author: Andrews, J. Yaw Brunt, P. J.

text:
    Henry M. Peyser et al., App’lts, v. Matthew R. Myers et al., Executors, Resp’ts.

      (Supreme Court, General Term, First Department,

      Filed March 31, 1892.)

      1. Partnership—Membership—Evidence.
    Defendants' testator was a member of a firm and agreed to accept twelve per cent, on bis capital invested in lieu of profits. Upon the dissolution of the firm a new one was formed under the same name and testator loaned capital to it at twelve per cent. The new members of the firm testified that testator retired, but were unable to fix the date. A member of the old firm testified that testator retired with the dissolution of the old firm, and it was shown that notice of the retirement was published by assent of all the parties. At that time the firm was solvent. It appeared that at the time of such retirement of testator an account was opened with him and for five years various small amounts of profits realized on the liquidation of old firms of which he had been a member, and that had gone out of active business years before, were credited. Letters passed between the parties clearly showing that a loan was intended, as did entries in the books of the new firm for eleven years prior to their assignment, although continuing partners had private accounts, but had also stock accounts which testator did not. Held sufficient evidence to show that testator was a creditor of the firm and not a partner.
    2. Same—Notice of retirement.
    Publication of a notice of the retirement of a member from a firm is admissible in evidence to prove actual retirement. '
    3. Same—Dealings of members of old firm—Evidence of retirement.
    For the purpose of determining whether a member of a firm retired therefrom at a certain time, the dealings of the members of the old firm with one another and with the public, their statements to each other and to the public, whether written or oral, and their books, are competent evidence.
    4. Same—Liability of new partner for old indebtedness.
    . Where a person is admitted into a firm without inquiry on his part as to assets or liabilities, the assumption of the indebtedness is part of the agreement by which he became a member of the firm, and becomes an indebtedness of the new firm.
    t>. Assignment for creditors—Preference paid with compound interest.
    A claim, preferred in a general assignment, was paid and receipted for, including compound interest computed without knowledge of its illegality. Held, that such payment and receipt were not fraudulent as to creditors, and that the payment was good as to the portion exclusive of the compound interest.
    Appeal from a judgment of the special term, which as against the defendants Myers dismissed the complaint.

      John J. Adams, for app’lts; W P. Williams, for resp’ts.
   Andrews, J.

The firm of Halstead, Haines & Co. made a general assignment for the benefit of creditors on J nly 12th, 1884, and in that assignment the defendants, as executors oí John K. Myers, deceased, were given a preference of $102,872.

On August 9th of the same year, said defendants recovered a judgment against the assignors for the full amount of such preference, and in October, 1884, said sum of $102,872 was paid to the defendants by the assignee. The present action was commenced in the summer of 1888, and the relief sought was, that such assignment should be set aside upon the ground that it was made witli intent to hinder, delay and defraud creditors, and that the judgments obtained by the plaintiffs against said assignors should be paid out of said $102,872.

The present action has .been tried twice. Upon the first trial it was decided that the assignment was void, but the complaint was dismissed as to the defendant executors. Upon appeal to the .general term, the decision of the special term as to the invalidity of the assignment was sustained, but it was held that said preference of $102,872 included compound interest, and upon that ground ■only the judgment was reversed and a new trial ordered. Upon the second trial it was conceded that the assignment was void, and the court found that the amount of such compound interest was $20,223. The action was tried at the same time with another action brought by Milliken and others against the same defendants, bat which had been commenced before this action was brought. -The plaintiffs in the Milliken action having a priority, were adjudged to be entitled to receive such sum of $20,223, and judgment was entered in this action dismissing the complaint as against the defendant executors, and from that judgment this appeal is taken; and it is now contended that the claim of the defendant executors, which was satisfied by the said sum of $102,872, was not a just and valid one as against bona fide creditors, for the following reasons:

First. Because, if it existed at all, it was due by an insolvent firm to one of its members, or his estate, and should, therefore, be postponed to the claim of outside creditors.

Second. Because it was not due by the firm which assigned.

Third. Because it was for the most part fictitious.

The validity of the reason first above mentioned depends upon the determination of the question whether John K. Myers, Sr., deceased, retired from the firm of Halstead, Haines & Go. on December 31, 1872, or whether he continued to be a member of that .firm until the time of his death in the year 1877. The contention of the plaintiffs is that said Myers, Sr., continued to be a member of said firm until the time of his death; but this question has been decided adversely to the plaintiffs, twice by the special term and once by the general term of this court, Peyser v. Myers, 56 Hun, 175; 30 St. Rep., 837, and after a very careful consideration of the able and elaborate brief submitted by plaintiff’s counsel, we have reached the conclusion that such decisions were correct, and that the evidence in the case conclusively proves that said Myers, Sr., retired from said firm on the 31st of December, 1872.

Halstead, Haines & Go. was the firm style adopted by several firms which succeeded each other, during the period from before 1860 down to 1884, when the firm last succeeding to the name-executed the assignment in question, with the intent, as the defendants admit, to hinder, delay and defraud creditors. Among-the creditors preferred in the assignment were the defendants, who are the executors of John K. Myers, Sr., who died in September, 1877. Said Myers, Sr., was in his life time a member of the several successive firms, which were distinguished from one another by letters of the alphabet At the commencement of firm I,’” said Myers, Sr., having accepted the presidency of an insurance company, and wishing to give less time to the affairs of said firm, agreed to remain a partner during the continuance of said firm “ I,” during the years 1870, 1871, and 1872, and to receive in lieu of profits a fixed interest of twelve per cent on his capital.

Said firm “ I ” was dissolved, by limitation of time, on December 31, 1872, and the contention of plaintiff is that said Myers continued to be a member of firm K,” which commenced on January 1, 1873, up to the time of his death in 1877; whereas the contention of the defendants is, that on December 31, 1872, when firm “I” was dissolved, said Myers had an adjustment with his partners as to the amount of his capital, and did not become a member of the new firm “ K,” but made a loan of the whole amount of his capital, as so adjusted, to said firm “K.” at twelve per cent interest.

Several witnesses who were called on behalf of the defendants upon the last trial testified that said Myers, Sr., retired from said firm on December 31, 1872. William A. Haines, Jr., testified that he went into the firm in January, 1870, and that Mr. Myers retired two or three years afterwards. He admitted that upon the first trial he had stated that he did not know when Mr. Myers retired, but explained that he supposed he was being asked about an exact date. He also said that lie had always known that Myers, Sr., retired from the firm within two or three years from the time he went in, in 1870.

John K. Myers, Jr., testified that he knew on the date of retirement that his father had retired; on the first trial he testified that his father retired in the latter part of 1872, though he could not fix the exact date. The testimony given by these witnesses is criticised by plaintiffs’ counsel because of its alleged want of precision as to the date of retirement, and because of the alleged contradiction between the testimony given on the first and second trials. It appears, however, that at the time of retirement of Myers, Sr., his son Myers, Jr., and Haines, Jr., were very young men, who. had put no capital into the firm; had no voice in its management; whose share of the profits was trifling; who acquiesced in whatever was done by their seniors, and who were admitted to the partnership merely because of their being sons of such senior members of the firm. Under these circumstances, after the lapse of twenty years, it is not surprising that their recollections are not more precise and definite as to the time of the retirement of Myers, Sr. The alleged contradictions between the testimony given bjr them, respectively, on the first and second trials of the action, are not of a serious character, and their- testimany, taken as a whole, certainly tends strongly to establish the fact that Myers, Sr., never became a member of firm “K.V

William M. Halstead, another member of the firm, was also ■examined as a witness, and he testified, positively and unequivocally, that Myers, Sr., retired on December 31, 1872. His testimony is also criticised by plaintiffs’ counsel, upon the ■ ground, among others, that on the first trial Mr. Halstead stated that interest was paid Myers, Sr., until 1877, under the agreement or arrangement made in 1870; but we think it is ■clear from all the testimony given by this witness, that such statement related to the amount of interest only which was paid, and not to the legal relations under which said payment was made. Plaintiff’s counsel also criticises the testimony given by Mr. Halstead, to the effect that the amount of Myers, Sr’s., interest in the firm was not definitely settled up until 1877; it does not seem to us, however, that such criticism is warranted, because it appears that after the adjustment, made at the time of the retirement of Myers, Sr., his credit was increased by the transfer to his account of small amounts of profits realized on the liquidation of old firms that had gone out of active business many years before.

John Wilson, who was assistant book-keeper of Halstead, Hames & Co. prior to January 1, 1873, and then became head book-keeper, testified that some time after the formation of firm K.” in pursuance of instructions of one or more members of the firm, he opened for Myers, Sr., a private account, as distinguished from the stock account.

The oral testimony given by the above witnesses, to the effect that Myers, Sr., never became a member of firm “K.”, is confirmed by documentary evidence. ■ On January 1, 1873, the following notice was published in the New York Times:

“Mr. John K. Myers retires from our firm this date, December 31,1872. Halstead, Haines & Co.”

Counsel for -plaintiffs contend that this notice was not admissible as evidence; that it was published without authority of the firm; that the publication was obscurely made, and was for the sole purpose of shielding Myers, Sr., from future liabilities, and therefore was not published in good faith.

We are of opinion that the notice was properly admitted in evidence.

The objection that it was res inter alios acta, and not competent against the plaintiffs, would apply with equal force to much of the other evidence in the case, including that on which the plaintiffs rely to prove that Myers, Sr., became a member of firm “ K.” For the purpose of determining whether Myers, Sr., retired in December 31, 1872, the dealings of the members of the old firm with one another and with the public; their statements to each other, and to the public, whether written or oral, and their books, were all competent evidence; and we think that no error was committed in the admission of such notice as evidence upon the trial. The objection that the notice was not published by authority of the firm is unfounded, for while Mr. Halstead, after a lapse of twenty years, was unable to remember what member of the firm sent the notice to the newspaper for publication. he testified positively that the partners assented to it 'The suggestion that the publication was obscure is equally unfounded. Such publication was made in one of the leading dailies, and it is inconceivable that the firm should have supposed that an announcement made in this manner should not attract the attention of the reading public. The suggestion that the notice was given in order to shield Myers, Sr., from possible future liability does not call for serious consideration. At the time of such publication the 'firm of Halstead, Haines & Co. was solvent, having a net surplus of several hundred thousand dollars over and above the amount belonging to Myers, Sr., and the assignment of the firm was not made until twelve years after-wards. Certain letters written by Haines, Sr., to Myers, Sr., in 1877, also tend to show the latter had ceased to be a member of the firm. It would seem that Myers, Sr.,' was apprehensive that the defense of usury might be set up against him, and such apprehension led to correspondence between him and Haines, Sr. In one of these letters, Haines wrote on behalf of his firm as follows : “ The money you have had with us at a higher rate was not an ordinary loan, but more as permanent capital, for years, subject to notice in writing, etc. * * * In making the change you propose, it would be virtually changing it to a call loan." This letter clearly shows that Haines, Sr., considered that the money which Myers, Sr., had left with firm “ K.” was not capital, but a permanent loan. It is hardly to be supposed that such a letter was written in anticipation of an assignment which was made seven years later.

The entries in the books of the firm, which were read in evidence, also furnished convincing evidence that Myers, Sr., never became a member of firm “ K.”

Prior to January 1, 1873, the accounts of all the partners, including Myers, Sr., were kept on adjoining pages, and headed with the word, “ stock; ” but after January 1, 1873, the account» of the continuing partners were still kept on adjoining pages of the ledger, and still headed “ stock,” but, on that date, the account of Mr. Myers was transferred to a page some seventy pages distant from the stock accounts of the partners, and was headed, “private account; ” moreover, after January 1, 1873, the conceded partners had a stock account and a private account, but. after that date there never was any account with Myers, Sr., headed “ stock account”

It also appeared that when firm “ Gr.” succeeded firm “ F." a part only of Myers’ credits, as shown on the books of firm “ F.”' was carried forward to his credit on the books of firm “Gr,” the balance being left in firm “F.” for liquidation; that the same-course was taken when firm “H.” succeeded firm “Gr.” and when firm “I.” succeeded firm “ H.,” and that this same plan was-adopted in the case of all the other continuing partners. When firm “ K.,” however, succeeded firm “I.,’’ on January 1,1873, this, plan was still followed as to the other partners, but was then for the first time abandoned as to Mr. Myers, Sr.

These changes in the manner of keeping the books of the firm, which were made eleven years before the assignment, would certainly indicate that on January 1,1873, the relations of Myers, Sr., to firm “ K.,” which was formed January 1, 1873, were very different from what they had been to the firm I.,” of which he-had been a partner, receiving since 1870, in lieu of profits, twelve-per cent upon his capital. It is inconceivable that such changes in the manner of keeping the books should have been made, if Myers, Sr., became a member of firm “ K.”

The learned counsel for the plaintiffs, however, strenuously contends that entries made in the books of the firm after January 1, 1873, show that Myers, Sr., still continued to be a member of the firm. We have examined the evidence and the brief of counsel with great care, and after such examination it appears to us-that every point raised by him is fully met in the brief of the counsel of the defendant executors, and that his contention is not well founded.

One of his contentions is that the word “ stock,” as used in the first line of Exhibit “D,” characterizes the whole page as a stock account. We agree, however, with counsel for the defendants that said word “ stock ” was used merely to designate the book, stock ledger, from which the $141,056.87 was posted; and that, this appears to be the true explanation from the general system of making entries as illustrated on the same page; from the fact that the word “stock” is immediately followed by the legend “ Fo. 1,” which indicates that page 1 of some book is referred to; from the fact that it is conceded that the word “ stock ” as used in another place was an abbreviation of “ stock ledger,” and from the fact-that the fly leaf of the stock ledger, which is actually page 1, contains the sum which is mentioned in the disputed entry, and opposite to that sum the words “ledger, page 76,” which shows a transfer to the book and page where 'the disputed entry appears.

The plaintiffs’ counsel also attaches importance to certain entries in the special cash book of firm “ K.,’’ showing that various sums were posted from that book into Mr. Myers" account. Opposite these entries were sometimes the words “stock,” and sometimes the letters “B” and “L,” but it appears by the testimony of the expert called by the plaintiffs that the word “ stock,” as thus used, did not indicate the character of the account, bub merely showed that the entry to which it was opposite was posted in the stock ledger, instead of the “ borrowed and lent ” ledger.

Counsel for plaintiff also calls attention to the fact that after December 31, 1872, the account of C. F. Thomas, who retired from the firm on that day, was subsequently kept in the “ borrowed and lent ” ledger, whereas Mr. Myers’ account was kept in the private ledger. This circumstance, however, is explained by the fact that Mr. Myers’ credit on the dissolution of Aim “L” was $131,828, and that Mi’. Thomas’ credit was only $6.85; and that the smallness of Mr. Thomas’ credit furnishes a reason for carrying his account among the smaller accounts which were kept in the borrowed and lent book; and this explanation appears to us to be a satisfactory one.

Counsel for the plaintiffs also lays great stress upon the accounts on page 76 of ledger “EL” The entries as they appear on that page are as follows:

1874.

Jan. 1, By balance............................ $140,000 ■

July 1, By interest, Spc. k. 174,. ........... 4,900

“ “ Spec. “ ................. 3,500

Dec. 31, “ Spec. “ .........____.... 3,500

“ “ Spec. “ .... 4,900

The contention of plaintiffs’ counsel is, that the letters Spc. k. were originally stock,” and were afterwards changed. We think that this contention of plaintiffs’ counsel is wholly unfounded, .and for the reasons assigned in the brief of the defendants’ counsel, .namely: the word “ stock ” in the place where the letters “ Spc. k.” would have been unintelligible; and if the word had been ■“ stock ” the figures 174 would have been meaningless ; the bookkeeper, who made the entries, testified that he never wrote the word “ stock ” there, but what he did write was, “ Spa k.,"’ refering to cash book “K,” and that the word “Spa” was the contraction for “ special ” and that “ K ” was the title of the cash book, and that what he first wrote had never been changed ; that ■under the disputed word, and with reference to the same page 174, occurred three times “ Spec.,” which the bookkeeper testified was a contraction for “ special ” ; also that special cash book “ K ’’ was produced and put in evidence, and that on page 174 thereof, as of the same date, appeared the amount $4,900, with an entry which showed a posting of that amount on that date on page 76 of the stock ledger. The entries on page 174 of special cash book 11K ” are as follows:

Stock.

July 1—76. John K. Myers, by int, 6 mos. on

$140,000, at 7* per an......... $4,900-

“ John K. Myers, by exp., 6 mos. on

$140,000, at 5* per an......... 3,500

Dec. 31-—76. John K. Myers, by exp. 6 mos. on

$140,000, at 5* per an.......... 3,50o1

“ John" K. Myers, by int., 6 mos. on

$140,000, at 7* per an......... 4,900

Plaintiffs’ counsel calls attention to various other facts which he claims tend to show that Myers, Sr., became a member of firm “ K.,” but we do not think that such facts warrant the inferences sought to be drawn from them.

It is said that, “ after January 1, 1872, the ledgers show private accounts for the continuing partners, as well as for Mr. Myers.” This fact, however, has not the significance which counsel claims for it, because it also appears that while the continuing partners had stock accounts, Mr. Myers had no account of that description.

It is also suggested that from 1870 to January 1, 1873, Mr. Myers, though stated to have been a member of the firm, was-not included among those who divided the profits. The answer to this suggestion is that during said period Mr. Myers was not entitled to profits, as such, because he had expressly agreed to-take twelve per cent interest on his capital, in lieu of profits.

It is also suggested that a stock account would have been unnecessary for Mr. Myers, even had he remained a partner, for the-reason that there was no share in the profits or losses credited or charged to him. If, however, Mr. Myers had been a partner his-account would necessarily have been a stock account, whether the return on his capital was a share of the profits or a fixed percentage on its amount. It would have been the fact of his having capital, and not the nature of the return upon it, that would have made a stock account appropriate. It is conceded that Mr. Myers had a stock account on the books during the years 1870, 1871 and 1872, although during those years he received a percentage on his capital in lieu of profits. A change from a stock account to a private account was made when the percentage which he received began to represent interest on the loan, instead of a return for capital.

No significance can be attached to the fact that the balance of Mr. Thomas, the partner, who also retired at the end of 1872,. was not transferred to the new firm “K.,” for the reason that. Thomas had made no arrangement to leave the amount due him by firm “I” as a loan to firm “K,” nor had he any other connections with said firm “ K.”

It is also claimed that the fact that Myers’ account as to the principal sum was kept in the ledger instead of the borrowed and lent ” book tends to show that he continued to be a member of the firm after January 1,1873. The account, however, was in terms a private account, and not a stock account, and besides this fact, if it justified the inference sought to be drawn from it, would prove too much, as all the succeeding firms, down to the assignment in 1884, followed the same plan in keeping the main account in the ledger, and the auxiliary account in the borrowed and lent book. The argument, therefore, if sound, would tend to prove that Mr. Myers continued a partner for nearly seven years after his death.

It is also suggested that, several years after 1872, Mr. Myers received twelve per cent, on his money, which was the same amount that he received during the years 1870, 1871 and 1872, when, it is conceded, he was a partner. The explanation of this fact may be found in the correspondence which passed between Mr. Myers and Mr. Haines in 1877. It appears from that correspondence that Mr. Myers could not have required payment of his loan except after six months notice, and then only in moderate “ monthly instalments.” His loan was unsecured, and this arrangement rendered it more precarious than it otherwise would have been and justified him in demanding a large return.

The contention of plaintiffs’ counsel that it was necessary for W. A. Haines, Jr., and John K. Myers, Jr., to formally agree that Mr. Myers should retire, is not well founded. The firm I.,” of which they were all members, expired by limitation ; and Myers, Sr., could not have become a member of firm “K.” except by an agreement on his part so to do. Moreover, upon the testimony, there can be no doubt that these young men knew that Mr. Myers had retired from the business, and acquiesced in such retirement.

The suggestion that Mr. Myers, after his retirement, was credited with profits, is answered by the fact that such profits were those realized, not. by firm “ K.,” but from old firms whose affairs were in liquidation.

The second ground, upon which plaintiffs’ counsel contends that the claim of the defendant executors was not a just and valid one, as against creditors, is that it was not due by the firm which assigned ; but we do not think this contention is well founded.

Bentley had been an employee of the firm for many years, and in 1880 was given an interest in the profits as salary ; and on February 1, 1882, was taken in as a partner, without any inquiries on- his part as to the assets and liabilities of the firm. Ho one contributed any capital to the new firm, except that the stock in trade, book accounts, etc., of the old firm were turned over to it The new firm went right on with the business of the old firm, at the same place, with the same stock,- the same customers, and without giving notice, by publication or otherwise, of Bentley’s admission as a partner. There was no arrest, or settlement of the old firm’s accounts, but the business of the old firm was continued by the new firm, without any break; the new firm collecting the old firm accounts, and selling the old stock in trade, and collecting the moneys for that. The Myers account was transferred to' the books of the new firm, and Bentley never looked at the books to inform himself as to the details of it. During the period that elapsed between Bentley’s admission to the firm and the assignment, the firm sent to the executors of the Myers estate statements of account, showing the indebtedness to said estate as it appeared in the books» of the firm, and containing charges against Mrs. Myers for merchandise sold her during the years 1882, "1883 and 1884, which charges were deducted from the amount that would otherwise have been due. Bentley himself was called as a witness, and testified that it was his intention to take the affairs of the old firm as he found "them, and go on with them as a member of the new firm; that before he went into the firm he asked for no statement of its assets or liabilities ; that he was in for a three years partnership, and did not propose to make any inquiries for those three years; that he had nothing to do with the financial operations of the firm or with the books; that knowing the firm to be using money of Myers, he never took the trouble to inquire how much or under what agreement; also that he never knew of any difference being made in the firm’s dealings because of his going into it; moreover, Bentley voluntarily united with his partners in preferring the Myers claim, and made no defense to the action brought against the firm for the recovery of it.

We are of the opinion that under these circumstances it must be considered that the assumption of the existing indebtedness of the old firm to the Myers estate was a part of the agreement whereby Bentley became a partner in the firm, and that such indebtedness became an indebtedness of the firm of which Bentley was a member. The case falls within the rulé laid down by the general term of this department, in the case of Mores v. Society for the Protection of Destitute Children, Manuscript Opinion, Daniels, J., less fully in 19 Wk. Dig., 247. In that case it appeared that Henry Louis, who had been carrying on business alone, took his brother into partnership, and the new firm, Henry Louis & Company, continued the business with the same stock, the same customers, and without arrest of accounts. To a claim in favor of the firm, the defendant was allowed to set off sums paid to Henry Louis before the partnership was formed. Mr. Justice Daniels, in the course of his opinion, said: “It has been further urged that the referee erred in extinguishing the balance, which accrued while the partnership continued, by applying upon it payments which had previous to the partnership been made to Henry Louis, one .of its members. But this partnership was not formed for the mere purpose of commencing and carrying on the business which was transacted. That had before been created and exclusively carried on by Henry Louis himself, and the only change which was made in the business was by his brother, the other assignor, buying into it and going on with it, as he found it to exist. There was no arrest or settlement of the preceding accounts, but the business was carried right along, the only change in it being that, by the partnership, another person became interested in it. What was in process of transaction in the course of the business of Henry Louis was from that time taken up and carried on by Henry Louis and his brother. They proceeded apparently with the same stock, the same accounts and the same customers, and they continued to deal with these customers as though the partnership itself had originated their business relations. The brother, who bought into the business, became entitled to his interest, as & partner, in the debts owing to it, and equally so liable to contribute, in the progress of the business, to the payment of the indebtedness owing to its customers by it. His relations and obligations were entirely different/ from what they would have been if the old business had been closed and a new business had been commenced from the time the partnership was formed.

“ It was not necessary, to subject the future dealings of the firm to the collection of the accounts which had accrued at the time of its formation, that the indebtedness should have been specifically, or in terms, assumed by the incoming party. The fact that he bought into an existing and continuing business would naturally subject the business to that obligation, and such appears to have been the understanding between these persons at the túne when their business relations were formed.”

It is claimed by plaintiffs’ counsel that finding 43 negatives the idea that the firm of Halstead, Haines & Co., which made the assignment, assumed the existing indebtedness of the old firm to the Myers estate.

We think, however, that a fair construction of this finding is that there was no formal agreement to assume such indebtedness, which, it is conceded, was never made. To construe the finding as meaning that there was no implied agreement, would make it inconsistent with findings 56, 73 and 74, and with the decision of the trial court. Moreover, the finding, however construed, refers only to an agreement between Myers and the members of the firm of Halstead, Haines & Co. It does not purport to extend to the agreement between the continuing partners and Bentley, which was found by the special term and was established by the testimony. Such an agreement, between Bentley and his partners,, enured to the benefit of the respondents even though there was no direct consideration issuing from them, and though they may not have been privy to it.

The third ground, upon which it is claimed the judgment should be reversed, is, that the compound interest, included in the preference, greatly exceeded the sum of $20,223; but we do not think this contention is well founded.

The method of computing the interest, which yields the sum of $20,223 as the amount of compound interest, included in the-preference, is the one which was held proper in the case of The State of Connecticut v. Jackson, 1 Johns. Ch., 13, and is as follows: “ The rule for casting interest, when partial payments have been made, is to apply the payment in the first place to the discharge of the interest then due. If the payment exceeds the interest, the surplus goes towards discharging the principal, and the subsequent interest is to be computed on the balance of principal remaining due. IE the payment be less than the interest, the surplus of interest must not be taken to augment the principal; but interest continues on the former principal, until the period when the payments, taken together, exceed the interest due, and then the surplus is to be applied towards discharging the principal; and interest is to be computed on the balance as aforesaid.” This rule was expressly approved by the court of appeals in Young v. Hill, 67 N. Y., 167. It was also adopted and approved in the following cases: French v. Kennedy, 7 Barb., 452; note to Williams v. Houghtaling, 3 Cow., 86; Bennett v. Cook, 2 Hun, 527, 529; Smith v. Fox, 2 City Ct, 339.

The authorities cited are binding upon us, and we are also of the opinion that the contention of plaintiffs’ counsel that interest should be calculated upon withdrawals is fully answered by the defendants’ counsel as follows:

“ The objection made to the method thus established, that it does not allow for interest or withdrawals, is merely specious, and is met by the fact that as soon as the withdrawals equal, or exceed, the accrued simple interest, a rest is made, and interest ceases upon so much of the principal as is paid. Until that happens the debtor is in default on the interest that he owes, and therefore should not be allowed interest on the sums that he pays.” We must therefore hold that the amount of compound interest, included in the preference, is only $20,223.

We are also of opinion that the respondents are entitled to retain all the preference money, except so much of it as represented compound interest.

This was in effect the decision of the general term on the first appeal of this case, and we think such decision was correct. The method in which the interest was originally computed was erroneous, but such method was the one customary with commercial houses, and the compound interest was included in the preference and paid to respondents without any intent that they should receive more than was legally due, and without knowledge that the method in which the interest was computed was illegal. The excess of payment must therefore be regarded as having been made and received in entire good faith. The cases cited by plaintiffs’ counsel are those in which the fraudulent intent was actual, as distinguished from constructive ; besides, in each of those cases there was involved the effect of some one entire instrument, which, under the statute against fraudulent conveyances, was absolutely void. In the case at bar, the respondents received $82,649 in payment of a valid debt, and the fact that there was paid and received by them, in good faith, without fraudulent intent, an additional sum of $20,223 did not render the payment and receipt of $82,649, fraudulent. We are also of opinion that it was proper to allow interest upon said sum of $20,223, only from the commencement of the present action.

The judgment should be affirmed, with costs.

Yaw Brunt, P. J.

I concur, but I do not assent to the proposition that entries' in the books of firm K, could in any way be resorted to as evidence that Myers was a member of that firm. Myers was only bound by those entries if he was a member of the firm; hence it seems to me to be apparent that they cannot be resorted to to show that Myers was a member of the firm.

Barrett, J., concurs.


source: Caselaw Access Project

author: Van Brunt, P. J. O’Brien, J.

license: Public Domain

text:
    John F. Zebley, App’lt, v. The Farmers’ Loan & Trust Company, Resp’t.

      (Supreme Court, General Term, First Department,

      Filed March 31, 1892.)

    1. Mortgage—Foreclosure—Railroad property—Rights op bondholders.
    A trustee under a mortgage given by a railroad company purchased the property at foreclosure sale, under a provision of the decree allowing such purchase and providing that upon the payment by each bondholder of his proportionate share of the moneys paid by the trustee for the expenses of the action and for the several payments directed by said decree, to be paid in cash, the purchase should enure to the benefit of such bondholders. Held, that the payment or tender of such proportionate share by a bondholder was a condition precedent to his right to an accounting from the trustee.
    2. Same—Time allowed in which to contribute.
    Fourteen years after the entry of such decree is too late for a bondholder to offer to contribute for the purpose of participating in the benefits of such purchase, the property having been sold by the trustee.
    (O’Brien, J., dissents.)
    Appeal from interlocutory judgment sustaining demurrer to the complaint.

      William Wirt Hewett, for app’lt; Turner, McClure ck Holston (Wm. W. MacFarland and II. B. Turner, of counsel), for resp’t.
   Van Brunt, P. J.

This action was brought by the plaintiff, a bondholder of the FT. Y. & Boston R. R. Co., against the defendant as trustee under a mortgage given by said company. The plaintiff alleged the incorporation of the defendant; the incorporation of the FT. Y. & Boston Railroad Company; the execution of the mortgage, the issuance of the bonds, and that the plaintiff, before the commencement of this action, became and still is the owner and holder of eleven of said bonds with the coupons thereon ; that said railroad company made default in payment of the interest on said bonds, and that thereupon the defendant, as trustee, elected that the principal of the bonds should become immediately due and payable in pursuance of the power conferred therein; that thereafter, on or about some day entirely indefinite, the defendant commenced an action in this court to foreclose the mortgage; and that on some day not mentioned a decree was entered directing a sale of the mortgaged premises, which decree provided that in case there should be no bona fide bid in cash at such sale to an amount equal to that of all the bonds outstamiing and secured by said mortgage, the defendant might bid for and purchase the premises, property and franchises so sold in behalf of all holders of such bonds and coupons in proportion to the respective interests of such holders, at a price not exceeding the whole of such outstanding bonds and coupons, so much being payable in cash only as should be necessary to meet and defray the expenses of the action and the several payments in said decree directed to be paid in cash, and that said decree further provided that thereupon and upon the payment by each bond or coupon holder of his proportionate share of such cash payments, such purchase should enure to the benefit of each such bondholder in the proportion of his interest as aforesaid, such sale, however, to be subject to certain liens.

The complaint further alleged that on June 5, 1876, no cash bid being made therefor, the said railroad property, franchises, etc., were sold to the defendant in conformity with the before mentioned decree; that subsequently the N. Y., Westchester & Putnam Railroad Co. was incorporated and the defendant, in co-operation with the corporators, conveyed said mortgaged property to said persons or to said company for some consideration to plaintiff unknown, and that at all the times mentioned the eleven bonds alleged to be held by the plaintiff were outstanding and the whole amount thereof with interest was due thereon.

The complaint further alleged that the plaintiff and the holders of said eleven bonds had no notice of the formation of said last mentioned railroad company or of said transfer by the defendant to said company, nor did said bondholders or this plaintiff in any wise assent or agree thereto; and that the N. Y. & Boston Railroad Co. was and "is insolvent.

The complaint contains the further allegation that this plaintiff has at all times been ready to pay his reasonable share of the expenses of the defendant, if any there be, and has at divers times, particularly on the 16th December, 1887, demanded that defendant account with him and that defendant pay him his just and reasonable share of the value of said mortgaged property, and that the defendant has refused and still refuses so to account, and has wrongfully and in violation of its duties as trustee converted to its own use the share of the plaintiff, and judgment is demanded for an accounting.

The defendants demur to the complaint upon the ground that it does not state facts sufficient to constitute a cause of action ; that the court has no jurisdiction of the action, and that there is a defect of parties defendant in that the N. Y., Westchester & Putnam Railway Co. is necessary to a complete determination of the questions raised therein. This demurrer was sustained and from the'judgment thereupon entered this appeal is taken.

Without discussing the many interesting points raised upon this demurrer, there is one which stands at the threshold of the plaintiff’s right to recover which seems fatal to the cause of action stated in the complaint. It is there alleged that by the terms of the decree of foreclosure and sale the defendant might, under certain circumstances, "purchase the property which was the subject matter of the foreclosure action; and that thereupon and upon payment by each bond and coupon holder of his proportionate sitare of the cash payments required to be made under the decree, such purchase should come to the benefit of each such bond and coupon holder, etc. It is not alleged what the amount of this cash payment was, but the plaintiff does allege that he has been at all times ready and willing to pay his reasonable share of the expenses of the defendant, if any there be, and demands an accounting. But he nowhere alleges that prior to the commencement of this action or in this bill, that he has ever made any effort to pay or even to ascertain what he was in duty bound to pay prior to his acquiring any interest under the foreclosure sale. And it is clear from the expression used in his allegation of willingness to pay his reasonable share of the expenses, viz.: “if any there be,” that there.is no admission upon his part of any obligation to pay anything. Now, as the interest of this plaintiff depended entirely upon the fact- that he had paid his proportionate share of the expenses of the action and the several payments in the decree directed to be made in cash, until a tender of these amounts had been made it is clear that he had no interest whatever in the purchase under the foreclosure action for which he was entitled to call the defendant to account.

This payment was a condition precedent to the acquiring of an interest. Until it was made, or' at least tendered, the defendant did not become his trustee for any purpose whatever. His claim upon the property was represented by the mortgage. By the foreclosure that claim was cut off, and it was only by coming in and paying his proportion of these various charges that he could acquire any interest in the purchase made by the defendant as trustee. The fact that this defendant did convey this property to another corporation was a matter of no interest or moment to this ¡Dlaintiff or his predecessors in interest of the bonds of which he now claims to be the holder. As it appears upon the face of the bill, the defendant owed to them no duty. The defendant was neither his trustee nor was he the defendant’s cestui que trust.

This purchase was made under this decree in 1876 it would seem. When the sale was made to the New York, Westchester & Putnam By. Co. does not appear. But can it be claimed for a moment that this trustee was bound to hold this property forever in order to see as to whether outstanding bondholders would come in and contribute their share of the expenses and cash payments as required by the decree, and thus be entitled to share or have a voice in the disposition of the property purchased under the foreclosure sale. The action in question seems to have been instituted nearly fourteen years after this foreclosure sale, and all that the defendant was bound to do was to wait a reaábnable time in order to enable these bondholders to come in and participate, and it does not appear that it did not do so.

It is certainly too late fourteen years after the entry of this decree for the holders of these bonds now to claim that they may come in and contribute and participate in the benefits of the foreclosure sale. If such a scheme is to operate, then there never could be, in the case of bonds passing from hand to hand, the closing up of a foreclosure suit upon a mortgage given to secure such bonds; and bondholders might lie quiet and wait and see what might be the result of the purchase by the trustee, and if advantageous to them, come in and contribute; and if it turned out badly, then stay out. Such is not the rule. Under a decree such as is alleged in the plaintiff’s complaint, the bondholder must come in within a reasonable time and make himself a beneficiary under the trust; and if he does not do this, then the trustee may close out his trust without in any way consulting or notifying the defaulting bondholder.

It would seem to us to be almost too plain for argument were it not for the facts that one of my associates thinks otherwise, that before an action of this kind can be maintained the party must be a beneficiary, and this plaintiff shows upon the face of his complaint that he is not a beneficiary, as he has not done those things which he is bound to do before lie can participate in the trust.

The judgment should be affirmed, with costs.

Patterson, J., concur.

O’Brien, J.

(dissenting).—Although several grounds of demurrer were assigned, the one upon which the judgment was based was that the complaint did not state facts sufficient to constitute a cause of action.

In determining the sufficiency of the complaint it is not necessary for us to set it forth in full, and we shall, therefore, confine ourselves to a statement of such facts alleged therein as we deem necessary to dispose of the questions thus raised on this appeal.

The action is brought by plaintiff, the holder of eleven bonds of, the N.Y. & Westchester Ry.Co. for an accounting from the defendant, the trustee in the mortgage under which the bonds were issued. The complaint alleges the incorporation of the railroad company, the mortgage to the defendant, the default of the railroad company in the payment of interest and the election of the defendant trustee that the whole principal and interest of the bonds should become due; that the trust company thereupon brought suit to foreclose the mortgage in which a decree and sale was had and the property of the railroad company bought in by the trustee for the benefit of all the bondholders under the power contained in the trust deed. It is further alleged that the bonds so now held by the plaintiff were ascertained to be outstanding, and that after the purchase the trust company conveyed the railroad property to the company which was formed in re-organization of the company in default, in which re-organization the holder of these bonds had no part, and in which he declined and declines to come; and that demand has been made upon the trust company, but the trust company denies that he has any rights whatever. Upon these facts the plaintiff demands that the defendant account for the disposition made of the property after the foreclosure.

The respondent contends that the facts stated do not constitute a cause of action for the following reasons :

I. The plaintiff’s claim is too stale and speculative to engage the attention of a court of equity.

II. If the plaintiff is entitled to any relief, it must be sought in the original foreclosure suit

III. W hen the defendant bought in the property it held the same as trustee under the provisions of the decree. To sustain any action against the trustee personally it must be alleged and proved that the trustee was guilty of a breach of trust, and departed from the provisions of the decree.

IV. The conveyance by the trustee to the new railroad company, if made by order of court, cannot be impeached collaterally, and if made without such order is a breach of trust and absolutely void.

Y. The allegation as to conversion by the defendant is defective, and amounts to nothing.

In regard to the first, while it is true that a court of equity frequently declines to entertain claims which are too stale, and while the complaint itself shows that many of the transactions now sought to be inquired into occurred more than ten years ago, still we have allegations of want of notice and knowledge on the part of the plaintiff which in the absence of a bar by reason of the statute of limitations (which could only be raised under our practice by answer) entitle the plaintiff to present the facts to the court and then have a ruling thereon.

As to the second ground, that the plaintiff’s relief, if any, must be sought in the foreclosure suit, this much need only be said. It may well be that the plaintiff might have intervened in that suit, and might have obtained the relief which he seeks in this. But that is all foreign to the question presented by the demurrer, which relates to the question whether the allegations are sufficient in law to enable him to maintain this action, and that is the question to be hereinafter considered.

As to the third, we agree with the respondent that when the defendant bought in the property it held the same as trustee under the provisions of the decree. It should, however, be remembered that there is no allegation in the complaint that all the property received by the defendant as trustee in the foreclosure suit were by the terms of the decree or any order of the ■court turned over to the new or reorganized company. It is true there is an allegation that the property was turned over; but there is an express statement that divers persons having ■associated themselves together formed, or attempted to form, a corporation * * * that the defendant in co-opera.tion with said persons thereafter conveyed said mortgaged property to said persons for the said company upon some consideration to the plaintiff unknown; and

“That this plaintiff and the holders of said eleven bonds had no notice of the formation of said railroad company, or the said transfer of said property by defendant to said committee or company, nor did the said bondholders or this plaintiff in any wise .assent or agree thereto, nor have they or he received any benefit or advantage under said so-called reorganization, but on the contrary thereof they and he have at all times elected to have their distributive share of the proceeds of said mortgaged property.”

So far, therefore, as the complaint itself gives us any information upon the subject, it would appear that the defendant acquired the title to all the property of the mortgagor railroad and thereafter held the same as trustee, until, as alleged, it made a disposition thereof by transferring the same to another corporation, but for what consideration or under what arrangement, or whether it was the result of a decree or order of the court, is not made to appear.

It seems to us reasonably clear as an elementary principle that-where nothing else appears, and where the decree in foreclosure gave no specific directions as to the disposition to be made by the-trustee of the property, that the defendant would hold the same as trustee for all the bondholders, subject, of course, to the terms- and conditions fixed by the decree relating to the rights of the bondholders.

It was provided therein that upon payment by each bond or coupon holder of his proportionate share of the cash pajnnent necessary to meet and defray the expenses of the action, and the other payments directed by the decree to be paid in cash, the purchase so made by the trustee should enure to the benefit of such bond or coupon holder in proportion to his interest

It appears that the plaintiff did not pay his proportion, but he asserts his readiness and willingness to pay his reasonable share of the expenses of the defendant, which, when taken in connection with the statement of the demand upon the defendant to account, was undoubtedly intended as a statement of willingness to comply with the condition precedent to obtain an interest in the property purchased upon the foreclosure by the trustee.

There can be no doubt upon a trial, upon a showing that this property pursuant to a decree or order of the court was transferred to the reorganized company, or upon a showing that the plaintiff was not entitled to any share or interest therein, that that would be a complete answer to the plaintiff’s right to recover. It seems to us, however, upon the facts stated, that we cannot ignore plaintiff’s right to know what became of the property which was purchased in the interest of the bondholders, except by assuming that the property purchased by the trustee was properly and lawfully disposed of. All these presumptions, however, do not destroy the plaintiff’s right to have a statement from the trustee as to what was done with the property.

The complaint does not allege that the property was wrongfully conveyed to another corporation, but there is a statement that the-property was converted by the defendant. Without, however, giving any weight to that; being a conclusion unsupported by any facts otherwise alleged in the complaint, it still appears from the facts alleged that the property was transferred in some way and upon some consideration to the plaintiff- unknown.

While we must therefore concede the respondent’s fourth contention that the conveyance by the trustee to the new railroad company if made by order of the court cannot be impeached collaterally, and if made without such order is a breach of trust and absolutely void, the fact still remains that the property having come into the possession of the defendant as trustee for the plaintiff and the other bondholders, the plaintiff has a right to know in what manner and how the defendant has disposed of the same. Upon such an inquiry to be entered upon at a trial after answer the presumptions as to lawful disposition, and that what has been done was pursuant to the trust reposed in it, will all arise in defendant’s favor. But it seems to us that the plaintiff has shown sufficient to entitle him to have the defendant by answer ■state just what was done with the property and pursuant to what authority and upon what terms, to the end that it may be determined what, if any, rights he may have therein, and as to whether or not the defendant has received or holds by reason of the transfer any money or property to which the plaintiff is entitled. We do not hold that this is a right which may not have been lost by loches or default of plaintiff, these being questions- which the trial court must decide.

Upon this demurred therefore, it will be seen that our view is that the abstract question of the power of the trustee to convey in good faith, and for an adequate consideration is not involved. The proposition before the court is whether upon facts showing that the trustee has come into the possession of the trust property he can dispose of the same upon terms and conditions unknown to the cestuis que trust, and thereafter refuse or deprive the latter of ■a right to know just what has been done with the trust fund. TVe have always regarded it as elementary that a cestui que trust had a right to demand of a trustee an accounting as to the administration of his trust, and in this respect there can be no distinction between the trustee of a railroad company and any other trustees, for the reason that the former are governed by the general rules that govern trustees in the ordinary performance of the duties of a trust.

We are of opinion therefore that the judgment should be reversed, with costs to the appellant to abide the event, and with leave to the defendant to answer, without costs.

Judgment affirmed, with costs.


author: Andrews, J.

text:
    Chauncey St. John, Resp’t, v. Howard H. Coates et al., Executors, etc., of George H. Peck, Deceased, App’lts.

      (Supreme Court, General Term, First Department,

      Filed March 31, 1892.)

    1. Limitation—Tenants in common.
    Two tenants in common of oil lands fraudulently converted part of the royalties and rents belonging to co-tenants, and thereafter agreed that the income should be retained by their co-tenants until the misappropriation should be made good. The parties resided in New York city from 1870 to 1877, when the action was commenced, and frequently had interviews, but the defaulting tenants never made any claim for any portion of the income received by the others. The latter received the last money in 1872. An action was brought on a claim assigned by one of the defaulting tenants and the wife of the other against one of the co-tenants, who had received the entire income under the agreement. Held, that the action was barred by the statute of limitations as to all income received prior to 1873-
    3. Contract—Interpretation.
    In such case, no recovery could he had as to the payment of 1873, because of the misappropriations, which exceeded the amount so paid, and the agreement regarding the same.
    3. Partnership—Allegations of.
    The complaint alleged that an owner conveyed an undivided interest in land to another, who conveyed to a third person an undivided portion of his interest. Held, that it was an allegation of a tenancy in common, and that the failure to make all those interested in the land parties, and the absence of allegations of partnership, negatived the idea of a partnership.
    4 Same—Tenants in common.
    The fact that one tenant in common collected the rents and royalties of oil lands under a power of attorney, and remitted to the other tenants, their net shares, does not tend to establish between such tenants a partnership.
    5. Tenants in common—Trustee or debtor—Limitations.
    Such tenant is not a trustee of the moneys so received by him, but a debtor to whom the statute of limitations applies.
    6. Same—Accounting between co-tenants.
    The supreme court’s jurisdiction to entertain an action for an accounting between co-tenants in equity is concurrent with its jurisdiction to entertain an action at law to recover the amount alleged to be due from one co-tenant to another; and where such concurrent jurisdiction exists, the six years limitation applies.
    7. Contract—Rights of assignee.
    The agreement as to the misappropriation hound the wife as a subsequent grantee of one of the defaulting tenants, he having acted as her agent in the matter.
    Appeal by defendants from a judgment for five thousand, four hundred and ninety-six dollars and seventy-five cents ($5,496.75) entered against them after trial at special term; and also from an order denying a motion for a new trial on the judge’s minutes made upon the trial of special issue in the action at circuit

      John H. Post, for app’lts; Loclauood & Post, for resp’t.
   Andrews, J.

This action was commenced on October 3,1877* against one George H. Peck, now deceased. The allegations of the complaint are in substance as follows:

That in 1886, the said Peck conveyed to one Lewis St. John, by deed, an undivided 20f~96ths of a certain farm of land, containing about 100 acres, situated in Venango county, Pennsylvania, called the Rooker Farm; that said farm contained oil wells, and that the same having been leased for a percentage of the oil produced, large sums of money were realized from the sale of suéh oil, and large profits were also realized from the letting of portions of said farm for building lots; that said Lewis St. John was entitled to 20|-96tbs of said rents and profits; that said Peck received large sums of money as manager of the said property, which belonged to said St. John, but neglected to pay over the same; that said Lewis St. John conveyed by deed to one Ellen Cole an undivided 10-96ths of said farm, for which proportion said St. John thereafter was bound to account to said Ellen Cole (the deed to her not having been recorded), that said Lewis St. John and said Ellen Cole assigned to the plaintiff all their interest in the premises; that the plaintiff demanded of said Peck that he render an account of the moneys received and paid by him for said Lewis St. John, but that he did not do so. Therefore plaintiff prays that an accounting may be taken of such moneys, and that the defendant may be adjudged to pay to the plaintiff anything which shall, upon the talcing of such account, appear to be due to the plaintiff.

The answer denies that the defendant conveyed a portion of said farm to Lewis St. John; or that said Lewis St. John was entitled to 20f-96ths of the rents and profits or that said Peck received any money belonging to said Lewis St John, or that. Lewis St. John ever assigned to the plaintiff any part of his interest in the premises ; also alleged that Lewis St John, for the previous two years, had been of unsound mind, and incapable of making any'such assignment; also set up the six years statute of limitation, and an affirmative defense, in the nature of a set-off, upon the ground that one Cole was agent of the property, and with said Lewis St John wrongfully retained, appropriated and converted to their own use large sums of money due to the defendant, the amount of which exceeded the share or interest alleged in the complaint to have been assigned to the plaintiff by said Lewis St John.

A trial of the action was commenced at special term in 1878, and was concluded before a referee, who found for the plaintiff. Peck died soon after the trial, on November 1, 1879, and the present defendants were substituted in his place. On appeal, the general term reversed the judgment, and directed that a special issue be framed as to the mental capacity of said Lewis St, John.

Subsequently an order was entered, in 1888, at special term, settling eleven special issues to be tried by jury. Upon the first trial of these issues, the jury disagreed as to some of them. Upon a second trial, all but three of said issues were stricken out by the court, and the jury returned a verdict as to those. On appeal the order of the circuit court, striking out a part of the issues, was-reversed by the general term. Subsequently an order was entered by the special term in 1890, striking out the same issues, and this order was affirmed by the general term. Upon another trial of the issues, as resettled, the jury found (1st), that Lewis St. John was mentally competent to make the assignment in question; (2d), the defendant’s testator had made a deed to Lewis St. John, conveying 20£-96ths" of the Booker farm; (3d), that the deed from Lewis St. John to Ellen Cole for 10-96ths was bona fide.

Subsequently the action was brought to trial at special term, and such trial resulted in judgment for the plaintiff for the sum above mentioned. From this judgment, and from an order denying a motion for a new trial of said issues, made upon the judge’s minutes, the present appeals were taken.

The transactions out of which this action arose are as follows i On August 80,1866, the sheriff of Yenango county, Pennsylvania, deeded to said Peck, and others, a tract of land in said county known as the Rooker farm. The deed conveyed the property in the following proportions: to one Perry, 51-96ths; to said Peck, '24-96ths; to one Bates, 12-96ths; to one Baum, 6-96ths; to one Austin, l-96th; to one Matthews, l-96th; and to one Graves and Seager jointly, l-96th ; all expressed to be in undivided portions; .and the deed was recorded September 6, 1866. On October 1, 1866, said Perry and his wife conveyed said 51-96ths to said Peck, •and the deed was recorded October 10, 1866. It appears that Joseph H. Godwin and Augustus A. Conover and Rhoades Cole were interested with Peck in the purchase of such 75-96ths of the farm, and Cole stated to Peck that one Lewis St. John (plaintiff’s assignor), was equally interested with him in a fractional share thereof. Cole went to the farm apd acted as a superintendent, under a power of attorney from Peck and the other owners, collecting the rents and royalties, paying expenses, and remitting to Peck what purported to be 75-96ths of the .net income.

The money so received Peck ■ distributed in the proportions above indicated to Godwin and Conover, retaining his own share, and paying to St John, by Cole’s direction, the joint share ■of Cole and St John. Up to June, Peck had received from Cole $33,750, which had been so distributed. It is claimed by the defendants that about this time Cole confessed to Peck that he and .St. John had been sinking oil wells in Pennsylvania on their own private and joint accounts, and that Cole had taken moneys from the income of the Rooker farm which should have been remitted to Peck, and had used the same on his own and St. John’s account, in sinking such wells; that said Cole then agreed that until such misappropriations were made good, all moneys sent by him to Peck should belong to and be divided between Godwin, the personal representative of Conover (who had died prior to February, 1867) and Peck; and that St. John consented to such agreement ; that from that time on Peck distributed the moneys received by him in accordance with said agreement.

In April, 1870, the production of oil having greatly diminished, Cole returned to New York, and resided there from that time to the time of the trial. It is also claimed by defendants that during the ensuing years, until the end of 1876, Peck and St. John lived in New York, meeting occasionally, and that Cole had been there since April, 1870, frequently calling at Peck’s office, but that no claims were ever made by Cole or St. John upon Peck for any moneys accruing from said farm, or that there were any unsettled matters between them.

It appears by a stipulation made in the action, that subsequent to June 30, 1868, Peck received of the productions of said farm the following sums: February 4,1869, $800; July 20, 1869, $1,912.50; May 22, 1870, $1.200; December 8, 1870, $1,500; April 28, 1871, $600 ; April, 1872, $541.50.

It is strenuously insisted upon this appeal, by counsel for the defendants, that many errors were committed upon the trial of the issues at circuit, in the admission and exclusion of evidence; also, that the evidence did not justify the findings of the jury, nor those made at the special term, as to the mental capacity of Lewis St John to make the assignments, or as to the making of a deed by Peck to St John conveying 20f-96ths of said farm, or as to the bonafides of the deed from Lewis St John to Ellen Cole.

It is not, however, necessary to consider the points raised as to these matters, because, even if we accept the view of the facts most favorable to the plaintiff, and assume that the findings of the jury, and of the court, upon these matters, were correct, still we are of the opinion that the judgment must be reversed upon other grounds, viz: that a recovery of all amounts paid to Peck, except the last one of $541.50, was barred by the statute of limitations; and secondly, that no recovery could be had as to that item, because of the misappropriation of moneys by Cole, for the benefit of himself and St. John, and the subsequent agreement of Cole, consented to, and acquiesced in, by St. John, that the moneys paid over to Peck should be divided by him between Godwin, Conover’s estate and himself, until such misappropriations were paid.

Plaintiff’s counsel claims that the relations between Peck and the other owners of the 75-96ths of the farm were those of partners, but we do not think that this claim is well founded. In the first place, the complaint contains no allegation that such relation of partnership existed between Peck and the other owners of such. 75-96ths. The allegation is that Peck conveyed an undivided 20|-96ths to St. John, and that St John conveyed an undivided 10-96ths to Ellen Cole. This amounts to an allegation that Peck, St. John and Ellen Cole were tenants in common. There is no allegation or suggestion to be found anywhere in the complaint, in regard to such alleged partnership. According to the complaint, the right of plaintiff to recover is placed solely upon the fact that the parties were tenants in common, and that Peck, one of such tenants, had received rents and profits of which a portion rightfully belonged to St. John and Mrs. Cole. Moreover, the only allegations in the complaint upon which a claim -for equitable relief can be founded are those in which it is alleged that plaintiff had demanded an account of Peck, which demand had not been complied wjth, and the prayer for relief that such account be taken. The complaint has not been amended, nor does it appear that any application to amend it was made, and it would seem that the idea of a partnership was an afterthought, put forward to meet the exigencies of the case. If the owners of such 75-96ths of the farm were partners, they or their representatives should all have been made parties to this action, and the fact that they were not tends to support the conclusion that it was not intended by the draughtsman of the complaint to rest the claim of the plaintiff upon the ground that the owners of such 75-96ths were partners.

Moreover, the evidence' in the action does not establish such partnership. According to the agreement of the plaintiff, at the time payments were made to Peck the title of the property stood as follows: 10f-96ths in St John, by virtue of Peck’s conveyance to him; 10-96ths in Ellen Cole, by virtue of St. John’s conveyance to her; 54i-96ths in Pock, by virtue of the conveyanee to him from the sheriff of Venango county, and Perry; which 54^-96ths belonged in equal parts to himself, Godwin and the heirs of Conover; and 2o-96ths in the various other parties above mentioned.

Cole went to Pennsylvania and acted as superintendent. His testimony as to what he did is as follows: “ I never had but one power of attorney from Mr. Peck; it was a power of attorney to .act for George H. Peck for 75-96ths of the farm, and collect the moneys; while I was out at the farm I collected the rents, royalties for the oil sold, and paid the money to the different parties .for the interest I held a power of attorney for; I sent 75-96ths of the profits to Mr. Peck; the expenses were deducted by myself ; J sent them the balance of the moneys after deducting expenses; •of the remaining interest, 12-96ths were owned by one William A. Bates; 6-96ths by Bond; l-96th by Graves and Seager; I collected these; I had a power of attorney from them, and remitted them the money; I held a power of attorney from all parties; I remitted 75-96ths to Peck, and the balance to the other parties; my position was superintendent.” * * *

“ The income came from the production of the farm, the royalties of the wells, and rents. * * * My duties as superintendent were to lease the farm in half acre plots for half royalties ; the usual way of the oil business. I collected royalties and gave 7o-96ths of them to Mr. Peck, and the other 21 shares were owned by others; I deducted expenses; what I sent to the owners -jyas the net product; I might nave received instructions from other persons, but I did not act upon any instruction or order of any other person than Peck with respect to the 75-96ths." The situation, therefore, was as follows: Peck, St. John and Mrs. ■Cole (the wife of Cole, the superintendent) and other parties were tenants in common of this farm; Cole stayed at the farm, received .royalties and rents, and after paying expenses sent 75-96ths of the net balance to Peck for distribution. These facts do not establish a partnership between Peck, St. John and Mrs. Cole, but merely that Peck, being a tenant in common with them, received certain moneys which, it is claimed, it was his duty to pay over to them.

Partnership, as between the partners, is a matter of agreement, and, so far as concerns the partners only, whether such agreement was made must depend upon the intention of the parties. There is no evidence whatever of any express agreement for a partnership between Peck and St. John or Mrs. Cole, or any of the other persons who were interested in the property. Peck and Godwin both testified that there was no partnership, and Peck testified that he never knew anything about St. John’s having an interest in the property, except what Cole told him; and it certainly is difficult to understand how Peck can be regarded as having formed a partnership with Mrs. Cole simply because St. John •conveyed 10-96ths of the property to her.

We are of the opinion that, assuming that Peck made the conveyance to St. John, and St. John to Ellen Cole, as claimed in the complaint, the relations between Peck, St. John and Mrs. Cole were not those of partners, but of tenants in common, and that the six years statute of limitations applies notwithstanding the fact that the complaint prays for an accounting, because the plaintiff could have maintained an action at law to recover any moneys due him as assignee of his brother, Lewis St. John, and Mrs. Cole.

Section 1666 of the present Code provides that a tenant in common of real property, or his executor or administrator, may maintain an action to recover his just proportion against his co-tenant, who has received more than his own just proportion, or against his executor or administrator. If Peck, being a tenant in common with Lewis St. John and Mrs. Cole, had received more -than his proportion of the rents and profits of the farm, they or their assignee could, under this section of the Code, have maintained an action to recover their proportion.

Moreover, independently of this provision of the Code, an action at law might have been maintained by Lewis St. John and Mrs. Cole, or the plaintiff, as their assignee, to recover money had and received for their benefit, if it was true that Peck had received from Cole moneys which it was his duty to pay over to Lewis St. John and Mrs. Cole.

“ Money in the hands of one person to which another is equitably entitled may be recovered in a common law action by the -equitable owner, upon an implied promise arising from the duty of the person in possession to account for and pay over the same to the person beneficially entitled. The action for money had .and received to the use of another is the form in which courts of common law enforce the equitable obligation. The scope of this remedy has been gradually extended to embrace many cases which were originally cognizable only in courts of equity.” Roberts v. Ely, 113 N. Y., 131; 22 St Rep., 185.

“ When money is received by one,to and for the use of another, under such circumstances that it is his duty at once to pay it over, then an action for money had and received may be brought to recover, without any demand; and in such case, the statute of limi-e tations begins to run from the day of the receipt of the money. * * Even if an accounting was necessary to determine the amount due from him to his brother, the account could be taken in an action at law as well as in an action in equity; and in whatever form the action was commenced, the legal rulé of limitations would be applicable. * * * All the relief asked for in the complaint is an accounting and a judgment for a sum of money, and no other relief was needed or possible upon the facts established. * * * It is said, however, that the defendant was in some sense a trustee of moneys received by him, and hence that the statute of limitations would not begin to run in his favor until he had repudiated the trust. But the defendant was not a trustee in the sense contended for. He had received money belonging to another and became a debtor for the sum, and he is in no other sense a trustee than every one is who receives money to and for the use of another. There was no actual express trust of these moneys created by the act of the parties. * * * If the defendant was in any sense a trustee of the moneys received by him, it was simply an. implied trust, which the law would raise for the purposes of justice; and as to the liability growing out of such trust, the ordinary rules of limitation apply.” Mills v. Mills, 115 N. Y., 80, 85, 86; 23 St Rep., 604.

“ In cases of implied trust in regard to personal property, or the rents and profits of real estate, where persons, claiming in their own right, are turned into trustees by implication, the right of action in equity will be considered as barred at the end of the time limited by the statute in analogy to the limitation of a similar action at law.” Hawley v. Cramer, 4 Cow., page 717.

In Smith v. Bodine, 74 N. Y., 30, 33, where a claim was made for a portion of the profits of the business as compensation for services rendered in it, the court said: The fact that a statement of account was necessary to establish his claim did not require an equitable action; and the nature of the action was. in no wise changed by the introduction of evidence showing how the account stood; ” and also that: “An accounting is proper in the action at law.”

Under these circumstances, the jurisdiction of the court to entertain this action for an accounting in equity was concurrent with its jurisdiction to entertain an action at law to recover the amount alleged to be due from the defendants to the plaintiff, and, upon all the authorities, where such concurrent jurisdiction exists, the six years limitation applies. Kane v. Bloodgood, 7, Johns. Ch., 121; Bertine v. Varian, 1 Edw. Ch., 345; Atwater v. Fowler, id., 422; Loder v. Hatfield, 71 N. Y., 103; Roup v. Bradner, 19 Hun, 517; Matter of Neilley, 95 N. Y., 390.

In Kane v. Bloodgood, supra, the court said: “Courts of equity are bound to yield obedience to the statute of limitations upon all legal titles and legal demands, and cannot act contrary to the-spirit of its provisions. I understand this proposition to mean that if a party has a legal title and a legal right of action, and instead of proceeding at law, resorts to equity; instead of bringing his action of account, or detinue, or case, for money had and received at law, files his bill for an account, the same period of' time that would bar him at law would bar him in equity. This is the principle that pervades the' cases.”

In Loder v. Hatfield, supra, the court said: “ An action at law might have been maintained against him therefor, if the cause of action had accrued before his death; or against his executors-after his death. * * * So that equity had not exclusive-cognizance of the demand. In such case the same law of limitation of actions applies in both courts.”

In Roup v. Bradner, supra, the court said: “ Assuming that there-was a trust which a court of equity would enforce, there was also-a concurrent remedy at law upon the agreement, and the six jmarslimitation applies.”

In the Matter of Neilley, supra, the court said: “ When the complainant has a concurrent remedy in a court of equity and in a court of common law, time is as absolute a bar in equity as it is at law. * * * And in such cases the limitation as to actions at law applies.”

In Butler v. Johnson, 111 N.Y., 204; 19 St Rep., 85, the whole subject of the application of the statute of limitations to actions in which there is concurrent jurisdiction in law and equity was elaborately considered, and the court held as follows: “We think that causes of action which, before the adoption of the Code, the" two courts had concurrent jurisdiction over, or in other words, where the subject of the action was the same in both courts and. the remedy only was different, such actions are included in and provided for by the sections preceding the above mentioned 77th section, and hence are not included in that section as within the ten years statute.”

In the case at bar, if the original defendant Peck received from dole moneys which equitably belonged to St. John and Mrs. Cole, it was his duty to have paid that over at once, and the statute of limitations began to run from the time he received the moneys. In point of fact, no accounting was necessary, for it appears by the testimony that before the action was brought Cole visited said defendant Peck, and examined his check ‘book, and ascertained that the amount which, it is alleged, Peck ought to have paid over to St. John, for the benefit of himself and Mrs. Cole, was the sum ■of $1,925; and that was the consideration named in the assignment from Lewis St. John to the plaintiff; and it was to recover that sum of money only that this action was brought. Hot only was no accounting necessary but, as a matter of fact, no accounting was had upon the trial.

We think it is clear, upon the facts proved in this case, that if Peck was indebted to the plaintiff, as the assignee of his brother :and Mrs. Cole, the plaintiff might have maintained an action for money had and received, and that the six years statute of limitation applies to all of said payments except the payment of :$541.50, which was made on April 15, 1872.

We are, moreover, of the opinion that the plaintiff cannot recover the said last item of $541.50, because the evidence establishes that Cole, while acting as superintendent, misappropriated moneys which he should have paid over to Peck, and that he subsequently agreed that the proceeds of the farm should be distributed between Peck,. Godwin and the estate of Conover, until the amount of the misappropriation was made good; and that St. John consented to this arrangement.

The ascertained amount of such misappropriation was, if Cole was entitled to a salary, $4,418.68. If he was not entitled to a salary, such misappropriations amounted to $11,710.35. The evidence tends strongly to establish the fact that he was not entitled to a salary. But it is not necessary to determine that question, because we consider that the statute of limitations bars a recovery as to all payments except the last, which was $541.50; and if the misappropriation was no more than $4,418.68, such •sum of $541.50 could not be recovered, if Cole and St. John agreed that the procéeds should be distributed between Peck and Godwin, and the estate of Conover, until such sum of $4,418.68 was made good. °

We think that the evidence fully establishes that the misappropriation by Oole did amount to said sum of $4,418.68, and that Cole made the agreement in question. It is objected, however, that such agreement did npt bind Cole’s wife, to whom it has been found by the jury that St. John made a bona fide conveyance of 10-96ths of the property.

We think, however, that the evidence shows that Cole was the agent of his wife, and had full authority to act for her in making such agreement, and that such agreement was binding upon her. Peck testified that St. John consented to this agreement, and the conduct of Cole and St. John, after 1868, tends strongly to prove that such agreement was made by both of them. For more than eight years after Cole’s confession to Peck in regard to the misappropriation of the money, and for more than six years after his return to New York, Cole never made, or caused to be made, any claim upon Peck for any moneys alleged to be due to Cole’s wife, nor was any claim for such moneys made on her behalf by any one. St John lived continuously in New York, and transacted business until October, 1876, and between 1868 and 1876 had interviews with Peck about matters relating to Pennsylvania oil interests, but during all this time made no claim to Peck that the latter had received any money from the Eooker farm which it was his duty to pay over to St. John or to Mrs. Cole. In the meantime at least two-thirds of the money received by Peck after 1868 had been paid over by him to Godwin and the personal representatives of Conover, in reliance upon the agreement of Cole and St. John that the net proceeds should be distributed between God-win, Conover’s representatives and Pock, until the misappropriation had been made good. Under these circumstances, it certainly would be a great hardship if Peck, or his personal representatives, the present defendants, should be required to pay over to the plaintiff moneys paid out by Peck under such circumstances. The plaintiff is pot entitled to any especial consideration in a court of equity. It seems that in the fall of 1876 Lewis St. John had a stroke of apoplexy, and that his mind was somewhat affected thereby. The assignment of his alleged claim against Peck to his brother, the plaintiff, was made after he had only partially recovered from such stroke of apoplexy, though the jury has found that he had sufficient mental capacity to make such assignment. It appears, however, that the plaintiff paid nothing for the claim,, but took it on account of an alleged antecedent debt.

It appears also by the testimony that Oole was active in promoting'this stale claim against the original defendant Peck. Lewis St. John,who had made no claim on his account for over eight years, was induced to execute the assignment to his brother, the plaintiff, and thereupon Mrs. Oole also executed to plaintiff an assignment of her alleged interest in such claim. The plaintiff, therefore, represents the alleged interest of his deceased brother, for "which he paid nothing, and also the interest of Mrs. Cole, who is the wife of Cole, whose misappropriation of moneys led to all the trouble. We think the evidence establishes the misappropriation by Oole, and the agreement by himself on behalf of his wife, which was consented to and acquiesced in by St. John, that until the misappropriation was made good, Peck should distribute the moneys in the manner above specified; and, even if the consideration of all the testimony in the case has led to a doubt upon these points, as the burden of proof was upon the plaintiff to establish his case by a preponderance of evidence, we should think that the defendants ought to have the benefit of any such doubt

Upon the whole case we think that the judgment should be reversed and a new trial ordered, with costs to appellants to abide event.

Yan Brunt, P. J., concurs.