author: Boswobth, Ch. J.

text:
    Abijah P. Cumings, Plaintiff and Respondent, v. Gouverneur Morris, Appellant.
    1. It is essential to a counter-claim, as defined by the Code, that it be a cause of action in favor of the defendant, and against the plaintiff in the action.
    2. In an action by the indorsee of a note against the maker, (where the note by its terms, is payable “ on demand after date,” and where it was transferred by the payee over two years after its date;) the maker cannot set off a demand against the payee growing out of a partnership between such maker, the payee, and a third person; when there has been no accounting between such partners, nor any balance agreed upon, as due from the payee to the maker, prior to such transfer of the note.
    3. Such a demand, although an accounting between the partners might establish its existence, is, until the accounting has been had, unliquidated, .and nob capable of being ascertained by “ calculation,” within the meaning of that word, as, used in sub. 3, of § 32, of 2 B; S., 354. Such a demand cannot be set off at law.
    4. Neither could such a demand be enforced as a set-off against the notes, in " a suit brought for that purpose against the payee at about the time of and before its transfer, without alleging and proving, inter, aMa, that the payee was then insolvent; or some other fact which would prevent the maker from collecting from the payee any sum that, upon such, accounting, it might be adjudged the payee owed and should, pay to the maker.
    5. The indorsee and holder of a note, (who brings a suit upon it against the maker,) is “the real party, in interest” within the meaning of § 111 of the Co'de; if he - has purchased it absolutely and in good faith; although by the terms of his purchase he is not to pay the contract price until the note is collected. . . ■'
    6. A plaintiff who has an absolute right to.the money due on a note, and to receive and appropriate it, to his own use, when recovered, is the real party in interest; although the payee of the note may be interested' in the event of the suit, in such wise, that if the note be not collected he will not receive anything as its price, or by. reason of his indorsement and sale of it.
    7. Exceptions taken on the trial of a cause, and not called to. the attention of the Court on the argument of an appeal from the judgment, taken by the party excepting, nor alluded to in the points submitted by him on such argument, will be deemed to have been abandoned by him.
    (Before Boswobth, Oh. J., and Hoffman," J.)
    Heard, November 4th;
    decided, December 4th, 1858.
    This is an appeal by the defendant from a judgment entered against him, March 27, 1858, on the .report of Hamilton W. Robinson, Esq., as referee. The" action was commenced about the 7th of June, 1856, against the defendant as the maker of two several promissory notes, which with the indorsements thereon, read as follows, viz.:
    “$1,000. New" York, October 25th, 1852.
    “ On demand of one day after date, I promise to pay to the order of James B. Sargent, ten hundred dollars, with interest at the rate of 7 per cent per annum, value received.
    “ GrOUYERNEUR MORRIS,
    “qf Morrisania.”
    (Indorsed)
    “ Pay Samuel J. Prime, or order.—Jas. B. Sargent.”

      “ Pay to A. P. Cumings, or order.—Samuel J. Prime.”
    “ $2,119tW. New York, November 13th, 1852.
    “ On demand after date, I promise to pay to the order of James B. Sargent twenty-one hundred and nineteen dollars, with interest at the rate of 7 per cent per annum, value received.
    “G-ouverneur Morris,
    “ of Morrisania.”
    (Indorsed)
    “ Pay Samuel J. Prime, or order.—Jas. B. Sargent.”
    “Pay to A. P. Cumings, or order.—Samuel J, Prime.”
    The complaint is in the common form of a complaint by the second indorsee, against the maker of a note, and counts upon each note separately.
    The answer does not .deny the making or indorsing of the notes, but avers, that on the 18th of September, 1853, this defendant, Joseph W. Allen and said James B. Sargent “ were contractors and copartners in the business” of building and equipping the Flushing railroad. That Allen and Sargent, had each one-fourth, and this defendant one-half interest in said business ; that “ this defendant was, from the commencement of the work, under the same, (the contract for building said road) largely and constantly in advance to the said copartnership for money advanced them, and laid out and expended in and about the said work, and for railroad iron and other materials furnished therefor.”
    That the notes were not indorsed by Sargent to Prime, or by Prime to the plaintiff, until more than two years after that date ; that they were then “ open and subject to all and any equitable or legal offset which the said defendant herein might have against the said James B. Sargent by reason of their age;” that Prime and the plaintiff were, and that each of them was bound to take notice, and knew at the time of the transfer t.o Prime and to the plaintiff, that there was at that time an open, unsettled partnership account between the said Morrris and Sargent, on which the said Sargent was then indebted to the said Morris, defendant herein, in certain large sums of money, much more than the whole amount of both of said notes, with all interest .and charges thereon.”
    It also avers, that the notes were indorsed and delivered by Sargent to Prime, “ with intent to avoid the payment by him of so much of his just indebtedness at the time to the defendant herein, and to avoid the set-off which he knew the said Morris had against the whole amount of the said notes, and the interest and charges thereon.”
    That Prime, in receiving the notes from Sargent, and the plaintiff in receiving them from Prime, were acting in collusion with Sargent and seeking to assist him “ in avoiding the payment of so much of his just indebtedness to this defendant, and to avoid the set-off, which this defendant had against the whole amount of said notes;” that neither Prime nor the plaintiff paid more than a nominal consideration for the notes, and that said “ Sargent is stiff the true party interested in said notes, and that this action is prosecuted for his benefit, and in fraud of the rights of this defendant to his set-off against said notes.”
    It also avers, that since the 1st of January, 1854, Sargent has always been indebted to Morris “in a sum of not less than the whole amount of both of said notes, with all interest and charges thereon, by reason of money advanced the said copartnership, and laid out and expended in and about the said work on the Flushing railroad, and for railroad iron and other materials furnished therefor by this defendant to and for the said copartnership, and for their benefit. Which indebtedness the said Sargent has heretofore refused to pay off and settle; and an action was commenced before the commencement of this action and is now pending in Chancery before the Chancellor of the State of New Jersey, in which this defendant is complainant, and the said Allen and Sargent defendants, to 'compel them to render an account, with this defendant, in and about the affairs of said copartnership, and to pay over to him the amount which shall be found due on such accounting, in which action both of the said defendants have appeared.”
    At the trial, the referee decided, “ that the matters stated in the answer by way of set-off or counter-claim, did not constitute a defense to the plaintiff’s claim and that he would hear no evidence on them, but that there was an allegation in the answer that the plaintiff was not the real party in interest, and that upon this point he would hear the defendant’s evidence. To the former part of this decision the defendant excepted.”
    The defendant called as witnesses in his behalf; the plaintiff and said Prime, and no others. Mr. Prime testified that he and Sargent married sisters; that -the latter died in March, 1857. That he received the notes sued on, from Sargent about September, 1855, a few days before he parted with them to the plaintiff. That he received the notes from Sargent under the following circumstances: “Mr. Sargent was in delicate health, and I was anxious that his affairs should be arranged with reference to the interests of his family, in case of his sudden removal by death; I stated to him my anxiety on that head; that his business was railroad business, exposing his life to particular hazard; I asked him to give me any properly that he might have, that I might make it available to his family in case of his death; not long after that conversation he gave me these notes; I paid him nothing for these notes; they were given to me to hold and make such use of for his family as I might please, entirely subject to my control; Mr. Sargent gave no special reason for transferring to me these notes in preference to other property; there was no writing in trust in reference to them.”
    “ Q. What cause had you for desiring to transfer these notes to Mr. Cumings ?
    “A. Because Mr. Cumings was residing in Westchester county in the neighborhood of Mr. Morris, and ás I was a clergyman and not much accustomed to financial affairs, I preferred to pass the notes to Mr. Cumings.” . . .
    “ I received from Mr. Cumings for said notes his promise to give me Cemetery of the Evergreens stock; it was worth, I understood, seventy-five per cent; I was to receive a sufficient amount to satisfy the notes; it has never been transferred to me on the books of the company or otherwise; I have not this promise of Mr. Cumings in writing; it never was put in writing; I have no control over the stock except Mr. Cumings’ word for it; he repeatedly offered it to me, it is solely through my neglect, I have not received it.” . . „ “I presume I did state to him the manner in which I became possessed of these notes; but I cannot state this positively; I can’t say that I did; I indorsed the notes over to Mr. Cumings.” . . “My agreement with Mr. Cumings was that he was i,o give me Cemetery of the Evergreens stock, or an equivalent; I did not agree with Cumings they should bean equivalent if returned.” . . “Mr. Sargent never mentioned to me that he had any controversy with Mr. Morris, or that Morris had any claim against him; I had no notice that there was any claim, offset or defense to the notes.”
    Cumings testified, that the notes were to be paid for in Cemetery of the Evergreens bonds, at 75 per cent of their par value; that they were worth that sum; “Mr. Prime was to guarantee the notes to me.” . . “ In case the notes should not be collected, the bonds will remain with and belong to me; I shall not part with them.”
    The defendant offered to prove
    “1st. That James B. Sargent, the payee of the notes in question, was from the eighteenth day of April, 1853, to February -21st, 1856, a co-contractac with Couverneur Morris, defendant herein, and a certain Joseph W. Allen, in building, constructing and equipping the Flushing Railroad in Queens county, New York, in which said contract, and in carrying on the business’ thereof, the defendant was from the commencement Of the work under the same, to the finishing and delivery thereof, largely and constantly in advance to his said co-contractors for money advanced them and laid out and expended in and about the said work, and for railroad iron and other materials furnished therefor, at no time less than thirteen thousand dollars, and generally more than fifty thousand dollars, of which sum said Sargent was indebted to said Morris, on the first day of August, 1855, not less than six thousand five hundred and forty-three dollars, and has continued so indebted ever since.
    “2d. That the contract was finished and the work delivered to the Flushing Eailroad Company, and accepted by them in May, 1855; and that the said James B. Sargent was on that day, and has ever since been, indebted to the said G-ouverneur Morris upon the said contract, and upon account stated by said Morris, in the sum of six thousand five hundred and forty-three dollars.
    “3d. That the said James B. Sargent is dead, and his estate is insolvent and insufficient to pay the said sum of six thousand five hundred and forty-three dollars, by the sum of more than four thousand five hundred dollars.
    “The referee stated that he would allow the defendant to give evidence of such alleged facts, if the defendant would accompany the same, with proof to show an account stated between Morris and Sargent.
    “ The defendant not offering such proof of account stated, the referee refused to receive evidence of the facts so offered to be proved by the defendant, and excluded the same. To which ruling and refusal to receive evidence, the defendant then and there duly excepted.”
    After the defendant’s counsel had summed up, the referee allowed the plaintiff to prove, by William G. Prime that “the. bonds of the cemetery are the only stock or evidence of the stock that exists,” and that “the bonds are transferable without consent of the company, by assignment or other legal way.”
    The introduction of this evidence was objected and excepted to “on the ground that the case on both sides having been closed, and having been summed up by the defendant, the plaintiff had no right to open the case, and supply such testimony as he might find necessary to fill up the gaps in his proof, after the evidence already in had been commented on by defendant’s counsel.”
    The referee in his report states, as follows; “I do find as matters of fact:

      “ That James B. Sargent, the payee of the promissory notes in the complaint mentioned, transferred said notes by indorsement thereof to Samuel J. Prime, and delivered the same to said Prime to hold and make such use thereof for the benefit of the family of said Sargent, as he, the said Prime, might in his discretion choose to make. That in a few days after said notes were so transferred to said Prime, to wit, on the 29th day of September, 1855, he transferred the said notes to the plaintiff for a valuable consideration agreed to be given or paid therefor by the plaintiff, to wit, the plaintiff agreed to give said Prime therefor, when the said notes were paid, the amount thereof in the bonds of ‘ The Evergreens Cemetery Company,’ estimating such bonds at seventy-five cents on the dollar.
    “ That it is not shown or proved on the part of the defendant that such transfer to said Prime was made under any collusion with said Sargent, or with any purpose or intent to assist him in avoiding the payment of any such indebtedness to the defendant, or any set-off which the defendant had as against said notes in the hands of said Sargent. That said James B. Sargent was not at the time of the answer in this cause the party interested in said notes, and - this action is not prosecuted'for his benefit or in fraud of any rights of the defendant, but that the plaintiff was and is the holder and owner of said promissory notes as is alleged in the complaint.
    “ And I do further find, that the affairs of the copartnership between said defendant James B. Sargent and Joseph W. Allen, in said answer mentioned, were, at the time of joining issue in this action, open and unsettled, and no adjustment, settlement or other statement of any indebtedness of 'any of said copartners to said copartnership, or to one another on account thereof, had ever been made.
    “ And I do further find as matter of law that the defendant is not entitled to any equitable set-off against said notes for or in respect to any rights or claims which he might have had against 'Sargent on account of said copartnership matters.

      “ That the plaintiff is entitled to recover against the defendant the amount of said two promissory notes in the complaint mentioned, together with eleven hundred and sixty-two dollars and eighty-four cents, interest thereon,” amounting in all to $4,286.53; and that judgment ought to be entered in favor of the plaintiff against the defendant for that amount, besides costs.
    The defendant excepted to the referee’s conclusion of law, and also, specially, to several of his conclusions of fact.
    Judgment having been entered on the report, the defendant appealed from it to the General Term.

      William Rutherford & Robert 0. Embree, for appellant.
    I. The referee erred in deciding “that the matters stated in the answer by way of set-off or counter-claim did not constitute a defense to the plaintiff’s claim, and that he would hear no evidence on them.”
    1. Because the notes sued upon being drawn payable on demand, and transferred by the payee three years after date; the plaintiff holds them subject to all the equities between the defendant and James B. Sargent. (Furman v. Haskin, 2 Caines, 369; Loomis v. Pulver, 9 J. R., 244; Losee v. Dunkin, 7 J. R., 70; Ferreira v. Depew, 4 Abb., 131; 13 How. Pr. R., 84; 12 id., 310; 2 Duer, 640; Code, § 112; 8 How. Pr. R., 335; Vassear v. Livingston, 3 Kern., 252; Miller v. Losee, 9 How. Pr. R., 357; Beardsley v. Stover, 7 How. Pr. R., 294; Kneedler v. Sternbergh, 10 How. Pr. R., 70.)
    2. To make the answer a perfect defense to the notes sued on, it is not necessary that the indebtedness of the plaintiff’s assignor to the defendant should be a liquidated demand, and it matters not in equity whether such demand be liquidated or unliquidated; arises under a partnership or any other contract, if the indebtedness by such assignor is proved. (Dillaye v. Niles, 4 Abb., 253; Ferreira v. Depew, 4 Abb., 131; Wolf v. H-, 13 How., 84; Davidson v. Remington, 12 How., 310; Gleason v. Moen, 2 Duer, 640; § 112 of Code; Spencer v. Babcock, 22 Barb., 335; Gage v. Angell, 8 How., 335, a parallel case to this so far as it goes.)
    H. The referee erred in excluding the testimony offered by defendant; to prove the indebtedness of Sargent to Morris, the death of Sargent, and that his estate was insolvent.
    For the reasons stated in the first point above, and because insolvency of the assignor, rendering resort to him by the defendant unavailing and worthless, raises a peculiar equity in favor of defendant on account of the necessity of the case, and the defendant would be otherwise without redress. {Lindsay v. Jac/cson, 2 Paige, 581; Gay and others v. Gay, 10 Paige, 370; Chance v. Isaacs and others, 5 Paige, 594. Ives v. Miller, 19 Barb. S. C. E., 202, overrules Gage v. Angelí, 8 How., 335, but states when a court of equity will set off)
    III. The referee erred in finding “that it is not shown or proved on the part of the defendant that such transfer to said Prime,” [the transfer of the notes in question by Sargent to Prime,] “was made under any collusion with said Sargent, or with any purpose or intent to assist him in avoiding the payment of any just indebtedness to the defendant, or any set-off which the defendant had against said notes in the hands of said Sargent.” [He does not find at, all, on the allegation of the answer, that there was collusion for that purpose between the plaintiff and Prime.]
    Because the finding is against the evidence before the referee. The necessary inference from the facts, proved, standing unexplained, is, that there was such collusion to avoid the payment of a just indebtedness from Sargent to Morris, not only between Sargent and Prime, but between both together and the plaintiff herein.
    IV. The referee -erred in finding “that James B. Sargent Was not at the time of the answer in this cause, the party interested in said notes, and this action : s not prosecuted for his benefit, or in fraud of any rights of the defendant.”
    And also in finding “ that the plaintiff was and is the holder and owner of said promissory notes as is alleged in the complaint.” For the reasons abo ve stated.
    And because the said James B. Sargent having been shown to have been insolvent at the time of the transfer of said notes to Prime and Cumings; and. defendant offering to show on the trial that Sargent’s estate was then insolvent. The proof offered to be made by the defendant that Sargent was indebted to him before the trsmsfer of said notes, and down to the time of trial, in an amount greater than the amount of said notes, was competent to show a good and equitable set-off and defense to said notes; and especially when coupled with the fact that no consideration whatever was paid, or agreed to be paid for said notes, either by Prime or Oumings, and that by failure of plaintiff to collect these notes, neither of them lose anything.
    The equitable presumption of ownership at least is that the notes really belonged to Sargent in his lifetime, and to his administratrix on the trial of this action, and all equities are open against them. (§ 111, of Code of Procedure.)
    Every action must be prosecuted in the name of the real party in interest. (Farrington v. Frankfort Bank, 24 Barb. S. C. R., 561; Killmore v. Culver, 24 Barb. S. C. R., 656; McBride v. Farmers’ Bank of Salem, 25 Barb. S. C. R., 657; McKnight v. Hunt, 3 Duer, 615; James v. Chalmers, 2 Seld., 209.
    Y. The referee erred in finding, as matter of law, “ That the defendant is not entitled to any -equitable set-off against said notes, for or in respect to any rights or claims on account of said copartnership matters.”
    Because the insolvency of Sargent is sufficient to open all equities, even if they were not open for the other reasons above set forth.

      Dan. Marvin & Wm. G. Prime, for respondent.
    I. The plaintiff, after reading the notes, and computing the amount due, was entitled to move for judgment upon the pleadings. (New Rules of the Superior Court, April 11th, 1857, Code, § 247; Seeley v. Engell, 17 Barb., 530; Flammer v. Kline, 9 Practice, 216; Catlin v. Gunter, 1 Duer, 265.)
    II. The referee did not err, in point of law, in excluding the evidence offered on the part of the defendant to establish payment, a set-off or a counter-claim.
    The averments of the answer amount to this: that there was a copartnership between the defendant and Sargent and Allen; that defendant had made advances, and the firm owed him.
    It is not alleged that the firm had dissolved, nor that a settlement had been had, or the accounts or the balance stated.
    The offer -of proof, was to prove that from April 18th, 1853, to February 21st, 1856, the defendant was a co-contractor with Sargent and Allen in building and equipping the Flushing railroad, and was, at all times, largely in advance to his co-contractors, at no time less than $13,000, and generally more than $50,000, of which sum Sargent was indebted to Morris, on August 1st, 1855, not less than $6,543, and has continued so indebted ever since; that the contract was finished in May, 1855; that Sargent is dead, and his estate insolvent.
    (The referee offered to receive such evidence, if defendant would prove an account stated between Morris and Sargent.)
    This presents the question, whether as between the parties to the present action an unliquidated partnership account could be set up by way of payment, set-off or counter-claim against the notes in suit?
    HI 1. The proposed defense was not available as a counterclaim under the Code. A counter-claim is defined to be

      a. A claim in favor of the defendant on the record.

      b. A claim against the plaintiff on the record. (Code, sec. 150.)
    The claim here is not against the plaintiff, but against Sargent, and that is not allowed by the Code. (Dillaye v. Niles, 4 Abb. Prac., 253; Ferriera v. Depew, id., 131; Wolf C. E. H., 13 How. Prac., 84; Ives v. Miller, 19 Barb., 197; Spencer v. Babcock, 22 id., 326; Vassear v. Livingston, 3 Kern., 248; Gleason v. Moen, 2 Duer R., 639.)
    2. The facts set out in the answer or offered in proof, do not establish a set-off to the notes.

      a. In an action on a promissory note, a set-off must have existed before the transfer and must have then belonged to the defendant. (Code,"sec. 112; 2 R. S., 2ed., 354, sec. 32, subd. 9.)

      b. It must have been a demand for real estate sold, or for personal property sold, or for money paid; or services done, or else it must have been liquidated, or be capable of being ascertained by calculation.

      c. It must have been a demand against the former holder or payee, and not against him and another jointly. (Beebe v. Bull, 12 Wend., 504; Plets v. Johnson, 3 Hill, 112; Ladue v. Hart, 4 Wend, 583; Belknap v. McIntire, 2 Abb., 266.)

      d. The present demand is not for real estate nor personal property sold, nor for money paid, nor services done. JSTor is it liquidated, nor can the amount be ascertained by calculation. It is not pretended that any settlement of the partnership affairs has ever taken place.
    IY. The unliquidated partnership accounts, where there has been no settlement between the partners, and especially where, as in the present case, the partnership was between three persons, only one of whom is a party to the suit, cannot be made a defense in any way to the present action.
    1. There is no case made out for a contribution.
    2. There is no demand for which an action would lie against Sargent.
    3. The defendant’s sole remedy, and which he has pursued, is a bill for an account against his copartners.
    4. Until the affairs of the firm are wound up and settled, what one copartner may owe is not a debt due to one copartner, but to the firm; nor is the indebtedness of the firm to one of the members a debt due to him, from the other partners individually. (Ives v. Miller, 19 Barb. R, 1855, Gen. Term, 4 Dist., Hand, Cady, Allen and James, Justices, and cases cited.)
    5. In the absence of all statements to the contrary, it is to be presumed that the copartners were paid for their work, especially as the statement in the offer of proof was, that the railroad company accepted the work, and before there can be any debt established, the amount received must be accounted for and applied.
    Y. The exceptions of the defendant to the admission of the evidence taken after the defendant had commenced summing up, are not well taken. No objection to this testimony was taken on the ground of relevancy, and its admission by the referee was an exercise of discretion which was right, and proper in itself.
    YI. The exceptions taken to the referee’s report, as to the ownership of the notes, and as to collusion, are not well taken.
    The evidence makes out a good title to the notes, and it does not show ownership of the notes in Sargent or any one else.
    1. The transfer from Sargent to Prime'was absolute. Prime was to take the notes, and to hold them and make such use of them for Sargent’s family as he might please, entirely subject to his (Prime’s) control.
    2. The transfer from Prime to Cumings was upon a valuable consideration, and vested in Cumings an absolute title to the notes. He had a right to collect and receive the money, and no one else had any claim to it.
    VII. 1. To these considerations must be added the following: That there is nowhere in the answer any denial of the plaintiff’s ownership of the notes, nor e u averment that any other person is the true owner.
    2. The referee has reported that the notes were transferred to the plaintiff for a valuable consideration agreed to be paid therefor, to which finding no exception is taken.
    VIH. The exception that toe transfer was collusive, and with the intent to prevent a set-off) is wholly unsustained by the case, either in law or in fact.
    IX. On the subject of the t itle necessary to maintain an action on a note, the Code has not changed the law as it existed previously and has always been held; and when the Code speaks of the real party in interest in an action on a bill or note, it means the holder of the paper, whether his title be legal or equitable.
    And the rule is, that the actual possession of a bill or note is prima facie evidence of the fact that the holder is the owner of the note, and that he has paid or rendered value for it. (Ross v. Bedell, 5 Duer, 462, and cases cited; Westervelt v. Allcock, 3 E. D. Smith, 243; James v. Chalmers, 2 Seld., 209, affirming S. C., 5 Sand., 52.) The judgment should be affirmed.
   By the Court,

Boswobth, Ch. J.

—Does the new matter, contained in the answer and which, the defendant at the trial offered to prove, constitute “ a defense or counter-claim ?”

The Code has defined the word; “counter-claim,” as used in section 149. It must be a cause of action “in favor of a defendant, and against a plaintiff, between whom a several judgment might be had in the action.” Id., section 150. However the claim may arise, which the defendant seeks to enforce, unless it is a cause of action against the plaintiff, it is not a counter-claim. The new matter, which the defendant offered to prove, constituted no cause of action against the plaintiff. It in no way affected him. He was not a party to the contract or transaction sought to be proved, nor did he ever have any connection with it. It is clear, therefore, that it does not constitute a counter-claim. (Vassear v. Livingston, 3 Kern., 248; Gleason v. Moen, 2 Duer R., 639.)

Does it constitute a defense? The Code has not declared what shall constitute a defense. It has provided that, matter which constitutes a partial defense only, if properly stated in an answer, will make the answer sufficient, as a pleading. (McKyring v. Bull, 16 N. Y., 297.) But this affects the mode of procedure only. • Whether new matter, set up in an answer, constitutes a total or partial defense, either at law, or in equity, must be determined by pre-existing law. The Code has not prescribed any new rules as to what will, or will not constitute a defense.

The contract or transaction, sought to be proved, is not, in any way, connected with the plaintiff’s cause of action, nor is it one to which he is directly, or indirectly, a party. If available, to prevent a recovery by the plaintiff upon the notes described in his complaint, it must be so for the reason that, either at law, or in equity, it constitutes a set-off in this action, against the notes sued on.

The notes, in suit, were transferred to the plaintiff, on the 29th of September, 1855, and by the payee to the plaintiff’s immediate indorser a few days prior thereto. One of those notes is dated on the twenty-fifth of October, and the other on the 13th of November, 1852. The first of them is payable “ on demand of one day after date,” and the other “on demand after date.” The claim, which the defendant seeks to establish and enforce, ■ as a set-off, against them, is in brief this:

From the 18th of April, 1853, to the 21st of February, 1856, the defendant, and one Joseph W. Allen, and James Sargent; the payee of the notes, were co-contractors with a railroad company for the construction of a railroad. The road was completed and accepted in May, 1855. In the construction of such road the defendant was greatly, and at all times, in advance to his co-contractors, for money advanced in and about the work, &c., and to an amount, at no time less than $13,500. On a proper accounting, it will appear that, of this amount, there is owing, and ever since May, 1855, there has been owing from said Sargent to the defendant, the sum of $6,543. Sargent is dead,. his estate is insolvent, and insufficient to pay said sum of $6,543, by the sum of more than $4,500. These are the facts offered to be proved.

In considering the effect of the facts offered to be proved, it should be borne in mind that, this suit was commenced in June, 1856, and that the defendant’s answer was served in the same month. The answer does not allege that Sargent was insolvent, either at the time he transferred the notes, or when the answer was put in. Eor did the defendant, by the offer made at the trial, propose to prove that Sargent was insolvent when the notes were negotiated by him. Sargent died in the spring of 1857.

This claim could not be set off in an action at law, commenced by Sargent at the time this was. The demand is unliquidated. To authorize a set-off of a demand which a defendant has against the plaintiff, unless it arise out of one of the causes enumerated in subdivision 3, of section 32, [sec. 18,] 2 R. S., 354, “the amount must be liquidated, or be capable of being ascertained by calculation.” Id. It must have been due, when, (as in this case, it is sought to be enforced against the payee of a note upon which the plaintiff sues as indorsee thereof,) at the time the payee negotiated it, and the note, sued on, must, also, have been due when so negotiated. (Id., subs. 2, 4 and 9.)

The transaction between Sargent and the defendant, which the latter offered to prove, was not one between them alone, but one to which they and one Allen were parties, and as to which, they were, as between themselves, partners. The transaction was open and unsettled between them when this suit was commenced, and yet is. Eo action at law could be maintained by either of them against the other alone, on the facts offered to be proved. (Murray v. Bogert, 14 J. R., 318.) Whether either of them ought, in respect to such transaction, to pay anything to the defendant, and if so how much, could only be ascertained and determined by an action of account, or a suit in equity, to which the three would be necessary parties. A claim, recoverable only by action of account, or by a suit in equity, cannot be set off at law. (Sherman v Ballou, 8 Cow., 304.)

Such a claim, being one which must be established, if at all, upon an accounting between Sargent, Allen and the defendant, in a suit instituted for the purpose, and to which the three must be parties, it is not one the amount of which is capable of being ascertained by calculation,” within the meaning of that word, as used in subdivision 3, of section 32, 2 Revised Statutes, 354. It is not a set-off at law.

Can the demand be set off on the established principles of equity jurisprudence?

The article of the Revised Statutes, entitled Of the General Powers, Duties, and Jurisdiction of the Court ” of Chancery, provides that, “ in suits for the payment or recovery of money, set-offs shall be allowed in the same manner, and with like effect, as in actions at law.” 2 R. S., 174, § 43. [Sec. 40.]

As a general proposition, the Court of Chancery and a Court of law follow the same rules as to set-offs. (McDonald v. Neilson, 2 Cow., 139 ; Van Beuren v. Van Gaasbeck, 4 Cow., 495.)

There is nothing in the new matter set up in the answer, nor in the facts offered to be proved at the trial, which brings this case within the rule by which the Court of Chancery, in some cases, will enforce a set-off of distinct and disconnected demands, when such a set-off could not be enforced by a Court of law. Even if it be assumed, on the facts offered to be proved, that, at the time Sargent negotiated the notes in question, the defendant could have commenced an action against him and Allen for an accounting, and that the result of such an action would have established that, in equity there was, then, due from Sargent to the defendant, in respect to the partnership or joint transactions of the three, the sum of $6,543, and that sum had at all times since, in equity been due, still one essential element is wanting, to make a case which would have given to the Court of Chancery jurisdiction of an action commenced against Sargent, at the date of his negotiation of the notes in suit, to compel a set-off of such equitable indebtedness against such notes. It is not alleged that Sargent was then insolvent. The existence of that feet would be essential to the maintenance of such an action, if then instituted, even if there were no other obstacles in the way of sustaining it. (Keep v. Lord, 2 Duer, 78, and authorities there cited; Bradley v. Angel, 3 Comst., 475.)

If an action had been commenced by the defendant against Sargent and Allen, on the day Sargent transferred these notes to Prime, the Court, would not, on a complaint and affidavits stating the matters offered to be proved on this trial (omitting the allegations as to the death of Sargent, and the insolvency of his estate), have enjoined Sargent from transferring, or proceeding, at law, to collect the notes in suit. Without an allegation of the insolvency of Sargent, or of some other fact, which, if true, would prevent the defendant from collecting any sum which, upon an accounting, it might be adjudged that Sargent owed and should pay him, there would be nothing to show the existence of a right, in equity, to demand the set-off. (Keep v. Lord, and Bradley v. Angel, supra; Gay v. Gay, 10 Paige, 369; Barber v. Spencer et al, 11 Paige, 517; Dade v. Irwin et al, 2 How. U. S. R., 383; Story’s Eq. J., §§ 1434 to 1437 inclusive.)

I, therefore, conclude that the facts, offered to be proved, do not establish that any equitable right of set-off existed, or had attached, at the time the notes were transferred to the plaintiff The answer alleges, inter alia, that, “the said James B. Sargent is still the true party interested in said notes, and that this .action is prosecuted for his benefit, ” &c.

The referee has found, as facts, that Sargent transferred and delivered the notes “to Samuel J. Prime to hold and make such use thereof for the benefit of the family of said Sargent, as lie, the said ■ Prime, might in his discretion choose to make.” That in a few days thereafter, and on the 29th of September, 1855, Prime “ transferred the said notes to the plaintiff for a valuable consideration agreed to be given or paid therefor, by the plaintiff, to wit: the said plaintiff agreed to give said Prime therefor, when the said notes were paid, the amount thereof, in the bonds of ‘The Evergreens Cemetery Company,’ estimating such bonds at seventy-five cents on the ¿ollar.”

Is this action prosecuted in the name of “the real party in interest,” within the meaning of the words “the real party in interest,” as used in section 111 of the Code ? A plaintiff, who has an absolute right to the money due on a note, and to receive it and appropriate it to his own use, when recovered, is the real party in interest. (Hastings v. McKinley, 1 E. D. Smith's R., 273; and Selden v. Pringle, 17 Barb., 468.)

The plaintiff had possession of the notes in question, when this suit was commenced. Ete also held the legal title. His purchase was absolute. The money, due upon the notes, is, both at law and in equity, owing to him; when recovered, it must be paid to him.

It is true that Prime as representing Sargent, (or “ the family ” of Sargent for whose use and benefit he received the notes), and that Sargent or his estate are interested in the result. A failure of the plaintiff to recover in this action, might be as great, and possibly a greater loss to Sargent, (if living,) than to the plaintiff. But that feature only illustrates the extent to which a person, not a party to an action, may be interested in the event of it, notwithstanding it is prosecuted by the legal and equitable owner of the cause of action stated in the complaint.

The plaintiff has a right to a complete execution of the contract for the sale of his “ cemetery bonds.” Whether he will make little or much by it is not a question for the Court to consider.

In considering the question, whether the plaintiff is to be defeated on the ground that he is not the real party in interest, it is to be borne in mind that, if this defense fails, there is no defense.

And hence, if this defense prevails, it must be held that, a person owning a note, as to which the maker has no defense, cannot sell it to a third person so as to enable such third person to sue upon it and recover in his own name, no matter how absolute and Iona fide the sale, if, by the terms of the sale, payment for the note is to be made, when the note is paid.

The referee has, substantially, found that, the transfer of the notes by Sargent to Prime, was not made under any collusion with said Sargent, or with any purpose or intent to assist him in avoiding the payment of any such indebtedness to the defendant, or any set-off which the defendant had, as against said notes in the hands of said Sargent.”

As the case stands, upon the papers before us, the defendant had no defense to the notes in the hands of Sargent. The notes were transferred by the latter to Prime, without any intent to defeat or avoid the enforcement of any claim that the defendant might have had against him. The plaintiff bought them absolutely and unconditionally, and thereby acquired a title to them, and the right to receive and retain, as his own property, any money that may be paid or collected on them. We think, therefore, that he was “the real party in interest,” as the owner of the notes, and that the action was, properly, brought in his name.

The exceptions taken to the decisions of the referee, permitting Wm. 0. Prime to be sworn after the parties had rested, and in receiving the testimony given by Dan. Marvin, are not noticed in the points submitted by the appellant on this appeal, nor was either of them argued by his counsel, on the argument of such appeal, nor was it intimated by such counsel that he relied on either of these exceptions. We therefore consider them waived "and abandoned.

Rule 43 of the Supreme Court (adopted in August, 1858).

The defendant having failed to establish any defense, either total or partial, to the notes, the judgment must be affirmed. Judgment affirmed.


source: Caselaw Access Project

author: Bosworth, Ch. J.

license: Public Domain

text:
    Rudolph Garrigue v. Philip A. Loescher.
    1. Where a plaintiff sues as the assignee of the cause of action described in the complaint, to recover a sum alleged to be due from the defendant to the plaintiff’s assignors at the time such claim was assigned; and where the plaintiff makes title under an assignment made by the assignors by their attorney, by virtue of a ppwer of attorney dated the 23d of April, 1856, the suit having been commenced on the 26th of May, 1856;) a paper writing executed by such assignors personally to the plaintiff, on the 21st of April, 1857, which recites the making of such power of attorney, and confirms the assignment made by such attorney to the plaintiff, by virtue of said power of attorney, is not competent evidence, as against the defendant, of the due execution of the power of attorney so recited.
    2. As a general rule, a paper executed by a third person, cannot be admitted as evidence of the truth of the facts it recites, when his declarations to the same effect would be inadmissible, on the ground of being hearsay evidence.
    3. A declaration by an alleged principal, made after a cause is at issue, that before suit brought he executed a certain power of attorney, the execution of which must be proved to enable the plaintiff to recover as assignee of a demand which such principal had against the defendant, is not competent evidence as against the defendant, to prove the execution of such power of attorney.

      4. A power of attorney by which A. authorizes B. as his attorney, “to enforce, either privately or before Court ” a claim to the amount of $7,602, which A has against L.; and to do everything “ which may be requisite to collect the sum of $7,602,” “to apply to the redemption” of certain bills of exchange named in said power, does not confer authority on B. to assign such claim to a third person, so that such third person can sue upon and collect it in his own name.
    5. A plaintiff who sues as the assignee of a cause of action, (in which he has no interest at the time of suit brought) cannot maintain his action, by purchasing after issue joined, the cause of action described in his complaint.
    (Before Boswobth, Oh. J"., and Hoffman, J.)
    Heard, November 5;
    decided, December 4, 1858.
    This action comes before the Court, on questions of law arising at the trial, and which were there ordered to be heard, in the first instance, at the General Term. It was tried before Mr. Justice SlosSON, and a jury, in February, 1858.
    The action is brought to recover $7,602, part of a larger sum alleged to have been owing on the 5th of April, 1856, from the defendant to Pfeiffer & Bolzmann, of Hamburgh in Germany, and to have been assigned by the latter, by their duly authorized' agent to the plaintiff.
    The answer admits that the defendant was indebted to said Pfeiffer & Bolzmann in account, but denies that, the balance was as large as the complaint alleges.
    It puts at issue the allegations as to an assignment of the $7.,602, to the plaintiff; and alleges, on information and belief that, Rudolph Garrigue is not the real party in interest in this action, and denies that the plaintiff has any interest, whatever, in it. This action was commenced on the 26th of May, 1856.
    At the trial, the plaintiff offered in evidence a “ power of attorney," dated the 23d of April, 1856, purporting to be executed by Pfeiffer & Bolzmann to Ferdinand Karck of Hew York city, and in the presence of “F. H. Prohme & A. Ritten,” as subscribing witnesses. It being offered, on a certificate, of the acknowledgment of the execution thereof made before a notary public of Hamburg, (which certificate was indorsed on such power,) it was rejected.
    The plaintiff then offered in evidence a paper, dated at Ham-burgh, on the 21st of April, 1857, purporting to be signed by Pfeiffer & Bolzmann, and called a “ ratification of an assignment iii trust." There was indorsed on the latter paper, a certificate of the acting consul of the United States at Hamburgh, in due form of law, of the acknowledgment, before him, on the 21st of April, 1857, by Pfeiffer & Bolzmann, of the due execution by them of such paper.
    Said paper recited that Pfeiffer & Bolzmann “ having constituted Mr. Ferdinand Karck, of the city of New York, by notarial power of attorney, dated Hamburgh, April 23, 1856, and executed on the same day our power of attorney with full power,” &c., “ and being informed that Mr. Ferdinand Karck, as our agent, has in our names, and on our account and behalf, assigned, by a deed of assignment, under seal, dated New York, May 21, 1856, of the contents of which we have perfect knowledge, all our notes, bills, book accounts, claims and demands, against the said P. A. Loescher, of every name and nature whatsoever, to Rudolph Garrigue, of the city of New York, in trust for the purposes in said assignment mentioned, therefore these presents witness that the aforesaid assignment has been made and executed by said Ferdinand Karck, as aforesaid, in perfect accordance with our intentions, and the power granted to him, and that we ratify and confirm the said assignment in every respect,” &c.
    “ The Court admitted such paper to prove the execution by Pfeiffer & Bolzmann of the said power of attorney. The defendant then and there duly excepted to the said decision and ruling of the Court."
    The plaintiff then offered the said power of attorney in evidence. The defendant then objected to the same being read on the ground, (among others,) “ that the foregoing paper, called a ‘ratification of an assignment in trust,’ did not prove the said power of attorney, dated Hamburgh, April 23, 1856, so as to enable the said power of attorney to be read in evidence.”
    The Court overruled the objection and decided the said power of attorney to be sufficiently proved, to which decision the defendant excepted.- It was then read in evidence.
    The plaintiff then read in evidence the assignment executed by Karck, as such attorney, to the plaintiff, and which bore date the 21st of May, 1856.
    The power of attorney recited that Pfeiffer & Bolzmann had a balance of account against Loescher of $7,888.93; and that against this balance of account they had sold bills of exchange to persons emigrating to Mew York, Quebec, and Chicago, to the amount of $7,602, and had received the amount of said bills from said emigrants, (specifying the name of each emigrant and describing the bill sold to him.) It also recited a purpose to do all in their power to prevent said emigrants from falling into embarrassment, and authorized Karck “to do all that may seem to him best, to the end that the said bills of exchange as a charge upon the aforesaid balance of account, may be accepted and honored by said Loescher.”
    “ In case, however, against all expectation, the bills should not be accepted,” it authorized their said attorney, “ to enforce, either privately, or before Court, or otherwise,” their claim against Loescher, to the amount of $7,602. If necessary, to make complaint and proceed judicially before the competent authorities and Courts, especially to apply for warrants of arrest and attachments, and to employ attorneys, &c. “ In short, to do and undertake any and everything, even though it be not specially mentioned here, which may be requisite to collect the sum of $7,602, or so much thereof as may be possible from the said Loescher,” and apply the same to the redemption of the said bills of exchange.
    Mone of the bills of exchange were accepted by Loescher.
    The assignment, which Karck, by virtue of such power of attorney, executed to the plaintiff, assigned to him, the whole balance of account alleged to be owing from the defendant to Pfeiffer & Bolzmann, in trust to collect the same and pay said bills of exchange, and return the surplus, if any, after deducting reasonable expenses, to Pfeiffer & Bolzmann, their executors, administrators, or assigns.
    When the testimony was closed, the defendant moved to dismiss the complaint on the grounds:
    First. The plaintiff has not proved himself the trustee of an express trust.
    Second. The power of attorney did not authorize the execution of the assignment.
    Third. The paper, called a “ratification of an assignment in trust,” could not retrospect, and was inoperative as a power to sanction the plaintiff’s action.
    The motion was denied, and the defendant excepted to the decision.
    The Court instructed the jury to find a verdict for the plaintiff for $8,657.73, the amount claimed and interest.
    To this instruction the defendant excepted.
    The Court then ordered that, the exceptions of the defendant, taken to the rulings and decisions of the Court, upon the trial of the cause, be heard, in the first instance, at the General Term of this Court, the entry of judgment to be in the meantime suspended.

      Zitz, Kapp and Hall, for plaintiff.

      F. B. H. Bryan, for defendant.
   By the Court.

Bosworth, Ch. J.

—The recital of one deed in another is evidence of the execution of the recited deed against the party who executed the reciting deed, and those claiming under him by title subsequent to the date of the latter deed. (3 Cow., and Hill’s Notes, p. 1235, note 869.)

But these recitals are not evidence against strangers, id.

As a general rule, a recital is evidence, against a defendant, only in those cases, in which, the declarations of the party, who executed the reciting deed, would be competent. (Id., p. 1236.)

Declarations, of Pfeiffer & Bolzmann made in April, 1857, are no evidence as against the defendant in an action commenced in May, 1856, when such declarations are to the effect that, before the action was commenced they authorized a transfer of the cause of action to the plaintiff, and the plaintiff’s right to recover depends upon the question whether they did authorize such transfer to be made; before suit brought.

That Karck was authorized to make the assignment under which the plaintiff claims, is a fact necessary to be proved, in order to maintain the plaintiff’s action: That fact is put in issue by the pleadings: The confession, of Pfeiffer & Bolzmann, made after issue joined, that Karck was authorized to make the assignment, would not be competent evidence, as against the defendant of that fact.

The declarations of a party, under whom a plaintiff or defendant claims title, made while such party owned and was in possession of the subject matter of the litigation may [in some cases] be evidence against such plaintiff or defendant, if he claim under a title derived from such party after such declarations were made. 1 Cow., Hill, and Edwards’ Notes, p. 318, (3.) But they are not evidence in favor of a person claiming under such party against a person who does not claim under him. (2 Cow. and Hill’s Notes, p. 669.)

The admission of the paper executed by Pfeiffer & Bolzmann on the 21st of April, 1857, as sufficient evidence that they executed on the 23d of April, 1856, the power of attorney recited in it, is erroneous, because, first, it was made after suit brought, and, second, because the defendant is a stranger to that transaction, and to the assignment alleged to have been executed by virtue of such power of attorney. Those transactions are res inter alios acta. As to them, there is no privity between Pfeiffer & Bolzmann and the defendant. He is not defending on the ground of any right, derived from them, either prior or subsequent to either of those dates.

If the plaintiff claimed under an assignment alleged to have been executed to him by Pfeiffer & Bolzmann, in person, and the fact of such assignment was put in issue, the plaintiff could not establish the fact, by proof of admissions made, after suit brought, by the alleged assignors, that they had executed such assignment.

There is no more propriety in admitting their declarations or confessions, as evidence of the fact declared or confessed, than in admitting the declarations of any third person, as evidence of the fact thereby asserted.

We think the learned Judge erred in holding that the paper called a “ Ratification of an Assignment in Trust ” proved sufficiently the fact that Pfeiffer & Bolzmann executed the power of attorney which was produced and received in evidence.

This conclusion makes the granting of a new trial unavoidable, and renders it unnecesary to decide the question whether the power of attorney, (if its execution shall be proved on a subsequent trial,) authorized Karck to assign the claim in question so as to vest such a title to it in his assignee, as would enable the latter to sue and collect it in his own name.

The latter question was discussed on the argument of the appeal. To avoid such inferences, as to our opinion upon this question, as might be drawn from our leaving it unnoticed, we deem it proper to say that the power of attorney does not, in terms, authorize an assignment of the claim in any event, for any purpose.

However general the language employed to express the authority conferred, in case “ the bills should not be accepted,” the power of attorney declares that the things, which it authorizes to be done, are to be done, “ to enforce ” the “ claim, to amount of $7,602, against the said Loescher;” or are to be done “in order to collect, the sum of $7,602, or so much thereof as may be possible, from the said Loescher.”

The language, by which the authority conferred, is expressed, however comprehensive, imports that the discretion confided and power granted, are to be exercised and employed by Karck, to collect, as the agent of his principals, the $7,602.

It can hardly be inferred that, it formed any part of the purpose of Pfeiffer & Bolzmann, that Karck should be at liberty to assign the claim for $7,602, to a third person, so as to place the proceedings which they might deem it expedient to institute, or which might be instituted under the said power of attorney, beyond their control. Yet this has been done, if the assignment which has been made, is as effective as it would be, if it had been executed by Pfeiffer & Bolzmann, in person.

We incline, strongly, to the opinion, that the power of attorney, assuming its execution to be proved, did not authorize Karck to make the assignment in question.

It is hardly necessary to say that, if the plaintiff, by force of the power of attorney and of the assignment, had no right of action, or in other words, did not own the cause of action, (against the defendant,) which is stated in the complaint, when this suit was commenced; Pfeiffer & Bolzmann, could not, by any acts they could do, after issue joined, vest a title in the plaintiff, as of a date prior to that on which this suit was commenced, with such effect as to enable him, thereby, to maintain the suit.

A plaintiff, who has no cause of action against a defendant when he sues him, cannot maintain his action and recover, by purchasing, after issue joined, the cause of action described in his complaint.

A new trial must be granted, with costs to abide the event. Judgment accordingly.


text:
    H. O. Andrews, Plaintiff and Respondent, v. Wm. B. Clerke, (survivor, &c.,) Defendant and Appellant.
    Where a defendant, by agreement between him and the plaintiff, purchases with his own money, stock and bonds for the former, upon a commission specified, and agrees to hold them until a day named and then sell them for the plaintiff; and the plaintiff deposits with the defendant a sum of money as security to him against loss, and agrees to watch the market value of the stock and bonds while the defendant is to so hold them, and in case of a decline in such value to give him additional security against loss, and if he fails to do so, that the defendant may sell the stock and bonds at the brokers’ board in the city of New York; that their market value as between the parties should be the price at which they were bought and sold at the daily meeting of said board of brokers; and on the 31st of October, 1855, on demand of the defendant, §1,012.25 of additional security was furnished to him; and on Saturday, the 3d of November, 1855, the market value of said stock and bonds was such that with the securities then held by the defendant, he was folly secured against loss; and on Monday, the 5th, (the stock falling in the market,) the defendant, without notice to the plaintiff and without his consent, sold the stock and bonds at the brokers’ board at their then highest market value, and at prices amounting in all to $16,850, which was $156.63 less than the plaintiff owed him on a settlement made on the basis.that the sale was authorized; whereas, charging the defendant with their market value on the day until which he had agreed to hold them, there would be due to the plaintiff on the latter day, the sum of §1,093.16, it was held:
    I. That the plaintiff was not in default, by reason of not having anticipated on the morning of the 5th, that the value of said stock and bonds would decline on that day, and by not having given to the defendant additional security on that day before the board of brokers met.
    2. The plaintiff not being in default up to the time of the sale of the stock and bonds by the defendant; such a sale was unauthorized and illegal, and the defendant by reason thereof is liable for the market value of said stock and bonds on the last day of the period during which he had agreed to hold them.

      3. According to the substance and legal effect of the transaction, the stock and bonds when so purchased became the property of the plaintiff, subject only to the defendant’s lien thereon for his advances and commissions.
    (Before Boswobth, Oh. J., and Woodruff, T.)
    Heard, November 9th;
    decided, December 4th, 1858.
    This is an appeal by the defendant from, a judgment entered against him on the report of Henry Nicoll, Esq., as referee. The action is brought by Henry 0. Andrews against William B. Clerke, as survivor, &c., of Thomas Clerke, deceased.
    The complaint, dated 12th January, 1856, alleges the death of Thomas Clerke, on the 16th of November, 1855, and his prior partnership with the defendant, under the firm of W. B. Clerke & Co.
    The possession by the defendant’s firm, November 5, 1855, of certificates of 200 shares of Erie Railroad stock, and $10,000 worth of Erie Railroad bonds, the property of the plaintiff, subject only to a lien for moneys advanced by them, of an amount which the plaintiff could not state precisely, but less than the par value of said stock and bonds, during 'the period from the 5th of October, 1855, to the tenth of that month; which stock and bonds the defendant’s firm agreed to hold for the plaintiff’s use, subject to his redemption, for sixty days.
    That defendant’s firm sold said stock and bonds on the 5th of November, 1855, without notice .to him, and applied the proceeds to their own use, and have not paid the same to the plaintiff although requested.
    It demands judgment for $18,275, and interest, allowing advances made by defendant’s firm to the plaintiff to be deducted therefrom. • .
    The answer, dated 19th March, 1856, denies that the defendant had in his possession such bonds and stock as are mentioned in the complaint, being the property of the plaintiff.
    It also denies the alleged agreement to hold stock and bonds for plaintiff’s use.
    Also any sale and disposal of bonds and stock of the plaintiff without notice to him; also the market value thereof as stated in the complaint.
    It avers an agreement of plaintiff to deliver to defendant’s firm further security for the sum advanced, if the market price of certain bonds and stock theretofore held as security for certain advances by them to him should decline, and in case he did not, the defendant’s firm should be at liberty to sell the same at the board of brokers without notice.
    Also the decline of such stock and bonds in the market before any sale, and their continuing to decline, and reasonable diligence by the defendant to find the plaintiff to notify him.
    It sets up, by way of counter-claim:
    Advances to the amount of..................... $17,633 72
    Services to the amount of...................... 150 00
    The reply, dated 11th April, 1856, admits the making of advances but denies the amount, and the plaintiff not having the means of fixing it, leaves the defendant to make proof; and avers that a large amount was advanced at usurious rates.
    The report of the referee shows, that the firm of William B. Gierke & Go., ( consisting of the defendant and Thomas Gierke,) in February, 1855, purchased, with their own money, for the plaintiff, $10,000, of certain mortgage bonds of the New York and Erie Railroad Company, and on the 6th of April, 1855, they also, in like manner, purchased 100 shares of the stock of said company. They were, by agreements made, from time to time, between them and the plaintiff, to hold the bonds until the 5th, and the stock until the 9th of December, 1855. They were, then, to sell the same for and on account of the plaintiff, and retain out of the proceeds the purchase money, and interest thereon, and certain commissions, agreed upon between them and the plaintiff.
    As security to them, against loss, the plaintiff deposited with them a certain amount of money, and it was agreed between them that, the plaintiff should watch the market value of the said stock and bonds during the time, that the said defendants had as aforesaid agreed to hold the same, and should from time to time, in case of a decline in the market price of said stock and bonds, give to them additional security against loss, and in case of his failure to do that, they should be at liberty to sell the said bonds and stock at the brokers’ board in the city of NewYork.
    The market value, of said bonds and stock, was fixed and established, as between, these parties, by the prices, at which, the same were bought and sold at the daily meetings of said board of brokers in the city of New York.
    On the 81st of October, 1855, the plaintiff, on the demand of said firm, furnished them additional security to the amount of $1,012.25.
    On Saturday the 3d of November, 1855, the market price of said stock and bonds was such that, with the securities furnished to and held by the said firm, they were fully secured against loss.
    On Monday the 5th of November, 1855, the said firm sold said stock and bonds at the brokers’ board in the city of New York, at the highest market prices at said board on that day, and at prices amounting in the aggregate to $16,850. Such sale was made without notice to the plaintiff and without his consent.
    On the 6th of December, 1855, the market price of said bonds was $87, per $100, and if sold that day would have produced $8,700. The 100 shares of stock, at their market price on the 10th of December, 1855, would have produced $9,500. If the sale made on the 5th of November, 1855, is to be treated as authorized and justifiable, the plaintiff on that day, after being credited with the proceeds of the actual sales, would be indebted to said firm in the sum of $156.63.
    If such sale was unauthorized and a breach of the firm’s agreement, and if the firm is chargeable with the market value of said bonds on the sixth and of said stock on the 10th of December, 1855, then the sum, which the plaintiff is entitled to recover, is $1,093.16, and interest thereon from the 10th of December, 1855, which interest, to the date of the referee’s report, amounted to $173.85.
    The said Thomas Clerke died on the 16th of November, 1855. The referee reported that, the plaintiff was entitled to judgment against the said William B. Clerke as survivor for the sum last mentioned, amounting with interest to the 18th of March, 1858, (the date of his report) to the sum of $1,267.01.
    Exceptions were duly filed to the decision of the referee. Judgment having been entered on his report, the defendant appealed from it to the General Term.

      Richard 0. Gorman, for appellant.

      M iS. Van Winkle & Geo. A. Halsey, for respondent.
   By the Court.

Bosworth, Ch. J.

—By the agreement, between the plaintiff and the defendant’s firm, as it is found by the referee, the said firm had no right to sell the said bonds and stock prior to the 5th of December, 1855, even though there should be a decline in the market price of the same, unless the plaintiff failed, upon the occurrence of such a decline in the market value, to give to said firm additional security against loss. On Saturday, the 3d of November, 1855, the market value of said stock and bonds was such, that the securities, held by said firm, fully protected them against loss. On the fifth, the next business day, the firm sold said stock and bonds, and, (tested by the result of such sale) the firm was unsecured by the sum of $156.63.

The plaintiff, on the facts as found, was not in default by reason of not having anticipated, on the morning of the fifth, that the market value of the stock and bonds would decline during that day, and by not having given to the defendant, additional security, on the morning of that day, before the board of brokers met. On the 31st of October, 1855, on being requested by defendant’s firm, to do so, the plaintiff had given to them further security. That security on the day preceding the sale, was as ample as it was his duty to make it, or the said firm had a right to demand. The plaintiff was not required, because he had not agreed, to furnish further security before a decline occurred. He agreed to furnish it, in case a decline occurred. Assuming that, the price of sale, at the brokers’ board, is, as between these parties to be the test of the market value of such stock and bonds, then until sales had been there made, on the fifth of November, it would not be determined that the market value of the stock and bonds had declined. The plaintiff ought not to be held in default, in case a decline occurred during the fifth, if he furnished additional security before the brokers’ board met on the morning of the sixth. We think, that the plaintiff had not failed to perform the agreement, on his part, by reason of not having furnished further security on the 5th of November, 1855, before such sale was made.

When the stock and bonds had been purchased by William B. Gierke & Co., they were, as between them and the plaintiff, the property of the latter. The firm, by the agreement, had a right to retain and sell them, when the time arrived at which they were authorized to sell. We do'not doubt, however, that on any day prior to the arrival of such time, the plaintiff, by paying or offering to pay all that the defendants would be entitled to demand or retain, if they should hold them until the time "to sell arrived and then sell them, would have a right to require the stock and bonds to be transferred and surrendered to him.

The substance of the transaction is the same as if the plaintiff had himself made the purchases, and borrowed of the said firm the money required to pay for them, and had then, to secure the defendants, transferred the stock and bonds to them upon the same agreement as to holding and selling them, and reimbursing to the defendants the amount of their loan, and as to keeping them secured by new securities, if necessary, until the time stipulated for selling the stock and bonds had arrived.

It cannot be said, therefore, that the facts proved, (as found by the referee,) make a case differing in its entire scope and meaning, or substantially from that presented by the allegations contained in the complaint.

In good sense, the stock and bonds were the property of the plaintiff and were held by the said defendants as a pledge to secure the repayment of the moneys advanced to complete the purchase with the interest thereon and to secure also the payment of their commissions.

If this view be correct, then the defendants could not lawfully sell the stock, without first notifying the plaintiff of the time and place of such sale, even though it was the duty of the plaintiff to furnish further security on the morning of the 5th of November, 1855.

The fact that the agreement, in terms, authorizes the defendants to sell, in case of the default of the plaintiff to furnish further security upon a decline of the market value occurring, confers no power which the law has not granted to every pledgee in case of a default to pay the debt secured when due. (Stearns v. Marsh, 4 Denio, 227; Wilson v. Little, 2 Comst., 443.)

It confers no more power than a mortgage of real estate, which in terms, authorizes the mortgagee to sell, in case the mortgagor fails to pay, on the maturity of the mortgage debt, and which does not provide how or when the mortgaged property shall be sold.

It will not be pretended, I think, that, in such a case the ■ mortgagee could, by a private sale, without notice to the mortgagor, cut off the mortgagor’s equity of redemption.

We are of the opinion that the plaintiff was not in default, in the matter of furnishing further security, when the sale was made; and that the sale was illegal and a breach of the defendant’s contract; and that the judgment should therefore be affirmed.

Judgment affirmed.


text:
    Anna Karl, Administratrix of Johann N. Karl, deceased, Plaintiff and Respondent, v. Henry Maillard, Defendant and Appellant.
    1. Where one of two servants, of a common principal, is injured by the negligence of the other while engaged in the'same general business, such principal is not liable for the injury.
    2. Where an employee in entering the building of his employer, in the ordinary course of his business, falls through an open hatchway and is killed, and the evidence given tends only to the conclusions, that whenever the hatchway was rightfully opened, it was by the order of the defendant or of a particular agent, and that in the latter case such agent always stood by it when it was open, to guard against accidents, and that on the occasion in question it was opened without the knowledge or permission of such particular agent or of the defendant, but by the unauthorized act of a fellow-servant of the deceased; the conclusion of law is, that the deceased, if himself without fault or negligence, was killed not by the neglect or default of his employer, but of his fellow-servant.
    3. A verdict for the plaintiff, upon evidence which only tends to prove such a state of facts, will be set aside, as contrary to evidence.
    (Before Bosworth, Oh. J., and Woodruff, J.)
    Heard, November 10;
    decided, December 4, 1858.

      This action comes before the Court, at General Term, on an appeal by the defendant from an order denying a motion for a new trial, and also on an appeal from a judgment entered on a verdict in favor of the plaintiff.
    It was tried in November, 1857, before Mr. Justice Woodruff and a jury.
    The action is brought to recover damages on account of the death of Johann N. Karl, which death, the complaint alleges, was caused by the negligence of the defendant. Johann N. Karl was killed on the 12th of March, 1856, and was, at the time, in the employment of the defendant. The latter, at that time, carried on business, at 621 Broadway; the premises, occupied -by him, extending through to Mercer street, and including No. 160 Mercer street.
    In front of the entrance door from Mercer street, and extending quite up to the door, there was, inside of the building, a hatchway or hoistway, covered by a trap-door, which trap-door was opened whenever it was necessary to hoist articles through the hatchway. All of defendant’s workmen entered through this door, when coming into the building to attend to their daily work. On the afternoon of the 12th of March, 1856, a little after one o’clock, the defendant returned, from his dinner, to resume his work. The entrance door was closed, but not ‘ fastened. The trap-door was up and the hatchway open, and the plaintiff, on opening the entrance door, fell through the hatchway and was killed.
    The complaint, after giving a description of the premises occupied by the defendant, and stating that his business was that of a confectioner, arid that Johann N. Karl was .employed by him to manufacture in said store “ fancy confectionery by the piece,” alleges “ that, in the course of his said employment, and in consequence thereof, it became, and was necessary, for the said Johann N. Karl, to go to and into the said store and building, by the door or entrance thereto from Mercer street, the said defendant having forbidden the workmen and servants in his employ to enter by the door from Broadway, and directed the said Johann N. Karl, and others in his employ, to enter said store by the door opening from Mercer street aforesaid.
    “And the said plaintiff further says and avers, that the said defendant .... did not cause the hoistway, in the said store and building, on each story thereof, to be inclosed by a good and sufficient railing around the opening thereof, and did not cause such railing to be securely fastened, but on the contrary thereof, the said defendant permitted the said hoistway to be and remain in an exposed and dangerous condition, without any railing inclosing the same; and on the said 12th day of March, 1856, wrongfhlly and negligently caused the trap-door on the first story, or ground floor of the said store, by which the opening of said hoistway was closed, to be raised, and negligently and wrongfully caused the door or entrance to said store from Mercer street aforesaid, to be closed, but not fastened or guarded.”
    . . That, “ on opening the outer door and stepping into the said store, he, the said Johann N. Karl was, by the first step across the threshold, precipitated through the opening of said hoistway, so left open and unguarded, down and into the subcellar, and upon an engine or other machinery, and was thereby so bruised, crushed and mangled, that he immediately died. And so the said plaintiff says, that the said defendant, on the day and year last aforesaid, at the city and county of New York aforesaid, by the wrongful act, neglect and default of him, the said defendant, and his agents and servants, did cause the death of the said Johann N. Karl.”
    The answer of the defendant, “ admits, that on or before the said twelfth day of March, the said Johann N. Karl was retained and employed by the said defendant in the manufacture of fancy confectionery by the piece, and that in the course of said employment, and in consequence thereof, it became and was necessary for the said Johann N. Karl to go to and into the said store and building by the door or entrance thereto from Mercer street.”
    It states, as a defense, that it was a regulation of the store, that all the workmen, who left the premises at noon, should be back at their place by 1 P. M. That, it being necessary that, the hoistway should be open daily, the further rule was established, that the hoistway should be used, each day, after 1 P. M., and that the deceased knew of both regulations. That on the said twelfth of March, the deceased left at noon, and in disregard of one of said regulations, did not return until some time after IP. M.

      That, when he did return, the hoistway was open, and being used in the regular and ordinary prosecution of the business of the said defendant. It concludes thus:
    “ And this defendant further says, upon information and belief, that the said Johann N. Karl, upon his return in the said afternoon, to the said store or building, opened the door or entrance thereof, and seeing the said hoistway open, carelessly and negligently attempted to jump across the said hoistway, and in so doing came in contact with some other person or object, whereby, and by his own carelessness and neglect, he, the said Johann N. Karl, was precipitated and fell through the said hoistway down and into the subcellar of the said building, and upon some material which was there deposited, and was thereby so bruised and crushed, that he immediately, or shortly thereafter died; and so this defendant says, that he, the said Johann N. Karl, by his own carelessness, neglect, default and negligence, came to his death, and not by any default, carelessness, or wrongful act of this defendant, or of any of his agents, servants, employees or workmen.
    “Wherefore this defendant demands judgment in his favor in this action, with costs.”
    John White, for the plaintiff, testified that, he was ordered by Degen, the foreman of the gum-room, to hoist a box of liquorice, which was on the floor below that in which the hoistway was. That he opened the hatch to raise it. He shut the door, “because Madame Maillard’s father called him, and said “ John, Mr. Mail-lard tells me to shut the door, it is very cold.” “Karl opened the door about one and a half minutes after I shut it. I was looking up stairs, and saw them take the box of liquorice. At that moment I saw the door open, and I sprung and put my foot forward as far as I could to try and catch the door to stop it, and I found I could not stop the door; but I caught deceased by the shoulder or arm, but I could not hold him. I held on as long as I could, but I myself fell forward, and he fell down the hatchway. He fell two floors, about eighteen feet. He fell in the corner where the big stove is, in which they make fire for the machine.”
    This is the only evidence as to the particular circumstances attending the falling of the deceased through the hoistway. He died on the day on which he fell.
    Vital Rosseau, a witness for the defendant, testified that, “unless I (the witness), gave my orders, the hatches could not be opened for the receipt or delivery of goods.’’ “ I never knew of any one opening the hatch, without applying to me or to the proprietor. At the time when any one applied to Mr. Maillard for goods, he either sent them to me or came and saw me himself.” That he had never known White to hoist before, when the witness was not present. He said, “ when we did use the hatchway, I stood by to see the goods delivered.” “I did not know that the hoist was in use at that time.”
    On cross-examination, he said, “ I had charge of the hatch and attended to the receipt of goods“ when I was applied to for sugar or liquorice, while I was engaged, I would not allow the traps to be opened; I would send the men back to their departments to wait until I was ready.”
    “ There were no goods hoisted unless I or the defendant gave the orders for opening the hatch.”
    Henry Degen, a witness for the plaintiff, testified that “Rosseau was bookkeeper;” “when I wanted supplies I would go to the office and ask defendant; if he was not in the office, the bookkeeper or some one "in the office for it; they then told me to send some men down in the magazine and get it; the men would send it up on the hatchway; sometimes the bookkeeper stood at the door when it was sent up, not always; “whenever we required the hatch we used it.”
    There was a conflict of evidence as to whether a wood-bar had been provided, prior to this accident, for fastening the entrance door. White says he never saw one there before. Degen says the defendant, after the accident, asked a carpenter to make one. Rosseau says there was one prior to the accident.
    They are the only witnesses who testified as to that matter.
    Julius Kollmar, a witness for the plaintiff, said “ the hatch, was used at all hours; sometimes I have seen it open between 12 and 1 o’clock.”
    George Roth, a witness for the plaintiff, said “ the hatch was used at all times; sometimes after 12, and before 1 o’clock.” When the plaintiff rested, (which he did do after the examination of John White was concluded,) the defendant’s counsel moved for a dismissal of the plaintiff’s complaint, on the following grounds :
    “ 1st. The evidence discloses that the deceased was himself guilty of negligence, and contributed to the accident.
    “2d. If any person, other than the deceased, was guilty of negligence, it was White, the fellow-workman of deceased, and the defendant is not liable for injuries accruing in such case.
    “3d. The accident was an ordinary risk and peril of the employment, incident to the place of carrying it on, and the master is not liable for injuries arising from such cause.
    “ The Court denied the motion, to which decision the defendant’s counsel excepted.”
    The ease made does not contain the charge given to the jury. It states that, “ the Judge charged the jury and the jury retired and found a verdict for the plaintiff of the sum of $1,500.”
    The only evidence, bearing on the question of damages, was to the effect that, the deceased was between 28 and 31 years of age; a confectioner and decorator in gum paste. “Karl was a pretty good workman, good as anyone; he was in defendant’s employ ten or twelve months.”
    The defendant moved for a new trial, on a case, and from the order denying the motion, he appealed to the General Term. A judgment having been entered on the verdict, he, also, appealed from that, and the two appeals were heard together.
    Lee & Smidt, for defendant and appellant.

      Elias J. Beach, for respondent.
   By the Court.

Bosworth, Ch. J.

—The testimony of Rosseau is direct and explicit that no goods were hoisted unless he or the defendant gave the orders for opening the hatches. No witness contradicts this testimony; some of the witnesses testify that, the hoistway was, sometimes, used between twelve and one o’clock. Rosseau does not deny this. But none of those witnesses testify that, it was used between twelve and one o’clock, without orders, for opening the hatch, having been first given by Rosseau, or the defendant.

Neither does any one testify that, it was a common thing to open the hatches, without first obtaining orders from Rosseau or the defendant authorizing it, or that the defendant knew that, any workman had done it, in any instance, without having- had orders to do it.

The only witness who, contradicts, in any way the testimony of Rosseau, viz.: “when we did use the hatchway, I stood by to see the goods delivered,” is Degen, who said: “Sometimes the bookkeeper stood at the door when it, (supplies) was sent up, not always.” Yet Degen specifies no instances of this kind, nor does he enter into any details, respecting any such occurrence, tending to show that, Rosseau omitted to stand by, when the hoistway was open by the orders of himself or of the defendant, or to the knowledge of either of them.

Rosseau testifies that he did not know the hoistway was open, or was being used, on the occasion in question, until after the accident. No one contradicts him. No one testifies that the defendant ordered, or authorized any one to open it, or was spoken to on the subject. White and Degen were the persons who obtained such permission or received such authority, (as the case is presented to us) if they were given by Rosseau or the defendant to any one. But neither White nor Degen testify to any such fact.

The fact that, Madame Maillard’s father said, “John, Mr. Maillard tells me to shut the door, it is very cold,” is not competent evidence to prove any fact, and would, doubtless, have been excluded had it been objected to. But though received without objection, it is not apparent that, it tends to show that, the defendant knew the hatchway was then open, or if he might suspect it was open that, he had' any occasion to conjecture that, it had been opened without the orders of Rosseau, or without his being present to see to the hoisting of the goods.

When evidence as explicit and direct as that of Rosseau had been given, I think more evidence on the part of the plaintiff was necessary, than she produced, to warrant the conclusion that, any of the defendant’s workmen, even occasionally, opened the hatch and hoisted goods, with any knowledge» on the part of the defendant, that they did so without the order of Rosseau.

If it be true that, when the hatch was authorized to be opened, it was so authorized by the order of Rosseau,. and if it be also true that, on such occasions he stood by to see the goods delivered, and if it be true that, on the occasion in question it was opened 'without the knowledge or direction of either of them, then it was so opened without any fault or negligence of the defendant, and by the careless and unauthorized act of White or Degen, or of both of them.

In thus acting, they were not acting in the scope of their employment, for neither of them had authority to open it, or had been allowed, with the knowledge of either Rosseau or of the defendant, to open it.

If such be the truth of the case, the deceased, if himself free from fault, was injured by the carelessness and improper conduct, of those who opened the hatch, without any direction, so to do, from either Rosseau or the defendant, and without the knowledge of either of them.

If injured by the negligence of a fellow-servant, who was engaged in the same general business as himself, their common principal is not liable, although the employments of the two were distinct; both being necessary, to the prosecution of the business. (Coon v. The Syracuse and Utica Railroad Company, 1 Seld., 492.)

It may, possibly, be made to appear on another trial, that the workmen were allowed by the defendant, to open the trap and use the hoistway, without obtaining his permission or that of Rosseau; but we think the evidence, in the case before us, does not warrant that conclusion.

On the contrary, the explicit testimony that it could not be rightfully opened, without the order of Rosseau, on an application to him, or on an application to the defendant, is, on a fair view of the whole evidence, uncontradicted.

If it be true, that the workmen, without orders from Rosseau or from the defendant, did assume, with the knowledge of the defendant, to open the trap and use the hoistway, it would seem that, it would be easy to prove the fact that, in some instances, or on some occasions which could be specified, it had been done. But no such proof has been given.

If the hatch had been used as Rosseau states it was, there might be no negligence on the part of the deceased, on seeing the door shut, in assuming that the trap was down, and in opening the door and walking in, as one naturally would do, who had no reason to suppose that he was exposing himself to danger in so doing.

On the other hand, if it was a common thing to use the hoist-way, at all hours, and as well between 12 at noon, and 1 P. M., (when the hands were usually absent to get their dinner,) as at other hours, and that any workman, who had occasion to use it, was at liberty to do so, and in the habit of doing so, and that it was not common to use guards or other precautions to advertise the workmen, when in use, that it was open, and all this was known to the deceased; it might be an act of great negligence on the part of the deceased, to walk heedlessly and hurriedly in, without first pausing to see the condition of the hatchway.

We do not think there was any error in refusing to dismiss the complaint. When that motion was made and denied, White was the only witness who had been examined. As the case then stood, there was this large opening, some six feet square, coming close up to the only door which the workmen were permitted to enter. It was open, without anything being done to advise Karl that it was in use. The testimony of White implies, though it does not expressly affirm, that the door was usually open, when the hatchway was open.

The testimony he gave, though somewhat vague and indefinite, was calculated to induce the belief that, he was using the hatchway, as he did then use it, with the knowledge of the defendant. We are not prepared to hold, if such were the facts, that the deceased did not fall through the hatchway, by reason of the negligence of the defendant.

It is with great reluctance that we interfere with the verdict of a jury, in a case submitted to them under instructions which we must assume to have been correct, and satisfactory to both parties, as no exception was taken to them by either.

But assuming the testimony, as it is presented to us, in respect to the regulations respecting the use of the hatchway, and as to the precautions employed, whenever it was used with the knowledge of the defendant, or of Rosseau who had charge of it, to be correct, and that on the present occasion, it was opened1 without the authority, or knowledge of either of them, until after the accident happened; then it would follow that the sad calamity for which the plaintiff seeks to subject the defendant to damages, happened without his fault, and by the fault of a fellow-workman of the deceased.

We think the evidence given, when carefully considered, tends only to the conclusions last stated, and that the ends of justice require that a new trial should be granted.

A new trial is accordingly granted, on payment of the costs of the trial. The costs of the motion for a new trial and of the appeal, to be costs in the cause and abide the event.