text:
    Edwin Einstein, Resp’t, v. The Rochester Gas and Electric Company et al., App’lts.

      (Supreme Court, General Term, Fifth Department,

      Filed March, 1894)

    1. Contra ct—-Construction .
    A provision, incorporated in an agreement between the assignee of the licensee and a company, organized for the purpose of operating certain patents, that he should, in case of any increase of the capital stock, have issued to him a percentage of such stock proportionate to his amount of' original stock, entitles him to take such increase only in the capacity of a stockholder and preserves his original proportion of the property of the corporation.
    3. Same.
    The consent, by such assignee, to the increase of the capital stock without the receipt of his proportionate share of such increase, operates to change the rate in case of a subsequent increase.
    3. Corporations—Merger.
    A corporation does not become merged in a new company, where it is not a party to the consolidation agreement and preserves a separate corporate existence.
    4. Same—Consolidation.
    Upon a consolidation, the new corporation has the power to purchase the stock of the old corporation, and the president and the officers of the latter, are eligible to become officers of the new corporation, the same as though they are individual stockholders therein. . .
    Appeal from an interlocutory judgment entered in Monroe county, overruling demurrers to the plaintiff’s complaint.

      Edward Harris, for app’lts; George F. JJan/orth, for resp’t.
   Lewis, J.

The demurrers interposed are placed upon the grounds that the complaint does not state facts sufficient to constitute a cause of action. The complaint demands judgment that the defendant, the Rochester Gas and Electric Company, issue to the plaintiff, certificates for $480,000, at its par value of its paid up stock, and in default thereof that the defendants, one or both, be required to pay him that sum. It appears from the allegations of the complaint that the Brush Electric Company of Cleveland, Ohio, was the exclusive owner of valuable patents and inventions for the manufacture of electricity for electric lighting and other purposes, and was the manufacturer of machines and machinery for producing and using electricity, and was the proprietor of what was known as the Brush Electric Light and Double Arc Light. That on the 4th day of March, 1881, it entered into a written agreement with one C. M. Rowley of New York city by which it gave to him the exclusive license and agency for the sale of the dynamos, electric machines and apparatus made by it, or the patents owned and controlled by it for electric lighting, etc., in the county of Monroe, state of New York. This agreement we shall for convenience designate as Exhibit “A,” and hereafter refer to it in that name. On the 19th day of May, 1881, Rowley entered into an agreement with James W. Whitney and George E. Mumford, of Rochester, N. Y., in which they agreed to organize a stock company with a capital of not less than $100,000 for the purpose of introducing the Brush Electric Light in the city of Rochester. In pursuance of such an agreement they appear to have organized such a corporation, and thereafter and on the 8th day of June, 1881, Rowley, as party of the first part, entered into an agreement with the corporation so organized, known as the Brush Electric Light Company of Rochester, N Y, as party of the second part, the material portions of which are as follows: “Now, therefore, this agreement witnesseth: That the said party of the first part for and in consideration of the issue and delivery to him of $48,000 paid up capital stock of the said party of the second part, being 48 per centum of the said capital stock, and the agreement of the party of the second part that if at any time hereafter the said ■capital stock of the said party of the second part shall be increased (otherwise than for stock issued for cash paid therefor at the time of such issue at par to the extent of $100,000) in addition to the present capital, 48 per centum of the par value of such increase shall be issued and delivered to said party of the first part or his assigns fully paid up, has assigned, transferred and set over and by these presents doth assign, transfer and set over, unto said party of the second part its ■successors and assigns, the exclusive agency and license in the ■said city of Rochester and county of Monroe in the state of New York, for the sale and use of the Brush dynamo, electric machines and apparatus made and sold and to be made and sold by or the patents which are or shall be controlled by the Telegraph Supply Company of Cleveland, Ohio, (now 'the Brush Electric Company) as the same are or shall be held and controlled by said party of the first part hereto under and by virtue of said contract hereto annexed, subject, however, to all the terms and conditions contained in said contract so far as the same are applicable to said party of the second part, for and during the said term of 17 years from said 24th of April, 1877, and for and during any renewals or extensions of said patents or any or either thereof. And the said party of the second part for itself, successors and assigns, covenants, promises and agrees to and with said party of the first part, his successors and assigns that in case at any time hereafter the capital stock of said party of the second part shall be increased ■(otherwise than for cash paid for the said increase at the time at par to the extent of $100,000) in addition to the present capital, that then and in that case said party of the second part will issue and deliver to the said party of the first part, his successors or assigns 48 per centum in amount of the par value fully paid up of such increase as a part of the consideration for this agreement; and in case of any such increase -for money paid at the time the said party of the first part or his assigns shall have the right to subscribe for such increase in the first instance on the same terms as other stock holders.” This agreement we shall designate as exhibit “ C " and hereafter refer to it as such. Thereafter and on the 13th day of June, 1881, Rowley assigned all his right, title and interest in exhibit “ A ” to the plaintiff who subsequently and on November 5th, 1881, assigned all his right, title and interest in exhibit “A” to the Brush Electric Light Company. These assignments together with that incorporated in exhibit “ 0,” were subsequently approved by the Brush Electric Company of Cleveland, Ohio.

On the 27th day of February, 1883, the Brush Electric Company of Cleveland, Ohio, the plaintiff and Eowley all joined in the execution of an instrument to the Brush Electric Light Company in which they recite the provisions of exhibit “0” relating to the increase of capital stock of the company ; and also that the purchase and improvement of the water power at the lower Falls in Eochester has involved the expenditure of a much larger amount of money than was contemplated, thus requiring an increase in the capital stock beyond the original amount contemplated, and concludes as follows: “ Mow, therefore, in consideration of the premises and for value received we, the undesigned, assignees of the said Charles M. Eowley of the said contract, and the present owners and holders of the rights and privileges secured to said Eowley in and by said contract, do hereby consent and agree that the said company (referring to the Brush Electric Company of Eochester) shall have the right to increase its capital stock to the extent of $200,000 in cash in addition to the present capital instead of $100,000 as stated in said contract, they not being required to issue and deliver "to said Eowley or his 'assigns any portion of such capital stock fully paid up as stated in said contract, and that said contract may be and is changed and modified in the particulars herein stated and not otherwise.’’ Thereafter the Brush Electric Light Company of Eochester increased its capital stock in the amount of $150,000 making its total capital stock $250,000. The complaint further •alleges that the Brush Electric Light Company of Eochester continued to do business in that city until about August 1st, 1892. That about that time it was thought by the officers, directors and managers of the Eochester Gas Company, the Brush Electric Light Company, the Edison Electric Illuminating Company and the Eochester Electric Light Company that the interest of the stock holders of each would be promoted by consolidating these companies with a largely increased capital stock and thus obtaining a monopoly of the business of furnishing light to the city and the people of Eochester by either gas or electricity. But the plaintiff’s right to 48 per cent, with any increase in the capital stock of the Brush Electric Light Company furnished an obstacle to the formal consolidation of the four corporations. That thereupon indirect means were resorted to by the directors and managers of the four corporations to accomplish, in fact and effect, a consolidation by putting the property and management of the business into the hands of a new corporation and thus obtain a monopoly of the lighting business in Eochester and yet cut the plaintiff out of his right to the 48 per cent, of the increase of the capital stock of the Brush Electric Light Company. For the purpose of putting this scheme into execution, on the 14th day of July, 1892, the Eochester G-as Company, the Edison Electric Illuminating Company and the Eochester Electric Light Company entered into a contract of consolidation into a single corporation to be called 61 The Rochester Gras & Electric Company,” organized under chapter 566 and 567 of the Laws of 1890. The capital stock of this company was fixed at $4,300,000 .represented by 43,000 shares of the par value of $100 each. The contract contained a provision that this company should retain in the treasury 12,500 shares of its stock with which the directors were authorized to-purchase not less than two-thirds of the capital stock of the Brush Electric Light Company paying therefor not more than five shares of the stock of the consolidated company for each share of the stock of the Brush Company. The new company as organized,, issued to the stockholders of the Gras Company 20,500 shares of its capital stock; to the stockholders of the Edison Electric-Illuminating Company 6,000 shares; to the stockholders of the Rochester Electric Light Company 4,000 shares and with the 12,500 shares retained, it purchased from the stockholders of the Brush Electric Light Company all of the outstanding stock of that company, paying therefor five shares of the stock of the new company for each share of the stock of the old'company. It is alleged that the new corporation immediately commenced business, took possession of the property of the old corporations, and that its stock is now worth par. The plaintiff claims that the transaction was in effect an increase of the.capital stock of the Brush Electric Light Company in the sum of $1,000,000, that he was entitled to 48 per cent, amounting to $480,000 of such issue, and that the defendant should deliver to him that amount of stock or pay him therefor. Assuming that the plaintiff is the owner of exhibit “C” and entitled to all the rights and privileges secured by it we are brought to a'consideration of those rights and privileges. What are théy ? As construed by the plaintiff the contract entitles him to recover 48 per cent, of any increase in the capital stock of the company over and above the $250,000-authorized by him whether he is or is not a stockholder. His position may be made more clear by illustration. The original stock was $100,000; of this $48,000 was issued to Rowley and $52,000' retained by the. other stockholders. Suppose the stockholders were of the opinion that their property was worth $500,000 and should decide to increase their capital stock to that amount; each person holding a share of the old stock would be entitled to five shares, so that Rowley holding $48,000 of the old stock would have his increased to $240,000, and the other stockholders who held $52,000 of the original stock would have $260,000; but under the contract Rowley is also entitled to 48 per cent, of the increase, there being an increase of $400,000 his proportion thereof would amount to $192,000 which must come out of the stockholders and. reduce the amount going to them in that sum. As stockholder he gets his share of the increase and as owner of the contract he gets 48 per cent, in addition making about three-fourths of the entire increase. Rowley was the owner of 48-100th of the plant, property and business of the corporation which we have assumed was worth $500,000. Suppose that Rowley had sold his stock before the increase and received therefor his proportion $240,000 the person who purchased from him would stand in his place and be entitled to their proportion of any increase in the capital stock that should be made. Assume an increase to have been made as above stated. Rowley would still be entitled to demand an additional $192,000 even though he had ceased to be a stockholder and had received his 48-100ths of the entire value of the property of the corporation. Again take the figures as actually presented in this case, Rowley received $48,000 of the capital stock; the other stockholders received $202,000, making a total of $250,000. Assume that the capital stock was increased in the sum of a million dollars, making a total of $1,250,000, of this sum Rowley, if he still held the stock originally issued to him, would receive $240,000 and the remaining stockholders $1,010,000. But of the one million increase he is entitled to his 48 per cent., amounting to $480,000, which must come out of the stockholders. He thus gets not only his 48 per cent, of this increase, but in addition thereto his proportionate share as stockholder. These results are, to say the "least, extraordinary and cause us to hesitate to assent to such an interpretation of the instrument. Is it possible that the agreement was ever so understood by the parties? Is such a conclusion rational and logical ? Let us see. The agreement should be read as of the time it was executed having in mind the conditions as they then existed. The Brush Electric Light Company had not then commenced business. By this agreement Rowley conveyed to it the right to use the Brush patents and machines. The company in turn transferred to Rowley his $48,000 of the capital stock. The stock of itself had no value. The value consists in the property and business that it represents. The value of the property, or the magnitude of the business is not dependent upon the amount of the stock which has been issued to represent it, and its actual value is the same before as it is after an increase of the stock. Fifty-two thousand dollars of the capital stock was held by the other persons. Rowley was in the minority, and it was but natural that he should wish to guard himself and prevent his stock from being depreciated. He, as we have seen, was the owner of 48-100ths of the entire property of the corporation. If the majority of the stockholders should see fit to increase the capital stock without paying therefor, and issue it to themselves and others, in common parlance to water it, the effect would be to reduce his interest in the property of the corporation. He had the right to guard against this. Consequently it was incorporated into the agreement that in case of an increase he should have issued to him 48 per centum of such increase which, at that time, was his proportionate share. The agreement treats him as a stockholder owning that percentage of the stock, and it is in that light that the clause in question must be read. Being a stockholder he must have issued to him his proportionate share of any increase in the stock and thus preserve to him his share or interest in the property of the corporation; and evidently the agreement only contemplates him as a stockholder. The property of the corporation is represented by stock. If Rowley should sell his stock he would cease to have any interest in the property of the corporation or voice in its management. As soon as he sells, the purchaser takes his place and becomes entitled to all of his rights in the corporation. Such purchaser is then interested in maintaining his proportionate share of the stock and in receiving his just proportion of any new stock that may be issued. This, the parties evidently had in mind when the provisions of the contract were framed; for we find that brease it should be determined that the capital stock should be increased “ that then and in that case said party of the second part will issue and deliver to the said party of the first part, his successors or assigns, 48 per cent in amount,” etc. Who are Rowley’s successors or assigns here referred to ? Can they be other than those who have taken his place in the corporation, the person or persons who have succeeded to, or to whom he has assigned, his stock? We think not. The purchasers of his stock in turn became entitled to the percentage. If one individual purchased his entire stock the percentage would have continued the same. Had he purchased but a portion thereof, his proportion, of course, would be rated accordingly. If we are correct in this view, the agreement was with Rowley as a stockholder for the purpose of protecting him as such, and upon another succeeding to his stock, his successors or assigns, in turn, became entitled to the protection which the contract gave to him. The 48 per cent mentioned in the contract had reference to his proportionate share of thestock as it then stood and as it was then doubtless expected to remain. Had he sold part of his $48,000 he could not expect his percentage to remain the same, and by consenting to the increase of the capital stock without the receipt of his proportionate share of such increase, operated to change the rate in case of a subsequent increase. If, as it is claimed, the transaction with the Rochester Gras and Electric Company was in effect an increase in the capital stock of the Brush Electric Light Company in the amount of $1,000,000, and Rowley still owned the original stock issued to him, he received his ratable proportion of the new stock. If he had transferred his stock to others they received it in his stead. We have thus far considered the provision of the contract pertaining to an increase of the stock when no money is paid, when the increase is in the nature of a stock dividend. It appears to us that our view is made more clear by the provision which follows, pertaining to an increase of stock for money paid. “And in case of any increase for money paid at the time, the said party of the first part, or his assigns, shall have the right to subscribe for said increase in the first instance on the same terms as other stockholders."

In this provision we have no reference to Rowley's forty-eight per cent, and for reasons that are obvious. If cash is paid for the stock, it would go into the treasury of the company and Rowley would thus get his proportion of the benefits. In case the increase is for cash he is not given forty-eight per cent, thereof, but is given the right to subscribe for such increase on the same terms as the other stockholders. He is thus placed on an even footing with them and given the power to maintain his proportionate share in the company’s property. But assuming that Exhibit “ G ” should be construed as contended for by the plaintiff, we do not understand that there has been an increase of the capital stock of the Brush Electric Light Company. It is not claimed that there has been any such increase, in fact. It is only claimed that the effect of the transaction described is the same as if there had been an increase, and that this plan was resorted to for the purpose of preventing the plaintiff from acquiring any rights under Exhibit “ C.’’ The question presented is one of right under that contract, and if the stockholders had the right to do what they did do, their interest becomes immaterial. The Brash Electric Company has not become merged in the new company, for it is alleged that directors have been elected, and a separate corporate existence maintained. It was not a party to the consolidation agreement upon which the new corporation was organized. Each individual stockholder sold his stock to the Rochester Gras and Electric Company, each receiving for each share so sold fi,ve shares in that company. This they were given the power to do by the express provisions of Exhibit “ 0.” The business of the two corporations was similar. The new corporation had the power to purchase the stock of the old corporation, and its president, or other officers, were eligible to become officers of such corporation the same as if they were individual stockholders therein. The statute provides that “any stock corporation, domestic or foreign, now existing or hereafter organized, except monied corporations, may purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebtedness of any corporation, domestic or foreign, and issue in exchange therefor its stock, bonds or other obligations. When any such corporation shall be a stockholder in any other corporation as herein provided, its president or other officers shall be eligible to the office of director of such corporation, the same as if they were individually stockholders therein, and the corporation holding such stock shall possess and exercise in respect thereof, all the rights, powers and privileges of individual owners or holders of such stock.” Laws of 1892, chapter 688, § 40. The plaintiff is not alleged to have been a stockholder in the old corporation. He, therefore, had no voice in its management or control, nor right to share in any of its property, assets or profits of its business. It is, therefore, not apparent that he suffered by what was done.

The interlocutory judgment should be reversed and the defendants’ demurrers contained, with costs; but with leave to the plaintiff to amend his complaint within twenty days, upon payment of the costs of this appeal and of the demurrers.

Dwight, P. J., and Bradley, J., concur, Haight, J., not taking part.


source: Caselaw Access Project

author: Lewis, J.

license: Public Domain

text:
    Robert E. Burger, Pl’ff, v. William D. Koelsch et al. Def’ts.

      (Supreme Court, General Term, Fifth Department,

      Filed March, 1894.)

    1. Municipal corporations—Ordinances.
    City ordinances have the force of law, and contracts in violation of them are illegal.

      2. Same—Contract—Prohibited by statute.
    When á contract is made to do an act prohibited by statute, no action can be maintained to enforce performance, or to obtain damages for a breach thereof ; nor, if the claim is founded really upon the contract, will an action on the case for damages be supported.
    3. Same—Building contract—Owner’s duty.
    Where a building contract conflicts with the ordinances of a city, it is not incumbent upon the owner to so change the plans and specifications as to conform thereto.
    4. Same—Enforcement.
    When it appears that the contract, which the plaintiff is asking to enforce, is illegal, it is the duty of the court to refuse to proceed with the action further and leave the parties where they have placed themselves.
    5. Appeal—First instance.
    An objection, which could have been obviated if made below, cannot be made for the first time on appeal.
    Motion by defendants for a new trial upon exceptions ordered to be heard in the first instance at the general term, after a verdict directed for the plaintiff at the Brie circuit.

      George M. Osgoodby, for pl’ff; Frank B. Perkins, for def’ts.
   Lewis, J.

The parties entered into a written contract on the 18th day of June, 1892, by the terms of which the plaintiff agreed to provide the materials and construct a three-story brick building on Chenango street in the city of Buffalo, for the consideration of $9,800, according to certain plans and specifications furnished by the defendant and forming part of the contract. The lot upon which the building was to be located was thirty feet front and rear and ninety-two feet in depth. The plans located the front of the proposed building upon the line of Chenango street and called for bay windows upon the front of the building projecting two feet into the street. The building was to be twenty-eight feet wide on Chenango street and the entire width of the lot in the rear and seventy-two feet long. The contract provided that the outside brick walls of the first story should be twelve inches only in thickness. An ordinance of the city of Buffalo, in force at the timé of making this contract and still in force, provided that the external walls of the first story of three-storv brick buildings constructed in the city should be of the minimum thickness of sixteen inches. The ordinances further provided that every building erected contrary to the provisions of the ordinances of the city shall be deemed to be a common nuisance, and the superintendent of buildings may order the same removed and, in case the owner shall neglect or refuse to remove such building within five day after notice so to do, the board of public works may remove it at the expense of the owner. The charter of the city provided that before the construction of any building in the city is commenced, the owner shall file with the superintendent of buildings a sworn statement of the character and use of the building he proposes to erect and its location on his premises, with a copy of the plans and specifications of such building, which statement shall contain the name and residence of the owner and the purposes for, which the building is designed. The superintendent shall, within ten days after the filing of the plans, specifications and statement approve the same or indicate in writing the alterations to be made therein to make them comply with the general laws of the stateand ordinances of the city. But no building shall be erected or remodelled until the approval of the superintendent shall be obtained ami a written permit issued by him to the owner or builder of such building.

The defendants presented plans specifications to superintendent for the purpose of obtaining the required permit, He refused his consent for the reasons : first, that the plans contemplated that the brick walls of the first story of the building were to be only of the thickness of twelve inches, second, that the bay windows would encroach upon the street, and various other objections to the plans were made by the superintendent. Defendant thereupon informed the plaintiff of the obstacles to the erection of the building, and the plaintiff suggested that changes be made in the plans and specifications so that they would conform to the ordinances of the city. The defendant declined to do so because of the additional expense, and for the reason that the increase of the thickness of the walls would make the stores, to which the first story was to be devoted, too narrow. The plaintiff, thereupon, proposed to the defendants that the plan of building of brick should be abandoned and that the building should be constructed of wood to which the defendants assented, and procured plans and specifications for a wood building and submitted them to the plaintiff and other builders for bids. The defendants, thereafter, let the contract to build a wood building upon the lot to another builder whose bid was considerably lower than that of the plaintiff's; the plaintiff, thereupon, claimed damages of the defendants for a breach of thecont ract and instituted this action. It was stipulated on the trial that the plaintiffs’ damages were $350 and the court directed a verdict for the plaintiff for that amount. Ho exception was taken by the defendant to the direction of the verdict. At the close of the plaintiff’s evidence the ordinance prohibiting the erection of the building with the walls of the thickness mentioned, as in evidence, and the defendants, at the close of the plaintiff’s case, moved for a nonsuit. The motion was denied and the defendants •duly excepted. It therefore appeared, at this stage of the trial, that the construction of the building according to the contract ■would have been in direct violation of the city ordinances; it would have been a nuisance if constructed, which the hoard of public works could have abated. The ordinance absolutely prohibiting the erection of the building according to the terms of the contract. The agreement was, therefore, unlawful. City ordinances have the force of law, and contracts in violation of them are illegal. 1 Dill. Mun. Corp., § 308 and note. A contract void for illegality is no contract. 2 Whart. on Contr. § 935. Where a contract is to do a thing which cannot be performed without a violation of the law, it is' void whether the parties knew the law or not. Law of Contr. by Sir W. R. Anson, 191. When a contract is made to do an act prohibited by statute no action can be maintained to enforce performance or to obtain damages for a breach thereof; nor, if the claim be founded really upon the-contract, will an action on the cáse for damages be supported. 1 Story on Contr. § 769 ; see Metc, on Contr., 247-250 ; Broom’s Com. Law, 357; Brinkman v. Eisler, 26 St. Rep. 94; 7 N. Y. Supp. 193 ; affirmed, 40 St. Rep. 865 ; 16 N. Y. Supp. 154. It claimed by the plaintiff that it was incumbent upon the defendants t$ so change and modify the plans and specifications that they iwould not conflict with the ordinances of the city. There is an 'absence of any evidence as to the increased expense of construct- > ing the building with sixteen instead of twelve inch walls. But, manifestly, the additional expense would have been considerable, and then, the width of the stores would have been materially lessened, and we do not see, as between the parties having equal opportunities to know, when they entered into the contract, of the existence of the ordinance making the contract illegal, that the defendants were under any obligations to make the changes in the plans and specifications suggested. Had the alterations been trivial and inexpensive it may be that the rule would be different. A further answer to this claim is that the complaint is based upon the original contract; the contract is alleged, the breach stated and damages are claimed on account thereof. There is no allegation that the defendants refused to make the changes suggested by plaintiff in the contract so as to-avoid the illegal features; if so changed it would have been anew contract, involving new bids for the work; the defendants were not obliged to make a new contract with plaintiff ; the plaintiff occupies the position of appearing in court with an illegal contract, one that he was powerless to perform, a contract which, if he had performed, he would have created a nuisance, and is asking damages for the breach of it. We are not referred to any case holding that when parties have made an illegal contract either party is-under implied obligation to make a new one; if one is bound so-to do the other must be, for there must be mutuality of contract, an illegal contract cannot be made a foundation of an implied assumpsit. Gillet v. Phillips, 13 N. Y. 119. A party to an illegal contract will be released therefrom while it remains executory. Strait v. Nat. Harrow Co., 18 N. Y. Supp. 224; 1 Story on Cont. § 617. It is claimed by the plaintiff that the defendants’ answer failed to raise an issue as to the illegality of the contract The answer in that regard is informal and somewhat imperfect. It does, however, allege that the defendants presented their plans and specifications to the superintendent of buildings and that he, by virtue of his office and the law and ordinances, did insist arid maintain that said building should not and could not, under the law and ordinances aforesaid, be erected or constructed according to said plans and specifications, and thereby prevented the erection and construction of said building under and according to said contract. Then follow allegations to the effect that the contract was abandoned by the mutual consent of the parties, and other plans adopted as stated. The prohibitory ordinance mentioned was received in evidence without the question being raised by the-plaintiff as to the sufficiency of the defendants’ answer. Had the attention of the court been called to the answer, it could, if necessary, have been so amended as to obviate the objection; it is too late, upon appeal, to raise the question. But, without reference to the pleadings when it was made to appear that it was an illegal contract plaintiff was asking to enforce, it was the duty of the court to refuse to proceed with the action further, and leave the ?arties where they had placed themselves. Richardson v. Buhl, 77 Mich. 661. The plaintiff failed to make a case entitling him to a verdict. The defendants’ motion for a nonsuit should have been granted; the verdict should be set aside and a new trial granted, with costs to abide the event.

Dwight, P. J., Haight, and Bradley, JJ., concur.


text:
    Clarence Delafield, App’lt, v. The Village of Westfield, Resp’t.

      (Supreme Court, General Term, Fifth Department,

      Filed March, 1894.)

    1. Contract—Warranty.
    Where the contractor relies, in making his bid, upon the representations as to the character of the excavation and assumes that it is as described in the specifications, such representation is a part of the contract and amounts to a warranty as to the quality of the excavation.
    8. Same—Construction.
    A provision in an agreement for the construction of water-works, that the village should pay a certain percentage of the value of the labor and materials on all work completed up to the first day of the month, does not contemplate an entire completion of the several portions of the work before the contractor is entitled to an estimate.
    8. Same—Accounting—Credit.
    Where the contractor, to secure an advancement, gave a bill of sale, to the city, of the pipe intended for use in the work, some of which was left upon the premises on his quitting the job and used by the city in completing the work, he is entitled to credit for its value, though not laid in trenches by him so as to become a part of the completed work.
    Appeal by the plaintiff from a judgment entered in the clerk’s office of Chautauqua county on the 29th day of August, 1892, in his favor and against the defendant for the sum of $2,515.70 upon the report of a referee.

      William J. Curtiss, for app’lt; Frank W. Stevens, for resp’t.
   Lewis, J.

In the year 1888 the village of Westfield caused to-be prepared plans and specifications for water-works for the village. Bids were invited from contractors. The plaintiff, who was a contractor and engineer, submitted a bid or proposal sheet for the work which was accepted by the defendant and a written contract based upon the plans and specifications and proposal sheet was entered into between the parties on the 19th day of July, 1889. The scheme contemplated taking the water from a stream several miles from the village at a point called the intake. From this point the water was to be first conducted through a vitrified pipe line to a point upon the lands of one Hawley where were to be constructed a filter and small reservoir known in the case as the Hawley filter and reservoir. From there a pipe line was to «conduct the water to the village where it was to be distributed through iron mains along the various streets specified in contract. These mains connected with a large reservoir upon the lands of one Kent known in the case as the Kent reservoir. A lull and particular description of the various parts of the system was contained in the specifications, and particular rules were stated to guide bidders. For the reservoirs, excavations and filling, bids were required tQ be made by the solid yard, once measured only in the dykes; for the ditches by the solid yard of excavation «only; for the iron and vitrified pipe lines by the running foot. At the end of the specifications was the following-: “Note. The vitrified pipe line is mostly and the tunnels are entirely to be in soft shale rock.” The plaintiff’s proposal sheet was submitted to the defendant in line with the specifications with a few modifications. He bid a lump sum of fifteen hundred dollars for the Hawley filter and cistern; one hundred dollars for the valve house at the main reservoir; for the work upon the Kent reservoir twenty-one cents per cubic yard measured in the dyke; modifying as will be observed the defendant’s specifications which provided that the filling should be measured once only in the dykes; for the vitrified and iron pipe by the running foot at different prices stated in the bid; and, under the head of “remarks” stated : “This bid to be considered only as a whole and in no case as a part. I hereby agree to enter into a formal contract with you to furnish such labor and materials, according to the advertisements and specifications, within five days after notice is given to me that you are willing to accept the proposal in all, as called for in the advertisement.” Plaintiff’s bid was accepted by the defendant and a written contract was entered into by the parties on the first day of July, 1889, which provided, among other things, that the plaintiff, in consideration of the payments to be made to him by the village, agreed to furnish all the labor and materials and do the work required to complete the work as named in the proposal sheet annexed, as the same is more fully described in the printed and written specifications hereto annexed; that he would do the work according to the plans and specifications, according to the true intent and meaning of his proposal sheet and such plans and specifications. The contract required the village to appoint a competent person to supervise the work as it progressed, it further provided as follows: “The party of the first part (the village) agrees that their executive committee will cause an estimate to be made before the 10th day of each month, of the value of the labor and materials on all work completed up to the first day of the same month, and will, on said tenth day of each month, pay to the party of the second part, (the defendant) ns a partial payment, ninety per cent, of the contract price of such •completed work, and will, within twenty days after the completion of the work, cause a final and complete estimate of the labor and materials furnished by the party of the second part under this contract, in accordance with said proposal sheet and specifications, and accepted by the board under this agreement, and will pay to the party of the second part, at the ratio named in this proposal sheet, the balance found him due, without undue delay.” It further provided that if the plaintiff failed to prosecute the work •diligently and complete the same by the first day of December, 1889, to the satisfaction of the village, it was at liberty to suspend the execution of the agreement and annul the same. The plaintiff made a deposit of two thousand dollars as security for the performance of the contract. This the con tfact provided should be repaid to him upon the completion of the work. The plaintiff entered upon the work and prosecuted the same till the fore part of December, when the defendant being dissatisfied with the progress and the manner of performing the work, terminated the contract, and this action was brought by the plaintiff to recover ten thousand dollars damages, for breach of the contract.

The case was referred to a referee to hear and determine, and he reported in favor of the plaintiff for the amount of the deposit, two thousand dollars, and interest, and an item or two of extra work, amounting in all to the sum of $2,515.70. From the judgment entered this appeal was taken. Whether the conclusions of the referee are to be sustained, depends upon the construction which should be given to the contract. He held that the plaintiff had failed to perform the contract within the time agreed, and to perform the work as agreed, and that the defendant was therefore justified in declaring the contract terminated. Within a few days after making the contract plaintiff commenced work upon the Kent reservoir. In a few days thereafter he received notice, in writing, from Kent, the owner of the land on which the reservoir was being constructed, directing him to discontinue work, for the reason stated in the notice, that no arrangement had been made for the purchase of the land by the defendant, and threatened to prosecute the plaintiff if he did not desist. The plaintiff, upon advice of his counsel, ceased work upon the reservoir for something over a month. The village had caused a survey and map to be made of the lands of Kent intended to be taken, and had filed the same pursuant to chapter 211 of the Laws of 1885, and therefore had the right to enter upon the land, but this was not known to the plaintiff during the suspension of his work thereon. The lawyer with whom he advised does not seem to have been aware of this act, he had in mind, undoubtedly,- as was quite natural he should, the general condemnation law; the plaintiff testified that he relied upon the advice of his counsel and'suspended work because of the notice, and his evidence in that particular is not contradicted. It is also contended by the plaintiff, and the evidence tends to show, that in digging the trenches and tunnels for the vitrified pipe line he encountered a very large amount of hard rock; that the excavation for the tunnels, instead of being entirely in soft shale rock, were largely made up of hard rock, which required blasting, and that he was in consequence very greatly delayed in the progress of the work. The learned referee held and decided that the note mentioned at the end of the specifications that the vitrified pipe line is mostly, and that the tunnels are entirely, to be in soft shale rock, was not a part of the contract for the reason as stated in his opinion printed in the case,, that at the time the plans and specifications were circulated the vitrified pipe line had not been staked out and located, but that at the time the proposal sheet was executed by the plaintiff and delivered to the defendant, the line had been staked out and located so that it could be traced and followed, and that the plaintiff, in his proposal sheet, offered to do the work in a complete manner, according to the specifications, and that the formal contract made no mention of this note at the foot of the specifications. There were 1225 feet of tunnels, as estimated in the plaintiff’s proposal. His bid was for the entire vitrified pipe line, without extra charge for the tunnelling.. The plans and specifications and the proposal bid of the plaintiff are all referred to im the contract, and are stated to be annexed thereto. They were, without objection, received in evidence. While the exact route- . of the pipe line had not been located at the time bids were invited, the evidence tends to show that the plaintiff relied in making his bid upon the representation as to the character of the-excavation, and assumed that it was as described in the defendant’s specifications, and we think it must be held to be a part of the contract, and that it amounted to a warranty on the part of the defendant as to the quality of the excavation.

It is a matter of common knowledge that in making contracts for such work the character of the material to be excavated, is an ' important factor. The referee construed that part of the contract requiring the defendant to make an estimate before the tenth day of each month of the value of the labor and materials on all work completed up to the first day of the same month, to mean, as applied to the pipe line, that before the plaintiff was entitled to an estimate he must have the portion of the work for which he required an estimate entirely completed; that is to say, he must have dug the trench, laid the pipe, soldered the joints, filled the trench and leveled the ground over the trench, and as to the work upon the Kent reservoir, that he was not entitled to an estimate 'until it was entirely completed. For the work upon the Kent reservoir as stated, the plaintiff was to receive twenty-one cents-per cubic yard for excavating and placing earth in the dyke. The learned referee finds that the plaintiff commenced work upon the reservoir and put into the embankment or dyke between seven and nine thousand yards of earth, but that at the time he abandoned the work, there was left considerable work to be done to complete the same and that he was not entitled to an estimate upon it for the reason that he had not entirely completed it. He found as a conclusion of law “ That for work and labor done on the vitrified and iron pipe line the plaintiff was not entitled to an estimate for its value on the first of the month unless as a matter of fact the trenches had been dug, the pipe laid therein and covered as required by the contract, and he applied that rule to all the work which had been done when the contract was declared terminated by defendant. A rational and equitable contraction should be given to this'contract with view to effecuate rather than defect the intentions of the parties in making it. It will aid in its -construction to consider the situation and condition of the parties at the time the contract was made. The defendant was desirous of obtaining a water system. To that end it was necessary that the party doing the work should be furnished with funds at stated periods as the work progressed, in amounts as large as it was safe for the village to advance. It was agreed that monthly estimates should be made, and that the defendant should pay ninety per cent, of the value of the labor and materials on ail work completed up to the first day of the month. The ten per cent, was reserved as a factor of safety to the defendant. The contract contemplated that the village would employ an expert engineer who should at the beginning of each month make an estimate oE the .amount of work completed by the plaintiff and determine the amount that it would be prudent under the contract for the village to pay to aid him in carrying on his work. There was no practical difficulty in the expert engineer estimating the amount the plaintiff was entitled to for the work performed at the close of a month taking into view the contract price for the work. It was not absolutely essential that the work should be finished and -completed to enable him to make such an estimate. It is suggested by respondent’s counsel that there was no basis for such an estimate until the work was completed, as some portions of the line might be more expensive than other parts and if the engineer was to estimate it in detail it might lead to an over estimate.

We are not able to appreciate the force of this suggestion; we must assume that an educated and competent engineer, knowing the amount to be paid for the different parts of the work, would be able to estimate with reasonable accuracy the proportion of the work done at any stage in its progress. The plaintiff would not be entitled to an estimate until some substantial part of the work had been performed. The plaintiff had done.a very considerable amount of labor upon the Kent reservoir there was no apparent difficulty in estimating the amount; the work upon it extended over several months and we are not willing to accept the theory that the contract contemplated an entire completion of the Kent reservoir before the contractor was entitled to an estimate; the parties did not so construe the contract for in making estimates they did not measure the length of the pipe which had been laid and the work thereon entirely completed, general estimates were made of work as it progressed. While the contract speaks of an estimate being made upon work completed, we think the parties used the word “ completed ” in the sense of work done or performed. Completed” is defined by lexicographers as “to consummate, execute, achieve, realize.” After the October estimate and payment the plaintiff needing more money to prosecute the work, applied to the defendant to advance him the sum of §7,500 as a payment upon his contract. He had at the time a large quantity of iron pipe upon the ground which had not been laid in the trenches, the defendant agreed to and did make the advancement and the plaintiff gave to the defendant a written bill of sale of the pipe in words and figures following: “Westfield, N. Y., October 14, 1889. In consideration of the Board of Water Commissioners of the Village of Westfield advancing to me the sum of seven thousand five hundred dollars over and above the estimate made on the 8th inst, I hereby sell, transfer, assign and set over unto the said commissioners all the iron pipe and specials and vitrified pipe and specials distributed along the line of the proposed waterworks and at the railroad station, to .belong to and be a part of the system of the water-works property as incompleted work on •my contract with the said board, which pipe now belongs to me and is free from any other claim or incumbrance whatever except as by this instrument." Signed by the plaintiff. A part of this iron pipe was afterwards laid in trenches by the plaintiff, the remainder of it, the referee not finding the precise amount, was left upon the premises at the time the plaintiff quit the job and was thereafter used by the defendant in completing the work.

The referee held that the plaintiff was not entitled to credit for the value of the pipe thus transferred to defendant or any part thereof, as it was not laid in trenches and covered as required by the contract, so as to become a part of completed work.

The referee found that at the contract price the work which had been completed on the 10th day of December, when plaintiff left the job, amounted to $28,328.85, what it would have been, had he given a different construction to the contract does not appear. It would manifestly have been a much larger sum for the work on the Kent reservoir alone for which nothing was allowed, ^amounted at the contract price, to from $1,500 to $2,000. Had plaintiff been credited the value of the pipe sold to the defendant, the amount would have been that much larger. If our views of the construction which should have been' given to the contract are correct, it follows that the judgment should be reversed, and a new trial granted, with costs to abide the event.

All concur, Haight, J., in the result.


author: Van Brunt, P. J.

text:
    The People, Resp’t, v. Julia E. Barringer, App’lt.

      (Supreme Court, General Term, First Department,

      Filed February 16, 1894.)

    Evidence—Intent—Criminal law.
    Where a written agreement is put in evidence to show felonious intent, parol evidence is competent to rebut such intent.
    Appeal from a judgment of conviction of grand larceny.
    17. T. Jerome, for app’lt; J. L. Lindsay, for People.
   Van Brunt, P. J.

The defendant was charged in the indictment with grand larceny, there being two counts. The first charges her with the felonious misappropriation of the sum of $2,000, the property of one Zacharias V. Spinosa, in her possession, custody, and control as bailee; and the second charges her with feloniously , taking, stealing, and carrying away the same sum belonging to said Spinosa. Evidence was given upon the part of the people and upon the part of the defendant, and, the jury having rendered a verdict of guilty of grand larceny in the first degree from the judgment thereupon entered this appeal is taken.

Upon the part of the people, the complainant was examined as a witness. He testified that he was a teacher of languages, living at 75 East 100th street, in the city of New York, in May, 1891, and that at that time he saw an advertisement in a newspaper relative to some business opportunity. The complainant answered the advertisement in writing, and subsequently called upon the defendant, Ho. 10 East 14th street, and met there the defendant and her husband. A conversation was had, to the effect that she wanted somebody to help her in her business, as a bookkeeper; that she-had been imposed upon by several other people, and needed somebody of trust; and that she required at the same time a deposit of $2,000 or $3,000 as security. He told her he would consider it, and went home. The second time the defendant sent for complainant, and he went back three or four days afterwards. At this time she said that if he would remain there she would give him half the profits of the business carried on in the house, and that the money complainant advanced would be returned at the end of 12 months in a lump. The complainánt replied that he had determined not to give the $3,000 as security, but he would not mind making an experiment for 12 months, and would give her a security of $2,000. This was accepted, and an agreement was drawn up by Mr. Smith, a brother of the defendant, who was present at the trial. The agreement was as follows:

“ Articles of agreement between Julia E. Barringer, of the city and county of New York, of the first part, and Zacharias V. Spinosa, of the city and county of New York, of the second part. The party of the first part, in consideration of the sum of $2,000-to her paid in hand as hereinafter provided, covenants and agrees to take the party of the second part into her service, at Ho. 10 East 14th street, for the term of one year, beginning from this date, and it is left to the pleasure of Mr. Spinosa to continue rendering his personal services; and it is further agreed that, at the expiration of nine months from this day, either party of this contract shall give notice to the other if the cancellation of this agreement is desired, and the party of the second part shall be entitled, as pay for his services, one-half of the net proceeds arising from the commission business carried on at Ho. 10 East 14th street, city of New York, under the name of the party of the first part. The, said amount of $2,000 to be returned to the second party, in a lump, at the expiration of the contract. The party of the second part, in consideration of the interest given to him as herein provided, covenants and agrees to pay to the party of the first part $500.00 (five hundred dollars) on the signing and execution of this instrument, and $1,500 (fifteen hundred dollars) more in three different payments, at $500 .each, (until the sum of $2,000 is paid,) at such time as may be required by the party of the first part during the term of the agreement as above specified. In witness whereof, the parties hereunto have set their hands and seals the eighth day of June, in the year one thousand eight hundred and ninety-one.
Julia E. Barringer.
Zacharias Y. Spinosa.”

This was signed and executed by the parties in the presence of .Smith, who had' drawn the same up. Pursuant to this agreement, the complainant paid the defendant $500, and four or five days afterwards made the next payment of $500, and three or four days after that a payment of $1,000. After the agreement, the complainant went there, in accordance therewith, to see what services he could render. The defendant asked him to copy certain chattel mortgages, which she drew with his name inserted as the mortgagee. The complainant said he did not like to have his name in those papers, and she said he need not fear; that his name wduld not be made public: that she could not insert her own name, because she was the broker, and if she inserted her own name it would be usury, but that she, as a broker, could charge any brokerage she liked. He made out seven or eight of these mortgages, which the defendant kept. The complainant did not keep any of them in his possession. This was all the bookkeeping he did. At the end of three weeks the complainant was introduced to a gentleman by the name of Armelia Castilo by the defendant, she saying: “ Here is a friend of mine, Mr. Castilo. He is a partner of mine.” The defendant told him afterwards that he would be entitled to half the profits she was making with him as a special partner. She said:

“ ‘H"o,’ I would not be entitled, because he would be a different partner from me. Question by the Court: Q. He was a different partner? A. Yes, sir. I said, ‘Ho;’ that I was nothing but her bookkeeper there; that I was entitled to half the proceeds of the business carried on in the house, according to the agreement; and that I could not be a partner, because 1 was nothing but a bookkeeper, and she had my money as security. She said then that the contract was wrong, and that it would be altered. I said, if the contract was wrong, and had to be altered,- that the money had to be returned to me after that, and we could see what new arrangements we could make. She said, ‘Ho,’ she wouldn’t give me the money back, but she would make a verbal contract, allowing me $40 a week for the use of the $2,000. She asked me if I wouldn’t be contented with that. I said ‘ Ho, that would be usury;’ I would stick to the contract to give me half the profits of the business carried on in the house.”

After that the complainant went to see his lawyer, and subsequently went to see the defendant, and tried to get as much money as he could out of her by way of profits. After certain negotiations, he got $15 a week on account of profits for two or three months from the latter part of August until the end of Hovember,, 1891. The complainant further testified to giving the notice under the contract, and the $2,000 was never returned. On cross-examination it appeared that the complainant had brought an action in the supreme court to recover the amount claimed to bs due. In his complaint he swore that he bad given the defendant $2,000, and received back $642, leaving a balance of $1,358. Tt further appeared that in June he had received certain other sums of money ; and the complainant further testified that the $2,000 was, to be given as security. It further appeared that, in addition to the mortgages testified to as being taken in the name of Spinosa, he received a number of notes which were held by him, and which were taken in the business carried on by the defendant.

Upon the part of the defense, the husband was examined as a witness. He testified as to the negotiations between the complainant and the defendant, and to certain conversations in regard to the form of the agreement, and that the complainant was to advance the money to put into the business, and that he stated how he wanted the money invested,—that the mortgages were to bear 6 per cent, interest, and to be taken in his name, and that he was to have half of the brokerage. The defendant was also examined on her own behalf, to the effect that he had $2,000 to invest, and that the money was to be invested on chattel mortgages on furniture, and the notes and mortgages were to bear 6 per cent, interest, and he was to have that; and that she was to charge 30 per cent, commission, the half of which was to go to the complainant. The defendant also offered as a witness William J. Smith, who drew the agreement, and he testified that at the time, or just before, it was signed, he heard a conversation between the defendant and the complainant, and when asked to state whether it was at the time, or immediately before, the court asked whether it was for the purpose of modifying or changing anything. The defendant’s counsel stated that he proposed showing what the conversation was, and the court replied that he would not allow him to introduce any evidence to contradict the paper. The defendant’s counsel stated that he proposed to show that at the time, or immediately before, it was signed, defendant objected to the word “ service ” in the agreement, and that the complainant insisted upon its going in there; and the court refused to allow the evidence. The defendant’s counsel insisted upon the right to show what was the understanding and agreement, and what was said in connection with the contract, and what led up to it. The court refused to allow the evidence. The defendant’s counsel then asked:

Q. At the time this contract was signed, was there anything suggested by Mr. Spinosa about avoiding the usury law? A. Yes, sir. Q, How, what did he say in regard to avoiding the usury law ? A. He said he would put that word 1 service ’ there to evade the usury law, to get around it—something like that. That is what he said. The Court: And then it was signed with that understanding? A. Yes, sir. The Court: And therefore the defendant in this case entered into an agreement to violate the statute by evading the usury law, so that one was about as bad as the other.”

The defendant’s counsel then asked:

“Did you hear any conversation immediately before the signing of this, or some time before between these two, as to what was to be done with this money ?”

This was excluded upon the ground that all conversations and all agreements are supposed, in law, to be merged in the written agreement; and an exception was taken. It is urged upon the part of the defendant that this was error. The complainant had "been allowed to testify as to the conversation which led np to the agreement, and the purpose for which the contract was entered into. It is true that no objection was taken to this. The defendant and her husband had also been examined on this point, and had testified. It further appeared from the testimony that Smith was present at the time of the execution of this agreement, and at the time it was drawn up; and, notwithstanding this condition of the testimony, the court refused to allow the witness Smith to testify upon the same subjects in respect to which the other witnesses had been examined. And the question submitted to the jury was whether this money was given to the defendant by the complainant as security, and the jury were instructed that if the defendant received it upon that understanding, and then, with intent to deprive the complainant of its possession, she used it for any other purpose than as security for his good conduct, and appropriated it to her own use, she was liable to be convicted under the indictment of grand larceny in the first degree. The jury were further charged that, in determining to whom they would give credence, they should take into consideration the written agreement, and, although any subsequent agreement in reference to the transaction might be made orally or by parol, no prior conversations or transactions were permitted to contradict or impeach the written contract. The court was further asked to charge the jury that if they found upon the evidence that, at the time the complainant delivered the money to the defendant, it was agreed that it should be invested in chattel mortgages, and the profits divided, and it was so invested, then the defendant should be acquitted. The court replied, “I have charged that, substantially, and I refuse to charge other than I have charged.” The question thus submitted to the jury was as to the circumstances under which this money was paid; and, as already stated, evidence had been given, both on the part of the people and the defendant, as to the circumstances which led up to this agreement. The agreement itself shows nothing in regard to the purposes for which the money was to be given. It is true it says that the complainant was to be entitled to half the profits for .his services, and that the amount of $2,000 was to be returned in a lump at the expiration of the contract. But the agreement is not of that definite and explicit character as to deprive the defendant, even as between the parties, of the right to give testimony as to the purposes for which the money was to be used; and it is clear'that in the case of a criminal prosecution the rule applied by the learned recorder cannotprevail. The question is as to the felonious intent of this defendant; and she cannot be precluded from showing that such felonious intent-did not exist, simply by the production of a paper wherein she has written or signed something inconsistent with her claim of the non-existence of the felonious intent. She is not estopped by any such writing. The jury have a right to consider the writing, in determining the question as to the credibility of the witnesses, and the weight to be given to the testimony; but there is no ground, in a case of that description, for the application of the rule that parol evidence cannot be offered to rebut the claim of felonious intent. The defendant, therefore, had a right to the testimony of Smith for the purpose of showing that it was the understanding of the parties, at the time this money was delivered, that it was to be invested in chattel mortgages, and not to be held merely as security. For this error, we think the judgment should be reversed, and a new trial ordered.

All concur.


author: Per Curiam.

text:
    Theodore B. Osborne et al., Resp’ts, v. John G. Norris, Impleaded, etc., App’lt.

      (Supreme Court, General Term, First Department,

      Filed February 16, 1894.)

    Mortgage—Whole sum to become due.
    In case of a covenant in a mortgage that the whole sum should become due after default in payment of interest for specified time, the court will not grant relief to the mortgagor from the effect of his default, when the mortgagee has done nothing to render it unconscionable for Mm to avail himself of it.
    Appeal from a judgment in favor of plaintiffs.
    A. J. Sire, for app’lt; Edward M. Scudder, for resp’ts.
   Per Curiam.

On the 6th day of August, 1891, James W. Ketcham mortgaged the premises No. 587 Seventh avenue to the plaintiff’s testator, to secure the payment, on April 15, 1896, of $28,000 with semi-annual interest at five per cent, per annum, payable on the 15th days of October and April in every year. The mortgage was given to secure the payment of part of the purchase price of the mortgaged premises, which were, on the day of the date of the mortgage, conveyed by the mortgagee to the mortgagor. The mortgage contains the following covenants:

“ First. That he, the said James W. Ketcham, the party of the first part, will pay the indebtedness as hereinbefore provided; and, if default be made in the payment of any part thereof, the party of the second part shall have power to sell the premises herein described, according to law.”

“ Third. And it is hereby expressly agreed that the whole of said principal sum shall become due, at the option of the party of the second part, after default in the payment of interest for thirty days, or after default in the payment of any tax or assessment for sixty days, after notice and demand.”

By the statement which precedes the case it appears that John Gf. Norris, the appellant, was the owner of the premises when this action was begun, in June, 1892, and he was the only party who appeared and answered. The sole defense interposed by the answer is that the mortgage ought not to be foreclosed for the principal sum, the defendant having tendered the amount due for interest. The interest which fell due on the 15th of October, 1891, was paid, but that which fell due on the 15th of April, 1892, has not been paid. On April 21, 1892, the plaintiffs’ attorney wrote the attorney for the owner of the fee that the interest was past due, and that a check therefor might be sent to the writer, or to Mr. Osborne, one of the plaintiffs “ as per mem. left with you.” On the 11th of May 1892, four days before the lapse of the thirty days mentioned in the mortgage, the plaintiffs, through their attorney, notified the attorney of the appellant that, unless the interest due on the mortgage was paid May 14th,' by 12 o’clock M. , the holders of the mortgage would elect that the principal sum be then due, and that they would immediately thereafter foreclose, unless the whole amount was paid. The interest not being paid, this action was begun on the 27th of June, 1892, for the foreclosure of the mortgage. The court found that the appellant did not, before the commencement of this action, tender to the plaintiffs the interest due on the mortgage, and that they were at all times ready and willing to receive the interest due April 15th, 1892, during "the next succeeding thirty days, but that no offer was made to pay it, The court also found that no offer was made until January 24, 1893, after this action was at issue, when the appellant tendered the sum due for interest and costs, and asked leave to have it paid into court, which was denied. Under such circumstances the appellant is in no position to ask to be relieved from the express terms of the-contract by which he was bound. The plaintiffs have not been guilty of fraud or oppression in seeking to enforce this mortgage. They gave the owner of the fee ample notice, before the thirty days had run, that unless the interest was paid they should elect to regard the whole amount secured by the mortgage as due and payable, and should commence foreclosure at once. Uo attention was paid to this, and after the lapse of six weeks this action was commenced, and not until the January following did the appellant offer to pay the amount which he concedes to be due. The right of the plaintiffs to enforce the co venant under such circumstances has been settled by a long line of adjudications in this state. Hale v. Gouverneur, 4 Edw. Ch. 207; Ferris v. Ferris, 28 Barb. 29 ; Dwight v. Webster, 32 Barb. 47; Bennett v. Stevenson, 53 N. Y. 508 ; Noyes v. Anderson, 124 N. Y. 180 ; 35 St. Rep. 94.

The judgment should be affirmed, with costs.


author: O’Brien, J.

text:
    William J. Quinlan, Jr., Resp’t, v. John E. Fairchild, App’lt.

      (Supreme Court, General Term, First Department,

      Filed February 16, 1894.)

    Bills and notes—Defenses.
    In an action between the original parties, where there was no consideration, but the note was delivered under a misapprehension and mistake, such facts, if proven, will be a good defense.
    Appeal from .a judgment entered upon a verdict directed by the court on the pleadings.

      John G. Bobinson, for app’lt; S. Hanford, for resp’t.
   O’Brien, J.

The action was on a promissory note given by the defendant to plaintiff. At the opening of the trial, before any evidence was taken, the plaintiff moved for the direction of a verdict in his favor on the pleadings, which motion was granted, and the defendant excepted.

The complaint is the usual one upon a promissory note, setting forth a copy of the note, which it is alleged the plaintiff received for value. The parties to the note are the parties to this action, and by the answer the defendant denies that it was given for value, asserting that he delivered.it under a mistake and misapprehension arising from the following facts: That one Washington Quinlan, in his lifetime, had certain obligations of the defendant which came into plaintiff’s possession ; that the plaintiff made demand on defendant for the payment of such obligations; and that defendant, “ believing the plaintiff to be the administrator or executor of the said Washington Quinlan, in order to liquidate the claim upon him of the estate of said Washington Quinlan,” upon the obligations mentioned, gave to plaintiff the note in suit. Then follows a denial that the plaintiff is such executor or administrator or personal representative of Washington Quinlan, or that the obligations belonging to the latter had ever been indorsed or transferred to plaintiff, who, it is alleged, was in no way entitled to receive payment on account thereof. The plaintiff’s motion for a direction was, in effect, a demurrer to the answer, and, in testing the correctness of the disposition made by the court of such motion, all the facts alleged must be taken as true. We think that in an action between the original parties to the note, where the defense, as here, is that there was no consideration passing between the parties, and no value given for the note, but that it was delivered under a misapprehension and mistake, such facts, if proven, would be a good defense. If the answer had alleged that the obligations claimed to have belonged to Washington Quinlan had been surrendered, or if there had been any allegation from which it would appear that there was a consideration moving from the plaintiff to the defendant, it would be otherwise; but, so far as appears, the defendant gave this note to discharge obligations which were due to the estate of Washington Quinlan, and it does not appear that these obligations were surrendered or delivered to defendant. Our conclusion is that it was error to direct a verdict on the pleadings, and that the judgment, therefore, should be reversed, and a new trial ordered, with costs to appellant to abide the event.

All concur.


text:
    In the Matter of the Holland Trust Company.

      (Supreme Court, General Term, First Department,

      Filed February 16, 1894.)

    Attorney and client—Order to pay over money.
    An attorney, employed by a guardian to collect money, will not be ordered to pay over to the estate the amount of his charges, in the absence of dispute as to his services.
    Appeal from an order in favor of the petitioner.

      Anson B. Stewart, for app’lt; Edward Bussell, for resp’t.
   Van Brunt, P. J.

It is difficult to imagine upon what theory this motion is founded. There is no claim but that the attorney rendered the services charged for and is entitled to be paid therefor. But it is said that his client has charged the same to his account as guardian, when he should have paid for them himself. Even if this were so it is difficult to see how the court can summarily take this money out of the attorney’s pocket. All charges of administration are primarily the personal debts of the administrator, but if incurred properly, for the benefit of the trust fund, they will be allowed to the administrator upon the settlement of his accounts. So, in the case at bar, the guardian was liable for the services of his attorney. If they were improperly charged to his ward, the only way to settle this matter was to have the accounts of the guardian passed, and to have him charged with whatever was due. The order appealed from should be reversed, with $10 costs and disbursements, to be paid by. the petitioner, and the motion denied.

All concur.


text:
    Colorado State Bank, App’lt, v. Patrick H. Gallagher, Resp’t

      (Supreme Court, General Term, First Department,

      Filed February 16, 1894.)

    Corporations—Foreion—Actions by.
    Section 1780 of the Code does not apply to an action by a foreign corporation against a non-resident.
    Appeal from a judgment and order overruling a demurrer to the answer, and dismissing the complaint.

      Geo. W. Van Slyck, for app’lt'; L. B. Beckley, for resp’t.
   O’Brien, J.

J.— This action was brought on a promissory note, and by the answer it is alleged that the plaintiff is a foreign corporation, that the defendant is a non-resident, and that the note sued upon was made at Durango, in the state of Colorado. The answer then alleges that by reason of these facts the court was without jurisdiction of the subject matter or of the person of the defendant. To this answer the plaintiff demurred, on the ground that it was insufficient, and this demurrer was overruled ; and from the order and interlocutory judgment overruling the demurrer this appeal is taken.

Section 1780 of the Code of Civil Procedure provides that an action against a foreign corporation'may be maintained by a nonresident only in the cases therein mentioned. Robinson v. Oceanic Steam Navigation Co., 112 N. Y. 315; 20 St. Rep. 741 which was an action against a foreign corporation, involved the application of § 1780. In the course of the opinion in that case it was said:

“ Our court should not be vexed1, with litigations between nonresident parties over causes of action which arose outside of our territorial limits. Every rule of comity and of natural justice and of convenience is satisfied by giving redress in our courts to nonresident litigants when the cause of action arose or the subject matter of the litigation is situated, within this state.”

With respect to the specific question therein presented,—of jurisdiction over a foreign corporation,—it was decided that it was controlled by § 1780; and the quotation above given from the opinion, apart from any provisions of law, is expressive of the policy of our courts in relation to action's in which non-residents ■are parties, and which are not otherwise, controlled by the Code. It will thus be seen that, in relying upon the case of Robinson v. Oceanic Steam Navigation Co. as authority for the proposition that the court was without jurisdiction, the learned judge below fell into error. It is true that, in cases coming within § 1780 of the Code, the court is without jurisdiction, but, with respect to actions other than those therein specified affecting non-residents, the court, though having jurisdiction, may, in a given case, from motives of policy, refuse to exercise it. This distinction between the jurisdiction of the court and the discretion vested in it is clearly pointed -out in the two cases of Winchester v. Browne, 13 N. Y. Supp. 655 ; 37 St. Rep. 542, and Burdick v. Freeman, 120 N. Y. 420; 31 St. Rep. 427. In the case at bar, as the" court had jurisdiction, if it saw fit to exercise it, the answer was insufficient in law, and was obnoxious to demurrer. Our conclusion, therefore, is that the judgment should be reversed and that the defendant should be permitted to answer over upon payment of costs.

All concur.


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

text:
    Henry H. Landon et al., Pl’ffs, v. George W. Walmuth, Def't.

      (Supreme Court, General Term, First Department,

      Filed February 16, 1894.)

    1. Vendor and Purchaser—Title.
    Where the right of executors to convey real estate is doubtful, it will justify a purchaser in refusing to accept title from them.
    ■3. Costs—Submission of Controversy.
    A provision, in the stipulation to submit a controversy, that the judgment should be without costs, is not binding on the court.
    Submission of controversy without action.

      H. W. Taft, for pl’ffs; Moses Weinman and D. G. Crosby, for ■def’t.
   Van Brunt, P. J.

In August, 1874, one Charles G. Landon, a, resident of the city of New York at No. 7 Bast Fourteenth ■street, made his last will and testament, by which, after having directed the payment of his just debts and funeral expenses, it was provided as follows :

“Second. I give, devise, and bequeath to my executors hereinafter named all my property and estate of whatsoever kind or nature, to be held by them, controlled, and managed without division or partition, until my son Francis Griswold Landon, now aged fourteen years, shall arrive at the age of twenty-one years, and, if he shall die before that time, then until my daughter Mary Gordon Landon shall arrive at that age; and out of the income and avails thereof to support and maintain my wife and family and0 to educate my younger children in a manner suitable to their ■condition and prospects in life. In case such income is not suffi dent for that purpose, my executors are empowered to sell suffi -dent of my estate for such purpose until my said son Francis shall arrive at the age of twenty-one years. In case my said son Francis and my daughter Mary shall die before arriving at such age, and all my other children shall be of full age, then the provisions of this, my will, hereinafter contained, shall be carried into-effect in the same manner as if my son had arrived at the age of twenty-one years at the time of his death. Third, After my son Francis G. Landon shall arrive at the age of twenty-one years, or if he and my daughter Mary Gordon Landon shall die before that time, all my other children now being of full age, then-that is to say, after the happening of either of said events—I will and direct as-to and concerning my said property and estate as follows: I give, devise, and bequeath to my beloved wife, Susan Gordon Landon,. in fee simple, absolutely, forever, my house and lot number T Bast Fourteenth street in the city of Hew-York, or such other-house as I shall own and reside in at the time of my decease, together with all the furniture, beds, bedding, china ware, plate,, pictures, ornaments, and property of all kind's in and about such-house, belonging to me, and my horses, carriages, harness, robes, and horse and stable equipments and furniture of all kind."

Then, after providing for an annuity to his brother and sister and to his wife, he directed his executors to divide the residue, and remainder of his estate on the arrival of his youngest child at the age of 21 years into six portions, giving one part to his wife- and one to each of his children ; and then, after having made-some provision in regard to real estate owned by himself and bis partner, and after appointing his wife guardian of his infant-children, and naming his executors, the will proceeded as follows:.

“ Thirteenth. I authorize, empower, and direct my said executors, to sell my real estate, wheresoever situate, whenever, without coming in conflict with the eighth provision of this will, they shall deem a sale thereof expedient and proper, and to execute .good and sufficient deeds to purchasers upon any sale thereof or any parts thereof; to collect and receive the rents, issues, and profits thereof; to repair and improve the same out of my personal estate and the proceeds of my real estate sold; and generally to manage, control, and dispose of the same as they shall see fit. Fourteenth. In case of the death of my wife, Susan Gordon'Landon, before my death, my said children and their issue per stripes shall take the share, property, and estate herein demised and bequeathed to my said wife in equal proportions. Fifteenth. In case of the death of either of my children before my son FrancisGriswold Landon shall arrive at the age of twenty-one years, without issue, the share to which the child so dying'would have been entitled under this, my will, if death had not intervened, shall go-to the survivors or the survivor of my said children, and the issue of such as shall be dead, per stripes, in equal shares. Sixteenth. If either of my said children shall die before the time of my death, leaving issue, then the share herein given to the said child shall go to his or her issue, per stripes; but if there be- no issue of such child so dying, then his or her share shall go to my surviving children, or their issue, per stripes."

In Hovember, 1874; the testator made a codicil to his will, re-yoking the legacies, devises, and bequests to his two daughters in said will contained, and in lieu thereof he gave, devised, and bequeathed all sums of money or property, real or personal, which would go to his daughters under and by virtue of said will, to two of his sons in trust, and then states the nature of the trust. In August, 1885, the testator made an additional codicil, by which he revoked all and every provision in his will and codicil for his son Henry H. Landon, except the provision making him one of his executors; and in lieu thereof he gave, devised and bequeathed to his other two sons the portion or share of his estate which in his said will and codicil he had given, devised, and bequeathed to his said son, in trust for certain purposes, among which was to sell and dispose of his estate, both real and personal, at such times and in such manner as to said trustees might seem advisable, and to invest and reinvest the proceeds, etc. On the 3d of October, 1885, the wife of the testator died, and the testator himself died on or about the 23rd of March, 1893, owning and residing in the dwelling house known as “No. 428 Fifth Avenue.” All the children of the testator survived him and are now living, and at the time of his death were, and now are, of full age. The will and codicils were duly admitted to probate, and on the 11th of October, 1893, the plaintiffs, as executors of the will of Charles Gr. Landon, deceased, entered into a contract with the defendant for the sale of the premises 428 Fifth avenue, in which the testator resided at the time of his decease. Upon the date and at the place appointed for the delivery of the deed mentioned in the contract the plaintiffs tendered to the defendant their executors’ deed, and the defendant tendered the consideration, but refused to accept the deed as a' compliance with the contract upon the ground that the plaintiffs did not have power under the will to convey said property. To meet this objection the plaintiffs, in addition to said executors’' deed, tendered to the defendant a deed purporting to convey said premises, duly executed and acknowledged by all the children of said testator and the wives of the married sons of the testator and also a deed executed by the trustees, mentioned in the first and second codicils to his will. The defendant again refused to accept the deeds as a compliance with the contract. Upon this state of facts various questions are presented, but there is only one which it seems to be necessary to determine, and that is whether the plaintiff tendered to the defendant a marketable title, and one free from reasonable doubt; and the answer to this question depends upon the construction of the will and codicils of' Charles Gr. Landon.

It is urged upon the part of the plaintiffs that, there being a general power of sale contained in the will, it applied to all the real estate of which the testator died seized, wherever situate, and included the premises in question. There seems to be very grave doubt as to whether it was not the intention of the testator to exempt from the powers of sale contained in the will the premises bequeathed to his wife. Upon the arrival of his youngest son at the age of twenty-one, the gift of the premises in which he might. live to his wife was absolute, and over which his executors had no control whatever after the happening of this event. It was undoubtedly the intention of the testator that until this time arrived all his children should live with their mother as one household. But when that time arrived, then the house in which he lived was to belong to his wife absolutely, and a provision was to be made for her support out of his remaining property; and that he did not intend that this general provision in regard to the power of sale should apply to this property is further emphasized by the fourteenth clause of his will, in' which he says: “In case of the death of my wife, Susan Gr. Landon, before my death, my said children and their issue per stripes shall take the share, property and estate herein demised and bequeathed to my said wife in equal proportions.” This devise is given after the general power of sale is conferred, keeping his property distinct from other portions of his estate, and making a separate disposition of the same in case of the death of his wife. It was not to fall into the residuary estate ; it was not to be divided up with the rest of his estate; it was bequeathed directly to his children, and they would have taken it under this will absolutely, had it not been for the codicil subsequently made. But by the first codicil he revokes all the provisions made in his will for his two daughters, and he places their share or interest in trust, and there is no power of sale contained in their codicil in respect to the interest or share of such daughters. As far as their interest in the other portions of the estate is concerned, it was unnecessary, because the power of sale contained in the will enabled the executors to sell the real estate for the purposes of division. That under this codicil real estate was intended to be devised to the trustees is evident, because he says he gave, devised, and bequeathed all sums of money, and property, real or personal, which would go to his daughters, and in respect to this real property in question no power of sale was given. It is apparent that the only real property which the testator had in mind as passing under this codicil was the real estate which had been devised to his wife, and which, in the event of her death, was to go in part to his daughters. He evidently contemplated that the balance of his estate should be divided among his children, not in realty, but after a sale for the purpose of division. In the subsequent codicil, where he revoked the provisions of his will for one of his sons, and in which he devised the portion or share of his estate which in his will he had bequeathed to his said son to certain of his other sons as trustees, there is an express giving of authority to sell and dispose of real estate, etc., which is conspicuously absent in the provisions of the previous codicil. Under these circumstances, can it be said that it was the intention of the testator that the general provision of the will should enable his executors to sell real estate which he had absolutely bequeathed to his wife? If it was not, then the portions of his daughters in such real estate went to trustees who had no power of sale over such interest.

Can it be said, then, that the title to this real estate tendered to this defendant is a marketable title, and free from reasonable doubt? We think not, and that under the principles laid down in Kilpatrick v. Barron, 125 N. Y., 751; 36 St. Rep., 15, the defendant should not be compelled to take. It is true, since the decision of Fleming v. Burnham, 100 N. Y., 1, the court of appeals have decided in at least one case that, where only questions of law were involved, in an action of this description the court was bound to interpret the will, and give judgment accordingly. But we think that the later decisions have not gone to this length, and that the case first cited should control in the disposition of this controversy. The defendant is therefore entitled to judgment. We notice that the stipulation of the parties is that the judgment shall be without costs, but we know of no power in the parties to take away the discretion which the Code absolutely gives the court in controversies of this description, and therefore costs are allowed.

Judgment ordered for defendant, with costs.

O’Brien, J., concurs.

Parker, J.

I concur in the opinion, except in so far as it refers to the question of costs. It is true that the provisions of the Code governing the submission of a controversy upon agreed facts does not give to the successful party costs as a matter of right, but commits to the judicial discretion of the court the duty of determining whether costs should be granted or withheld. Were the Code silent on the subject of costs in such a proceeding, the prevailing party could not recover costs, either with or without the aid of the court. By the Code the right to costs is given when the facts are such as to require the court, in a judicial exercise of the discretion committed, to award them. When awarded, it is by way of indemnity to the party because of the expense incurred in securing his legal rights, and is beneficial to him. Now, it is difficult to see why a party may not waive such an advantage or benefit as well as another; why he may not deprive himself by his consent of that which may for convenience be called a “contingent benefit,” as well as of an absolute one; why he may not deny to himself the right to costs which may be awarded in the discretion of the court, as well as of costs which the Code awards absolutely to a successful party in an action at law. There is no right which a man has that he may not waive. He may waive rights which are secured to him by statute or organic law, and that which he duly waives the court has no power to award to him. I think costs should not be allowed.


text:
    Charles F. Smith, Resp’t. v. Claude L. Gourand, App’lt.

      (Supreme Court, General Term, First Department,

      Filed Feb. 16, 1894.)

    Pleading—Complaint—Service.
    Plaintiff’s remedy, after the time for serving the complaint has expired, is by motion to open the default, and not by a motion to compel defendant to accept service.

      Appeal from an order requiring defendant’s attorney to accept service of the complaint

      Stephen C. Baldwin, for app’lt; Edwin B. Leavitt, for resp’t.
   Per Curiam.

The complaint was served after the time, for such service had expired, and the plaintiff therefore, as a matter of right, could not have insisted upon the defendant accepting the same, and the form of his motion, instead of being to compel defendant to accept, should have been to open the default. In his. notice of motion, however, he asked for such other relief as the court might grant; and, sufficient facts appearing to warrant the opening of the default, and the granting of the motion for leave to serve the complaint, it is to be assumed that this was the relief which the court intended to grant. We think, therefore, while the form of the notice of motion, and the order entered upon granting the same, may not be strictly correct, because requiring the defendant to accept the complaint, instead of opening the default, and granting permission to serve the complaint, that the proper disposition to be made of the appeal would be to affirm the order, without costs.


text:
    Ira A. Harpending, Resp’t. v. Elisha Gray, App’lt.

      (Supreme Court, General Term, First Department,

      Filed Feb. 16, 1894 )

    Bills and Notes—Defense.
    Payment of a note, to one who has parted with it, is not valid as against a holder for value before maturity.
    Appeal from a judgment entered on a verdict directed in favor of plaintiff, and from an order denying a motion for a new trial

      B. L. Harrison, for app’lt; W. 0. Campbell, for resp’t.
   Van Brunt, P. J.

This action is founded upon a promissory note made by the defendant to his own order, and indorsed, and alleged to have been acquired by the plaintiff in good faith before maturity. The defense admits the making of the note, but denies any knowledge or information sufficient to form a belief whether the alleged copy of the note contained in the complaint is a true copy of the note executed by her, and also denies any knowledge or information as to whether said note passed to the plaintiff for value before maturity; and, further answering, alleges that the note has been paid, and that the note was lost or mislaid by the holder thereof; and at the request of the holder, upon the representation that such note was lost, the defendant paid such note; and that defendant is informed and believes that the plaintiff well knew that the note had been lost, and had been paid by the defendant,' when the note came into the hands of the plaintiff. Upon the trial it appeared that the note was made on the 13th September, 1886, six months after date, and was delivered to one Bodney M. Whipple, who delivered it, with other notes, to D. H. Jackson, in part payment for stock in the Chicago Mining & Seduction Company, some time after the notes were made, and before maturity. Subsequently Whipple had .transactions with one D. G. Boberts, whereby Boberts is alleged to have pledged with Whipple, for loans to him, $15,000 of the defendant’s paper. Boberts delivered to Whippje $12,500, and was to send him $2,500 more, and stated to him that he and Jackson had some unsettled matters, and that Jackson had not delivered to him the last $2,500 note he was entitled to, and the matter would be fixed up after a while, and he would send it to him. It appears that Boberts never delivered the note in question to Whipple, and there is some statement of a correspondence in respect to its being lost. But it further appears that Boberts did deliver $12,500 notes upon this $10,000 loan from Whipple to him, which notes were paid; and there was also evidence tending to show that the defendant paid to Whipple the $2,500 note in suit, upon the theory that it was lost. The evidence further shows that between the 5th and 15th of October, 1886, Boberts called, with the note in question, at the office of the plaintiff’s husband in East Twenty-Fifth street in the city of New York, and desired to get some money upon it, and that the husband, having certain moneys of his wife’s,, by and with her consent bought and paid for the note. It is urged that the evidence in regard to the buying of and payment for the note by the plaintiff’s husband was of such a character as to excite suspicion, and that the question should have been submitted to the jury as to the credibility of such evidence. But the question as to the right to recover goes beyond this. There is no doubt that Jackson was a holder of this note for value, and that the defendant paid this note to Whipple after the latter had parted with the same; and there is no evidence that Whipple •ever again had possession of the note, or ever had any right to the note, except upon the promise of Boberts to deliver it upon the loan of $10,000, which was entirely paid without such delivery. It appears, therefore, that Whipple ‘had no title of the note, and no right to collect the same. We think, therefore, that the learned -court below was correct in directing the verdict, as there was no question which could be submitted to the jury. If any payment -of this note was made, it was made to a party not entitled to receive it. Aside from this feature of the transaction, the fact of the note having been held for so long, and some of the peculiar features in regard to its purchase, might have excited suspicion, and justified the submission of the case to the jury. But when we consider that Jackson was a holder for value, and that Whipple, from the time he first parted with the note, never acquired any title thereto, never was the actual owner of the note, and never had possession of the same, it is evident that payment to him would be no defense,.as against a holder of the note, even though such holder had paid no consideration, and had received the note after maturity.

The judgment and order should be affirmed, with costs.

All concur.