author: HekRIOK, J.:

text:
    The New York Security and Trust Company, Respondent, v. The Saratoga Gas and Electric Light Company and Others, Defendants; The First National Bank of Saratoga Springs and Others, Appellants. William V. Reynolds, as Receiver, Appellant, v. The New York Security and Trust Company and Others, Respondents. The New York Security and Trust Company, Respondent, v. The Saratoga Gas and Electric Light Company and Others, Defendants; William V. Reynolds, as Receiver, Appellant. William V. Reynolds, as Receiver, Appellant, v. The New York Security and Trust Company and Walter Stanton and Others, Respondents. The New York Security and Trust Company, Respondent, v. The Saratoga Gas and Electric Light Company and Others, Defendants; William V. Reynolds, as Receiver, Appellant.

      Equity — trust mortgage executed Iry a corpoi'ation — cross-action ■— a stranger cannot question the irregulczr appointment of a trustee — notice of the exercise of an option to declare due all the bonds secured by a mortgage is an executive duty not requiring a resolution of the board of directors — confirmation by the board — a mortgage covering after-acquired, personal property of a corporation — power to mortgage it — effect of recording the mortgage —rule as to fixtures between mortgagee and bondholders• — what are fixtures — necessity of proof that the property was subsequently acquired —property necessarily consumed in the conduct of a business • — • when separate judgments in two actions are necessary — nature of a cross-action in chancery — discretion of the court in talcing pi'operty from one receiver and transferring it to another.

    In 1887 the Saratoga Gas and Electric Light Company, a domestic corporation, in order to secure an issue of bonds, mortgaged to the American Loan and Trust Company, as trustee, its corporate property of every nature, “whether now owned or hereafter acquired or constructed ” by it. The mortgage also provided that any vacancy in the trusteeship from whatever cause might be filled by a written appointment executed in a manner prescribed; or, if not thus made within thirty days, then “ by the Supreme Court of the State of Hew York for the fourth judicial district, upon application of any party in interest on such notice as the court may prescribe.” It also provided that in case of a default in payment, existing for sixty days, the principal sum secured by all the bonds should at once become payable at the trustee’s option, to be exercised, however, only upon the written request of the holder or holders of a majority of the bonds.

      In May, 1891, tlie American Loan and Trust Company was dissolved "because of its insolvency, and J. Edward Simmons was appointed its permanent receiver. In May, 1892, "Walter Stanton applied to tlie court by a petition, in which he ■ stated that he owned or controlled a majority of the bonds of the Saratoga Gas and Electric Light Company, and asked for the appointment of a new trustee; the president of the Saratoga Gas and Electric Light Company consented in writing to the appointment of the Hew York Security and Trust Company, and on May 23, 1892, on notice to the Attorney-General and to Simmons, as receiver, the Hew York Security and Trust Company was appointed trustee under the mortgage or deed of trust. The order appointing the Hew York Security and Trust Company as trustee was made in the first judicial district and not in the fourth judicial district, as it was provided that it should be in the mortgage. The trustees of the Saratoga Gas and Electric Light Company confirmed this action by a resolution, and later, by an agreement executed on June 10, 1892, conveyed all the property covered by the mortgage, subject to the same conditions, to the new trustee, which accepted the conveyance and trust. This agreement was executed by the president of the gas and electric light company, and by its treasurer, William Y. Reynolds, but as alleged without authority.
    Thereafter a reorganization was undertaken, under which the bondholders deposited with the Hew York Security and Trust Company 271 bonds out of a total of 300 — the latter company acting as trustee and paying interest on the bonds until August 1, 1893, when a default occurred.
    On the 11th day of Hovember, 1893, the secretary of the Hew York Security and Trust Company notified the Saratoga Gas and Electric Light Company, in writing, that the former company exercised its option to declare the principal of all the bonds immediately due, and on the same day the Hew York Security and Trust Company, upon the written request of a majority of the bondholders of the Saratoga Gas and Electric Light Company, began a foreclosure of the mortgage, and in the action first above entitled, on Hovember 16, 1893, Lafayette B. Gleason was appointed receiver of the gas and electric light company for the benefit of the plaintiff. An amended complaint was filed December 23, 1893.
    The First Hational Bank of Saratoga Springs, which urns made a party defendant to the foreclosure action, answered, alleging that on the 27th day of September, and on the 11th day of Hovember, 1893, it recovered judgments against the gas and electric light company and levied on its property, and that its executions were liens “upon any property acquired by said gas company after the execution and delivery of the mortgage set out in the complaint, prior and superior to the lien of said mortgage;” that the mortgage, so far as it related • to personal property, was void because the mortgager used and sold property covered by the mortgage and applied the proceeds to the purchase of other property instead of applying them to the payment of the mortgage debt, and .that the appointment of the plaintiff as trustee was void, and asked judgment that its liens be declared absolute for the balance due it; that the property used and sold by the gas and electric light company since the execution of the mortgage he deemed a payment of the mortgage pro tanto ; that the mortgage he declared fraudulent as against the hank, and that the plaintiff he declared to he neither a trustee nor entitled to maintain the action.
    Edward F. Andrews, also made a party defendant, interposed an answer in which ' he alleged that he had obtained a judgment against the gas and electric light, company and that under it sequestration proceedings were taken against the corporation, resulting in the appointment of William Y. Reynolds as receiver on the 16th day of December, 1893; he attacked the legality of the appointment of the trust company as trustee; the use of the corporate property by the corporation, and in all other respects asked the same relief as the First National Bank.
    William V. Reynolds, also made a party defendant, set forth his appointment as. receiver in the sequestration proceedings, put in issue the legality of the appointment of the trust company as trustee and its exercise of the option to. declare the whole amount of the principal of the bonds to he due, and asked that the appointment of the trust company as trustee he vacated.
    On the 28th day of April, 1894, William Y. Reynolds, as such receiver, began the-action secondly above entitled and alleged in his complaint the commencement of the foreclosure action and the appointment of the New York Security and Trust Company as trustee; he further alleged that the notice upon which this appointment was made was given only to the Attorney-General and the attorney for the American Loan and Trust Company; that Waiter Stanton did not at the time of his petition own or control any of the bonds, and that neither Simmons, as receiver, nor the People owned any of the bonds; and he asked as relief that, the order appointing the trustee he vacated and that the complaint in the foreclosure action be dismissed.
    The two actions, the first for a foreclosure of the mortgage and the second by Reynolds, as receiver, were tried at the same time. A foreclosure was directed in the first action; in the second the complaint was dismissed; separate judgments were entered in each action.
    The Saratoga National Bank, Andrews, and Reynolds, as receiver, appealed in the first action. In the second action Reynolds, as receiver, appealed. In both actions Reynolds, as receiver, moved to have the judgments set aside and to have one judgment entered upon the ground that in both there was but one cause of action. These motions were denied and the appeals of Reynolds therein constitute the third and fourth appeals above entitled. Finally Reynolds made a motion for an order directing Gleason, as receiver, to deliver to Reynolds, as. receiver, the possession of the mortgaged property. The motion was denied, and Reynolds’ appeal from that order constitutes the appeal fifthly above entitled.
    Held, upon a consideration of the appeals of Reynolds from the two judgments, that as the original trustee under the mortgage had become insolvent, the court, had power to appoint a new trustee, and that while the appointment of the1 New York Security and Trust Company as trustee might have been irregular,, it was not void;

      That as two applications to vacate it had "been denied, and as it appeared affirmatively that it met the approval of the gas and electric light company and of a very large proportion of the bondholders, and as Reynolds, as receiver, did not represent either the mortgagor, the mortgagee or the bondholders and was practically a stranger, having no interest in the matter, he was not in a position to question the jurisdiction of the court or the regularity of the proceedings;
    That the fact that the directors of the New York Security and Trust Company had not authorized the secretary of that company to send the notice which he did send to the gas and electric light company, to the effect that the New York Security and Trust Companjr elected to exercise its option to declare the principal of all the bonds due because of the default in the payment of interest, did not make the notice void;
    That this notification was a mere executive duty which the executive officers of the New York Security and Trust Company could perform without a prior resolution authorizing the act;
    That if a resolution were necessary, a resolution of the board of directors of the trust company, shown to have been passed after the commencement of the foreclosure action, was a sufficient confirmation of the action of the secretary;
    That the mortgage was not invalid because it covered after-acquired personal property;
    That the company had power to make the mortgage, and, as it had been properly recorded, it was, under the provisions of chapter 171 of the Laws of 1891, notice to all persons of a lien, not only upon the real property, but also upon the personal property of the corporation;
    That as a valuable portion of the property of a gas and electric light corporation consists ordinarily in its tools and machinery, which must from time to time he renewed, and also in improved appliances necessarily introduced, such a mortgage should, in the interest of investors, bo held to cover after-acquired property of this nature;
    That a liberal rule should be adopted in this respect, in the ease of such corporations, to protect bondholders and mortgagees;
    That, even if this rule were questionable, no proof was made upon the trial by the appellants, the First National Bank of Saratoga Springs and Andrews, that any of the property, on which they claimed a lien, was purchased after the execution of the mortgage, except certain dynamos and exciters;
    That as it appeared from the evidence that those were intended as permanent improvements to the freehold, designed to be used until worn out, they must be deemed to be a part of the realty;
    That as to so much of the mortgaged property, alleged to have been used and disposed of, as consisted of coal, oil, lime and similar substances, these were necessary to the conduct of the business, and tlieir cost could not in- any view he credited upon the mortgage as a payment;
    That the motions of Reynolds, as receiver, to vacate the judgments in both actions, and to direct the entry of a single judgment, were properly denied; that as the cause of action set forth in the second action, called a cross-action, was not a defense to the first or foreclosure action, and as the parties were not the same in both actions, and as the complaint in the second action was dismissed, separate judgments were necessary and proper.

      It seems, that the chancery practice by cross-action was abolished by section 3889 of the Code of Civil Procedure, and was not preserved by section 817 of said Code;
    That the motion of Reynolds, as receiver, relative to Gleason, as receiver, was properly denied; that whether the court should take the mortgaged property from Gleason, the receiver appointed in the foreclosure action, and turn it over to Reynolds, the receiver appointed in the 'sequestration proceedings, was a matter resting in its discretion, and that upon the facts the discretion of the court below had been properly exercised.
    Appeals by the defendants, The First National Bank of Saratoga Springs and others, from a judgment of the Supreme Court in an action in which the New York Security and Trust Company was plaintiff and the Saratoga Gas and Electric Light Company and others were defendants, entered in the office of the clerk of the county of Saratoga on the 21st day of November, 1894, upon the decision of the court directing a foreclosure of the mortgage upon the premises described in the complaint, rendered after a trial at the Saratoga Special Term.
    Also an appeal by the plaintiff, William Y. Reynolds, as receiver of the Saratoga' Gas and Electric Light Company, from a judgment of the Supreme Court, rendered in an action in which the said Reynolds, as such receiver, was plaintiff and the New York Security and Trust Company and others were defendants, entered in the office of the clerk of the county of Saratoga on the 19th day of September, 1894, upon the decision of the court dismissing the complaint upon the merits, rendered after a trial at the same Special Term and at the same time with the action first above mentioned.
    Also an appeal by said Reynolds, as such receiver and defendant, from an order of the Supreme Court, made in the action first herein above set forth at the Schenectady Special Term on the 23d day of November, 1894, and entered in the Saratoga county clerk’s office, denying his motion to set. aside the decision and judgment in said action secondly hereinabove set forth and to enter one judgment in both actions.
    Also an appeal by said Reynolds, as such receiver and plaintiff, from an order of the Supreme Court, made in the action secondly hereinabove set forth at the same Special Term on the 23d day of November, 1894, denying his motion to set aside the decision and judgment in said action and to enter one judgment in both actions.
    Also an appeal by said Reynolds, as such receiver and defendant, from an order of the Supreme Court, made in the action first above herein set forth at the Schenectady Special Term on the 4th day ■of May, 1895, denying his motion for an order directing Lafayette B. Gleason, as receiver of the Saratoga Gas and Electric Light Company, to pay the coupons upon the first mortgage bonds of said •company due February 1, 1894, and that Gleason, as receiver, turn •over to Reynolds, as receiver, the property described in the complaint.
    The answer of Edward F. Andrews, defendant, interposed in the action first above entitled, alleged that Benjamin M. Whealey duly recovered a judgment against the Saratoga Gas and Electric Light Company on the 8th day of July, 1893, before a justice of the peace ; that on or about October 12, 1893, execution was issued thereon and returned unsatisfied; that on the same day the judgment was duly assigned to him; that on October 16, 1898, he began an action in this court to sequestrate the property of the corporation, and that on the 4th day of December, 1893, he obtained a judgment sequestrating its property and appointing William Y. Reynolds as receiver, and that the latter had duly qualified and entered upon the performance of his duties.

      Edward Winslow Paige, for William Y. Reynolds, receiver, appellant.

      Edgarr- T. Brachett, for First National Bank of Saratoga Springs, appellant.

      John II. Benedict, for Edward F. Andrews, appellant.

      William B. Ilornblower and Ilowcvrd A. Taylor, for New York Security and Trust Company and Walter Stanton, respondents.
   HekRIOK, J.:

The above-entitled appeals all arise out of an action commenced by the New York Security and Trust Company to foreclose a mortgage executed by the Saratoga Gas and Electric Light Company.

Appeals 1 and 2 are appeals from judgments, and Nos. 3, 4 and 5 are appeals from orders made in the course of such proceedings.

The facts in each appeal shed some light upon the others, and to save unnecessary repetition it seems to me best to consider all the appeals in a single discussion.

On the 1st day of February, 1887, the defendant, the Saratoga Gas and Electric Light Company, a corporation organized under the laws of the State of New York, and doing business at Saratoga Springs, for the purposes of securing an issue of bonds made, or to be made by it, to the amount of $300,000, each of said bonds to be in the sum of $1,000, executed a mortgage to the American Loan and Trust Company of New Yrork, a corporation doing business as a trust company under the laws of the State of New York, as trustee; such mortgage purports to convey: “ All the corporate property, real, personal and mixed, including all lands, easements, rights of way, buildings, fixtures, materials, supplies, machinery and plant, franchises, contracts and dioses in action, whether now owned or hereafter acquired or constructed by said gas company, together with the appurtenances thereto, and all rents, tolls, issues, income and profits of said gas company present and future.”

It was provided that said property was to be held by said trust company, its successors and assigns, in trust for the equal benefit and security of all the holders of said bonds, and it contains the usual covenants and conditions of mortgages executed for such purposes.

It provided that Any vacancy in the trusteeship, from whatever cause, may be filled by a written appointment executed by said gas company and the holder or holders of a majority of the bonds hereby secured; or if in thirty days such appointment be not made, then by the Supreme Court of the State of New York for the fourth judicial district, upon application of any pai'ty in interest, on such notice as the court may prescribe.”

Such mortgage also provided that “ If any default shall be made and shall continue for sixty days as above specified, then the principal of all said bonds, although not then due by their terms, shall, at the trustee’s option, become immediately due and payable; any-tiling in said bonds or herein contained to the contrary notwithstanding. • Said option shall be exercised or not exercised, and such principal declared due or such declaration annulled and withdrawn by the trustee, according- to the written request of the holder or holders of a majority of said bonds.”

In March, 1891, an action was brought in behalf of the People of the State of New York against the American Loan and Trust Company for a dissolution of that corporation for alleged insolvency ; and thereafter, in the month of May, 1891, a judgment was rendered in said action dissolving such corporation, and appointing J. Edward Simmons as permanent receiver thereof.

Thereafter, and in the month of May, 1892, one Walter Stanton presented to the Supreme Court a petition, wherein he stated that he represented a majority of the bonds issued by the Saratoga Gas and Electric Light Company, and was the owner, or in possession of, and had control of the majority of said bonds at that time, and representing that the American Loan and Trust Company had become insolvent, and that J. Edward Simmons had been appointed as receiver thereof, and that no proceedings had been taken for the appointment of a successor trustee to said company, and that the interest upon said bonds which had matured May 1, 1892, was in default, and coupons therefor had been presented, but were unpaid, and asked that a successor trustee to the American Loan and Trust Company be at once appointed. On the same day the president of the Saratoga Gas and Electric Light Company executed and acknowledged an instrument, whereby he consented to the appointment of the New York Security and Trust Company as successor trustee to the American Loan and Trust Company, and requested that such company be appointed as such successor trustee, under the deed of trust or mortgage executed by the Saratoga Gas and Electric Light Company February 1, 1887. Thereupon, on the 23d day of May, 1892, notice having been given to the Attorney-General of the State, and to the receiver of the American Loan and Trust Company, an order was made at a Special Term of this court, held in the city of New York, entitled in the same proceedings, wherein and whereby the American Loan and Trust Company was dissolved, appointing and designating the plaintiff herein, the New York Security and Trust Company as successor trustee, “for said Saratoga Gas and Electric Light Company, under the mortgage or deed of trust of. said company to said American- Loan and Trust Company, dated the first day of February, 1887.’

Thereafter, and on the 3d day of June, 1892, at a meeting of the trustees of the Saratoga Gas and Electric Light Company, the following was adopted: On motion, Resolved, that the New York Security and Trust Company be appointed trustee for the bondholders of the Saratoga Gas and Electric Light Company.”

On the 10th day of June, 1892, an agreement in writing was entered into, purporting to be between the Saratoga Gas and Electric Light Company, as party of the first part, and the New York Security and Trust Company as party of the second part, which agreement recites the execution of the mortgage herein-before referred to, to the. American Loan and Trust Company as trustee, the fact that such American Loan and Trust Company had been declared insolvent, and also reciting that an order of the court made May 23, 1892, appointed the New York Security and Trust Company as successor trustee to the American Loan and Trust Company, and then follows a conveyance by the gas company to the trust company of all the property described in the mortgage theretofore executed to the American Loan and Trust Company, subject to the terms and conditions of said mortgage, and the New York Security and Trust Company in such instrument accepts the same pursuant to and under the terms and conditions of the mortgage executed to the American Loan and Trust Company.

This agreement was signed in behalf of the Saratoga Gas and Electric Light Company by the president and treasurer of said company, and properly acknowledged and verified by them as having been executed and signed by them by order of the board of directors. -The treasurer so signing said instrument is the same person as William Y. Reynolds, one of the appellants herein.

The appellants claim that there was no authority given to execute said instrument, and none was proved upon the trial, and the book of minutes of said company does not show that any resolution was ever adopted authorizing the execution of such instrument.

On the 1st day of December, 1893, an agreement was entered into between certain holders of such bonds and such others as might thereafter deposit their bonds in pursuance of such agree-meut, and a committee of five named in tbe agreement, whereby such committee was authorized to procure the sale of all the property of the said Saratoga Gas and Electric Light Company as an entirety, and to declare the principal of said mortgage debt due, or if the same had already been declared due, to confirm the same, and to purchase the property of said company upon the foreclosure sale, and to reorganize said company in the event of its property being-bid in by them, in the interest of the bondholders, and the plaintiff trust company was designated as the depositor and trustee under such agreement; and in pursuance of such agreement the majority of -the bonds of said gas company are held by the plaintiff trust company.

After the order of May 23, 1893, appointing it as successor trustee to the American Loan and. Trust Comjmny, the New York Security and Trust Company assumed to act as trustee under such mortgage, receiving money from the Saratoga Gas and Electric Light Company to pay the interest upon the bonds as it became due, and paying the coupons as they were presented to it down to August, 1893.

On the 3d day of October, 1893, upon the petition of one Pruyn, who claimed to be the owner of $15,000 of said bonds, and upon the statement of the insolvency of the American Loan and Trust Company, and upon his statement also that he believed that no trustee had been appointed as successor of said American Loan and Trust Company, at a Special Term of the Supreme Court, held in Saratoga county, Messrs. Scott and Hamilton were appointed as trustees under said mortgage, to succeed the American Loan and Trust Company.

Thereafter, at a Special Term, in the county of Clinton, October 13, 1893, an order was made vacating and setting aside.the order appointing Messrs. Scott and Hamilton as such trustees, upon the ground that such order had been made inadvertently, and in ignorance of the order appointing the plaintiff as such trustee.

At the same time and place a motion was made to vacate and set aside the order made in the first judicial district, dated May 23, 1892, appointing the plaintiff as such trustee, which motion was denied ; the order setting aside the appointment of Scott and Ham-, ilton, and the order denying the motion to vacate the appointment of plaintiff as trustee were both appealed from to tlie General Term, and botli orders were affirmed. (76 Hun, 610.)

After tlie commencement of tlie action to foreclose said mortgage, as hereinafter set forth, William Y. Reynolds, by a petition verified December 27, 1893, and entitled in the action in which the American Loan and Trust Company was dissolved, and in which he stated that he had been appointed receiver of the Saratoga Gas and Electric Light Company, “ by a judgment of this court in a sequestration action against the Saratoga Gas and Electric Light Company,” asked the court to vacate the appointment of the trust company as trustee, upon the ground that such appointment was irregular and .void, as being in contravention of the terms of the mortgage, which provided the manner in which the successor trustee should be appointed. The motion upon such petition was heard at a Special Term held by the same justice who had theretofore made the order appointing the trust company as such successor trustee. Upon such hearing the affidavits of all the members of the committee of 'bondholders hereinbefore referred to, who were to take charge of the interests of the bondholders, and to purchase the property and reorganize said gas company for the benefit of said bondholders, were read, in which they asked that such motion be denied, and that the trust company be continued as such suq-cessor trustee.

The motion of Reynolds to vacate the order appointing this plaintiff as trustee, in place of the American Loan and Trust Company was denied, and it does not appear that the same has ever been appealed from.

Default was made in the payment of interest upon said bonds August 1, 1893.

November 10 and 11, 1893, the holders of a majority of said bonds signed written requests, directed to the plaintiff herein, wherein it was requested to exercise the option to declare the principal of all the bonds immediately due and payable, reciting the fact that default had been made in the payment of the interest due August 1, 1893, and that such default had continued for a period of sixty days, and also requesting the plaintiff to proceed to foreclose the mortgage.

On the eleventh day of November the secretary of the plaintiff notified the Saratoga Gas and Electric Liglit Company, in writing, that the plaintiff exercised its option to declare the principal of all the bonds immediately due and payable, because default had been made in the payment of interest, and that such default had continued for a period of sixty days, and on the same day the action first entitled, for a foreclosure of said mortgage, was commenced.

On the 16th day of November, 1893, Lafayette B. Gleason was appointed receiver of the Saratoga Gas and Electric Light Company for the benefit of the plaintiff in said foreclosure action.

An amended complaint and notice of pendency of action bringing in other defendants was filed in the cleric’s office December 23, 1893.

The defendant, the Eirst National Bank of Saratoga Springs, in answer to the plaintiff’s complaint, alleged that before the commencement of the foreclosure action, and on or about the 27th day of September, 1893, it recovered judgments in the Supreme Court against the Saratoga Gas and Electric Light Company to the amount of over $7,900 ; that executions had been issued thereon, and personal property belonging to the said gas company had been levied upon and sold, and bid in by the said bank, upon which sale the amount realized, over and above the fees and expenses of the sheriff, was the,sum of $1,296.06, which had been credited upon,the amount of. said judgment, and that the balance of said judgment remained due and unpaid.

That thereafter, and on the lltli day of November, 1893, other executions upon said judgments were issued to the sheriff of Sara-toga county, and the said bank claims that such executions are liens upon any property acquired by said gas company after the execution and delivery of the mortgage set out in the complaint, prior and superior to the lien of said mortgage.”

The bank also asserts in its answer 'that the mortgage sought to be foreclosed was, as against such defendant, “ so far as the same was or assumed to be a mortgage upon the personal property of said * * gas company, fraudulent and void,” alleging that after the execution of such mortgage the mortgagbr continued to use up, dispose of and sell property covered by the said mortgage, and instead of applying said proceeds in payment of said mortgage debt, used the same in the purchase of other property which, under the terms of said mortgage, became subject to the lien of said mortgage, and wliicb in turn was itself sold and tbe proceeds again used as before, wliicb process continued until tbe commencement of tbis action and tbe appointment of tbe receiver therein; that such use and disposition of tlie property was, by and with tbe consent and concurrence of said mortgagee, and of tbe holders of said bonds, secured by such mortgage, and such use and disposal was contemplated and agreed to when such mortgage was given.

Tbe bank further alleges that tbe plaintiff was not entitled to begin or maintain tbe action because it was illegally and improperly appointed successor trustee to tbe American Loan and Trust Company and in contravention of tbe terms of tbe mortgage, wherein tbe manner of appointing a successor trustee was provided for, and asked judgment that tbe judgments and executions issued thereon in favor of such bank be declared a lien upon tbe property, real and personal, to tbe amount remaining unpaid on such judgment, and that tbe property bid in by such bank at tbe sales under such execution be declared to belong to it, not subject to tbe lien of tbe mortgage set out in tbe complaint, and that the value of tbe property used by tbe gas company since the execution and delivery of said mortgage be declared as against said bank to be a payment upon tbe mortgage set out in tbe complaint and tbe amount thereof deducted from tbe amount due upon the bonds and mortgage. That such mortgage be deemed fraudulent and void as against tbe defendant, and that it be declared that the plaintiff is not tbe trustee under such mortgage and is not entitled to maintain tbe action.

The appellant Andrews, in bis answer to tbe complaint, set forth tbe obtaining of a judgment against tbe gas company, tbe return of an execution unsatisfied, tbe commencement thereon of sequestration proceedings against tbe gas company and tbe appointment of William Y. Reynolds as receiver thereof. lie also put in issue tbe legality of tbe appointment of tbe trust company as successor trustee, and also raised tbe same question as to tbe use of the mortgaged property 'by tbe mortgagor as is raised in tbe answer of tbe Sara-toga National Bank, and asked that bis judgment be declared a lien upon all tbe property of the gas company, and in all other respects asked the same relief as is asked by tbe bank in its answer.

Tbe appellant William Y. Reynolds, in bis answer to tbe complaint set forth bis appointment as receiver on tbe 16th day (/. December, 1893, and put in issue. the legality of the appointment of the trust company as successor trustee, and also put in issxie the exercise of the option by the trust company to declare the whole amount of the principal of the bonds to be due, and asked that the order appointing the trust company as successor trustee be vacated and set aside, and that it be adjudged that the said trust company is not the trustee under the said mortgage.

On the 28th day of April, 1894, William Y. Reynolds, as receiver, commenced an action against the New York Security and Trust Company and. others, as defendants, alleging in his complaint the commencement of the action first entitled for the foreclosure of the mortgage, the dissolution of the American Loan and Trust Company, and the appointment of the New York Security and Trust Company as successor trustee to the American Loan and Trust Company, and alleging that no notice of any application for the appointment of the New York Security and Trust Company was given to any one, except to the Attorney-General and to the attorneys for the receiver of the American Loan and Trust Company, and alleging, upon information and belief, that Walter Stanton, upon whose petition such appointment was made, was not at that time the owner of any bonds issued by the Saratoga Gas and Electric Light Company, and did not have- any in his possession nor under his control, and that the receiver of the American Loan and Trust Company, Simmons, did not, nor did the People of the State of New York, own any such bonds, and asked that the order appointing the New York Security and Trust Company, as successor trustee, “ be reviewed, vacated, set aside and held for nothing,” and also asked that the complaint in the foreclosure action, commenced by the New York Security and Trust Company, be dismissed.

Both actions, the one to foreclose the mortgage and the action of Reynolds, as receiver, to review the order appointing the trust company, as successor trustee, were by agreement tried at the same time, and resulted in a judgment dismissing the complaint in the action brought by Reynolds as plaintiff, and in a judgment and decree of foreclosure and sale in the action brought by the trust company to foreclose the mortgage. Separate decisions and separate judgments were rendered and entered in each. Final judgment in the action wherein Reynolds was plaintiff, and an interlocutory judgment in the foreclosure action, was entered September 19, 1894, and final judgment of foreclosure and sale was entered in the foreclosure action November 19, 1894.

From eacb of these judgments appeals have been taken; from the judgment of foreclosure and sale, by the Saratoga National Bank, by Andrews and by Reynolds as receiver; and from the judgment dismissing the complaint in the action brought by Reynolds an appeal has been taken by Reynolds, which appeals constitute the first and second-entitled appeals.

The appellant Reynolds made a motion to set the decision in each case aside, and, after judgment was entered upon such decisions, moved to set such judgment aside and to have one judgment entered upon the ground that the foreclosure action and the action by Reynolds to review the order appointing the trust company as trustee constituted but one cause and should end in but one judgment disposing of all the issues in both actions; both these motions were denied, and from the orders denying the same Reynolds appeals to this court, which appeals constitute the third and fourth above-entitled appeals.

Thereafter, and on the 2'Tth day of April, 1895, the said Reynolds made a motion at a Special Term of the Supreme Court for an order directing Gleason, as receiver, to pay the coupons due February 1, 1894, and that upon the payment by him, said Reynolds, of the coupons due August 1, 1894, and on February 1, 1895, the said Gleason, as receiver, deliver the possession of the mortgaged prop- ' erty to said Reynolds, which motion was denied, and from the order denying the same Reynolds appeals to this court, which constitutes the fifth above-entitled appeal.

The history of the entire proceeding having been thus- given, so that the situation of all the parties as to each appeal may be fully understood, we will now consider such appeals in their order. First, the appeal of Reynolds from the judgment in the foreclosure action and from the judgment in the action seeking to review the order by which the trust company was appointed the successor trustee.

No question was raised upon the trial but what default had been made in the payment of interest upon the bonds, and that such default -had continued for a period of over sixty days before the commencement of this action. -No question is raised but that the trust company represents in fact a large majority of tlie bondholders, and it appears that upon the hearing before the referee appointed under the interlocutory judgment the plaintiff trust company produced before such referee and had in its custody 271 of tlie 300 mortgage bonds.

The only questions raised upon the trial and argued upon this appeal by the appellant Reynolds were as to file legality of the appointment of tlie trust company as successor trustee, which question is common to both actions, and which is the only question presented in the action wherein Reynolds, as receiver, is plaintiff; and as to whether the trust company did in fact legally exercise its option to declare the whole principal amount of the bonds immediately due and payable, pursuant to the terms of the mortgage, after the expiration of sixty days from the default in tlie payment of interest, which last question only enters into the action for foreclosure.

The plaintiff is properly acting as trustee of the gas company.

The Court of Chancery had jurisdiction of trusts and trustees and had power, independent of any statute, to remove a trustee on good cause shown, and to appoint another in his place.

The Supreme Court has succeeded to the jurisdiction and power of the Court of Chancery, and it seems to me unnecessary to cite authorities to prove its jurisdiction and power to appoint one trustee in the place and stead of another.

The original trustee under the mortgage becoming insolvent, the Supreme Court had jurisdiction to appoint a successor trustee; its order making such appointment was, therefore, not a void order, but may have been, under the circumstances, irregular.

Without discussing the question as to the power and authority of the court in a proceeding pending before it for tlie dissolution of a corporation, which is acting as a trustee, to appoint a successor trustee, as a part of the proceeding pending before it, I will assume that the original appointment of tlie New York Security and Trust Company, as successor trustee to the American Loan and Trust Company, was irregular. The orderly and ordinary course of proceeding to dispose of such an order is to appeal from it, or, if the facts upon which it was obtained were falsely stated to the court, to move for a rehearing.

As we have heretofore seen, a motion to vacate the order appointing the trust company as successor trustee was made in another district from that in which such order was granted, and was denied, which denial was affirmed upon appeal to this court.

That was the only proceeding taken by any bondholder to vacate or set aside the appointment of the trust company as successor trustee. From that time forward no bondholder has appeared in these proceedings to contest the appointment of the trust company, or to contest the foreclosure proceedings.

After the commencement of the foreclosure action a motion was made at a Special Term, before the same justice who had appointed the trust company as successor trustee, to vacate such appoint-' ment, which motion was denied, and no appeal was taken therefrom. This ordinarily would conclude the matter. But assuming the right in a proper case to have reviewed by action a judgment, decree or order obtained 'by fraud, in what position does the appellant then stand ?

He alleges as his cause of action that the person upon whose petition such appointment was made falsely represented himself as the owner, or in possession of, or having under his control, bonds of the gas company, and claims that at that time such petitioner neither owned, possessed nor controlled any of such bonds.

In my view of this case, as it now stands, it is a matter of absolutely no importance whether such petitioner owned, possessed or controlled at that time any bonds or not.

The action to vacate the appointment of the plaintiff as successor trustee is one in equity; to sustain it the plaintiff must show some equity existing in his favor. The only persons interested in the question of who shall be trustee under the -mortgage are the bondholders and the gas company, all of whom have recognized, acquiesced in and requested such appointment.

The gas company, first, by its officers, the president and treasurer, executing to the trust company the so-called supplemental mortgage; secondly, by its board of trustees adopting the resolution, heretofore set forth, designating the trust company as the successor trustee; and thirdly, by paying over to it, from time to time, money to pay the interest upon its bonds. The bondholders, by requesting the trust company to exercise its option and declare the whole principal sum due, and commence foreclosure proceedings upon the mortgage.

Again, in the agreement of the bondholders constituting a committee to act for them, heretofore, referred to, wherein the trust company was designated as their trustee, and in pursuance thereof depositing a large majority of the bonds with it; and still again, upon the motion made at Special Term to vacate and set aside the order appointing the trust company as successor trustee, when the entire committee of bondholders, by separate affidavits, requested the Special Term to deny such motion, and to continue the trust company as successor trustee.

Upon the trial, as we have seen, the trust company produced before the court 271 of the 300 bonds issued under the mortgage, and under such circumstances, where it is so evident that the plaintiff is acting for and on behalf of a vast majority of the bondholders, I do not think that a court of equity will, at the instance of one who represents neither the mortgagor nor the mortgagee, nor any of the bondholders under the mortgage, interfere because of any alleged irregularity in its appointment of a trustee which is acting at the request and by the consent of all the parties interested.

A stranger not interested cannot raise any question as to the want of jurisdiction of the court appointing a trustee or as to the regularity of the proceedings. (People v. Norton, 9 N. Y. 176; Matter of Livingston, 34 id. 555-570.)

As to the exercise of the option to declare the principal sum due, the majority of the bondholders requested the trust company to exercise such option. The contention is made that the trust company did not legally comply with that request; that the notice sent by the secretary of the company to the gas company was not sufficient, it not appearing that he was authorized so to do by a resolution of the board of directors of the trust company. I am inclined to think that no such resolution was necessary, that it was a matter that called for no deliberation or action upon the part of the directors, but that it was a mere executive duty which the executive officers of the trust company could perform in the ordinary discharge of their duty. By the terms of the mortgage the request of the bondholders was conclusive and mandatory; but, be that as it may, the bringing of the suit itself was a sufficient declaration of its intention to exercise such option. (Northampton National Bank v. Kidder, 106 N. Y. 221.)

And no question is raised here but what the action was commenced in the name of the trust company by proper authority.

But, in addition to that, there was produced and given in evidence upon the trial a resolution of the board of directors of the trust company ratifying and approving the action of the secretary in giving notice that the trust company exercised the option in question. It is true that this resolution was passed after the commencement of the action and during the trial thereof, but, nevertheless, I think it was a sufficient confirmation of the action of the secretary to sustain and make good the position of the trust company, if any such resolution was at any time necessary, to authorize the secretary to act. What should have been done only by their authority, having been done without such authority, they may at any time ratify.

The contention of the appellants, the bank and Andrews, that the lien of their judgments, execution and sale be declared liens prior to the lien of the mortgage, I do not think should be sustained.

The gas company was organized under chapter 40 of the Laws of 1848, entitled “ An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,” passed February seventeenth. By chapter 163 of the Laws of 1878 all corporations organized under chapter 40 of the Laws of 1848. and the acts amendatory thereto, were authorized to mortgage “ all or any part of the goods and chattels of such corporation, and also the franchises, privileges, rights and liberties thereof.”

By chapter 481 of the Laws of 1871, companies organized under such acts aforesaid, were authorized to mortgage all or any part of the real or personal property of such corporation.

Under these statutes the gas company had power to execute the' mortgage in question.

Chapter 171 of the Laws of 1891 provides that It shall not be necessary to file as a chattel mortgage any mortgage which has been, or shall hereafter be, executed by any telegraph, electric light or telephone company upon real and personal property, and which has been or shall be recorded as a mortgage,” etc.

This statute, I think, includes the gas company; being a gas and electric light company, it properly comes under the words : “Amy * * * electric light "x' * * company.”

The mortgage being recorded in the proper county, it was notice to all persons as to the personal property as well as to the real estate.

I am not prepared at this time to assent to the doctrine that mortgages of the kind in question here do not extend to after-acquired personal property. It seems to me that the principle established in Rochester D. Co. v. Rasey (142 N. Y. 510) is not applicable to mortgages of the kind here under consideration.

Enterprises like that of the gas company commonly require too much capital to be carried on by a single individual; a partnership is not adapted to conduct such undertakings ; it requires an aggregation of capital and a method of business which is best secured by a corporation; the accepted manner of raising the greater portion of the needed capital is by an issue of bonds, secured by a mortgage upon the franchise, real estate and business plant and property of the corporation. These bonds and mortgages are ordinarily, and almost-necessarily, long term bonds and mortgages ; those in question here are payable twenty years from date of their execution.

Frequently the most valuable portion of their property does not consist in the land owned by them and the buildings erected thereon, but in the implements and machinery necessarily used in carrying on the business. In the natural course of business, during the long term of the bonds and mortgage, much of such machinery, implements and tools becomes worn out and must be replaced; then, too, there is a "constant improvement in machinery, better and cheaper methods are devised, but which demand new and different machinery; the machinery that is from time to time put in in place of that which is worn out, the new machinery that supersedes the old, in order to adapt the plant to modern processes and methods, become an essential part of the plant; and such renewals and additions, I think, may fairly be said to be contemplated when any large enterprise of the kind I have been discussing is inaugurated, and may fairly be said to be part of the security contemplated when investors are asked to advance their money in aid of such undertakings; otherwise, the longer the business continues, the more enterprise that is exhibited in adopting new methods and devices, the less the security of the investors becomes, unless every time a tool, implement or piece of machinery becomes worn out and a new one is put in its place, or where a piece of improved machinery is put in -place of an old one, wliicli it supersedes, new bonds and a new mortgage is given to the bondholders. That is obviously impracticable. In the interest, as it is said, of trade and commerce a liberal rule in favor of the tenant has been adopted, as between landlord and tenant, in the question of what additions to leased property made by the tenant become fixtures.

So, in the interest of commerce and manufactures, a liberal rule as to bondholders and mortgagees should be adopted as to .after-acquired personalty that becomes a necessary or proper part of the mortgaged plant. It has been held that after-acquired real estate can be mortgaged. (Carpenter v. Black Hawk Gold Mining Co., 65 N. Y. 43; Seymour v. C. & N. F. R. R. Co., 25 Barb. 284; Stevens v. Watson, 4 Abb. Ct. App. Dec. 302.)

When real estate is conveyed to the mortgagor the lien of the mortgage, which before that time remained but an equitable claim upon the property to be acquired, becomes a vested legal right to such subsequently acquired realty. (Fisk v. Potter, 2 Abb. Ct. App. Dec. 138-144.)

In the case of Seymour v. C. & N. F. R. R. Co. (supra), where the question was whether real estate acquired by a railroad corporation, after the execution of a mortgage, was within the lien of such mortgage, the court said that it was entirely “ immaterial whether the right of way for the railroad was all acquired or not at the time the mortgage was put on record, and it is equally immaterial whether the road had or had not been at that time entirely located, or the location thereof, if previously made, was afterwards changed.”

That case was approved in the case of Carpenter v. Black Hawk Gold Mining Co. (supra). The mortgagor in that case was organized under the saíne act that the gas company in this case is, and the court said of the mortgage given by it, that “ It is not in conflict with the statute, because it mortgaged the future as well as present real estate of the company. There is nothing in the statute which limits the effect of the mortgage to the present real estate of the company, and nothing in the nature of a mortgage security which can thus limit its effect.” (65 N. Y. 51.)

I can see no difference in principle between mortgages of this nature upon the realty from those given upon chattels.

The power to mortgage the personal property is under the same statute that authorizes the mortgaging of realty. Creditors and persons dealing with the company have the same notice of the mortgage of the personalty that they have of the mortgage upon the realty. Chapter 171, Laws of 1891, above quoted, renders the recording of a mortgage of the kind in question, including both real estate and personal property, equivalent, so far as the personal property is concerned, to the filing of a chattel mortgage upon the same property.

It seem to me, therefore, that unless some third person has acquired a lien upon such property, prior to its acquisition by the gas company, as soon as the gas company became possessed of it, it became subject to the lien of the mortgage.

If I am mistaken, however, as to that aspect of the case, there is another which I think must dispose of the appeal of the bank and Andrews. Their contention, it will be borne in mind, is that their judgments and executions should be declared liens, prior to the mortgage, upon all after-acquired property.

The mortgage by its terms covered all the property of the gas company and all property to be thereafter acquired. As to after-acquired property, I take it that there is no occasion to cite authorities to show that, as between mortgagor and mortgagee, at least, it was valid.

Upon the face of the mortgage then the trust company was entitled to foreclose all the property in the possession of the gas company at the time of the foreclosure. The appellants, the bank and Andrews, by their answers, claim a lien prior and superior to that of the mortgage; they allege that they have such a lien because the property levied upon by them was purchased after the execution of the mortgage; it was incumbent upon them to prove that allegation, and if the fact that any part of it was after-acquired property, was an essential element to establish the priority of the lien claimed by them, it was incumbent upon them to establish that fact; their mere assertion of their claim in their answers was not sufficient to place the burden of proof upon the trust company to show that all the property in the possession of the gas company was in its possession at the time of the execution of the mortgage.

There is no evidence that any of the property upon which the bank and Andrews claim that their judgments or executions and sale should be declared liens, prior to that of the mortgage, was purchased after the execution of the mortgage, except the dynamos and exciters. Dynamos and exciters are essential in the manufacture of electricity. They were placed in the building used by the gas company for the manufacture of electricity as a part of the electric plant. It appears that the dynamos weighed about two tons each; that they rested upon special foundations upon which were sliding grooves, in such form that a dynamo could be slipped out and another of the same size slipped in; they were fastened to the floor by screws. Each dynamo was joined by a large leather strap to the shaftings. The floor of the building could be removed without disturbing the dynamos.

The exciters weighed about 500 pounds each, and were fastened in the same way that the dynamos were, except that there was no special foundation built for them. It was the intention in placing these dynamos and exciters in the building to keep them there until they were worn out or superseded by others.

The fact that a piece of machinery can be taken out of a building without impairing the construction of the building, does not determine the question as to whether it has become part of the real estate. The question is, was it the intent to place it there, as a permanent improvement, an addition to the freehold, to be applied to the property and to the use of the businesss there carried on ? (Potter v. Cromwell, 40 N. Y. 287; Voorhees v. McGinnis, 48 id. 278; McRea v. Central Nat. Bank of Troy, 66 id. 489.)

The case of Potter v. Cromwell (supra) was one where a portable grist mill was placed in a building theretofore used as a tannery. It could be removed without impairing the structure of the building. It was no more firmly or permanently attached to the realty than the dynamos and exciters in this case.' It could be removed without impairing the structure of the building. It was placed in the building for the purpose of being used as a permanent structure for a custom grist mill for the neighborhood; it was held to have been part of the realty.

In Davidson v. Westchester Gas Light Company (99 N. Y. 558) it was held that so much of the tools, implements and machinery in question as were attached to, and liad become essential to the use of, the building and machinery erected upon the mortgaged property, for the purpose of manufacturing illuminating gas, bad become thereby a part of the realty, subject, upon annexation, to.the lien of the mortgage.

In the case before us we have a corporation whose franchise is to enable it to manufacture and dispose of gas and electricity, with land, upon which are buildings used for the purpose of manufacturing gas and electricity and distributing it. In these buildings have been placed pieces of machinery of the kind that are essential in the production of electricity, placed ■ there with the intention of their remaining there until worn out, or, in the -expression used, superseded,” by which I take it was meant until, in the progress of invention, better and more suitable machinery should be produced. They thereby became part of the permanent plant of the company, proper and necessary for it to have in order to carry on its corporate business. It seems to me, therefore, that, within the principles of the cases above cited, these machines became a part of the realty mortgaged.

The property of the gas company that has been used, disposed of and sold by the gas company, since the execution of the mortgage, as set forth in the answer of the bank and of Andrews, the value of which they allege should, as against them, be credited upon the amount of such mortgage, appears to have consisted of- coal, oil, lime and articles of that character, which were used in manufacturing-gas and electricity, and renewed from time to time 'in carrying on the business of the corporation. The moneys expended appear to have been expended for the purchase of supplies, repairs to the building and plant, and the general expenses of conducting the business. It is hardly worth while spending time upon the contention that is made, that such use and sales of property and expenditure of moneys should be credited upon the mortgage, as made in fraud of creditors.

As was stated in the court below, the question “ whether a mortgage is fraudulent against creditors is a question of fact.” And again, every case must stand upon its own facts, and the test of fraud in such cases is whether the mortgaged property is really devoted to the creditor’s security.”

It is not pretended here that this was any scheme by which the gas company, under the shield of a mortgage, was to be permitted to dispose of its property for its own profit in fraud of its creditors; no question is raised but that the mortgage was actually given for the security of the bondholders. Such being the case, the rule that is invoked, that where mortgaged property is permitted by the mortgagee to be used or appropriated by the mortgagor, it shall, as against other creditors of the mortgagor, be credited upon the mortgage for the reason that then the security of the bondholders is lessened, ultimately leaving less for other creditors, I do not think can be applied to corporate mortgages like the one in question, where such appropriation and use of property and expenditure of money is made in the course of the corporate business, the articles used up or worn out replaced by others, the moneys expended necessarily expended in keeping the business alive and to produce a revenue, and without which use of property and expenditure of money the corporate business would cease and no revenue could be derived with which to pay the interest upon the mortgage or other debts of the corporation, and but for which it would cease to have any active existence. By such use of the corporate property and expenditure of money the value of the corporate property is enhanced or at least kept good, which is for the benefit of all creditors of the company, whether mortgage creditors or others. To hold to the contrary would greatly impair the value of long term bonds secured by mortgage upon real and personal corporate property, as authorized by statute, and would not upon the whole be for the benefit of other creditors of such corporation.

The appeals from the orders denying the motions to vacate the judgments entered as above stated, and direct the entry of a single judgment embracing both actions, are next to be considered.

These motions were founded upon the assumption that a cross-action as known to the old Chancery practice still exists. The argument to that effect was predicated upon section 217 of the Code of Civil Procedure, which states that the general jurisdiction foi'merly possessed and exercised by the Supreme Court of the colony of New York at any time and by the Court of Chancery of England outlie 4th day of July, 1776, is now vested in the Supreme Court with such exceptions and limitations as have been created and imposed by the Constitution and lawrs of the State. And that, a subject to those exceptions and limitations, the Supreme Court of the State has all the powers and authority of each of those courts, and exercises the sarnie in like manner.”

By the words “ exercises the same in like manner ” I do not think it can be held that a cross-action with the forms and procedure relative thereto has been preserved, because by the old Code of Procedure all forms of action, both legal and equitable, theretofore existing were abolished, and by section 518 of the present Code of Civil Procedure it is provided that the chapter of which that section forms a part prescribes the forms of pleadings in all actions, and the rules by which the sufficiency thereof is determined, except where special provision is otherwise made by law. Section 3339 provides that there shall be but one form of action, abolishes the distinction between actions at law and suits in equity and abolishes all forms of action at law and suits in equity.

While the jurisdiction of the old Supreme Court and of the Court of Chancery has been vested in the present Supreme Court, and while -all remedies, both in law .and equity, have been undoubtedly preserved, the method of procedure by which that jurisdiction shall be exercised, and the remedies pursued, have been entirely changed, and are now to be found in the Code of Civil Procedure or in the rules of court.

Decisions as to former rules of. practice and procedure, while they may be valuable as shedding light upon similar procedure provided for in the present Code, or in the rules of practice, or as guides where such codes and rules have failed to definitely prescribe in some particular -the practice to be followed, are no longer precedents in questions of practice except to the extent I have stated.

The case of Simpson v. McKay and McKay v. Simpson (3 T. & C. 65), relied upon to sustain the motion to vacate and consolidate, I do not think sustains the contention of the appellant.

As I understand it, a cross-suit is not maintainable where the relief sought can be obtained in the first action.

It is more than doubtful as to whether the case of McKay v. Simpson was properly a cross-action or could have been sustained as such if challenged; the parties to both actions were identically the same, and the remedy sought in the second action was one that could apparently have been obtained in the first.

The court said: “ The defendants, Alexander and Robert McKay, brought the cross-action claiming to be allowed payments and set-offs omitted in their answer in the former suit. Why this end was not sought to be attained by an amended or supplemental answer, rather than by cross-action, is not obvious.” And further on in the opinion the court said : “ The trial embraced the subject-matter of both actions. The matter of the cross-suit was but a defense to the original action, and, therefore, the original cause and the cross-suit constituted but one action.”

Where the cross-suit is really nothing but an answer or defense, which could have been asserted by answer in the first action, and where both, as was said in the McKay v. Simpson case, “ constituted but one action,” and where the parties are the same, as in that case, a single judgment may he proper. But that is not this case.

Here the cause of action set forth in the so-called cross-suit did not constitute a defense to the original action, and was confessedly brought because it was not a defense to the cause of action set out in the first action, neither are the parties to both actions the same.

Again, in that case the original action was commenced in the Court of Chancery in 1843, some years it will be observed before the merger of the Court of Chancery in the present Supreme Court, and before the distinction between actions at law and Suits in equity were abolished, and before the abolition of the old forms of procedure. These differences, without adverting to others, between the case of Simpson v. McKay and the one at bar, seem ■ to me sufficient to destroy it as a controlling authority in this case.

The actions now being considered are separate and distinct; the relief sought in one cannot he asserted as a defense in the other; the parties to the record are not the same in each.

Ordinarily, where separate actions are brought, each proceeds to an appropriate judgment upon the record.

There may be cases, where an action is brought to restrain the prosecution of another then pending, and where the relief prayed for is granted, in which a single judgment, to wit, a judgment restraining the further prosecution of the first action, is proper ; there the relief that has been granted is of such a nature as -to render the prosecution of the first action to judgment impossible in law.

The second action in such a case having, by the affirmative relief that has been granted, swallowed up, or superseded .the first; but no such result will follow in the event of such second action being unsuccessful; then, it seems to me, there would be an obvious propriety in entering up a judgment dismissing the complaint in the second action, and permitting the first action, the prosecution of which it had been sought to restrain, to proceed, in the regular and usual method of procedure, to final judgment.

It may be that such an order would have been proper here had the plaintiff Reynolds succeeded in his cross-suit, although I do not feel clear in that regard ; but having failed in securing the affirmative relief sought by him, I can see no reason why each action should not proceed to judgment the same as other actions. As a matter of convenience, it may be proper where cases are practically tried together as these were, the evidence in one being taken as evidence in the other, that a single decision and order for judgment in both cases should be rendered, but on such decision and order separate judgments should be entered in order that the record in each case may be complete in itself.

As to the appeal of Reynolds from the order denying the motion to direct the receiver Gleason to pay certain coupons, and upon the payment by said Reynolds of the remaining coupons, to turn over all the property of the gas company in his possession to'said Reynolds, it seems to me that such motion was properly denied. No question was raised upon this appeal, but that the appointment of a receiver in the foreclosure proceeding to preserve the property and receive the profits for the bondholders, was within the power and discretion of the court. The order appointing Gleason receiver seems to have never been questioned or appealed from. The motion to discharge him and to turn over the property in his possession to a receiver appointed in a sequestration proceeding was one largely in the discretion of the court at Special Term to grant or refuse. Each of these receivers is an officer of the court, acting for it, and in its place and stead. Each is simply the instrument of the court to guard, protect and manage for it the property and interests which are in its custody and control. The discretion of the court as to which receiver should have the future control of the property was exercised after a review, probably, of all the proceedings in this matter, as they have been herein set forth, the motion having been heard by the same justice before whom the actions were tried. The motion was made after the final judgment and decree of foreclosure and sale, in the foreclosure action, and after the receiver Reynolds had been beaten in his efforts to defeat such action, and there is nothing before the court- to show that any person interested would be benefited by granting snch order, except the receiver Reynolds, who would thus have placed in ids possession a large amount of property upon which he might be entitled to receive a percentage. No abuse or mismanagement is shown on the part of Gleason, and, in fact, I can see nothing in the record that in any way shows that the court below did not properly exercise its discretion when it refused to grant the motion which would practically remove Gleason from the receivership, and place the property in the control of one, who from the record before us, seems to have vexatiously delayed the bondholders in securing their rights under the mortgage given to protect them, and who has unnecessarily increased the expenses of the proceedings they were compelled to take to enforce and protect such rights.

The number of questions to be considered in these appeals and the length to which their consideration would necessarily extend, have precluded me from entering upon any discussion of many of the authorities cited in the learned and ingenious briefs of counsel, and I have, therefore, largely confined myself to an expression of the conclusions at which I have arrived after considering the authorities referred to.

The views herein expressed lead to an affirmance of the judgments and orders appealed from, with costs of the appeals wherein Reynolds, as receiver, is appellant, against said Reynolds personally.

MayhaM, P. J., concurred; PutNam, J., not acting.

In first ahove-entitled action judgment affirmed, with costs and disbursements.

In second above-entitled action judgment affirmed, with costs and disbursements.

In third above-entitled action order affirmed, with ten dollars costs and disbursements, to be paid by Reynolds personally.

( In fourth above-entitled action order affirmed, with ten dollars costs and disbursements, to be paid by Reynolds personally.

In fifth above-entitled action order affirmed, with ten dollars costs and disbursements, to be paid by Reynolds personally.


source: Caselaw Access Project

author: 13RADLEY, J. :

license: Public Domain

text:
    Charles F. Goodwin, Respondent, v. Josephine Thompson, Appellant, Impleaded with Others.

      Pleading — decision of (he issues on a motion on affidavits, improper — when a ■pleading is sham.

    Where a party sets up allegations which, if true, constitute a substantial defense, the court has no right to determine, on motion and upon affidavits the issues in the action or .the truth of the matters alleged.
    The granting of a motion to strike out allegations from an answer is justified only when the pleading is sham, and, therefore, false, in the sense that it is a mere pretense set up in bad faith without color of fact.
    In an action brought to foreclose a mortgage given by Ella H. Clements to Charles O. Peckens on or about May 1, 1894, upon property on Raymond street in the city of Rochester, and assigned to the plaintiff on August 10, 1894, the defendant Josephine Thompson interposed an answer in which she alleged that on July 10, 1894, she conveyed certain premises on Saratoga avenue in the city of Rochester to Ella H. Clements, and in part payment received from her a second mortgage upon the Raymond street property; that the negotiations were conducted through Peckens; that he falsely represented to her the value of the Raymond street property and the financial condition of Ella H. Clements, and that the transaction was the result of a conspiracy to defraud her. By the seventh and eighth clauses of -her answer she alleged that the assignment of the prior mortgage by Peckens to the plaintiff was a part of this , scheme, and that the assignment was merely nominal to the end that the foreclosure might be brought by an outside party who could cut off her equities in the Raymond street property.
    Upon motion' the court struck out the seventh and eighth clauses as sham and the residue of the answer as frivolous.

      Held, that, taking all tlie allegations together, they, raised questions whether the plaintiff was an assignee of the mortgage in good faith as well as for a sufficient consideration, and that such questions were not to he determined upon affidavits.
    Appeal by the defendant, Josephine Thompson, from an order of the Supreme Court, made at the Monroe Special Term and entered in the office of the clerk of the county of Monroe on the. 27th day of March, 1895, striking from her answer paragraphs 7 and 8 as sham, and the remainder of the answer as frivolous, and granting judgment upon the answer.

      O. J. Brownvn.g, for the appellant.

      S. I). Bentley, for the respondent.
   13RADLEY, J. :

The action was brought to foreclose a mortgage made by Ella H. Clements to Charles 0. Peckens of date of May 1, 1894, on certain premises situated on south side of Raymond street in the city of-Rochester, to secure the payment of $1,700.

The mortgage, with the bond, was assigned by Peckens to the plaintiff August 10, 1894. The complaint alleges that the defendant Thompson has or claims to have some. interest in or claim upon the premises which accrued subsequently to the lien of the mortgage.

The defendant, by her answer, alleged that on or about July 10, 1894, she made to Ella II. Clements a deed of certain premises situate on the west side of Saratoga avenue in the city of Rochester, and, as security for the payment of $1,000 of the purchase money, she received from the grantee her bond with a mortgage. on the Raymond street property, being then advised that there was a prior mortgage of $1,700 on the premises; that the negotiation which resulted in the sale and conveyance by the defendant of her premises to Clements and the taking of the mortgage was had with her by Charles O. Peckens, the plaintiff’s assignor of the mortgage in suit. And the defendant alleged that she was induced by the fraudulent representations of Peckens to make the deed to and take the mortgage from Clements, and that the transaction on the part of Peckens in procuring the defendant to part with her title and take such security was a scheme within the purpose of a conspiracy between Peckens, one Sears, Mary Wheeler, Ella H. Clements and others to perpetrate frauds to the prejudice of others. Apparently and in practical effect the mortgage, as then understood by the defendant, was made upon the equity of redemption of Clements in the Raymond street property, and subject only to the $1,700 mortgage. But the defendant charges that she was induced to make the conveyance and take the mortgage by the false and fraudulent representations of Peckens to the effect that Clements, who was and became liable to pay the moneys secured by the mortgages, was pecuniarily responsible and worth $30,000 and upwards, and that the value of the Raymond street property was upwards of $4,000, but that, in fact, Clements was utterly irresponsible to the knowledge of Peckens, and that she was made the depository of the title of both properties for the purpose of giving the mortgages in aid of and to consummate a scheme for the advantage of those persons so united in purpose and to defraud others, including the defendant. And the defendant also, in substance, charges that the $1,700 mortgage in question on the Raymond street property was not given or intended to secure any valid debt, but was given and intended as a fraudulent cover to enable Peckens and others to carry out the fraudulent scheme mentioned in her answer, and that it, with another mortgage thereon of which she was not advised of $550, prior to that given to her, was greater in amount than the value of that property.

Those facts do not concern the plaintiff, provided he is a bona fide purchaser of the bond and mortgage for a valuable consideration. (Moore v. Metropolitan N. Bank, 55 N. Y. 41; Simpson v. Del Hoyo, 94 id. 189.)

A different question would arise in an action by an assignee of the defendant’s mortgage. (Hill v. Hoole, 116 N. Y. 299.)

The defendant, by the seventh and eighth paragraphs of her answer, upon information and belief, alleges in substance that pursuant to such conspiracy and with such fraudulent purpose those conspirators caused Peckens to make a “ nominal assignment ” of the bond and mortgage to the plaintiff that it might be foreclosed by an outside party, and thus defeat the rights which the defendant might otherwise have in the Raymond street property as against the mortgage; that tbe plaintiff is not tbe real party in interest, and that tho' real persons in interest are tbe said Charles O. Peckens, Mary "Wheeler and others of said conspirators.”

Those two paragraphs, 7 and 8, were stricken out as sham upon motion founded upon affidavits, by which, amongst other facts stated in them, it is made to appear that the plaintiff purchased the bond and mortgage in good faith and paid the full amount thereof •for them. The relief given by the order appealed from may in a proper case be granted on motion. (Code Civ. Proc. §§ 531, 538.)

The matters in the answer, exclusive of the allegations in the seventh and eighth paragraphs, constitute no defense as against the plaintiff. But with those of the latter, to the effect that he is not an assignee in good faith of the bond and mortgage, there is sufficient alleged to present a defense, and if the alleged fraud, including the alleged fact they were without valid consideration, is established, the burden of proving that the plaintiff is a bona fide assignee for value will be cast upon him. (Simpson v. Del Hoyo, 94 N. Y. 189; Starin v. Kelly, 88 id. 418.) The want of ample consideration for that bond and mortgage is an essential element in the alleged defense. The general proposition, that when a mortgage is taken subject to a prior one the junior mortgagee is estopped from attacking the prior one for invalidity, is not necessarily applicable to defeat the defense founded in fraud as against a party not an assignee in good faith of the prior, mortgage.

The question, therefore, is whether those paragraphs, 7 and 8, for the purposes of relief upon the motion forrnded upon affidavits, were properly stricken out as sham. In the legal sense a defense is sham when it is so clearly false in fact as that it does not in reality involve any matter of substantial litigation.” (People v. McCumber, 18 N. Y. 320.)

The allegations in those two paragraphs alone constitute no defense. The effect of them as such is dependent upon the matters of fraud charged in other -portions of the answer, and both are essential to the alleged defense. In view of the fact that the defendant was advised of the prior mortgage in suit .at the time she took hers upon the property, and of the facts stated in the affidavits upon which the motion -was made, it is difficult to see that the defendant can reasonably entertain any hopes of making a defense to the action. But- in recognition of the rule applicable to such motions, it is not seen that the motion can well be supported.

When a party sets up matters by allegations constituting, if true, a substantial defense, he cannot be compelled to submit to have the ■issues or the truth of the matters so alleged determined upon motion by affidavits. The granting of such motion is justified only when the pleading is sham, and, therefore, false in the sense of being a mere pretense set up in bad faith without color of fact. (Kiefer v. Thomass, 6 Abb. Pr. [N. S.] 42; Farnsworth v. Halstead, 18 N. Y. Civ. Proc. Rep. 570; Webb v. Foster, 13 J. & S. 311; Wayland v. Tysen, 45 N. Y. 281.)

It does not necessarily appear that the defendant may not have had some information and belief of the matters alleged in the answer. It is verified, and by affidavit she states that the answer was interposed in good faith.

And although it appears by the facts as stated in the affidavits on the part of the plaintiff very specifically, with circumstances in detail of the transaction of the purchase, that, the plaintiff is assignee •in •good faith and for a valuable and ample consideration, the defendant cannot be required to submit to the disposition of the issues upon • affidavits, but is entitled to have them tried in the usual manner.- -The adoption of any less stringent rule in its application to the present case could be treated as holding that the determination of the question of the truth or falsity of affirmative matter of defense by affidavits upon motion is subject to the discretion of the court and the result made dependent upon the preponderance of fact in that manner presented upon the motion.

It is unnecessary to consider the question relating to the service of the amended answer as there is no essential difference between it and the original one.

The order should be reversed and the motion denied.

Lewis and Ward, JJ., concurred.

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


author: Bbadley, J.:

text:
    In the Matter of The Auburn City Railway Company.

      Street surface railroad — appointment. of commissioners to determine whether it should he constructed — the refusal of property owners to consent is the only prerequisite— the consent of the municipality is not material to such appointment.

    Where a. proceeding is taken by a street railroad company pursuant to that portion of the General Railroad Law of 1890 (Chap. 565, art. 4, § 94 et seq.) which relates to street surface railroads, to obtain the consent to its construction required by law, the only prerequisite to the appointment of commissioners to determine whether such railroad ought to be constructed and operated is the fact that the consent of the property owners bounded on the street upon which it is proposed to build or operate the railroad cannot be obtained. The consent of the municipal authorities is a prerequisite to the construction, extension or operation of the railroad, but, as such consent is not necessary to the appointment of commissioners, the question whether it has been given does not necessarily arise upon a motion to confirm their report.
    When it appears at the initiation of such a proceeding that the consent of the property owners to the construction of the route named in the petition cannot be obtained the statutory ground for the appointment of commissioners is shown, and upon a motion to confirm their report the court will not consider the question whether the petitioner contemplates the extension of its railroad beyond the terminus stated in the petition, nor whether it has applied tó the common council of the city to permit such an extension nor whether the common council has consented to the extension.
    MotioN for the reargument of an application for an order confirming the report of commissioners appointed to determine whether a street railway ought to be constructed on West Genesee street in the city of Auburn.
    The motion was made upon the ground that the court, in confirming the report of the commissioners, overlooked certain objections to the appointment of the commissioners set forth in the answer of the respondents, and reserved by the court for consideration upon the application for confirmation.

      John D. Teller, for the motion.

      JS. G. Aiken, opposed.
   Bbadley, J.:

On the coming in of the report of the commissioners appointed in this proceeding and after hearing counsel for the parties the report was confirmed. This motion for reargument is founded upon the apprehension that certain .preliminary questions or objections may not have had consideration in granting, upon the merits, the motion to confirm the report of the commissioners and especially the question sought to be raised of asserted variance between the route of the railway as described in the petition and that on which it is said the petitioner proposes to construct its railway. The Auburn City Railway Company was organized upon the consolidation of the East Genesee Street and Seward Avenue railway and the Auburn and Owasco Lake railway pursuant to Laws of 1886, chapter 168. The petition by which this proceeding was instituted, after stating the streets of the city in which it has since the organization of the company operated its railway, states that the “ petitioner proposes to extend its railroad from the corner of State street west through "West Genesee street to South Division street near the west bounds of the city;” that application had been made to the common council of the city of Auburn “ to consent to the construction and operation of said railroad of your petitioner and a hearing has been advertised as required by law,” and after stating that diligent efforts had been made in behalf of the petitioner to obtain consent of the owners of the property bounded on that portion of the street upon which it is proposed to construct and operate its railroad, it is alleged that “the consent of the required owners of property cannot be obtained to permit the construction of said proposed railroad.”

The contestants answered the petition. And thereupon, on application, an order was made appointing commissioners to determine whether a street railway ought to be constructed on West Genesee street. The commissioners were thereby directed to take the evidence touching all questions of fact raised by the answer, and it was by the order provided that all questions of law and fact arising upon the petition and answer be heard and determined by the court at the time the application should be made for confirmation of their report, as fully as if they had been heard before the commissioners were appointed; that “ it appears that objections, based upon both law and fact, were raised by such answer to the appointment of said commissioners, and that the hearing, trial and determination of such questions and objections should be postponed until the confirmation of the report oí the commissioners' is applied for without prejudice to any of said objections by reason of such postponement.”

It is said that the company proposes and intends to construct its road beyond South Division street and to the west bounds of Cayuga County Agricultural and Horticultural grounds, which is some distance westerly of that street, and that the consent of the municipal authorities of the city of Auburn is for the construction of a railroad to the west bounds of such grounds. This fact did not appear in the evidence before the commissioners. The petitioner offered in evidence a statement of a proposed extension and franchise granted by the common council, and it was excluded upon the objection of the contestants. The contestants seek upon the application for confirmation of the commissioners’ report to raise this question, and thereupon to urge as an objection to the confirmation that no consent of. the municipal authorities, other than the one for the construction of the railroad extending to the west line of those county grounds was given; that it does not appear that the requisite consents could not be obtained to construct the railroad to that point, or that any effort was made to obtain consents for the construction of the railroad described in the petition.

.No such objections were taken upon the application for the appointment of the commissioners, nor did any facts appear upon that application in support of such objections. Reference, however, is made to the order, by which it is claimed that the consideration of them was postponed until the application for the confirmation of the report should be made, and then to be presented and determined. Such seems to be the saving provisions of the order as to such objections as are raised by the answer.

By it the contestants admit that the company had made application to the common council of the city “ to consent to the construction and operation of said railroad, and a hearing thereon has been advertised, as required by law, but allege that said application is for the construction and operation of a railroad from the corner of State and Genesee streets in said city through Genesee street to the west bounds of the Cayuga County Agricultural and Horticultural grounds, a point some distance west of the western terminus of the railroad described in the petition.” This fact, so affirmatively alleged, did not appear upon the hearing before the commissioners, nor did it appear there what consent had been given by the municipal authorities, nor was any objection specifically taken by the answer to the effect that no application had been made to the common council, or none given by it, for the construction of a railroad in West Genesee street, as described in the petition.

The hearing before the commissioners proceeded in reference to the latter route, and, after taking the evidence, etc., they, by the report, determined “ that the railroad described in the petition ought to be constructed and operated.” It seems that whether the petitioner contemplated the extension of its railroad beyond the western terminus mentioned in the petition, or whether application therefor was made to the common council and the consent of the common council was given, are not here for consideration on the application for confirmation of the report of the commissioners.

• The requirement preliminary to the application for the appointment of commissioners in sucli a case is the fact that the requisite consent of the property owners cannot be obtained; when that appears, the commissioners shall 'be appointed. (Laws 1890, chap. 565, § 94.) That is the only prerequisite to the -appointment. (Matter of Thirty-fourth, St. R. R. Co., 102 N. Y. 343.)

The allegation in the petition that the requisite consent of the owners of property could not be obtained to permit the construction of the proposed railroad was supported before the commissioners by the concession there made and entered in the minutes of the proceedings that the consent of the requisite number of property owners cannot be obtained to consent to the proposed railroad by the petitioner.” The preliminary fact essential to the appointment of the commissioners and in support of their report in that respect was thus made to appear and established.

The consent of the municipal authorities is a prerequisite to the construction, extension or operation of the railroad. (Laws 1890, chap. 565, § 91.) But as such consent is not necessary to the appointment of the commissioners, the question whether or not it has been given does not necessarily arise upon motion to confirm their report.

Our attention is called to Matter of Cross-town Street Ry. Co. (68 Hun, 236; 22 N. Y. Supp. 818) as authority in opposition to the motion to confirm the report. There the petitioner, having obtained by purchase the right to construct a railroad in Prospect avenue 'from Huron street to Pennsylvania street in the city of Buffalo, and having obtained the consent of the authorities of the city of Buffalo to construct it, made application for the appointment of commissioners in a proceeding instituted for the purpose. The length of that route in the avenue was nearly 4,000 feet. The proceeding was abandoned, and upon petition another application was made for the appointment of commissioners to determine whether a railroad ought to be laid and operated in that avenue between Huron street and Carolina street, a distance of 1,175 feet. The application was denied. And the reasons for the denial as given in the opinion of the court were (1) that the petitioner had failed to show that it had made ineffectual effort to obtain the necessary consents of the property owners along the avenue from Huron street to Pennsylvania street, and for aught that appeared they might have been obtained ; (2) that no consent of the city authorities had been obtained to any change of the route, and it could not be assumed that they would .consent to construct a railroad 'only between Huron and Carolina 'streets (3) that it did not appear that the petitioner had abandoned any part of its right to construct a railroad in the avenue, (4) and that it was not within the contemplation of the statute that the petitioner should have the right for the purpose of distinct proceedings to divide the route thus acquired in the avenue into sections. No general principle was enunciated by the court in that case. It was disposed of upon its own peculiar circumstances,' and in view^óf them it is deemed well decided. Unless something'appears to take a case of this nature out of the operation of the general rule, the main question is whether it is made to appear that the requisite consent of the property owners cannot be obtained. The main reason for the denial of the application in the Gross-town case may have been in the fact that it did not appear that the petitioner could not obtain the requisite consent of the property owners for the construction of the railroad between the termini of the route in the avenue, where it appeared that the petitioner had obtained the right and consent, other than that of the property owners, to construct it. In the present case no such objection was specifically raised upon the application for the appointment of commissioners or in the answer to the 'petition. And it appeared on the hearing before the commissioners that the requisite consents of the property owners to the construction of the proposed railroad could not be obtained by the petitioner as before mentioned. For the purpose of the question here the proposed railroad must be deemed that to which the proceeding and the hearing had before the commissioners related. And it cannot now well be insisted by the contestants in this proceeding that it did not appear that the jietitioner could not obtain such requisite consents.

No other question requires the expression of consideration on this motion.

The motion for realignment should, therefore, be denied.

Lewis and "Ward, JJ., concurred.

Motion for reargument denied.