by the Produce # Bank for services rendered by him as its vice-president, and alleged that at the date of the appointment of the plaintiff as receiver the board of directors of the bank were indebted to him in the sum of $8,600.

      Held, that the court erred in sustaining a demurrer, interposed to the counterclaim, upon the ground that such counter-claim was alleged in favor of the-defendant in his individual capacity only. u

      That as the counter-claim tended in some way to diminish or defeat the plaintiff’s recovery, as required by section 601 of the Code of Civil Procedure, and as the demand existed against the person whom the plaintiff represented, or for whose benefit the action was brought, it was properly interposed and should be sustained.
    Appeal from a judgment sustaining a demurrer interposed to a counter-claim set up by tbe defendant in his answer to the complaint herein.

      Burton N. Harrison, for the appellant.

      John S. Gadwdllader, for the respondent.
   Brady, P. J.:

The complaint alleges that the Produce Bank of this city had discounted for N. H. Decker & Co. certain promissory notes, having as security liens on amounts due that firm for constructing the Riverside drive, and that they assigned all such claims to the defendant, who thereupon executed a declaration to the effect that the assignment was made to him in trust only, to pay out of the moneys or drafts all liens, claims, debts and demands growing out of the contract and existing against the firm or either member thereof as such by reason, of the contract, and he agreed to account to Decker for all moneys and drafts received or to be received under the assignment, and to pay over to him all moneys and drafts received or to be received, and to account for all moneys received by him after the payment of the liens, claims and demands by him to be paid.

It is further alleged in the complaint that by the declaration of trust the defendant agreed with the Produce Bank and others to account for sums received thereunder and to pay the loans and claims and to pay to Decker the surplus; and further, that amounts were from time to time collected by the defendant and certain liens or claims discharged, including some of the notes discounted by the bank, the remainder of the notes then unpaid being the only outstanding liens, claims or debts growing out of the contract and within the meaning of the declaration of trust.

The complaint also alleges an account stated with the defendant as trustee, and further, that it thereupon became the duty of the defendant, as trustee, to apply the balance in his hands in accordance with bis trust, and to pay the outstanding notes held by the plaintiff, or on which the Produce Bank- was the indorser, having pledged the same, less such sums as he was entitled to as commissions. The plaintiff demanded judgment that an accounting might be taken of all the sums in the hands of the defendant, as trustee, for which he was liable to account, and that the balance out of it should be paid over and applied to the purposes of the trust.

The defendant, for a second defense, set up as a counter-claim a demand due to him by the Produce Bank for services rendered as its vice-president, and alleged that at the date of the appointment of the plaintiff as receiver of the Produce Bank the board of directors of the bank were indebted to him in the sum of $3,600, a sum which had been duly demanded and which had not been paid in whole or in part. The plaintiff demurred to the counter-claim upon three grounds, as follows: First, it does not contain a cause of action arising out of the transaction set forth in the complaint as the foundation of the plaintiff’s claim, or connected with the subject of the action; second, the cause of action alleged in said counter-claim is not one existing against the person whom the plaintiff represents; third, the counter-claim is alleged in favor of the defendant in his individual capacity only.

The learned justice in the court below sustained the demurrer. He seems to have held the first ground of demurrer well taken;. the second ground of demurrer unavailable, but the third ground of demurrer well taken. It is true that the defendant is sued as a trustee, a relation created by written instruments for specific purposes, as has been seen. But all such purposes have been accomplished except the payment of some notes which were discounted by the Produce Bank, and which the plaintiff represents. There is no allegation in the complaint that there are any other creditors.

The Code, by section 501, declares that the counter-claim specified in section 500 must tend in some way to diminish or defeat the plaintiff’s recovery, and must be one of the causes of action, stated, against the plaintiff, or, in a proper case, against the person whom he represents; and the causes referred to are those of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim or connected with the subject of the action, or in an action on contract any other cause of action on contract existing at the commencement of the action.

By section 502, as amended by the act of 1877, the counter-claim specified in subdivision 2 of section 501 is subject to certain rules, one of which is that if the plaintiff is a trustee for another, or if the action is in the name of a plaintiff, who has no actual interest in the contract upon which it is founded, a demand against the plaintiff shall not be allowed as a counter-claim; but so much of a demand existing against the person whom he represents, or for whose benefit the action is brought, as will satisfy the plaintiff’s demand, must be allowed as a counter-claim, if it might have been so allowed in an action brought by the person beneficially interested. This provision is predicated of a similar one to be found in the Revised Statutes. (2 R. S., 354, part 3, chap. 6, title 2, § 18.)

It is supposed by the learned counsel for the respondent that, as this action was brought by a receiver, the case of Osgood v. Ogden (4 Keyes, 70) is an adjudication against the right of the defendant to set up a counter-claim. An examination of that case demonstrates this to be an erroneous view. That was a proceeding to oblige a defendant to refund a sum which he had wrongfully received as a stockholder, and it was, therefore, one as to which the company itself, represented^by the receiver, could not maintain an action. The receiver, therefore, represented the creditors, and not the bank, and it was upon that view of the relations between the parties that the court predicated its judgment. Justice Bacon said : “ The sensible and legal view of this action, and the results flowing from it, is, I think, taken by the referee, that inasmuch as the acts for which this recovery is sought were frauds upon the creditors of the insolvent corporation, and the reparation sought is the restoration of these improperly abstracted funds for their benefit, the action is brought and is only to be maintained in the rights of the creditors, and in this specific action the plaintiffs represent the creditors only.”

In the elaborate brief of the counsel for the respondent it seems to be conceded that if the receiver were prosecuting the demand due to the company, the set-off interposed might be sustained. And in the argument made by the counsel for the appellant, containing to some extent a history of the law on set-off, cases are cited showing that in actions kindred to this the set-off could be entertained. (Miller v. Receivers of Franklin Bank, 1 Paige, 444; Berry, Receiver, etc., v. Brett, 6 Bosw., 672, 673 ; In re Globe Ins. Co., 2 Edw. Ch., 625; In re Receiver Middle District Bank, 1 Paige, 585.) In the last cited decision Chancellor'W’alwoeth said: “In the case of Miller (supra) this eourt decided that any equitable set-off which the debtor had at the time that the bank stopped payment was not altered by the appointment of a receiver. It makes no difference whether the debt of the bank was then payable or has become due since.” (See, also, Osgood v. De Groot, 36 N.Y., 348.)

The case of Ives v. Miller (19 Barb., 196), to which the learned counsel for the respondent refers on his, brief, was substantially disregarded in the case of Waddell v. Darling (51 N Y., 327), in which it was held that in an action upon a contract a balance due the defendant upon an unsettled partnership account between the parties, where the partnership was dissolved prior to the commencement of the action, was a proper counter-claim, and that the defendant could ask for an accounting and the application of the balance due him in the extinguishment of the plaintiff’s demand. That case was decided in 1873, and, therefore, prior to the amendment of the Code in 1877, to which allusion has been made, and which adopted, as already intimated, the ]^ovisions of the Revised Statutes.

Although the action is against the defendant as a trustee under the assignment and declaration of trust already referred to, nevertheless it appears from the complaint that the only outstanding claims are those of the Produce Bank, which the receiver represents, and it is thought, therefore, that the counter-claim does tend in some way to diminish or defeat the plaintiff’s recovery, as required by section 501 of the Code of Civil Procedure, and is a demand existing against the person whom the plaintiff represents or for whose benefit the action is brought, and, therefore, should be allowed to an amount sufficient to satisfy the plaintiff’s demand, in accordance with subdivision 3 of section 502 of the Code.

As the case is understood by the pleadings, the action is brought to recover from the defendant a sum of money which should be paid by him in liquidation of demands due to the Produce Bank, and to which lie responds by saying the Pro-dnce Bank is indebted to him in a snm of money of which he demands payment and he sets np this indebtedness to him as a counter-claim. As the obligation assumed by him was to pay the bank, it is not understood why, under the decisions referred to and the provisions of the Code, he might not pursue that course if he thought proper so to do. Section 507 expressly provides that a defendant may set forth in his answer as many defenses or counter-claims, or both, as he has, whether they are such as were formerly denominated legal or equitable; and the counter-claim interposed may justly be denominated equitable. The question thus considered is embarrassing,. and the conclusion arrived at is not, perhaps, entirely free from doubt, but it is evident that the legislature meant to, and did, enlarge the rights of persons having counter-claims when prosecuted for liabilities against which they might be applied. For these reasons it is thought the judgment should be reversed and plaintiff permitted to withdraw the demurrer, and reply on payment of costs of the demurrer.

Daniels, J., concurred.

Judgment reversed, and plaintiff permitted to withdraw the demurrer, and reply on payment of costs of the demurrer.


text:
    THE NATIONAL PARK BANK OF NEW YORK, Appellant, v. JAMES D. WHITMORE and Others, Respondents.

      Attachment — when an affidavit therefor is sufficient if made by an officer of the plaintiff when a corporation — general assignment — when invalid, as to creditors, by reason of a preference being given therein pursuant to a previous agreement to do so.

    Motion to vacate an attachment under which a levy was made on December 31, 1885, upon the property of the defendant, who made a general assignment for the benefit of creditors on January 2,1886. The affidavit used on behalf of the plaintiff, on the application for the attachment, was made by its assistant cashier, who stated positively that the plaintiff was entitled to recover the sum mentioned, with' interest, over and above all counter-claims known to the plaintiff.

      Held, that this was sufficient.

      Ma/rine National Bank of New York v. Ward (35 Hun, 395) distinguished.

      The plaintiff, in the moving affidavits, charged that the defendants had agreed, in the event of an assignment, to prefer William Whiting, who was spoken of as the Whiting Paper Company, and were using threats of such a preferential act to coerce their creditors into a favorable compromise. The defendants denied the use of any threats, hut admitted that the firm had made an agreement with the Whiting Paper Company, that in the event of an assignment becoming necessary to protect the property of the firm, that company should he preferred to the amount of the stock furnished by it and not'paid for. By the assignment, made on January second, the Whiting Paper Company was preferred for an amount asserted to he due to it.

      Meld, that this agreement invalidated the assignment.
    That as the levy had been made before the assignment was executed, and as the latter contained a fraudulent element, in accordance with a previously existing arrangement or agreement, that instrument itself furnished the evidence of an intention to assign and dispose of property fraudulently and with a view to defraud the creditors.
    A debtor will not be permitted, at or before the time the debt is created, by a secret tacit agreement or understanding with any one or more of his creditors, to make an engagement in reference to his property by which their debts shall, in case of emergency, be preferred under any and all circumstances, and by such an arrangement, in effect, place a secret mortgage upon the debtor’s assets.
    Appeal from an order made at Special Term vacating art attachment.

      Charles W. Wetmore, for the appellant.

      Stewart ds Boardman, for the respondents.
   Brady, P. J.:

The attachment herein was granted on the 31st of December, 1885, and a levy made under it on the property of the defendants on the afternoon of that day. On the second of January the defendants united in an assignment of their firm and individual property for the benefit of their creditors, which was filed on that day.

The attachment was granted upon affidavits presenting what, were supposed to be sufficient reasons to justify the conclusion that the defendants were about to make an assignment or dispose of their property' with the intention of defrauding tlieir creditors: The defendants moved to vacate the attachment upon the affidavits of two of the defendants, and the motion was heard upon these and affidavits read in opposition, and granted.

The respondent assails the affidavit read on plaintiff’s behalf stating the indebtedness upon the ground that it does not contain the allegation required by section 636 of the Code of Civil Procedure, namely, that the plaintiff is entitled to recover the sum stated to be due over and above all counter-claims known to the plaintiff. The averment relating thereto by Mr. De Baun, the assistant cashier of the plaintiff, is positive however, namely, that the plaintiff is entitled to recover the sum mentioned, with interest, over and above all counter-claims known to the plaintiff.

In the case of the Marine National Bank of New York v. Ward (35 Hun, 398), it was said by Davis, P. J., expressing the opinion of the court, that the affidavit in this respect might undoubtedly be made by an agent of the plaintiff or any officer of the corporation to whom the facts were personally known, or where the información was based upon such facts disclosed by evidence as would show satisfactorily that the plaintiff was entitled to recover the sum stated over and above all counter-claims known to the plaintiff and the affiant. It was also held in that -case, it is true, that it was not enough for the agent or officer to make the statement simply upon information and belief, without showing whence and from whom his information was derived, and why the affidavits of the informants were not produced.

This ease entirely differs from that in the respect to which attention has already been called, namely, that there is an affirmative declaration on the part of the assistant cashier that the sum claimed is due over and above all counter-claims known to the plaintiff. There are averments of some acts tending to establish the proposition of a contemplated sale, by the defendants, of their property with intent to hinder and delay their creditors, which rest chiefly upon information and belief, and which are not, perhaps, sustained by confirmatory affidavits; but it is not necessary to give them examination, inasmuch as the conclusion -arrived at in reference to one feature of the case renders that ceremony unnecessary.

It appears from the assignment made by the defendants that the Whiting Paper Company was preferred in it for an amount asserted to be due. The plaintiff, in the moving affidavits, had charged that the defendants had agreed, in the event of an assignment, to prefer William Whiting, who was spoken of as the company, and were using threats of such a preferential act to coerce their creditors into a favorable compromise. To this the defendant Whitmore responded, and while be emphatically denied the use of any threats, ■admitted that the deponents’ firm had made an agreement with the Whiting Paper Company to the effect that in the event of an assignment becoming necessary to protect the property of the firm, that company should be preferred to the amount of the stock so furnished and unpaid for.

It thus appears that an agreement, which may be regarded as secret, was made with the Whiting Paper Company, by which, in case of insolvency, or in the event of an assignment becoming necessary by the defendants, it was to be protected by a preference to the amount of the stock furnished to the defendants and unpaid for. Such an agreement as that was declared to be fraudulent and to invalidate an assignment, in the case of Smith v. Craft (11 Biss., 340), and in a well considered opinion by Justice Gresham. It appeared in that case that certain creditors loaned money to the assignor on the faith of his agreement to secure them if he became insolvent. And the learned justice said that the complainants, ignorant of that agreement, had sold the assignor goods on time, trusting to his skill, energy and integrity, and they would not have done this, he said, it is safe to presume, if they had known of this agreement.

This is analogous to the principle announced in the case of Potts v. Hart (99 N. Y., 168), in which it was declared that a chattel mortgage was fraudulent and void as to creditors, where it was given with a tacit or express understanding and arrangement that the morgagor might sell and dispose of the mortgaged property and apply the avails to his own use. It is also analogous to the familiar proposition that a creditor who signs a composition deed for his debtor cannot, by any secret agreement with the debtor, preserve the entire indebtedness or acquire any superior advantage, when, by the composition deed, he agrees with others to take a portion of it only in full discharge.

The legal proposition affecting the integrity of the assignment and intended to be declared hereby, is that the debtor will not be permitted, at of before the time the debt is created, by a secret tacit agreement or understanding with any one or more of his creditors, to make an engagement in reference to his property, by which their debts shall, in case of emergency, be preferred under any and all circumstances, and by such an arrangement, in effect, place a secret mortgage upon his assets.

The only possible answer to this, doctrine is that such an agreement could not be enforced by the creditor. But this view is not responsive in a case where the agreement has assumed a positive form by which the debtor has carried it out and the creditor has taken advantage of it, as appears in this case. The answer might have some force if the plaintiff had made the arrangement and was insisting that the assignment was fraudulent because of the failure of the assignor to keep his promise with it. In other words, whilst the agreement might prove to be questionable as between-the original parties in any controversy between them, yet, when it is attempted to be carried out as against creditors, it must be regarded as fraudulent as to them, and so declared. The levy having been made before the assignment was executed, and the latter containing a fraudulent element, in accordance with the previously existing arrangement or agreement, that instrument itself furnishes the evidence of an intention to assign and dispose *bf property fraudulently and with a view to defraud the creditors.

The application of this view is new, but it has been invoked by the learned counsel for the plaintiff in an able and elaborate argument. It rests on sound doctrine, as he has demonstrated, and is unquestionably sustained upon the proposition of fair dealing between man and man.

For these reasons the order appealed from, should be reversed, and the motion to discharge the attachment denied, with ten dollars costs.

Daniels, J., concurred.

Order reversed and motion denied, with ten dollars costs and disbursements.


author: Brady P. J.:

text:
    In the Matter of the Application of ELIZABETH BIER-BAUM for the Appointment of Her Husband to Execute a Power Given by Will.

      Discretionary power of sale conferred upon an executor — the court cannot appoint, to exercise it, a successor to the one named by the testator —1882, chap. 185.
    The mother of the petitioner by her wiE directed her executor to pay aE just debts and liabilities^ including funeral expenses, and gave and devised to her daughter all her estate, of whatever kind or nature, to be used and enjoyed by her duringher natural life, and immediately after her death she gave and devised the same unto the children of the daughter, or such of them as might be living at that time, and to the legal representatives of those that were dead; and in the event of the daughter dying without leaving descendants, then she gave the estate to her collateral relatives. She nominated and appointed W. W. Sprague her executor, and authorized him to sell her real estate at any time, at either public or private sale, and to give good and sufficient deeds to the purchaser or purchasers thereof. The executor having died the daughter, after having been herself appointed administratrix, with the will annexed, applied to have her husband appointed a trustee, in place of the executor, with power to execute the power of sale conferred by the will.

      Seld, that the application should be denied as the power given by the will was a naked and purely discretionary one, which could be performed by no person other than the one selected by the testator.
    Semble, that chapter 185 of 1882, providing for the appointment of a trustee, upon the death of a surviving trustee, has no application to this case, as no express trust was created by the wiE.
    Appeal from an order made at Special Term, denying an application for the appointment of a trustee to execute a power of sale.
    The petitioner, Elizabeth Bierbaum, resides with her husband • Henry Bierbaum, and their children, in this city. She is the only daughter of Margaret O’Grady, deceased, who died on or about the 19th of July, 1877, in this State, leaving a last will and testament a copy of which is as follows :
    “Know all men by these presents, that I, Margaret O’Grad.y, widow of Peter O’Grady, of the city o-f New York, do make, ordain, publish and declare this to be my last will and testament. I direct my executor hereinafter named to pay all my just debts and liabilities, including my funeral expenses, as soon after my death as practicable.

      “I give, bequeath and devise unto my daughter, Elizabeth Bierbaum, all my estate of whatever kind or nature, to be used and enjoyed by her during her natural life, and immediately after her death, I give, bequeath and devise the same unto the children of my said daughter, or such of them as may be living at that time, and to the legal representatives of those that are dead, and in the event of my said daughter dying without leaving descendants, then I give my said estate to my collateral relatives forever.
    “I nominate and appoint, as executor of this my last will and testament, Dr. Welcome W. Sprague, and authorize him to sell my real estate at any time, at either public or private sale, and to give good and sufficient deeds to the purchaser or purchasers thereof.
    “ In witness whereof, I have hereunto set my hand and seal the-18th day of duly, 1877.

    “MARGARET >T O’GRADY.”
    The will was admitted to probate in August, 1877, and on the' 26th of March, 1884, the executor, Welcome W. Sprague, whilst acting as such, died, leaving the power conferred upon him by the will unexecuted. The petitioner was subsequently, and in April, 1884, appointed administratrix with the will annexed, and now she asks the appointment of her husband in the place and stead of the-executor, deceased, with authority to execute the power in accordance-with the provisions of the will of Mrs. O’Grady.
    The learned justice, by whom the application was considered, denied it, and for the reason, as appears from the record, that some authority should be presented showing that the court could appoint a trustee-to execute the power of sale under the will.

      E. Sames, for the petitioner, appellant.

      Valentine Marsh, for the guardian ad litem for infants,, respondents.
   Brady P. J.:

It will have been perceived that after the direction to pay the-debts and funeral expenses, the testatrix gives all her estate to her daughter, the petitioner, of whatever kind or nature, to be used and enjoyed by her during her natural life, and immediately after her death she gives the same unto the children of her daughter, or such of them as may be living at that time, and to the legal representatives of those that are dead, and in the event of her daughter dying without leaving descendants, then she gives her estate to her collateral relatives forever. And this is followed by a distinct and separate clause appointing Dr. Welcome W. Sprague her executor, and authorizing him to sell her real estate at any time, at either public or private sale, and to give good and sufficient deeds to the purchaser or purchasers thereof. There is no special fund or property from which the debts are to be paid and satisfied. It must be presumed that the personal estate is, therefore, primarily applicable thereto, and consequently that the devise of the estate being in general terms, without any declaration or statement that the real estate is given after, or subject to, the payment of the debts or any part thereof, there is no ground for the inference that the testator intended to appropriate it to such purpose. It follows that such payment and satisfaction could only be made out of the personal estate, and that the testatrix, in giving the power to make the sale of the real estate, could not have intended its exercise for ■such object. (Kinnier v. Rogers, 42 N. Y., 534.)

The absolute power of disposition, as said in the case just cited, is given to the executors, and if no other person has any interest in its execution, and it be construed as unaccompanied by any trust, it is an absolute power in them and they take an absolute fee. The power is general, since it authorizes the grantee to convey the property to any alienee whatever. But it is neither imperative nor beneficial, since its exercise is left altogether to the discretion of the grantee. The interest which the heirs in remainder took in the described estate did not at all depend upon the execution of the power, and they, therefore, had no interest in having it executed, their only concern in the subject relating to its wise exercise whenever the donee should, in his discretion, choose to avail himself of the authority conferred. And as no duty is imposed by the will upon' the grantee to execute the power, so no authority is conferred upon the courts to compel its execution, and the subject of a sale is left to the sole discretion of the donee. It would seem, therefore, that the power was simply one of trust, to be exercised only when, in the judgment of its donee, the prudent and proper management ■of tbe property required its exchange into some safer or more remunerative investment. And the exercise of the power was intended for the benefit of the owners of the ultimate estate, as well as for that of the life tenant, and could be exercised or omitted at the mere discretion of the donee. The terms of the power confer its exercise upon the donee alone, and being a trust to sell real estate it was purely a discretionary power, whose execution could not be delegated to another, or restrained or enforced upon the application of any of the parties. (Coleman v. Beach, 97 N. Y., 545.)

The principles enunciated in these two cases seem to dispose of the question presented for our consideration and adjudication, and the contention, therefore, of the respondents that the power given by the will was a mere naked one and purely discretionary, and which could be performed by no fcther person, was well taken.

The respective counsel have not presented any views as to the effect of chapter 185 of the Laws of 1882, in reference to the appointment of a trustee, and which provides that upon the death of a surviving trustee of an express trust the trust estate shall not descend to his next of kin or personal representatives, but the trust, if unexecuted, shall vest in the Supreme Court, with all the powers and duties of the original trustee; and, it is supposed, for the reason that there was not an express trust conferred by the will of Mrs. O’Grrady, although some of the provisions of the statute in relation to trusts were made applicable to certain powers. If it could be regarded as an express trust in any aspect in which it might be considered, then it would be the duty of the court to make the appointment asked, for the reason as declared In the Matter of the Petition of Waring, etc. (99 N. Y., 114), that such appointment must be made, and without reference to any question involving the rights and interests of the various parties as they are affected by the validity, extent and character of the trust, or the right or possession of the property alleged to be covered by it.

For these reasons it is thought the order appealed from should be affirmed.

DaNiels, J., concurred.

Order affirmed.


text:
    EDWARD M. KNOX, Respondent, v. THE COMMERCIAL AGENCY and Others, Appellants.

      Pleading — plea of justification in an action for libel — the facts mustie alleged— and in Mice manner the facts which ave to he proved in mitigation of damages.

    In tliis action, brought by the plaintiff to recover damages alleged to have been sustained by reason of the publication by the defendant of libelous charges, the defendant served an answer, by the first paragraph of which he admitted that the plaintiff was a merchant in the city of New York, and that one defendant was a corporation carrying on business in that city and the other defendants were officers connected with it, and denied every other allegation in the complaint. As a second defense it adopted the admissions which were made, as already stated, and alleged, upon information and belief, that the statements stated to be libelous, and averred in the complaint to have been published, were true, and then repeated th® said statement in the words of the complaint without any additional facts.

      Eeld, that a demurrer interposed to the second defense was properly sustained, as it contained no statement of facts constituting a defense by justification, or which might properly be pleaded in mitigation of damages.

      Wachter v. Quenzer (29 N. Y., 617) followed.
    If a justification is attempted it must be by a statement of facts showing the truth of the libelous matter charged to have been published, and if the pleader designs to mitigate the damages, he is equally bound to state the facts of which such mitigation is predicated.
    Appeal from a judgment, sustaining a demurrer to tlie second defense in tbe several answers of tbe defendants.
    Tbe complaint alleged, among other things, that at tbe times hereinafter mentioned tbe defendant, Tbe Commercial Agency, was, and still is, a corporation carrying on business in tbe city of New York, under that name, and tbe other defendants are officers connected therewith; that tbe plaintiff is, and for tbe past fifteen years and upwards has been, a merchant carrying on business in the city of New York as a manufacturer and seller of bats; that, as tbe plaintiff is informed and believes, prior to and on ar about tbe 12th day of March, 1885, at tbe city of New York, tbe defendants, without any reasonable or probable ground for so doing, and with means of ascertaining tbe truth readily accessible, falsely and maliciously composed, wrote and published, of and concerning the plaintiff, a libel, in tbe words or of tbe tenor following, to wit: •“ He (meaning the plaintiff) is a figure-bead for bis father, and bas no standing whatever.” And for a second cause of action : That the defendants, on the 15th day of March, 1885, without any reasonable, probable ground for so doing, and with means of ascertaining the truth readily accessible, again falsely and maliciously composed, wrote and published, of and concerning the plaintiff, a libel, in the words or of the tenor following, to wit: “ He (meaning the' plaintiff) is fast, is a politician, and is. doing business on the money that should have gone to his father’s creditors. He (meaning the plaintiff) squandered $40,000 of his father’s money and married a Brooklyn concert singer ” (meaning, by the last phrase, that the plaintiff had married a person of low calling and repute).
    The defendant, The Commercial. Agency, by its answer to the plaintiff’s complaint and for & first defense thereto, admits that this defendant, The Commercial Agency, was, and still is, a corporation carrying on business in the city of New York under that name, and the other defendants are officers connected therewith, and that the plaintiff is a merchant in the city of New York, as a manufacturer and seller of hats, and has been for the length of time alleged in the complaint, and it denies each and every other allegation contained in the complaint. For a second defense, this defendant adopts the admissions in the next preceding deff nse, and makes the same a part hereof, and alleges, upon information and belief, that the statements stated to be libelous and averred in the complaint to have been published, of and concerning the plaintiff, were then and there true in this, that on or about the 12th day of March, 1885, at the city of New York, the plaintiff was a figure-head for his father, and had no standing whatever; also, that on or about the 15th day of March, 1885, at the same place, the plaintiff was fast, was a politician, and was doing business on the money that should have gone to his father’s creditors, and that the plaintiff had squandered $40,000 of his father’s money, and had married a Brooklyn concert singer, and this defendant denies that the expression, “ married a Brooklyn concert singer,” had the meaning that the plaintiff had married a person of low calling or repute.

      D. M. Porter, for the appellants.

      .John Wi Weed, for the respondent. ■
   Brady, P. J.:

In answer to tbe publication of tbe alleged libel, tbe defendants admitted by tbe first paragraph in tbe answer,.that tbe plaintiff was a merchant in tbe city of New York, and tbe defendants were still a corporation carrying on business in that city, and that the other defendants were officers connected with it, and denied every other allegation in tbe complaint; and for a second defense, adopting tbe admissions which were made as already stated, and making tbe same apart of such second defense, it alleged, upon information and belief, that the statements charged as libelous and averred in the complaint were true.

This defense was demurred to and disposed of by the learned justice in the court below in a very brief opinion, but, nevertheless, showing the insufficiency of the. defense. He said: “ The fault of the second defense demurred to is that it contains no statement of facts constituting a defense by justification.” (Citing, Wachter v. Quenzer 29 N. Y., 517.) And he further said that it was equally barren of facts which, not constituting a defense, might properly be pleaded in mitigation of damages.

In Wachter v. Quenzer (supra), the statement contained in the answer was analogous to the one in question, namely, that it was true that the plaintiff made himself invisible on account of too much borrowing and not paying, i, e., ran away — which the court said was as general as the libel and apprised the plaintiff of nothing. The court approved the rule stated by Mr. Chitty in his Treatise on Slander, which declares that in this class of actions, if the defendant undertakes justification it must be by stating the particular facts which evince the truth of the imputation, and that the rule holds whether the imputation upon the plaintiff’s character be of a general or a specific nature. And it was held that this rule was not abolished by the Code. No report of any case in this State has been found which, under the common law or any piovision of the Code, has dispensed with this rule and none is likely to be found, because it is wise and just. There is nothing in section 536 of the Code of Civil Procedure which warrants a departure from it..

The defendant does not derive any advantage from that portion of that section which declares the defendant may prove at the trial facts not amounting to a total defense, tending to mitigate or otherwise reduce tlie plaintiff’s damages if they are set forth in the-answer. For, in the case of Bradner v. Faulkner (93 N. Y., 517), it is said to be tbe essence of mitigating circumstances tbat tbej do not constitute a total defense to the action, but are those facts from which the party acting upon them might reasonably suppose that the offense, for the punishment of which the prosecution was instituted, had been committed by the defendant therein.

It will have been observed that the right of justification and the right to mitigate or reduce the plaintiff’s damages are dependent upon the statement of facts, and as suggested by the learned justice in the court below, there are no facts. It is a mere repetition of the libelous charge contained in the complaint. The rule may be said, therefore, to be founded on the cases cited, and to which others might be added, that if a justification is attempted, it must be by a statement of facts showing the truth of the libelous matter charged to have been published, and if the pleader designs to mitigate the damages, he is equally bound to state the facts of which such mitigation is predicated. For example, it is averred that the plaintiff was a politician. There are no facts given to prove that averment or illustrative of it. The allegation is also made that the plaintiff had squandered $40,000 of his father’s money. There are no facts given to show that this is true, and none either that he had married a Brooklyn concert singer. So that the second defense is a bald reiteration of the slanderous charge, without the statement of one single fact in reference to any of the libelous matter contained within it tending to show its truth in any respect, or presenting reasons why there should be a mitigation of damages. A more extended examination of this question might be indulged in, but it is deemed to be unnecessary, for the reason that it seems to be a very plain case and one which was properly disposed of in the brief opinion of the learned justice in the court below, and which presents the fatal infirmity of the answer.

For these reasons we think the judgment should be affirmed, with liberty, however, to the defendants to answer de novo upon the payment of costs.

DaNIEls, J., concurred.

Judgment affirmed, with leave to defendants to answer on payment of costs.


author: Daniels, J.:

text:
    ALLEN FITCH, Plaintiff, v. THE MAYOR, ALDERMEN AND COMMONALTY OF THE CITY OF NEW YORK, Defendant.

      •Qlm'ten' of New York — what employees a/re officers within sections 55 and 59 of chapter 410 of 1882.
    The plaintiff held the position of examiner in lunacy under an appointment made by the department of charities and correction, in which position he received a compensation of thirty-seven dollars and fifty cents per month. While he held that position he was appointed a sanitary inspector by the health department in the vaccinating corps, for which, if his appointment was valid, he was entitled to receive a compensation of $100 per month.

      Held, that while retaining his office in the department of charities and correction the plaintiff was, under the provisions of sections 55 and 59 of chapter 410 of 1882, ineligible to official employment as a sanitary inspector in the vaccinating corps of the health department, and was not entitled to receive the salary attached to that office.
    Case agreed upon and submitted without an action.

      John, M. Bowers, for the plaintiff.

      John J. Townsend, Jr., for the defendant.
   Daniels, J.:

The plaintiff held the position of examiner in lunacy under an appointment made by the department of charities and correction, for which he received a compensation of thirty-seven dollars and fifty cents ($37.50)' per month. While he held that position he was appointed a sanitary inspector by the health department in the vaccinating corps, for which, if his appointment was lawful, he was entitled to receive compensation at the rate of one hundred dollars ($100) per month. Hnder that appointment, and for the services performed by him, his compensation amounted to the sum of one hundred and nineteen dollars and ninety-eight cents ($119.98). Payment of each of the salaries was, by the charter, to be made out of moneys raised by taxation upon the property of the taxable inhabitants of the city. The payment of the amount demanded by the plaintiff has been resisted upon the ground that he was an officer of the corporation of the city in holding the position and exercising the functions of examiner in lunacy. If lie was such, officer, then be has no legal claim for salary .as an inspector in the vaccinating corps of the health department, for by section 59, chapter 410 of the Laws of 1889, it has been provided, among other things, that no member of the common council, head of department, chief of bureau, deputy thereof, or clerk therein, or other officer of the corporation, shall be, or become directly or indirectly, interested in, or in the performance of, any contract, work or business, or the sale of ány article, the expense, price or consideration of which is payable from the city treasury,” etc. By preceding sections of the same act provision has been made for the distribution of the powers of the city government. The legislative authority was vested in the board of aldermen and the executive power in the mayor and the officers of the departments. (Id., §§ 29, 30.) And the different departments were declared and provided for by section 34 of the same act, and among these departments are those of charities and corrections and the health department. In these departments defined portions of the government authority of the city has been vested. While they are distinct and separate in their powers and functions, they are still classified and provided for as different departments of the government of the city. The heads of each departments have also, by section 48, been empowered to appoint and remove all chiefs of bureaus except the chamberlain, and all clerks, officers, employees and subordinates, in their respective departments, except as it was otherwise specially provided. And the functions and duties of all officers, clerks, employees and subordinates in every department, subject to the same exception, with their respective salaries, are declared to be such as the heads of the respective departments shall designate and approve. It was under this general authority that the plaintiff received his appointment as examiner in lunacy. It is not shown to have been a position subject merely to the orders or directions which from time to time might be given by the head of the department, but it was a position whose functions and duties were to be defined by the head of the department, and the appointment was necessarily of a somewhat permanent character vesting the appointee with the power to exercise his judgment and skill within the limits of the appointment. What was conferred upon bim was a portion of the authority vested in the department." He was not merely an attendant, servant or employee, but a person selected to exercise authority and discharge the duties appropriate to his position, and that constituted him an officer of the department in which he had been appointed, for an office has been defined to be “ a public charge or emjfioyment with the right to take the fees and emoluments belonging to it.” It is an authority to exercise legal or public functions in the service and for the benefit of the public. (People v. Nostrand, 46 N. Y., 375.) And the plaintiff, as an examiner in lunacy, was vested with such functions and authority. He was accordingly an officer of the department in which he had been appointed; and officers of such departments were designed to be included within the general language of section 59 of this act. Provision was previously made for the existence of the officers, the power by which the appointment should be made, and the functions and duties to be exercised, and after that had been done this general prohibition contained in section 59 was added, and from its position and relations, as well as the language used, it was evidently intended to include the officers previously mentioned or referred to in the act.

By section 588 of the same act the board of health was empowered to appoint a certain number of sanitary inspectors, and under that this appointment of the plaintiff as inspector in the vaccinating corps seems to have been made. It is also, for the reasons already given as well as those disclosed by this section of the act, apparent that it was an office in one of the departments of the government of the city. The functions and duties, as well as the rights appertaining to the position, rendered it an office within the authority which has already been stated. And by section 55 of the act it has been declared that “ no person shall hold two city or county offices except as expressly provided in this act.” And no exception, including either of these offices, was made by the act from this general prohibition. By his second appointment, if it could have been legally made, the plaintiff would have become directly interested in the performance of work, the expenses of which were to be payable from the city treasury, and as he continued to retain his preceding office under the department of charities and corrections, he was ineligible to official employment as a sanitary inspector in the vaccinating corps of tbe health department.

The case of Macdonald v. The Mayor (32 Hun, 89) has been relied upon as sustaining the plaintiff’s right to compensation while he discharged the duties of inspector in the health department. But, when justly considered, it lends neither countenance nor assistance to this position, for the compensation allowed to the plaintiff in that action was not for a service rendered either as an officer of the municipal government or one of its departments, but the service was rendered for the district attorney of the county and was chargeable to the city as the county and not as the city. This case is brought by its facts more directly, and especially within those of McAdam v. The Mayor (36 Hun, 340) and Mullaly v. Mayor (3 id., 661). The case last decided is especially applicable to this controversy, and by the principle which it settled in the construction of this prohibitory provision of the charter, the plaintiff is excluded from the right to claim the compensation for the services rendered by him as an inspector- in the health department. The policy of the charter, upon this subject, was to separate and distinguish the officers of one department from those appointed in and exercising their authority and functions in another. It was designed to abrogate abuses which previously had existed, and it should be liberally construed to produce that result. As it has been made a portion of the charter, it was intended to include the officers to which reference was previously, as well as subsequently, made in it. And by the construction which should be placed upon it, and upon the prohibitory language of this section, the plaintiff has no right to the compensation which is the subject of controversy in this case.

Judgment should, therefore, be ordered in favor of the defendant, with costs.

Beady, J., concurred.

Judgment ordered for the defendant, with costs.


text:
    MICHAEL SULLIVAN and JAMES O’NEIL, Plaintiffs, v. JAMES MILLER and THOMAS R. KNOX, Defendants.

      General assignment — effect of, on the rights of a creditor subsequently recovering a judgment to set aside a prior chattel mortgage, void as to him because not filed.

    On July 8, 1882, one Miller executed two chattel mortgages upon a quantity of hook plates to secure the sum of $6,500, which were not filed until January 4, 1883, on which day Miller made a general assignment. One Ames, acting under and in the execution of the assignment, on March 15, 1884, applied for and obtained an order directing him to sell the plates covered by the mortgages, and to pay out of the proceeds the debts secured thereby. The petitioners, who had recovered a judgment against Miller on March 8,1888, and issued two executions thereon, one of which still remained in the hands of the sheriff, applied to have the order amended, and to have the proceeds arising from the sale of book plates applied towards the payment of their judgment, on the ground that the mortgages were, as to them, void because not filed when given.

      Eeld, that the application was properly denied.
    That the mortgages, having been made in good faith, were valid and binding upon the mortgagor and Ames.
    That, as the general assignment was made before the recovery of the judgment and the title to the mortgaged property was thereby vested in the assignee, the assigned property was not subject to levy or sale under executions issued under the judgment.
    That the petitioners, having no lien upon the mortgaged property, sustained no such relation to the property as would permit them to maintain an action to set the mortgages aside as void.

      Semble, that the assignee was not in a position to bring suit to set aside the mort- ' gages, but that it did not for that reason follow that the petitioners could take proceedings to do so.
    Appeal by Joseph L. Little'and William J. Demorest from an order denying a motion to amend an order authorizing the sale of certain booh piates and for the payment of a judgment recovered by the appellants against James Miller.

      James Ma/rvin, for the petitioners Little and Demorest, appellants.

      Thomas D. Robinson, for Ames, the receiver, respondent.
   Daniels, J.:

The j'udgment of the petitioners, who are the appellants in this case, was recovered on the 3d of March, 1883, for $2,281.30, and an execution was issued upon the judgment to the sheriff of the county of New Tom on the same day, and that execution is still in the hands of the sheriff. Another was issued to the sheriff of the county of Westchester, which was returned unsatisfied, in the spring of 1883. Miller, the judgment debtor, executed two chattel mortgages upon a large quantity of book plates and wood cuts, to Alexander Masterton, to secure the sum of $6,500. These mortgages were executed on the 8th of July, 1882, but they were not filed, as that was required to be done by the statute, until the 4th of January, 18S3. And for that reason the petitioners claimed in this proceeding that the mortgages were inoperative and void as against their judgment. But on the 4th day of January, 1883, Miller, the debtor, made a general assignment for the benefit of his creditors to Thomas R. Knox, who was afterwards removed as assignee, and John F. Ames was appointed receiver to execute the assignment, and under that appointment he has since continued to act in that capacity. On the 15th of March, 1884, on his application, and without notice to the petitioners, an order was made directing him to sell the plates included in the mortgages, and to pay out of the proceeds the debts secured thereby. Such a sale was made and out of the pi’oeeeds the receiver, conforming to the order, paid the debts secured by the mortgages. The petitioners alleged that this order operated injuriously upon their rights as judgment creditors, on the ground that the mortgages were, under the statute, void as to them, because of the omission to file them, as that was provided for by the statute. And one object of the motion was to relieve them from the effect of the directions contained in the order empowering the receiver to pay the debts secured by the mortgages. In support of this application the position was taken that the petitioners had the right to avoid these mortgages and have the proceeds of the mortgaged property applied to the payment of their judgment. And it was further claimed that the receiver, having proceeded in violation of their rights in this regard, had misappropriated these proceeds, and should, notwithstanding the payment made, be required to pay the judgment recovered in their favor.

To support these positions affidavits were presented stating that the receiver had been informed of the claim made on behalf of the petitioners, before proceedings were taken by him to obtain the order for the sale of the property, and that on the 6th day of July, 1883, written notice of their claims was served upon him. The service of the written notice, however, was denied by him and an order was made directing a reference to take proof and report to the court whether the alleged service of this notice had been made. Upon that reference testimony was taken by the referee, upon which he determined that the service of the notice had not been proved, and the evidence which was given before him upon this subject presented the point as a question of fact to be determined by him. And as that determination was made upon a conflict of the evidence of the witnesses before him, not very decidedly preponderating either way, his conclusion cannot be set aside by the court.

During the progress of the hearing objections were taken to the exclusion of evidence, but it is not necessary to consider them for the reason that the evidence excluded was not within the order directing the reference. But while the service of this notice was not established to the satisfaction of the referee, it still did appear that before the application for the order permitting the sale of the plates was made, proceedings were had between the creditors and the receiver out of which he had acquired information apprising him of the nature of their claim. These proceedings consisted of motions to set aside a levy upon the plates under one of the executions, and to require the property to be delivered over to the possession of the receiver. The disposition of the motions did not depend upon any priority of right in favor of the creditors, but upon the irregularity of the levy after the property had passed under the custody of the receiver. The levy, for this reason, was set aside, as it very well could be, but in the motions made and heard, in the course of the proceedings, there is reasonable ground for believing, even from the evidence of the receiver himself, that he did understand the claim of priority which was made on behalf of the judgment creditors. At least as much as that was conceded by him in the course of his cross-examination before the referee.

But this understanding or notice does not entitle the petitioners to the relief for which they apply, for the assignment of the debtor’s property was made by him before the recovery of the judgment of these creditors; and it has not been insisted in their behalf that the assignment was not made in good faith, or that it for any reason eonld be assailed or set aside as an invalid instrument. And as it was legally made it vested the assigned property, including that covered by the chattel mortgages, in the assignee. He, from that time, became its legal owner, and the same title upon his appointment vested in the receiver. The judgment debtors, therefore, had no such remaining interest in the assigned property as to permit the execution to become a lien upon it under section 1405 of the Code of Civil Procedure. Neither could they, for the same reason,levy upon or sell the assigned property. It was no longer liable to executions against the judgment debtor, but was vested in the assignee under the assignment subject to the execution of whatever trusts may have been created by that instrument. For that reason the judgment creditors sustained no such relation to the property included in the mortgages as would permit them to maintain an action to set aside the mortgages as void. For no judgment which could be recovered by them, in any view, would entitle them to take the assigned property from the assignee or the receiver and apply it to the payment of their debt. A point of this description was considered in Spring v. Short (90 N. Y., 538), and it was so disposed of by the opinion of the General Term, which seems to have secured the approbation of the Court of Appeals in the decision of the case. (Id., 544.) If the mortgages could have been set aside, the decision through which the result should be attained would do no more than so far advance and improve the title of the assignee. It would not, as long as the assignment was permitted to stand, allow the creditors to take the property, or to dispose of it, in violation of the terms of the assignment and appropriate its proceeds to the payment of their judgment. In the event of their success they would still be confined in their rights to come in under the assignment, and to take in payment of their debt whatever pro rata interest or share might be applicable by the terms of the assignment to that object.

It will not follow because the assignee or receiver could not maintain an action himself to set aside the mortgages under the authority of chapter 314 of the Laws of 1858, as he probably could not (Southard v. Benner, 72 N. Y., 424, 428), that these creditors could maintain a suit for that purpose under the facts appearing in this case. For tbe disability still remains that through the intervention of such an action the petitioners would be incapable of securing any part of the proceeds of the property for the payment of their judgment, beyond whatever pro rata share they might be entitled to under the assignment. And being in this condition, it would be of no advantage to them to make the modification of the order directing the sale of the plates for which they have applied. Neither can an order be made directing the payment of their judgment by the receiver. He has proceeded as' the legal situation of the parties required that to be done. The mortgages being made in good faith, were legal instruments as to the mortgagor, and the assignee and receiver claiming under him, and the order did no more, by directing payment of the mortgaged debt out of the proceeds of the sale of the plates, than the receiver was bound to do-under his legal obligations in the proceedings.

The order from which the appeal has been taken was justified,, and it should be affirmed, with the usual costs and disbursements^

Beady, P. J., concurred.

Order affirmed, with ten dollars costs and disbursements.


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    WILLIAM C. COWPER, Appellant, v. THOMAS THEALL and HARRY WILLIAMS, Respondents.

      An action cannot be brought by one person to restrain another from, instituting legal proceedings against him, — when an action will lie to compel the cancellation of an agreement brolcen by the defendants.

    The complaint alleged the making of an agreement between the parties by which the defendants were authorized to produce and perform a dramatic composition of the plaintiff, they agreeing to produce' and present the play and make the necessary disbursements, not to exceed $'3,000, and to employ the plaintiff in the principal role, the net profits to be divided equally between them. The complaint further alleged that the defendants refused to fulfill their obligations under the agreement, and instances were given where, in consequence of such failure, the performance of the play proved to be unattractive and unremu-nerative; that after such failure the plaintiff rewrote the play under another name and was about to produce it at another theatre in the city of N ew T ork, rand that he was apprehensive that the defendants would enjoin him from producing it, and prayed for an injunction restraining them from so doing.

      Held, that although the action could not he maintained to restrain the defendants-from taking such legal proceedings, yet the facts stated in the complaint showed a breach of the contract on the part of the defendants which authorized the plaintiff to maintain an action to have the same canceled and annulled, and that it was error to sustain a demurrer interposed to the complaint.
    Appeal from an interlocutory judgment sustaining a demurrer interposed to tbe complaint.

      M. L. Maries, for tbe appellant.

      H. B. Kinghorn, for tbe respondents.
   Daniels, J.:

Tbe complaint set forth tbe making of an agreement between tbe parties, by wbicb tbe defendants were authorized to produce and perform a dramatic composition of tbe plaintiff, entitled “ Her Last Hope.” That agreement is annexed to the complaint and forms a part of it. By its stipulations tbe right to produce and present tbe play was secured to tbe defendants. They undertook to make the disbursements necessary for that purpose not exceeding tbe sum of two thousand dollars ($2,000), and to employ tbe plaintiff in tbe principal role of one of tbe characters of tbe play. And out of the net profits resulting from tbe performance, tbe plaintiff, it was agreed, should receive fifty per cent and tbe defendants tbe same amount. They also agreed faithfully to fulfill on tlieir part all tbe duties and obligations arising under tbe contract to tbe best of their abibty, and to do and perform all things requisite for a faithful performance thereof. Tbe complaint alleges tbe failure of the defendants to fulfill their obligations under tbe agreement, and instances are repeated where, in consequence of such failure, tbe performance of tbe play proved to be unattractive and unremunera-tive. Tbe complaint also contains tbe allegations that the plaintiff, after such failure to observe and fulfill the obligations of tbe agreement on tbe part of tbe defendants, rewrote tbe play and gave it tbe name of “ Black Mail,” and was about to produce it at the Union Square Theatre, in tbe city of New York, and that be was apprehensive that tbe defendants would restrain and enjoin that production. These facts are admitted by tbe demurrer. But it does not follow from them that tbe plaintiff was entitled to an injunction restraining tbe defendants from taking legal proceedings to prevent the performance of the play at the Union Square Theatre. That practice, as it is stated in the opinion of the judge presiding at the trial, would be irregular and unsustained by any authority. The law will not permit a person to maintain an action to prevent the taking of legal proceedings of this description. This subject has recently been fully considered by this court in the case of Hayward v. Hood (39 Hun, 596), where it was held that an injunction will not be permitted to be issued to restrain proceedings in another litigation in which full relief can be secured to the party by way of defense. This case so far is within the principle of that authority, and the action cannot be maintained for that purpose.

But from the allegations contained in the complaint, and admitted by the demurrer, it is clear that the defendants have substantially failed to perform the agreement made by them for bringing out this play. And by reason of that failure they have placed the plaintiff in a situation in which he is entitled to rescind the agreement. For it is “ the legal right of every contracting party to hold himself absolved from his obligation when the other contracting party has failed to keep some condition precedent which he is bound to perform.” (Higgins v. Del., L. and W. R. R. Co., 60 N. Y., 553-557.) And where, by reason of the misconduct of the defendants, they have failed to perform the agreement entered into, as they have according to the admitted allegations of the complaint in this case, an action may be maintained to rescind and cancel the •agreement itself. (McHenry v. Hazard, 45 N. Y., 580.)

The equitable principle upon which this jurisdiction is founded is: “ If an instrument ought not to be used or enforced it is against ■conscience for the party holding it to retain it, since he can only retain it for some sinister purpose.” * * * “ If it is a mere written agreement, solemn or otherwise, still while it exists it is always liable to be applied to improper purposes; and it may be vexatiously litigated at a distance of time when the proper evidence to repel the claim may have been lost or obscured, or when the ■other party may be disabled from contesting its validity with as much ability and force as he can contest it at the present moment.” (2 Story’s Eq. Jur. [5th ed.], § 700.)

The case, as it has been disclosed by the plaintiff, is within this equitable principle. The defendants, by their misconduct, have forfeited tbeir right to produce oi perform the play. They have violated the obligations upon which that right has been made to rest, and having failed in this manner to perform the agreement, the plaintiff is entitled to rescind it, and to have it terminated by an action of this description. For that reason, upon this state of facts, the defendants could be enjoined from performing, producing ■or exhibiting the play. They had forfeited their right to do so by their repeated failure to perform the terms and obligations of the agreement. To this extent the complaint does disclose a cause of action, although it does not as to the other relief demanded in it. For this purpose the action may very well be sustained, as the facts are, by the demurrer, conceded to be.

The judgment should be reversed and a judgment entered overruling the demurrer, with costs, and with leave to the defendants to answer upon payment of the costs of the demurrer and the costs and disbursements of the appeal.

Beady, J., concurred.

Judgment reversed; judgment ordered as directed in opinion.


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    FERDINAND BOEGLER, Respondent, v. FRANCIS M. EPPLEY, Appellant.

      Practice — what motions may be hea/rd, at chambers — general assignment — an agreement between the assignor and assignee that the latter shall receive a specific compensation cannot be enforced on an accounting.

    A general assignment from one Howe to tlie defendant Eppley having been set aside as fraudulent, and a reference had to take and state the assignee’s accounts, a motion to confirm the report of the referee was brought up for consideration at a Special Term held at chambers in the city of New York.

      Held, that an objection that the motion to confirm the report should have been made at a Special Term for enumerated motions was properly overruled.
    Upon the accounting the referee allowed the assignee commissions, amounting to ninety-nine dollars and eight cents, but refused to allow him the sum of $300, which he claimed to be entitled to receive under an agreement made with the assignor, by which he was to receive that sum in case the assignor should compound with his creditors, or the assignment should be attacked by creditors and set aside.

      Held, that the claim was properly disallowed.

      Matter of Huttmrt (89 N. Y., 259) followed.

      Appeal from an order modifying and confirming the report of a referee upon the settlement of the accounts of an assignee under a general assignment.
    TJpon the hearing the assignee claimed to be entitled to retain the sum of $300 as a compensation for his services under an agreement made, prior to the assignment, between him and the assignor, to the effect that if the assignment did not go through, or there was a composition with the creditors, or the assignment was set aside by a creditor, he should retain that amount from the moneys in his hands.

      Charles Blaniy, for the appellant.

      A. Walker Otzs, for the respondent.
   Daniels, J.:

The assignment to the defendant Eppley was made by Philip Ilowe for the benefit of his creditors. It was set aside as fraudulent upon trial at the Special Term, and a reference directed to take and state the accounts of the person named as assignee in the assignment. That was done by the referee and his report thereupon made to the court. It was brought up for consideration and confirmation, before the Special Term, held at chambers in the city of New York. An objection was taken on the part of the appellant that the motion to confirm the report should be made at a Special Term for enumerated motions, and not at the Special Term held at chambers. This objection was overruled, and the court heard and disposed of the application. In that there was no error, for the judge presiding at the hearing had the power, if he was disposed to exercise it, to entertain the application and to hear and decide it as he did. (People ex rel. Mayor, etc., v. Nichols, 79 N. Y., 583, 589, 590.)

The objection principally made to the confirmation of the referee’s report was on account of the disallowance by him of a specific compensation claimed by the appellant, as assignee under the assignment, for the sum of two hundred and fifty or three hundred dollars stipulated to be paid to him by the assignor in case he would accept the assignment and act as assignee. Upon the hearing of the motion he was allowed commissions, amounting to the sum of ninety-nine dollars and eight cents, and the court rejected the sum claimed by tbe assignee under tbis agreement; and that was properly done, for tbe law lias fixed tbe compensation wbicb a person shall receive as assignee under a general assignment for tbe benefit of creditors. That is tbe extent to wbicb it bas been deemed proper or judicious to allow tbe assigned estate to be charged, and tbe assignor bad no authority to charge it further for tbe payment of compensation to tbe assignee to tbe prejudice of bis creditors. If be could bind tbe estate by agreeing for a moderate sum be could for a large amount, and in that manner dispose of bis property in a way not permitted by tbe laws of tbe State. "What be was authorized to do was to execute and deliver a general assignment in good faith for tbe benefit of bis creditors, leaving tbe compensation of tbe assignee to be adjusted as that bad been provided for by tbe legislature. He •could do no more than that, and to have attempted it in the assignment itself would probably have rendered that instrument invalid, by reason of that circumstance, if it bad not been for any other cause. Tbis subject was considered in Matter of Hulburt (89 N. Y., 259), where such an agreement, as is relied upon in tbis case, came up for decision and was disapproved by tbe court. If the assignee is entitled to anything beyond his legal commission, be must look to tbe assignor individually for tbe difference. Many other objections have been presented to sustain tbe appeal, but they do not require special consideration for tbe reason that tbe stipulation of tbe parties, as well as tlieir rights and interests, have been limited to these two points.

Tbe order and direction wbicb was made by tbe court were fully authorized and proceeded, as far as the nature of tbe case required it should go, and it should be affirmed, with ten dollars costs, besides tbe disbursements.

Beady, J., concurred.

Order affirmed, with ten dollars costs and disbursements.