text:
    MARGARET J. WATSON, Respondent, v. THE FORTY-SECOND STREET AND GRAND STREET FERRY R. R. CO., Appellant.

      Statute of limitations.—Aetionsfor damages for personal injuries-
    An action for damages for personal injuries caused by negligence, which accrued prior to September 1, 1877, and as to which the former limitation of one year had not at that time expired,, does not fall within the exceptions to section 414, Code of Civil Procedure, and- by the operation of the repealing act and subdivision 5, section 883, Code of Civil Procedure, the action may be brought within three years from the time the same accrued.
    Before Sedgwick, Ch. J., and Speir, J.

      Decided December 12, 1881.
    The action is to recover for injuries to the person of the plaintiff through the negligence of the defendant, on April 18, 1877. It was commenced on January 15, 1880. The defendants pleaded the one year’s statute of limitation, and the reply was that she had three years under the Code of Civil Procedure, and that the period had not elapsed when the suit was brought. The only exception raised is to the ruling of the court denying a motion to dismiss the complaint after the proofs were in.

      A. G. Vanderpoel, for respondent.

      Ely & Smith, for appellant.
   By the Court.—Speir, J.

Under section 94 of the Code of Procedure, in force when the injury to plaintiff occurred, April 18, 1877, a right of action accrued to the plaintiff, subject only to the one year limitation. On June 5, 1877, the repealing act was passed by section 383, subdivision 5, and went into effect September 1, 1877, repealing absolutely section 94, subdivision 2 of the Code of Procedure, containing the one year clause.

The defendant’s counsel claims that the case is within the exceptions of section 414 of the Code as .amended. When subdivision 4 of that section went into effect, the time to commence the action had not expired.

When the injury occurred, April 18, 1877, the plaintiff had one year in which to bring the action. The repealing act was j>assed and took effect within the year, viz., on September 1, 1877, and the time of limitation was changed from one to three years, and there is no saving clause in the repealing act by which the act repealed can have any application in this case •under the provisions of the Code. It certainly could not be in the mind of the legislature, while extending the statute from one to three years, that they should cut off the short time of one year secured to a party, as a matter of law, to a period of about four months.

Where an act of parliament is repealed, it must be considered, except as to transactions passed and closed, as if it never existed (Dwarris on Statutes, 676).

Judgment affirmed, with costs.

Sedgwick, Ch. J., concurred.


source: Caselaw Access Project

author: Henry E. Howland By the Court.—Freedman, J.

license: Public Domain

text:
    KERSEY COATES, as Assignee, &c., Appellant, v. ROBERT W. DONNELL, et al., Respondents.

      Head-note to Gen&ral Term decision.

    I. Amendment.
    1. Grounds for.

      (a) Promotion of general justice and prevention of future
    LITIGATION.
    1. On a trial before a referee, plaintiff’s counsel, after the' close of the case, discovered that, on the testimony, he might have recovered a certain sum, with interest, in addition to that covered by the allegations and prayer of the complaint, and thereupon in his proposed findings, submitted at the time of the submission of the case, he requested the referee to to find, as matter of law (the finding of the requisite facts having been requested), that the plaintiff was entitled to judgment for a sum which included the amount " covered by the allegations and prayer of the complaint, and this additional amount. The referee refused to find the facts and law as requested in this respect, and plaintiff excepted. At the time of the submission of the case, plaintiff’s counsel submitted a brief, copy of which was handed to the defendant’s counsel. In this brief he moved to amend the complaint so as to conform to the proofs by making the allegations and prayer of the complaint cover this additional sum. It was admitted that $333.98 of this additional sum was due outside the matters litigated. The referee ruled that the motion—not having been orally made before the case was closed, and his attention not having been called to it until he came to decide the case, and the attention of defendant’s counsel not having been called to the motion until after the decision of the cause, dismissing the complaint with costs, and indeed not until the settlement of the findings, and he not having had an opportunity to be heard in it—was made too late, and therefore denied it.

      Held,

    That, on the above grounds, the amendment should have been allowed, upon condition that the plaintiff stipulated that defendants should recover their costs in the action.
    II. Appeal.
    1. Discretion of referee in denying amendment.

      (a) Review of—añoraros fob.
    1. His decision will be reviewed, and reversed, when general justice will be promoted and future litigation will be prevented thereby.
    2. Amendment on.—Modification.—Affirmance.

    1. Where the decision of a referee upon a trial of issues, denying a motion to amend, is under review upon appeal from the judgment below, the general term, on reviewing his decision, may grant the amendment upon the testimony on which it should have been granted below, when its effect on the judgment below is on the conceded facts a mere question of law, and only requires a modification of the judgment below in accordance with the law applicable to the conceded facts, and may modify the judgment accordingly, and affirm the judgment, as modified, with costs to the respondent.

      Head-note to Referee's decision.

    I. Corporation.
    1. Cashier's power to pledge funds for a loan.

    1. The cashier of the Mastín Bank arranged with defendants to accept four drafts, amounting to $35,000, drawn on them in the firm name of John J. Mastín & Co., payable to the Mastín Bank, upon an agreement, made by him on behalf of the bank as a condition of acceptance, that the bank should keep a corresponding balance to its credit with the defendants, which the defendants should hold and have a lien on as security for their liability as acceptors, and that defendants be kept informed of the condition of the bank, and should have the right at any time to charge the bank with the amount of the bills so accepted, and take, appropriate, or apply the said deposits of the bank, or so much thereof as was necessary, to the payment of the liability of the bank because of such acceptances.

      Held,

    That the cashier had power to make the agreement.
    2. Transfer in contemplation of insolvency.

      B. 8. part 1, chapter 18, title 2, article 1, § 9.

      (a) What is not.
    1. The facts that the bank was in need of funds, and its officers were making efforts to keep its credit unimpaired and to meet all future calls on it—it not being supposed to be insolvent, and all claims on it having been paid as they were presented—do not bring the above agreement within the operation of the above cited statute.
    n. Lien.
    1. Property not in existence.

    By agreement a lien may be given on any property not in existence or owned by a person at the time of the agreement, to take effect when the property comes into existence or is obtained,
    in. Equitable set-oee.
    1. Defendants under above agreement accepted four drafts; two fell due August 10, 1878, and two September 9, 1878. Between 25th and 27th July, Mastín wrote defendants, advising them that the bank would probably suspend, and directing them to protect their acceptances out of its funds in their hands. On August 3, 1878, they received a telegram from Mastín, stating that the bank had suspended, or would suspend; they therefore, on that day, charged the acceptances against the bank’s balance. On the same day, August 3, the bank made a general assignment for the benefit of creditors. Notice of the assignment was received by defendants August 5. This action was brought to recover the sum against which the acceptances were charged. Before the action was brought, the defendants paid their acceptances. Held,

    That they were entitled to set off against the plaintiff’s claim the amount paid by them on their acceptances, and were consequently entitled to judgment against plaintiff.
    Before Sedgwick, Oh. J., Speir and Freedman, JJ.

      Decided December 12, 1881.
    On June 8, 1878, John J. Mastín, a member of the firm of John J. Mastín & Co., and also cashier of the Mastín Bank, a corporation doing business as a banking house at Kansas City, in the State of Missouri, drew at St. Louis four drafts on the defendants, amounting to §35,000, in the firm name of John J. Mastín & Co., and payable to the Mastín Bank, to raise money for the benefit of the Mastín Bank, which was in need of funds. The drafts were indorsed by Mastín, as cashier of the Mastín Bank, and deposited in St. Louis banks.
    The drafts were not at this time accepted by the defendants. The St. Louis banks forwarded them by mail for acceptance, and Mastín came to New York before their arrival and, as defendant stestified, induced them to accept the drafts by agreeing, on behalf of the bank, as a condition of acceptance, that the bank should keep a corresponding balance to the credit of the Mastín Bank, with the defendants, which should be subject at all times to be charged with the acceptances which should be held by the defendants as security for their liability as such acceptors, and that the defendants should at any time be allowed to so apply or appropriate so much of any deposits of the Mastín Bank as should be sufficient to pay the amount of acceptances or secure the defendants against all liability or loss thereon.
    The defendants accepted the drafts under this agreement, and the money was paid by the St. Louis banks, which discounted the drafts, to the defendants, as correspondents of the Mastín Bank, after the acceptances were made; and the $35,000 so received was placed to the general credit of the Mastín Bank with the defendants. Two of the drafts were at sixty days, and became due August 10, 1878, and two were at ninety days, and became due September 9, 1878.
    On August 3, 1878, the Mastín Bank made a general assignment, for the benefit of all its creditors, to the plaintiff. The defendants received notice of this assignment by a telegram received from the assignee on August 5.
    Between the 25th and 27th of July a letter had been written them by Mas tin advising that the bank would probably suspend, and directing them to protect their acceptances out of the funds of the Mastín Bank in their hands. A telegram was received by the defendants from Mastín on August 3, that the bank had suspended or would suspend, and on that day defendants charged the acceptances against the balance of the Mastín Bank, before notice was received from the assignee of the assignment.
    The balance of the Mastín Bank with the defendant on August 3, before charging the acceptances, was $50,459.68. Defendants, before the amended complaint herein, paid the plaintiff the sum of $5,111.81, and before the commencement of this action paid into court, to the credit of a litigation between the assignee and other claimants, the sum of $10,023.89, leaving a balance of $35,323.98.
    Prior to the commencement of this action plaintiff demanded of defendants $50,076.38, less $10,023.89, making the sum demanded $40,052.49, from which take the credit given by the amended complaint of $5,111.81, leaves $34,960.68, for which sum the amended complaint demands judgment.
    The defendants’ acceptances matured before the commencement of the action, and they were paid at or before maturity.
    Defendants claim they are entitled :
    1. To charge the acceptances against the balance due the Mastín Bank, having a lien thereon under their agreement with Mastín, the cashier; and, ,
    2. That in equity they are entitled to set off the amount of acceptances against any balance due the Mastín Bank or its assignee.
    3. That consequently they are entitled to judgment.

      The cause was tried before a referee, and was submitted to him for decision on February 9, 1881.
    At the time of the submission of the cause plaintiff’s counsel, finding that on the undisputed evidence there was, on the basis of defendants not being entitled to charge against the fund in their hands the amount of their acceptance, a balance on August 3, 1878, in excess of $50,076.38 (the sum stated in the amended complaint) by $383.30, and that, at the time of the demand, the sum due was in excess of that demanded by the same amount, and that at the time of drawing the amended complaint, the sum due was in excess of that covered by the allegations and prayer by the same amount, submitted the proposed findings and brief mentioned in the head-note to the general term opinion. The effect of the amendment" asked for in the brief would have been to raise plaintiff’s claim from $34,940.68 to $35,323.98—thus leaving due plaintiff, after deducting defendants’ acceptances, $323.98.
    The referee made the ruling on the motion for an amendment contained in said brief, which is stated in said head-note.
    Upon the decision of the cause the following opinion was delivered by the referee.
   Henry E. Howland

Referee.—The fact that Mas tin, the cashier, made the agreement testified to by the defendant is not disputed. This was, in effect, that it they would accept the drafts the bank would keep a balance with them large enough to protect them, on which they should have a lien, and in case the bank got into trouble they should be notified and be at liberty to charge up the acceptances against the balance in their hands.

The plaintiff’s counsel have argued with great earnestness that in making such an agreement the cashier exceeded his powers, and that such an agreement is in violation of the provisions of the Revised Statutes, prohibiting any transfer by any incorporated company in contemplation of insolvency (1 R. S. 608, § 4).

At the time this agreement was made, the bank was not supposed to be insolvent—the claims upon it had all been paid as they were presented, and its officers were making efforts to keep its credit unimpaired, and to meet all future calls upon it. The property pledged by the cashier consisted in part of the very funds realized from the defendants’ acceptances under the agreement. The agreement was not a transfer in contemplation of insolvencj?-, but was rather an agreement to raise money to prevent insolvency.

If the cashier had power to borrow the money,' I am at a loss to see how the bank or its representatives can object to his making a valid agreement to repay it or to secure its repayment. The assignee stands in no better position than the bank in that respect (Griffin v. Marquant, 17 N. Y. 28; Schieffelin v. Hawkins, 14 Abb. Pr. 116 ; Green v. Warwick, 64 N. Y. 220 ; Crane v. Turner, 67 Id. 437; Cutts v. Guild, 57 Id. 232.

If the cashier came clothed with authority to raise money, and the bank accepted the money, they cannot have the benefit of it and repudiate the other part of the contract, as to the mode of its payment, if the contract is not forbidden by law (31 N. Y. 611; 32 Id. 105 ; 19 Id. 156).

A cashier must act within his authority, but when his bank receives and uses money borrowed by him in pursuance of an agreement, they- imply that he had authority to make the agreement, and must abide by it, unless its provisions are repugnant to law.

There is no doubt that an officer of a moneyed corporation cannot transfer property of the corporation in contemplation of insolvency; but this is not that case. A part of the funds of the bank were raised by virtue of the very agreement which plaintiff’s counsel claim was a fraudulent transfer. Shall the plaintiff s assignee have the benefit of funds so .raised, and repudiate the rest of the transaction % The law cannot surely sanction such a proceeding. The bank and its assignee are estopped from setting up such a defense.

The fact that the lien was upon a shifting balance does not render it invalid.

By agreement, a lien may be given on any property not in existence or owned by a person at the time of the agreement, but to take effect when the property is obtained or came into existence (Hale v. Omaha Nat’l Bank, 49 N. Y. 626; McCafferty v. Woodin, 65 Id. 459, reversing S. C., 62 Barb. 316, cited by plaintiff’s counsel; Wisner v. Ocumpaugh, 71 N. Y. 113).

The defendants did not, by entering into this agreement, become parties to a fraudulent transaction. They held out no representations to the holder of drafts drawn against any funds in their hands. They owed them no duty until they accepted drafts. The holders of the drafts purchased solely on the credit of the Mastín Bank, not on any representations of the defendants that the bank had funds in their hands. They had signed the acceptances only on condition that the bank would give them just that security, and it would have been fraud on the part of the bank if it had not done so.

It is urged, on the part of the plaintiffs, with much earnestness, that the defendants cannot invoke the principle of equitable set-off in this case, because, as it is asserted, their obligation or debt had not matured at the time of the assignment to the plaintiff, whereas the debt was due from the defendant to plaintiff’s assignor.

The cases have made this distinction, that where there are cross-demands between a solvent and an insolvent person, the party who is solvent can, in equity, set off his debts agaiiast the others, if his cross demand against the insolvent is due, notwithstanding the claim against the insolvent debtor is not due, for the reason that he has a right to waive a credit which is solely for the benefit of the other party ; but if the cross-demand against the insolvent is not dne, no set-off will be ordered in equity, because the insolvent is entitled to the full period of credit, and until he is bound to pay the debt a debt due him cannot be set off against it. Whatever may be the effect of his insolvency, the court cannot change the contract of the parties.

And the cases cited where this doctrine is laid down are mainly cases where the principle has been invoked before both debts became due, in order to prevent the insolvent from parting with the evidence of debt of the solvent debtor.

It will be seen in all those cases that it is not because the court has not the right of equitable power to do it, but because the peculiar facts of each case show that it would be contrary to equity to do so. In a case where the debt from the solvent party is due, and the debt from the insolvent party is not due, something more than the mere insolvency of the one party is required. In the language of Judge Hogeboom, (36 Barb. 230), " There must, in such a case, be some special circumstances—an agreement between the parties, expressed or implied, or a course of dealing between the parties—leading clearly to the inference that such was their intention or expectation, or some other controlling equities, to justify such a course.”

Latterly, the courts do not require so much. Within the spirit and the letter of the later decisions in the court of appeals, no distinction is made between the cases where the debt from the insolvent is not due, and the cases where the debt from the solvent party is not due. It is sufficient that justice and equity require the set-off. • In the language of Judge Allen, in Smith v. Felton (43 N. Y. 423): “ It is enough, that justice and equity demand that the debts should be set off against each other, rather than that the defendants should be made to pay the note and left to rely upon the estate of an insolvent debtor for the payment of the debt due them” (see also 74 N. Y. 473, 474 ; 59 Id. 537, 538).

In all of the cases presenting this question, where the set-off has been denied, the court in each case has simply passed upon the case before it, as presented by the facts and pleadings in that case, and so left it.

In Seaman v. Van Rensselaer (10 Barb. 83) Judge Hand says: “ In a case of natural equity the court will allow an equitable set-off when justice cannot otherwise be obtained,” citing many authorities ; and then adds : The case of Bradley v. Angel (3 N. Y. 475) is not opposed to this rule, but rests upon a special contract.”

'The case of Myers v. Davis (22 N. 7. 489), was a claim for articles manufactured for the insolvent after he had made his assignment, and was, therefore, a debt, which neither in law nor in equity could be set off.

In the case of Martin v. Kunzmuller (37 N. Y. 396), no equitable defense was set up or relied on. The action was brought by an assignee, and the defendant attempted to set off a note against the assignor, which was not due when the assignment was made, relying on the statute. The court charged the jury that it “ was not a legal off-setP To that the defendants excepted, and as the court said on appeal, was, “ the only question presented ” (page 396), and at page 397 says that “the case depends entirely upon the statute.'” - -

Leaving out of view the fact that under the agreement the defendants had a right to charge up their claim, which was fixed and liquidated, whenever they should be notified by the bank, and the deposits in their hands were not payable until they were demanded, it is enough to say that at the time this action was brought both debts were due, and that unless the assignment by the bank to the plaintiff changed the positions of the parties, the defendants can, in equity, set off their claim against that of the bank.

Holmes & Adams, attorneys, and Leslie W. Russell, of counsel, for appellant, urged:

I. The agreement was void under the laws of Missouri (Myers' supplement to Wagners Missouri Statutes, p. 394, c. 122, § 21; 1 Wagner Stat. [ed. of 1870], p. 280, § 2 ; O’Shea v. Collier W. L. Co., 42 Mo. 397). II. A promise is to be interpreted in that sense and with that reservation which the parties understood at the time of making it (Barlow v. Scott, 24 N. Y. 40). We assume that the defendants did not intend to agree with Mastín to do that- which was contra bonos mores, or against public policy. That the parties did not intend the agreement as one which must be observed, according to their present claim, is evident from the fact, that the deposits were nearly all the time below the amount of the acceptances, after June 11, 1878—at one time running as low as $17,000; and from the further fact that daily drafts were drawn and paid, to the amount of $41,992.09, only those remaining unpaid which were not presented before August 3, 1878. Therefore the legal effect of the oral negotiation, called an agreement by the referee, being limited by well-defined rules of law, renders nugatory any apparent understanding, which was hostile to the purpose of the depositor, both because hostile to that purpose and because against public policy (4 Kent Comm. 468; 2 Parsons on Contr. 513). III. But, if it can be held that legally a fund can be created for the purposes indicated, and still be destroyed by reservations unknown to the world dealing commercially with the parties, then we submit that the agreement is void for other reasons of public policy. Is it possible that a banking corporation, within the rules which usually govern banking business, can pledge in advance funds which are not in the bank or in the control of the bank at the time of the pledge, and by the mere operation of such an agreement shift the lien from day to day, cause it to vault from the funds of one day to the new deposits of the next, and transfer it by force of a simple promise from funds in esse to those non-existent at the time of the alleged agreement, especially to the prejudice of parties buying drafts against those very balances ? ' If this supposed rule of shifting liens exists, it is an anomaly in the law-merchant. The ordinary rule of law is that the creation of a lien requires a subject in esse in the power of the grantor at the time the lien is created (Edgell v. Hart, 9 N. Y. 217; Bank v. Hunt, 11 Wall. 391; Mittnacht v. Kelley, 3 Abb. App. Dec. 301; In re Aldrich, 6 Ben. 483 ; Powers v. Freeman, 2 Lans. 127; Otis v. Sill, 8 Barb. 102). The learned referee, however, apparently nullifies the effect of these authorities by the later cases, cited by him, of Hale v. Omaha Bk., 49 N. Y. 646 ; McCaffrey v. Woodin, 65 Id. 449 ; and Wisner v. Ocumpaugh, 71 Id. 113. A scrutiny of these cases shows that they are not antagonistic to those cited. IV. The cashier had no power to make the agreement in question, and his act was not binding upon the bank, nor certainly upon.the assignee. Ho greater irresponsible power could be placed in the hands of a cashier, and the agreement was void (Hoyt v. Tompson, 5 N. Y. 320; Bank of United States v. Dunn, 6 Pet. 55; 1 Daniel Neg. Inst. 322; Elliott v. Abbott, 12 N. H. 549 ; Divies Co. Asso. v. Saylor, 63 Mo. 24 ; 1 R. S. 591, § 8). The learned referee states three objections to this argument': First. That the agreement was designed to raise money to prevent insolvency instead of being in contemplation of insolvency. How that could be when no increase of property is obtained, is not perceivable, and the same statement might apply to every effort of a failing corporation to struggle on, when it ought to be summarily wound up ; but were it so, the point is entirely evaded that the law does not 'tolerate the clothing of the cashier with such a tremendous authority, and does not intrust to him the power to terminate the life of the bank at his own will. Second. The learned referee further says, that if the cashier, had the power to borrow the money, he is at a loss to see how the bank or its representatives can object to his making a valid agreement to repay it, or to secure its repayment. He has undoubtedly the right to make the ordinary agreement for repayment tolerated by commercial usage and public policy ; but this is a widely different thing from the power to borrow any sum of money that he chooses and to place upon the assets of the bank a lien, open or secret, which is entirely inconsistent with commercial usage and utterly alien to the purposes and existence of the bank. And even if he had the power of pledge of the very funds which he raised upon the plea of some equity of the defendants, as they contributed to the raising of those funds, he could not continue the lien indefinitely upon future sums which might be remitted by the bank in due course of business to be drawn against. Third. The learned referee further says, that the bank and assignee are estopped from setting up such a defense. If this be so, it is the first time in the books that a case has arisen where parties negotiating an illegal contract, and presumed to know its illegality, are estopped from setting up that illegality because the other side had carried it out by the mere payment of money. Nearly all of the cases which pass upon the powers of cashiers or other agents of corporations are those in which parties have parted with their money to the corporation upon the assumed faith of the validity of the agreement, but it is held to be their duty to know whether the agreement is legal or illegal, and if illegal, that it cannot be enforced (Delafield v. State, 26 Wend. 192, 221; Pratt v. Eaton, 79 N. Y. 419 ; reversing S. C., 25 Hun, 295 ; Crocker v. Whitney, 71 N. Y. 161 ; Bank of Salina v. Alvord, 31 Id. 473). The learned referee also observes in various places in his opinion that the assignee stands in no better position than the bank, and that he simply represents the bank. Our argument is founded upon the assumption that the bank itself could have repudiated the power of the cashier to make such a contract, and could have maintained the position, had the action been brought by it before insolvency, that the pledge was invalid and against public policy. But upon the equitable branch of the case and where the position of either party must rest upon equitable considerations, it becomes evident that the assignee, being the trustee of the creditors, and, as expressly found, of the holders of sight drafts to the amount of more than the balance in the hands of the defendants, occupies a more favorable position than the bank itself, and can disaffirm acts which it could not (Southard v. Benner, 72 N. Y. 424, 427; Laws 1858, c. 814 ; Grillet v. Phillips, ubi supra). That the laws of New York -govern the transaction, except so far as, by comity, the courts will recognize the law and decisions of Missouri, is evident, it being a question of public policy (Edgerly v. Bush, 81 N. Y. 199 ; Faulkner v. Hart, 82 Id. 413; Southern Life Ins. Co. v. Packer, 17 Id. 51, 53 ; Curtiss v. Leavitt, 15 Id. 9). Therefore, the statutes of this State upon questions of public policy, especially where the plaintiff represents the interests of a large number of creditors residing in this State, govern the transaction, if inconsistent with the laws of Missouri. The letter of Mas tin, and the telegram of August 2, did not confer upon the defendants the power to appropriate the general balance on deposit with them to the credit of the Mastín Bank to the payment of bills of exchange not due and not owned by them. 1. The cashier had no more power to make any such arrangement then than he had in June, 1878. 2. By the statutory laws of this State and of Missouri, preferences are not to be given to the creditors of moneyed corpora- ; ions, the design being that its funds, in case of insolvency, shall be equally distributed among its creditors (1 R. S. 591, § 9 ; 6 ed. vol. 2, p. 298). This statute, as it affects'public policy, is alike applicable to domestic and foreign corporations. This was so held in regard tó the defense of usury (Southern Life Ins. Co. v. Packer, supra). Such a transfer or payment is utterly void (Huxton v. Bishop, 3 Wend. 13 ; Robinson v. Bank of Attica, 21 N. Y. 406 ; Furniss v. Sherwood, 3 Sandf. 521, 523; Horcy v. Kerr, 8 Bosw. 194). VII. The doctrine of set-off cannot be invoked as a defense or counter-claim. If the defendants had held, on the 4th day of August, 1878, the acceptances themselves, under the ■ ordinary rules pertaining to set-off, these acceptances would not be a defense as against the suit by the bank itself (2 R. S. [Edm. ed.] § 18, et seq.; Code Civ. Pro. § 502; Beckwith v. Union Bank, 9 N. Y. 211; Referee’s opinion, fol. 351, et seq.). VIII. But the defendants claim that certain equitable principles may be successfully invoked in this case to avoid the rule of law in regard to a set-off, and give the defendants exemption from the payment of the money, upon the doctrine, purely, of equitable set-off as settled by the courts. It will be observed at the threshold of the argument, that reserved rights or liens limiting the free disposition of. balances of. accounts with a banker are not favored by the courts (Grant v. Taylor, 35 Super. Ct. 338). And it is evident that the legal rule of set-off cannot be modified to admit of the interposition of an unmatured indebtedness on behalf of the alleged debtor, unless equity demands that it shall be done (Lindsley v. Jackson, 2 Paige, 580 ; Barber v. Spencer, 11 Id. 517 ; Smith v. Felton, 43 N. Y. 419 ; Bradley v. Angel, Id. 475; Meyers v. Davis, 22 Id. 489 ; Martin v. Kuntzmuller, 37 Id. 397; Chance v. Isaacs, 5 Paige, 592; Union Bank v. Beckwith, 9 N. Y. 211; Keep v. Lord, 2 Duer, 78). In all cases, to jus-' tify its interposition, there must be, in addition to insolvency, the existence of a personal demand against the debtor, held by the creditor at the time the creditor acquired his rights to the claim of the debtor which he seeks to enforce. It must also be equitable to interpose the defense. In the case at bar, the defendants held no demand against the Mastín Bank at the time of the assignment. They simply stood in the light of acceptors of drafts. The case is further distinguishable from those cases in which equitable set-off has been allowed, by the fact that there is no principle of equity whatever that demands the allowance of a defense. The defendants had for many years done a very large business with the Mastín Bank, and, presumably, a beneficial and profitable one, and this arrangement was designed to continue the business. Under such circumstances, the drafts were not accommodation drafts (2 Gfreenl. Ev. § 172; Chilly on Bills, 319, 328 ; Bagnall v. Andrews, 7 Bing. 217; Farmers’ Bank v. Rathbone, 26 Vt. 19). The learned referee rules equitably that a set-off exists, and that the equitable rights of the draft-holders may not be enforced, because legally the plaintiff only represents the bank and not them (see Westlake v. Bostwick, 15 Super. Ct. 261; Jordan v. Nat. Shoe and Leather Bk., 74 N. Y. 467). IX Even if the referee is right in his legal conclusions, the plaintiff was entitled to a judgment for the balance, which is $4,323.98, with interest. Because a less sum than the balance which we claim to be due was demanded in the complaint, the referee erroneously supposes that we cannot have judgment for the sum which is really our due, to wit, the above balance, and that it is necessary to have an amendment of the pleadings to accomplish that end. This is incorrect. We might have been contented with the sum demanded by the pleadings, irrespective of the error of a few hundred dollars, in case of a recovery; but, in case of defeat upon the main proposition, we are entitled to as much less than the sum demanded as the proof shows we are entitled to claim. It needs no amendment for this purpose; and if it be urged that the allegations in the complaint that “since the beginning of the action the defendants have paid to the plaintiff the sum of $5,111.81, a part and on account of said indebtedness of $50,076.38, over and above the sum of $10,023.29, now in court,” which is not denied by the answer, in any way affects the question, then we can urge with the same propriety of reasoning that we have a distinct admission of the payment of this sum as a part of the larger sum which we claim, and are entitled to draw therefrom the conclusions which the admission warrants. But, if any amendment were necessary, it is merely a formal one, as the precise evidence of what the balance was, was derived from the defendants’ own books and testimony ; and the refusal to conform the pleadings to the proof in such a respect, preventing thus a small judgment for the plaintiff and giving a judgment to the defendants, would be a ruling which the courts would review and correct.

But a general assignee for the benefit of creditors succeeds merely to the right of the assignor. He is not, in respect to the property transferred, a bona fide holder for value, but takes it simply as a trustee, subject to any equities which may exist between the debtor and his creditors. He stands in precisely the same condition that his assignor did, and if the debt could have been equitably set off against the bank, it can against him.

Such was the language of the court in the case of Scheiffelin v. Hawkins (14 Abb. Pr. 114), where that very question arose, and the reasoning seems to be sound (see also Smith v. Felton, 48 N. Y. 423).

Upon both the grounds above indicated I think the defendants are entitled to judgment.

Judgment having been entered in favor of defendants against the plaintiff on.this decision, dismissing the complaint, and adjudging that defendants recover against plaintiff their costs, plaintiffs appealed to the general term.

Knevals & Ransom, attorneys, and Erastus S. Ransom, of counsel, for respondents, among other things, urged

I. As between the defendants and the Mastín Bank, the defendants, although acceptors, were in fact sureties, and were entitled to security (Bank of Toronto v. Hunter, 20 How. 292). It was the duty of the drawers to put the acceptors in funds (2 Denio, 211, 212), and the drawers may at any time direct the application of the funds in the drawee’s hands to the discharge of the obligation (2 Denio, 216). And charging up a check or draft against the drawer is an application of the deposit.- It is the same as drawing out the money and then handing it over or back again (Pratt v. Foote, 9 N. Y. 463; S. C., 10 Id. 600, 601). II. It cannot be said that the bank had no right or power to make such an arrangement. By agreement, a person for whom another assumes a liability or a contingent liability may pledge property he then has or may thereafter have, to the payment, or as security for the payment, of that liability, or authorize such property to be appropriated by the surety before he pays the debt-. A confession of judgment to secure a contingent liability is a case of that kind. Such a judgment is not only a lien on property, but the party to whom it- is given may enforce and collect it by execution before he pays it. So a mortgage may be given upon property to secure an indorser or other person contingently liable. A lien that a party would not otherwise have, may be given by. express agreement (4 N. Y. 498, 501). By agreement a lien may be given on any property not in existence or owned by the party at the time, but to take effect when the property is obtained or comes into existence (Hale v. Omaha Nat. Bank, 49 N. Y. 626; McCaferty v. Wooden, 65 Id. 459; Wisner v. Ocumpaugh, 71 Id. 113). Besides, a banker has a lien on deposits for any debt due from the depositor (74 N. Y. 473); and, as above shown, any property may be pledged or mortgaged, or a lien given on it, to secure a debt not due or upon a contingent liability. The plaintiff in this case is not even a bona fide purchaser, but as an assignee in trust, he stands in no better situation than the bank would have stood if the assignment had not been made (Reed v. Sands, 37 Barb. 185; Bliss v. Cottle, 32 Id. 322; Griffin v. Marquardt, 17 N. Y. 28). Besides, any assignee would take such a claim (not being negotiable paper), subject to all equities (Green v. Warwick, 64 N. Y. 220 ; Cram v. Turner, 67 Id. 437; Cutts v. Guild, 57 Id. 232, 233 ; Blydenburgh v. Thayer, 34 How. Pr. 88; Ely v. McKnight, 30 Id. 97). And even if the transaction had been fraudulent, no one will pretend that the bank could have repudiated the transaction or prevented the set-off, if the defendants had not made the application at all (2 Parsons on Cont. 277, 278; Draper v. Trescott, 29 Barb. 404). If it shall be said that the act of 1858, chapter 314, gives an assignee in trust such right, it is a sufficient answer to that, that that act simply authorizes an assignee to file a bill to annul and set aside a previous transaction in fraud of creditors, and then, with that fraudulent contract or conveyance annulled and removed by the judgment of the court, to recover the property (see McMahon v. Allen, 12 Abb. Pr. 277). That is not the case; this is an action at law to recover the debt without regard to that statute, and cannot be transformed into a suit in equity (Short v. Barry, 3 Lans. 147; Craig v. Hyde, 24 How. Pr.. 313; Towle v. Jones, 19 Abb. Pr. 449; 1 Robert. 87 ; Heyward v. City of Buffalo, 14 N. Y. 540; Mann v. Fairchild, 2 Keyes, 106; Bradley v. Aldrich, 40 N. Y. 504). But above and beyond all this is the fact that there was no fraud in the transaction. It is not fraud for a party to pay what he owes, or even to pay it in advance. It is not fraud for a debtor in any case to secure his creditor, particularly when he agreed to do it at the time of the contracting of the debt. The defendants signed the acceptances only on condition that the bank would give them just that security, and it would have been gross fraud on the part of the bank if it had not done so. III. If it shall be said that at the time the defendants charged up and appropriated the deposits, the bank did not owe them anything, the acceptances not being due_, there are these answers to that: 1. A contingent liability is a debt (18 Wend. 375, 383, 384, 385, 398; 8 Cow. 406, 424). 2. This was even more than a contingent liability. The defendants being acceptors were primarily liable without protest or notice (Suydam v. Westfall, 2 Denio, 206, 212, 216; Bank of Toronto v. Hunter, 20 How. Pr. 292). 3. As before shown, it is not always necessary for a person who is liable to pay money for another, to first pay that money before enforcing payment of the person liable over to him (see also Gilbert v. Wyman, 1 N. Y. 550 ; Brancroft v. Winspear, 44 Barb. 209; Rector of Trinity Church v. Higgins,. 48 N. Y. 532). If then the bank could have been compelled to make the application or give the security, how much clearer the case is made by the fact that the bank did do it, and that before the assignment was made to the plaintiff it was done and ended. IY. It is not necessary to invoke the doctrine of equitable set-off, as the defense is established by proof of the agreement between the bank and the defendants, that at the time the defendants agreed to accept the drafts, and as an express condition of the acceptance, the defendants were to have a lien upon the deposits which should be made by the bank with the defendants, and the right to hold and apply them for that purpose, and that the defendants should at all times be kept secured in that way, and have timely notice of any embarrassments of the bank, so that, for the defendants’ protection, they might, in such case, take and charge against the bank the amount; and that such deposits were máde with the defendants, such notice of the bank’s embarrassment was given them, and, as further directed by the bank, the amount of the drafts or sum which the defendants had assumed and become liable to pay, was charged up, and the deposits taken and applied or appropriated for that purpose. All that was lawful, right and just, audit was a complete defense to this action. But even if the acceptances had not been charged against the bank, or if the deposits had not been appropriated or applied before the assignmen t was made, and independent of any agreement on the subject, the facts and circumstances of the case entitled the defendants to have their claim against the Mastín Bank, or rather, the sum paid by them as accommodation acceptors, allowed and applied as an equitable set-off to the extinguishment of the plaintiff’s claim (Smith v. Felton, 43 N. Y. 419 ; 37 Barb. 230 ; 74 N. Y. 437; 59 Id. 537 ; Seaman v. Van Ramson, 10 Barb. 83; Scheiffilin v. Hawkins, 14 Abb. Pr. 116). The cases of Bradly v. Angel, 3 N. Y. 475 ; Myer v. Davis, 25 Id. 487; Martin v. Kuntzmuller, 37 Id. 396; as applied to the facts in the court, are not in opposition. V. There is nothing in the laws of Missouri differing from the laws of New York affecting the question in dispute. But if the Missouri laws were different, and made such transactions as the defendants had with the Mastín Bank void, it would not affect this case, as the contract with the defendants was a New York contract, and the security given to the defendants was given in New York, and the New York law governs. The defendants made their contract in the State of New York. They accepted the drafts in the State of New York. The drafts were made payable in the State of New York. The security given to the defendants was given in the State of New York. According to the law, as well settled, the New York laws govern (Story Conf. Laws, §§ 242, 280 ; Dickinson v. Edwards, 77 N. Y. 573, 575, 576, 458; Jewell v. Wright, 30 Id. 259; Everitt v. Vendryes, 19 Id. 436; Bowen v. Newell, 13 Id. 290 ; Ruckle v. Eckhart, 3 Id. 132; Hyde v. Groodnow, Id. 266).

By the Court.—Freedman, J.

Upon a careful examination of the case none of the exceptions taken appear to constitute ground for reversal. The facts found are sustained by the evidence and they support the legal conclusions based thereon. Upon the merits that were litigated, the referee clearly adopted the correct view. There is only one subordinate question that requires notice. After the close of the case the plaintiff’s counsel discovered that according to certain testimony given at the trial the plaintiff might have asked in his complaint to recover $323.98, with interest, in addition to the sum demanded, and thereupon moved that the complaint be amended to conform to the proof. But as the attention of the defendants’ counsel was not called to the motion until the settlement of the findings after the decision, the referee held that the motion was too late, and he therefore denied it, to which ruling plaintiff’s counsel duly excepted.

The plaintiff was not entitled to the $323.98 in dispute without making a demand therefor. The original complaint and the admissions of the answer and the proof do not tend to establish that there was any demand which included this amount, e. g., a demand for $50,086.38 ; and a refusal to pay that specific sum, does not, under the peculiar circumstances of this case, include by implication the demand for a balance of $323.98, and a refusal to pay that. If a general demand for whatever balance there was, had been made, a different case would be presented. The refusal to pay the sum specifically demanded was justified by the defendants on the ground that, by the charges rightfully made for their acceptances, according to the agreement between the parties, their indebtedness to that extent had become extinguished before the action was brought. That question constituted the issue in the case, and upon that issue the defendants succeeded. I think, therefore, that an amendment was necessary tó enable the plaintiff to recover judgment for the sum of $323.98. As it is admitted that that sum is due outside of the matters litigated, justice requires that the plaintiff should get it in some way; but as to get it he must amend, he should, not enjoy that amendment without a corresponding preservation of the rights of the defendants. The amendment should have been as of the beginning of the action, when the defendants would have had an opportunity to take issue upon this additional demand of $323.98, or to admit their indebtedness to that extent with the usual consequences. Under the most unfavorable circumstances the defendants would have had to pay costs up to the time of an offer for judgment. Whether now they should be required to pay such costs, is questionable, nor is it important to determine the question, for the costs that the plaintiff in any event might have been made to pay as a condition for granting his application for leave to amend, would have off-set them.

As the case now stands I think the result should be that the plaintiff have judgment for that sum, but that the defendants have judgment for the costs of the action, and that plaintiff’s judgment be off-set against that of the defendants.

The ground of reversing the order denying the amendment, which ordinarily is, and in this case was, properly within the discretion of the referee, is that general justice will be promoted and future litigation prevented thereby. For if the complaint does need amendment, another action may be brought on the demand for $323.98.

The order denying the amendment should be reversed, and leave to amend be given upon conditions which embody the above suggestions, and in all other respects the judgment appealed from should be affirmed, with costs.

Order to be entered hereon to.be settled on notice.

Sedgwick, Ch. J., and Speir, J., concurred.

The following order was entered on the general term decision.

“Ordered and adjudged, that the plaintiff, upon stipulating to pay the costs of this action, have leave to amend his complaint by inserting a claim for $323.98, in addition to the sum demanded, and increasing his claim to that extent; and that if he give such stipulation on making' such amendment, the said sum of $323.98 be deducted from the defendant’s recovery for costs in this action, and that thereafter the judgment as so modified be and the same hereby is affirmed, with costs. Further ordered, that upon plaintiff’s failure to give such stipulation within ten days after serving a copy of this order, the judgment appealed from be and the same here is affirmed, with costs.”

The costs in the judgment below were $2052.27. The plaintiff did not stipulate, and judgment was entered affirming the judgment below, with $85.36, costs of appeal, to the respondents.


author: By the Court.—Freedman, J.

text:
    GEORGE WOOD, Respondent, v. MARIA MULOCK, Appellant.

      Equity.—Enforcement of parol agreement for creation of estate or trust in lands, on ground of part performance.—Statute of frauds.— Uses and trusts.

    Plaintiff’s time to redeem his interest by remainder in certain real property sold under execution against him, having expired, in pursuance of an oral agreement with defendant (his mother), he confessed judgment for $3000, theretofore received by him from her, and she, as judgment creditor, redeemed said interest with her own moneys for plaintiff’s benefit, agreeing orally to hold the legal title in trust for defendant till lie should desire a conveyance to him and should repay said expenditures. After due demand and tender, plaintiff brought this action for specific performance.

      Meld, that plaintiff was not entitled to judgment; that if the $3000 was a loan to plaintiff, there was no consideration to uphold defendant’s promise to convey to plaintiff; that if it were a gift, plaintiff, by swearing falsely in the confession of judgment, and using the same against a bona fide creditor who would otherwise have been entitled to a deed, did not come into court with clean hands; that the case does not come within the exception to the statute of frauds, permitting the enforcement of oral agreements, for the creation of estates in or trusts concerning lands, &c., in case of part performance, and, therefore, does not fall within the saving clause of the statute of uses and trusts.
    The principles governing courts of equity in the enforcement of oral contracts void by the statute of frauds, upon the ground of part performance, stated by the court; and the authorities reviewed and distinguished.
    Before Freedman, Russell and Arnoux, JJ.

      Decided February 6, 1882.
    Appeal from judgment entered upon the report of a referee directing the defendant to execute and deliver to the plaintiff a deed.
    The facts found by the referee, as stated by the court, are as follows:
    “1. That the plaintiff, George W. Wood, is a lawful child of the defendant, Maria Mulock, by John Wood, her first husband, and that said defendant is the daughter of John W. Gilbert, late of the ciiy of New York, deceased, who died prior to the year 1854.
    “ 2. That at the time of his decease, the said, John W. Gilbert was seized in fee simple of the premises described in' the complaint, situate on Pulton and Nassau streets, in the city of New York.
    “3. That said John W. Gilbert left a last will and testament duly executed to pass the title to real estate, and that said will was admitted" to probate prior to the year 1854, in the office of the surrogate of the county of New York.
    “ 4. That in and by said last will and testament the testator gave to the defendant, then the wife of John Wood, the father of the plaintiff, a life estate in the real property above described, subject to certain charges on the income of said property, and also gave the fee of said premises to the lawful child or children of the defendant, who may survive her, and the child or children of any of the children of the defendant who should die before the defendant, as tenants in common.
    “5. That on February 24, 1854, a judgment was duly entered in the office of the clerk of New York county against said George W. Wood, and in favor of one Benjamin M. S til well, for the sum of $737.23, and that execution thereon was duly issued to the sheriff of the county of New York, on September 25, 1854.
    “6. That on February 23, 1854, a certain other judgment was duly entered in the office of the clerk of New. York county against the said George W. Wood, and in favor of the said Benjamin M. Stilwell, for $362.61.
    “7. That by virtue of the execution mentioned in my fifth finding, the sheriff of New York county did, on November 18,1854, sell at public auction to the said Benjamin M. Stilwell, in consideration of $750, all the right, title and interest which said George W. Wood had on January 23, 1854, or at any time afterward, of, in and to all the land described in my second finding, and that on the same day a certificate setting forth the above facts, and that said Stilwell would be entitled to a conveyance thereof on February 18, 1856, was duly executed and delivered by the said sheriff to the said Stilwell.
    “8. That the time of the said George W. Wood, as judgment debtor, to redeem said lands from said sale, expired on November 18, 1855, and that the time for any judgment creditor to effect such redemption expired February 17, 1856.
    “9. That on November 14, 1855, the plaintiff, George W. Wood, received from the defendant the sum of $2,000.
    “10. That subsequent to said November 18, one Francis Byrne, of the city of New- York, an attorney and counselor-at-law, a mutual friend of the plaintiff and defendant, learned of the facts contained in my fifth and 7th findings, who immediately communicated the same to the defendant, whom turn communicated them to the plaintiff, and that, at the request of the defendant, she, said defendant, the plaintiff, and said Byrne met by mutual agreement at said Byrne’s office in said city on November 27, 1855.
    “11. That at such meeting, the situation of the plaintiff, by reason of the sale under the execution on the judgment mentioned in my fifth finding, and the expiration of the time of the plaintiff to redeem therefrom, was discussed, and that it was suggested by Mr. Byrne that it was expedient for the defendant to get a judgment by confession from the plaintiff, for the sum of $2,000, received by said plaintiff from the defendant on November 14, 1855, as aforesaid ; so that she might, as judgment creditor, redeem the lands heretofore described-from said sale, inasmuch as, although the time for the plaintiff to redeem had expired, the time for a judgment creditor to effect such redemption was still running.
    “12. That to this proposition the plaintiff interposed the objection that it would not be possible for him to confess judgment for said sum, inasmuch as the same had been a gift from the defendant.
    “13. That the defendant told plaintiff that said sum was a loan, and that a judgment might properly be confessed therefor; that if plaintiff would confess a judgment to her thereon, she would redeem said lands from said sale, and hold the same for ,his benefit, and could reconvey the same to him at any time he desired; that all' she wanted said judgment for was to get said lands away from the control or interference of said S til well, the purchaser at said sale, and that such a course was the only way to get it; and that she further desired to acquire the title of said lands for the purpose of protecting the same generally in case the plaintiff was not successful in business. That at any time he should pay back to her the money she would have to pay to redeem said lands from said sale, she would reconvey said lands to him, and all his right, title, and interest therein and that Mr. Byrne, in the defendant’ s presence and hearing, and with her assent, gave similar assurance to the plaintiff.
    “14. That thereupon, and on said November 27, 1855, the plaintiff and defendant entered into a parol agreement, whereby the plaintiff agreed to confess a judgment to the defendant for said $2,000, and to waive all right to contest his liability for said sum, on the condition and for the consideration that the defendant should make nse of her rights as a judgment creditor, thereby confessed, to redeem the plaintiff’s interest in the lands described in the complaint, and to hold the legal title in trust for him until such a time as the plaintiff should desire a reconveyance, should pay the amount of said judgment, and should repay, with interest, whatever outlay of money the defendant might be obliged to make to effect such redemption ; that the defendant fully assented and concurred in said agreement, and that the waiver of the plaintiff of his right to contest said judgment was part of the consideration of said agreement.
    “ 15. That thereupon the plaintiff, relying on the said agreement, and in performance of his portion thereof, and waiving all defense in regard to said $2,000, on the ground that the same was a gift, did, on November 27, 1855, sign and verify a statement and confession of judgment, without action, in favor of said Maria Mulock, for said sum of two thousand dollars, and five dollars costs, making together $2,005 ; that the same was drawn up by said Byrne, and executed under his direction, and that the judgment-roll was duly filed by said Byrne, and judgment duly entered thereon, in the office of the clerk of the county of New York, on'the same day.
    “ 16. That in said judgment-roll the name of said Byrne appeared as attorney for plaintiff, said Maria Mulock, but that said Byrne acted throughout as counselor and adviser for both parties, at their request, as he thought for their best interests, and that said agreement was made at his suggestion, and with his consent.
    “17. That under and by virtue of the judgment confessed by the plaintiff herein to the said Maria Mulock, the said Maria Mulock did, on December 2, 1855, asa judgment creditor, by virtue of said j udgment, duly redeem said lands from the sheriff’s sale as aforesaid, by paying to the said sheriff the sum of $807.50, being the sum bid by said Benjamin M. Stilwell for said land so sold to him under said execution, with interest thereon from the said November 18, 1854, to said December 22,1855, and thereupon she received from said sheriff a certificate showing such redemption.
    “18. That after said redemption by said defendant, the said Benjamin M. Stilwell threatened to redeem said lands from said sale by virtue of his.rights as a judgment creditor under the judgment set forth in my sixth finding of fact, and that in order to prevent redemption by said Stilwell the said Mulock did, on February 16, 1856, pay to said Stilwell the sum of $413, and took an assignment of said judgment.
    “ 19. That by virtue of said sale and said redemption, the said Maria Mulock became entitled to and did, on February 18, 1856, receive from John Orser, then sheriff of the city and county of New York, a deed by which was conveyed to her all the estate, right, title and interest which the said George W. Wood had on January 23, 1854, or at any time afterwards, of, in and to all the parcels of land heretofore described, which said deed was duly recorded ' on August 3, 1857, in liber 740 of Conveyances, page 113.
    ‘ ‘ 20. That in December, 1859, the plaintiff requested the defendant to reconvey to him the interest in said lands which she had acquired by virtue of said sale and redemption, which the defendant refused to do,- and on October 23, 1860, the plaintiff duly tendered to defendant the sum of $4,322.67, which was the amount of said sums of $807.50, $2,005, and $413, so as aforesaid paid out by her, together with interest on said sums from the date of their respective payments to October 23, and again demanded of her a conveyance to him of his interest in said land so acquired by her as aforesaid, which the said defendant refused to do.”
    Upon these facts the referee found the following conclusions of law:
    “1. That the plaintiff, prior to 1854, and by virtue of the will of John W. Gilbert, and as a lawful child of the defendant, became seized of a portion or the whole of the remainder of the premises described in fee on the death of said John W. Gilbert, either as sole devisee, or as a tenant in common, according to the contingencies provided for in said will, and subject to the life estate of the defendant.
    " 2. That by virtue of the sale under the execution aforesaid, all the estate, right, title and interest of the plaintiff as above set forth, was disposed of.
    “ 3. That the parol agreement set forth in my fourteenth finding of fact was valid and legal, the same having been fully performed by the plaintiff on his part, by his confessing judgment to the defendant as aforesaid, and the waiver of all defense to the claim of the defendant for said $2,000, on the ground that the same was a gift, being a valid consideration therefor.
    “4. That the defendant, by virtue of the judgment, confessed to her by the plaintiff, and in performing the acts heretofore set forth, and by the conveyance from John Orser, sheriff, became vested with all the estate, right, title and interest which the said defendant had on January 23, 1854, or at any times afterwards, of, in .and to the lands described in the complaint, in trust to retain the legal title of the same until such time as the plaintiff should desire a conveyance of said interest to himself, and should pay the defendant the amount of her judgment against him, and repay all sums paid out by her to effect the redemption.
    “5. That the plaintiff is entitled to a deed from the defendant duly executed and acknowledged by her, which shall convey to him all the right, title and interest of the plaintiff, which were conveyed to said defendant by the deed to her from John Orser, sheriff of the city and county of New York, as aforesaid, in the lands mentioned and described in the above second finding of fact.
    “6. That by reason of the tender, demand and refusal set forth in my twentieth finding of fact, the defendant is not entitled to interest on the amount of the judgment confessed by the plaintiff to her, or on the sum of $807.50, and $413, laid out by her to effect redemption as found by me, beyond October 23, 1860, the date of said tender.
    " 7. That at the time of the execution and delivery of said conveyance the defendant is entitled to receive from the plaintiff the sum of $3,225.50, with interest on $807.50, from December 22, 1855, to October 3, 1860, and on $413 from February 16, 1856, to October 23, I860.”
    Judgment was ordered accordingly, with costs and disbursements to the plaintiff, and from the judgment thereupon entered the defendant appealed.

      Browne & Rabe, attorneys, and Edward E. Brown, of counsel, for appellant.
    Dorsheimer, Bacon & Deyo, for respondent.
   By the Court.—Freedman, J.

Upon a careful examination of the whole case I fail to see how the judgment can be sustained.

According to the clear weight of the evidence the transaction between the plaintiff and the defendant which resulted in the receipt by the plaintiff of the sum of $2,000, was a loan, and not a gift. The plaintiff himself so characterized it in a certain part of his testimony, and in confessing judgment he so swore. If that, then, was the true character of the transaction, the plaintiff was under a legal obligation to repay, and hence, the pretended waiver of a defense which did not exist to the knowledge of the plaintiff, and the confession of judgment, constituted no sufficient consideration for the defendant’s promise that, in case of her redemption of the premises, she would redeem, not for herself, but for the benefit of the plaintiff.

In the second place, assuming that the transaction was a gift, the plaintiff, by falsely swearing in the confession of judgment that it was a loan, and then agreeing with the defendant that the confession should be used by her for his benefit in the redemption of the premises from the claim of a bond fide creditor who otherwise would have become entitled to a deed, was guilty of a fraud upon such creditor. In this aspect the case presents the anomalous feature of a party guilty of fraud appealing to a court of equity to assist him to consummate it/

In the third place, the conclusions arrived at by the learned referee are erroneous, because the alleged agreement to redeem for plaintiff’s benefit was not in writing. The referee held the agreement to be valid, and then he proceeded upon the theory that the defendant, by the conveyance from the sheriff, became vested with all the estate, right, title and interest of the plaintiff in and to the lands described in the complaint, in trust to retain the legal title of the same until such time as the plaintiff should desire a conveyance of said interest to himself, and should pay the defendant the amount of her judgment against him, and repay all sums paid out by her to effect the redemption.

By the statute of this State concerning uses and trusts, all uses and trusts were abolished except as authorized and modified by it (2 R. S. [6 ed.] 1105, § 45), and the trust claimed in the case at bar does not fall within the saving clause, unless it is a trust arising or resulting by implication of law from the transaction between the parties. This in turn depends upon the nature and character and validity of the agreement between them, and right here the plaintiff encounters another difficulty. The statute concerning fraudulent conveyances and contracts relative to lands, provides : (1) That no estate or interest in lands, other than leases for a term not exceeding one year, nor any trust or power, over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by a deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering or declaring the same, or by his lawful agent, thereunto authorized by writing (3 R. S. 6 ed. 141, § 6). (2) That every contract for the leasing for a longer period than one year, or for the sale of any lands, or any interest in lands, shall be void, unless the contract, or some note or memorandum thereof, expressing the consideration, be in writing, and be subscribed by the party by whom the lease or sale is to be made (Id. § 8). (3) That every grant or assignment of any existing trust in lands, goods or things in action, unless the same shall be in writing, subscribed by the party making the same, or by his agent lawfully authorized, shall be void (Id. 145, § 2).

The first two provisions are subject to the exception that nothing contained in them shall be construed to abridge the powers of courts of equity to compel the specific performance of agreements, in cases of part performance of such agreements (Id. § 10).

It is conceded that the agreement in question was never reduced to writing, and that no written note or memorandum of any kind concerning it was ever made ; but the plaintiff relies upon the exception expressly made by the statute. It therefore becomes important to consider the doctrines by which courts of equity are guided in the class of cases therein referred to.

The best way to enter upon, the discussion, is to start with the general proposition that a court of equity cannot in general specifically enforce a contract embraced by the statute of frauds, any more than a court of law can give damages for its non-performance. But courts of equity have always been clothed with the salutary power of preventing fraud, or affording positive relief against its consequences ; and this power they have not hesitated to exercise, by compelling the specific execution of a verbal contract to which the provisions of the statute of frauds apply, where the refusal to execute it would amount to practicing a fraud. In so doing they disclaim the power of en-grafting exceptions upon the statute, but proceed upon# the ground that to prevent fraud is their supreme duty as courts of equity and conscience. The general rule may therefore be stated to be that when the statute of frauds has been used or is about to be used as a cover to a fraud, equity will relieve or protect against the fraud, notwithstanding the provisions of the statute ; but in the absence of fraud equity will not interfere, though there may have been a reliance upon the honor or promise of the defendant.

When this general rule is kept in mind, it becomes obvious that the mere circumstance that a verbal agreement has been in part performed, can afford no reason such as to control the action of any court, whether of law or equity, for holding the parties bound to perform what remains executory. The doctrine of equity in such cases is, that where an agreement has been so far executed by one party, with the tacit encouragement of the other, and relying upon his fulfillment of it, that for the latter to repudiate it and shelter himself under the provisions of the statute would amount to a fraud upon the former; that fraud will be defeated by compelling him ,to carry out the agreement (Browne on Frauds, § 448, and cases there cited).

The'right of a party who has done acts in part execution of a verbal contract, to call upon a court of equity to enforce it against the other, is subject to the ■same general restrictions as that of any other plaintiff in equity, and he therefore must show, among other things, that his position is such that an action at law for damages will not afford him adequate relief {Browne on Frauds, § 452, and cases cited).

It is mainly for the reason last stated that it became settled, too firmly for question, that payment, even to the whole amount of the purchase-money, is not to be deemed part performance, so as to justify a court of ■equity in enforcing 'the contract (Browne on Frauds, § 461; Story Fq. Jur. §§ 760, 761; Rice v. Peet, 15 Johns. 503 ; Thayer v. Rock, 13 Wend. 53).

The money, it is said, may be recovered back by action and the parties restored to their original position. It is only when, from the nature of the payment, or the peculiar circumstances of the case, this cannot be done, that the rule would seem to fail with the reason of it. Thus payment, although alone not sufficient, may serve to corroborate other acts which are generally regarded as amounting to part performance, so as to afford ground for a decree of specific execution. Where, for instance, it is accompanied by a purchaser’s entering into possession of land in pursuance of a verbal contract for the purchase of it, a case of part performance is quite uniformly considered as made out. So it is always regarded as strongly confirmatory of right of plaintiff seeking the specific execution of a verbal contract, for an estate in land, that he has proceeded, on the faith of the contract, and with the knowledge of the vendor, to expend money in improving the land. But in order to be admitted asan act of part performance, the improvements relied upon must be of a kind permanently beneficial to the estate, and involving a sacrifice to the purchaser who has made them. For so discriminating is equity that, if it appears that the purchaser gained more by the possession and use of the land, than he had lost by his improvements, or if he has been in fact fully compensated for the improvements, they will not be available to him as a ground for specific execution.

Prom the examination so far made it appears with sufficient certainty that the plaintiff in the case at bar, in order to sustain the action, was bound to show not only an agreement valid but for the statute of frauds, but also, in order to overcome the statute, such a part performance on his part as raised such a clear and real equity in his favor that, unless he were relieved, he would be the victim of a fraud. Now, what are the facts in that respect ?

Under the first judgment, entered February 23, 1854* and the execution issued thereon, the sheriff of the city and county of New York, on November 18, 1854, sold to Benjamin M. Stilwell, the judgment-creditor, for a consideration of $750, all the right, title and interest that the plaintiff herein had on January 23, 1854, or at any time thereafter, in the lands devised by John W. Gilbert, deceased, of which sale the sheriff executed and delivered his certificate to Stilwell on the same day. The time for the plaintiff, as judgment-debtor, to redeem the lands in question from that sale, expired on November 18, 1855, and the time for any of his judgment-creditors to effect such redemption, expired February 17,1856. The plaintiff failed to redeem. Indeed, he made not even an effort to do so within the time allowed bylaw for that purpose. After the time had expired, he made the parol agreement relied upon, and then confessed judgment in favor of the defendant for the sum of $2,005. At that time, therefore, he had in no event an interest left in the land. No claim or right, either vested or contingent, remained in him. All his interest in the land was as effectually cut off as if, for a valuable consideration, he had, years before, voluntarily conveyed it away. In that condition of things, and in order to regain at some future time an interest in the land, he agreed with the defendant that by his act the defendant should be created a judgment-creditor, and that as such the defendant should redeem from Stilwell for his benefit, but with her own moneys. He expended no money on the faith of the agreement, and from the time it was entered into as claimed by him, to the time at which the defendant obtained a deed from the sheriff, the plaintiff did no act upon the faith of the agreement in regard to the premises, which left him in a worse position than he was in before. He was notin possession of the premises at the time, or any portion of them. In short, he parted with absolutely nothing, unless it can be said that his confession of judgment was a parting with value. The whole of plaintiff’s equity, therefore, turns upon the importance to be given to this confession, and if that did not raise an equity sufficient within the rule, as above laid down, the defendant’s promise, even if made as claimed by the plaintiff, was but a mere naked promise, the illegality of which is positively declared by the statute of frauds. How, as to such confession, I remarked at the outset that if the transaction which resulted in the receipt by the plaintiff of the sum of $2,000, was a loan, the pretended waiver of the defense, that it was a gift, which to the knowledge of the plaintiff did not exist, and the confession of judgment, constituted no sufficient consideration for the promise of the defendant; if it was a gift, the plaintiff, by falsely swearing that it was a loan, and agreeing with the defendant that the false statement should be used for his benefit, was himself guilty of a fraud. In no aspect of the case, therefore, can the confession be treated as a parting with value, or a part performance of the agreement on the part of the plaintiff, sufficient in equity to call upon the court to decree the specific execution of the agreement, which otherwise is void under the statute of frauds. Even if the plaintiff, instead of confessing judgment, had actually paid the money, it would not have helped him; for I have shown that even payment of the purchase-money is not of itself a sufficient part performance of an agreement void under the statute of frauds. Moreover, the statute of uses and trusts expressly provides, that when a grant for a valuable consideration shall be made to one person, and the consideration therefor shall be paid by another, no use or trust shall result in favor of the person by whom such payment shall be made; but the title shall vest in the person named as alienee in such conveyance, except as against the creditors, at the time, of the person paying the consideration; and that a trust shall result in favor of such creditors to the extent necessary to satisfy their just demands .(1 R. S. 6 ed. 1105, 1106, §§ 51, 52).

The cases cited and relied upon by the learned counsel for the plaintiff are not in conflict with the foregoing views. In Hess v. Fox (10 Wend. 436), it was agreed between mortgagor and mortgagee that the mortgagor should convey by an absolute deed, and deliver up the mortgaged premises to the mortgagee ; that the latter should sell them at the best price obtainable, and after deducting the sum due, pay the surplus, if any, to the mortgagor. The premises having been conveyed, delivered up and sold, pursuant to the agreement, and a surplus realized, it was held that the agreement was not void as within the statute of frauds, and that the mortgagor might maintain assumpsit for the surplus.

In Malins v. Brown (4 N. Y. 403), it was agreed between vendor and vendee and mortgagee, that the mortgagee, upon receipt of $700, should release the premises about to be conveyed from the lien of the mortgage which covered them, with other lands, and the mortgagee did receive the $700, as a complete performance of the agreement on the part of the vendee. The sale having been consummated upon the assurance that the release would be given, it was held that, upon the mortgagee’s failure to give it, the vendee could maintain an action for the specific execution of the agreement, because a recovery of the money would not restore him to his former position. In the course of his opinion, Taylor, J., fully recognized the doctrine that mere payment of money is not a sufficient part performance, and that nothing will be deemed part performance which does not put the party into a situation which is a fraud upon him unless the contract be performed.

Murray v. Smith (1 Duer, 412) was an action to recover the sum of $532.40, which the plaintiff had been compelled to pay as a deficiency upon foreclosure. Peter Murray and Hugh Smith were speculators together in the purchase and sale of lands. For eight lots conveyed to Murray by William P. Powers, Murray paid $516, in cash, and gave his bond and mortgage to Powers for $1,204. Murray subsequently conveyed to Smith one equal undivided half part of the eight lots, subject to one-half part of the mortgage, and as part of the consideration Smith paid $258 (being one-half of the sum paid by Murray in cash) and orally promised to keep Murray harmless and indemnified from all loss or damage by reason of the one equal half part of the money becoming due upon the mortgage. Murray subsequently paid his equal half part, and having thereafter been compelled to pay a deficiency arising upon a sale of the land under foreclosure of the mortgage, instituted for the collection of the other half, it was held, that Murray having executed his part of the agreement by a conveyance on the faith of the promise, the promise could be enforced.

In Dodge v. Crandall (30 N. Y. 294) it was orally agreed between Holberton, plaintiff’s testator, and Holcomb, the owner of the equity of redemption, who as such, had assumed the payment of a certain mortgage then past due, that, in consideration of $50 to be paid by Holcomb, Holberton should buy the bond and mortgage of the then holder thereof, and take an assignment thereof and hold the same for the term of five years, and that Holcomb should have five years within which to pay ; and the agreement was executed on the part of Holberton by taking such an assignment, and on the part of Holcomb by paying the $50. Upon these facts it was held that, there having been a good consideration and the contract having been executed as stated, there was a valid extension of the time of payment for the period of five years, and that, in the absence of a default in the payment of the interest, there could be no foreclosure on account of the non-payment of the principal sum due before the expiration of that time.

In Dodge v. Wellman (43 How. Pr. 427) the defendant was the equitable owner and as such in possession of the land in question. ' He held an agreement, valid in law and in equity, for the conveyance to him of the legal title on payment of the price. That price he had in part paid, and had, in reliance upon his equitable title, cultivated the land as a farm and made improvements thereon. The residue of the purchase-money being about to become payable, a parol agreement was entered into between plaintiff’s testator and the defendant, that the testator should advance the money ($284), and take the conveyance to himself, and should give to the defendant a written agreement for the conveyance of the land on repayment of the money so advanced, with interest, at any time within five years. The defendant at once entered upon its performance. He surrendered to the original vendor his contract of purchase as a consideration for a conveyance to plaintiff’s testator, procured a conveyance to the latter and carried and delivered it to him, and the testator thereupon advanced the money stipulated for. Subsequently the testator refused to give any contract or writing declaring the rights of the defendant, and ejectment having been brought by the executor, it was held that the principles upon which courts of equity enforce agreements that have been in part performed. were an adequate protection to the defendant, and that the facts stated constituted an equitable defense to the action.

Ryan v. Dox (34 N. Y. 307) was decided upon the principle that a statute cannot be invoked as a shield to protect a party in the perpetration cf a fraud. In commenting upon this case and the principle of its decision in the later case of Levy v. Brush (45 N. Y. 589), Grover, J., says: “Theposition, rightly unde:stood, is correct. This is the basis upon which the doctrine of specific performance of verbal contracts for the purchase of real estate by courts of equity, in cases of part performance, rests. Upon this principle, where a party whose lands were about to be sold by judicial sale has agreed with another to loan him money, and bid off and hold the land as a security for the money, and the agreement has been consummated, the vendee has been held to hold the title so acquired as a mortgage in equity. Upon these grounds Ryan v. Dox was decided. But no case can be found where a contract has been taken out of the statute in favor of a party who had no existing interest in the property, who had done no act of part performance, who had parted with nothing under the contract, simply upon the ground that the other party was guilty of a fraud in refusing to .perform his verbal agreement.”

In Freeman v. Freeman (43 N. Y. 34), the question, as expressly stated by the court, was whether a parol promise by one owning lands, to give the same to another, will be enforced in equity, when the promisee has been induced by the promise to go into possession, and, with the knowledge of the promisor, make comparatively large expenditures in permanent improvements upon the land, and it was held that the ground upon which this equitable jurisdiction is exercised, although sometimes said to be part performance, really is to prevent a fraud being practiced upon the parol purchaser by the seller, by inducing him to expend his money upon improvements, upon the faith of the contract, and then deprive him of the benefit of the expenditure,, and secure it to the seller.

In Miller v. Ball (64 N. Y. 286), Earl, J., in delivering the unanimous opinion of the court of appeals, said: “The payment of the consideration alone, in a case where its recovery in an action at law would fully indemnify the party paying, would not be a sufficient part performance within the rule under consideration, and neither would mere possession be, without any other circumstances of hardship or fraud. But payment of the consideration, and possession under the agreement, or by the consent of the vendor, are facts which maybe considered with other facts upon the question of part performance. Here the whole consideration-money was paid, and the plaintiff took all the possession of such a lot which is ordinarily practicable. He built roads to it and upon it; built a shanty, and made some clearing. His improvements thus made were probably equal in cost to the consideration paid for the lot, and that cost would be lost to him unless the defendant be compelled to perform his agreement. He paid the taxes, and the money thus paid he cannot recover back. Iam, therefore, of opinion that enough was done by the plaintiff to bring his case within the equitable rule as to part performance.”

Instead of being at variance with the views expressed by me, the cases cited by the plaintiff fully harmonize with them and furnish additional support to them. And so does the case of Getman v. Getman (1 Barb. Ch. 499), which in many respects presents striking similarities with the case at bar.

Assuming, therefore, that there was such an agreement between the parties as found by the referee, and that the plaintiff performed his portion of it, yet such part performance being, in view of all the circumstances surrounding it and under the principles which control courts of equity in such cases, wholly insufficient to take plaintiff’s case out of the statute, the agreement was void, because not in writing, and there being no subsequent written declaration of trust, there is nothing whatever constituting ground for decreeing specific performance of defendant’s promise. A contract void by the statute is void for all purposes. It confers no right and creates no obligation as between the parties to it. It cannot be enforced, directly or indirectly (Dung v. Parker, 52 N. Y. 494).

For the foregoing reasons the conclusions of the referee in favor of the validity of the agreement and the existence of a trust, were and are erroneous. In the absence both of a writing and of circumstances amounting to a fraud upon the plaintiff, the void agreement could not become capable of enforcement, nor could a trust result in plaintiff’s favor by implication of law, nor could the defendant, in the absence of a legal obligation on her part to convey, be guilty of fraud by a mere refusal to do so.

Neither can the plaintiff’s tender of $4,322.67, to the defendant, on October 23, 1860, and his offer to perform, be construed as a part performance of the agreement. In Levy v. Brush (45 N. Y. 589), it was said: “To hold the offer of performance by the plaintiff to be sufficient to take the case out of the statute,' would repeal it. A party in no legal sense commits a fraud by refusing to perform a contract void by its provisions. He has not in that sense made a contract, and has a perfect right, both at law and in equity, to refuse performance.”

The plaintiff having wholly failed to make out a case authorizing a judgment compelling specific performance of the defendant’s promise or agreement, it is unnecessary to consider the question raised by the defendant’s exception to the referee’s refusal to receive in evidence the plaintiff’s petition and schedules in bankruptcy, offered by the defendant.

The judgment appealed from must be reversed, the order of reference vacated, and a new trial ordered, with costs to the appellant to abide the event.

Russell and Arnoux, JJ., concurred.


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    STEPHEN D. PRINGLE, Appellant, v. HENRY S. LEVERICH, Impleaded, &c., Respondent.

      Co-partnership—liability as partner, of one not member of the firm.

    It is only where one held forth to the world as partner, is so held out by his direct authority or connivance, that the rule is, that he is so held out to every creditor or customer. In other cases, the liability of one not a member of the firm, and sought to be charged as such, rests upon the principle of estoppel by conduct ; and, while it is immaterial whether or not he share the profits and losses, and no particular mode of holding" out is requisite, yet it must appear that he has done something which he had no right to do, and which was calculated to, and did, create a belief that he was a partner, and that plaintiff was actually misled thereby. This is especially so where the particular holding out complained of rests on negligence alone.
    The above principles applied to the facts in this case and defendant held entitled to a dismissal of the complaint.
    Before Freedman and Russell, JJ.

      Decided February 6, 1882.
    Appeal by plaintiff from judgment dismissing complaint with costs. The facts appear in the opinion.

      Stickney & Shephard, attorneys, and Albert Stickney, of counsel, for appellant.

      Platt, Gerard & Bowers, attorneys, and John M. Bowers, of counsel, for respondent.
   By the Court.—Freedman, J.

The action was brought to recover an indebtedness of the firm of Leverich & Co. of Hew York to the plaintiff’s assignor, John J. Pringle. Henry S. Leverich was sought to be held on the ground that, even if he was not a partner in fact, he had held himself out as such. At the trial evidence was given on both sides, and at the close of the case the complaint was dismissed as to the defendant Henry S. Leverich, and plaintiff’s request to be allowed to go to the jury as against him was denied, which rulings were duly excepted to. The evidence clearly established that the said defendant had never been a partner in fact. A finding to the contrary could not be sustained even if it had been made. It, therefore remains to be considered whether there was anything in the conduct of Henry S. Leverich which would have justified the imposition of a liability as a partner on the ground that he had held himself out as such. > The evidence shows in substance as follows: In 1851 or 1852, John J. Pringle, plaintiff’s .assignor, commenced to have business transactions with Charles P. and Henry S. Leverich, not as constituting any firm, but as individuals. They had no firm-name and signed their names separately. The transactions were had sometimes with one, and sometimes with the other, and they continued at' intervals, and consisted of consignments of cotton and sugar, against the proceeds of which Pringle drew. Charles P. Leverich had also charge of a large amount of securities belonging to Pringle’s wife, and as to them Pringle kept an account with him which, upon the death of Charles P. Leverich, was transferred to Henry S. Leverich, and kept distinct from all other transactions.

The firm of Leverich & Co. was formed in 1867. It then consisted of Charles D. and Edward Leverich. In about 1869, Stephen Duncan Leverich came in as the third partner. Charles D. and Stephen D. were the sons of Charles P., who died in 1875. Edward was the son of the defendant Henry S. The two fathers, Charles P. and Henry S., were brothers, and they advanced to their sons, from time to time, in the shape of loans to the firm, the capital necessary for the transaction of the firm’s business. Pringle’s dealings with the firm began in October, 1867, when he received a letter in which his account with Charles P. Leverich and his account with the firm, condensed into one, was transmitted to him, and he was informed that “your account hereafter will be kept by us exclusively.” The body of this letter was in the handwriting of Henry S., but the signature “Leverich & Co.” was in the handwriting of Edward, which was then known to Pringle. At that time Pringle had no business with Henry S., except that as Charles P. was always very busy as president of the Bank of Hew York, Henry S., who had a desk in the office of Leverich & Co., attended to his business with Pringle for him. From that time Pringle made his consignments to the firm of Leverich & Co. He came to Hew York about twice a year and then visited the office of Leverich & Co., and there usually found Henry S., with whom he then conversed about his account with Charles P., or about his wife’s account, or about his business with the firm of Leverich & Co., as occasion prompted. As to the business with the firm, Pringle sometimes talked with the other defendants. But though this intercourse was thus kept up until the failure of the firm in February, 1878, Pringle failed to show that a single remark was ever addressed to him by Henry S., or any of the members of the firm, or anybody else having antliorifcy from either of them for that purpose, which was calculated to induce in him a belief that Henry S. was a member of the firm. Having himself had transactions with Henry S., which concerned neither Henry S. personally nor the firm, Pringle had no right to be misled, though he does not even say he was, by the mere presence of Henry S. on the premises of the firm, and the fact that he then and there had conversations with him concerning the business of the firm. True, Henry S. was there looking after his loans. But, so far as Pringle was concerned, he might have been employed as general manager. As the case stands, he might have been anything but a partner. What the plaintiff was bound to prove was, that Henry S. was held out to John J. Pringle as a partner, and that the latter on the faith thereof gave credit to the firm. The evidence fails to come up to this point. There was no such relation of trust or confidence between Henry S. and Pringle as imposed the obligation upon Henry S. to give full information of the composition of the firm to Pringle, and the latter could not omit all inquiry and examination and proceed blindly, and then complain that the former did not volunteer to communicate the knowledge he had. The authorities cited by the learned counsel for the appellant upon the question of holding out, are not in conflict with these views. They all agree that, while it is wholly immaterial whether the person holding himself out as a partner does or does not share the profits and losses, and while no particular mode of holding out is requisite, the person sought to be charged must at least be shown to have done something which, under the circumstances, he had no right to do, and which was calculated to and did create a belief that he was a partner, and that the plaintiff was actually misled thereby. All these elements must concur to create an estoppel by conduct, and especially when the particular holding out complained of rests on negligence merely. It is only where one held forth to the world as a partner, is so held out by his direct authority or connivance, as in Poillon v. Secor (61 N. Y. 456), in which case the defendant for a valuable consideration had expressly authorized the use of his name, that the rule is that he is so held out to every creditor or customer. In Conklin v. Barton (43 Barb. 435), upon which the appellant strongly relies, the liability arose upon certain declarations by the party sought to be charged, upon which credit was given, and which, in connection with certain appearances created by the defendant, were calculated to create the impression that he was a partner.

In the case at bar, Henry S. Leverich was shown to have done nothing but what, as against John J. Pringle, he had a right to do, and Pringle, on the other hand, did not directly claim that he was misled. From his two letters, written March 23, 1878, and his subsequent affidavit, made in the course of the bankruptcy proceedings, on which he proved the claim in suit here, against Edward and Stephen D. Leverich, the then members of the firm, it would even appear that Pringle never believed Henry S. to have been a partner. The plaintiff, therefore, failed to make out a case, and his request to be allowed to go to the jury was properly denied.

The copy of the letter offered was properly rejected. No sufficient foundation had been laid for its admission. It contained no declaration by Henry S. or of any person authorized to speak for him. Nor was it shown to have ever been brought to his attention (Hoppock v. Moses, 43 How. 201).

The judgment should be affirmed with costs.

Russell, J., concurred.


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    SIMON VAN WICKLE, et al., Appellants, v. THE MECHANICS’ & TRADERS’ INS. Co., Respondent.

      Marine insurance —implied warranty of seaworthiness—evidence of unseaworthiness.

    That a canal-boat, upon arrival in port, after a voyage of forty-eight hours, without having encountered storm, stress of weather or other peril of the sea, in fine weather and smooth water, and though properly loaded, suddenly sank at her dock without apparent cause, and in such a way that in going down she looked as if she broke in two, is presumptive evidence of unseaworthiness at the time of sailing.
    Rogers v. Sun Mutual Ins. Co. (46 Super. Ot. 65), followed as to • implied warranty of seaworthiness by effecting insurance, etc.
    Before Freedman and Russell, JJ.

      Decided February 6, 1882.
    Appeal by the plaintiffs from judgment dismissing the complaint with costs.
    The facts appear in the opinion.

      L. Laflin Kellogg, for appellants.

      Stanley & Clarke, attorneys, and Stephen G. Clark, of counsel, for respondent.
   By the Court.—Freedman, J.

The action is on a policy of insurance upon a cargo of coal shipped on board of the canal-boat W. S. Storms, from South Amboy, N. J., to New York city. The defense is unseaworthiness. That the assured, by the mere fact of effecting an insurance upon ship, freight, or cargo, and independently of the particular terms used, impliedly warrants that the ship is at the commencement of the voyage seaworthy; that this warranty is. a condition precedent to the policy attaching ; the extent of the warranty; the standard of seaworthiness—all. these questions have been so fully examined and discussed in Rogers v. Sun Hut. Ins. Co. (46 Super. Ct. 65), that a bare reference to that case is all that is necessary here. The case' at bar falls within the rule as there laid down.

Upon the question of seaworthiness the evidence shows that the vessel, after a voyage of about twenty-four or forty-eight hours only, and after her arrival at this port without having encountered any storm, stress of weather or other peril of the sea which might furnish an explanation, in fine weather and smooth water, and though properly loaded, suddenly sank at her dock without any apparent extraneous cause, and in such a way that in going down she looked as if she broke in two. This was presumptive evidence of unseaworthiness at the time of her sailing (Wright v. Orient Mut. Ins. Co., 6 Bosw. 269), and the plaintiffs having failed to give any proof showing seaworthiness, the complaint was properly dismissed.

The judgment should be affirmed with costs.

Russell, J., concurred.