text:
    Daniel Bedell, plaintiff and appellant, v. The Commercial Mutual Insurance Company, respondents.
    1. Where, in an action upon a policy of insurance, the defense is that by mutual consent the policy was canceled as of a day when the vessel insured sailed from one of two ports named to the other; after evidence has been given that the assured, on an application made to him to cancel the policy, referred the applicants (the Ins. Co.) to one West, as a person who would settle the whole matter; it is competent to prove the conversations had subsequently between West and the officers of the company on that subject.
    2. In such a case, where evidence is given tending to show an agreement between West and the company to cancel the policy as of a day when the vessel sailed from one of two ports named to the other, it is competent to prove on what day she so sailed.
    3. When, during the progress of the trial, it is proved in such a case, without objection, that the insured was told by his agent that the company charged an extra premium for a voyage between the two said ports, a refusal to instruct the jury that the company had no right to make such a charge, is not an error for which a new trial will be granted; when the judge states to the jury, as the reason of his refusing to so charge, that the case did not involve any such question, and it does not appear by the bill of exceptions or otherwise, that it was urged to the jury that the company had any such right; or that proof of such a claim, being rightfully made, or being in fact made, was proper to be considered by them, in determining the issue whether the policy had been actually canceled prior to'the time of the loss, by the mutual consent of the insurers and the insured.
    4. On an appeal from the judgment only, in an action tried before the Court and a jury, the Court will not review the case upon the, evidence, with a view to determine whether the verdict is against evidence. Such an appeal presents, for the consideration of the appellate Court, questions of law only.
    (Before Bosworth, Woodruff and Pierrepont, J. J.)
    Heard, February 12;
    decided, May 29, 1858.
    This is an appeal by the plaintiff from a judgment against him, entered on the Verdict of a jury. The action was tried before Mr. Justice Boswobth and a jury, on the 22d of December, 1857.
    It is on a marine insurance policy, issued by the defendants. The complaint sets forth the incorporation of the defendants, as a Marine Insurance Company, the issuing of a policy by the defendants to one David W. Smith, on one-sixteenth part of the schooner Anne E. Coxe (valued, at $1,650), for one year, from April 19, 1856; alleges the giving of a note for the amount of the premium ($165), and that the same is not yet due; the continuous interest of the insured in the policy; the total loss of the vessel on the 1st of July, 1856; the famishing to the defendants due proof of the loss and of the interest of the insured; a subsequent assignment to the plaintiff of the policy and of all claim for the loss; offers to deduct the amount of the note given for. the premium; and prays judgment for $1,485, and interest thereon, from April 6th, 1857.
    The answer admits the facts alleged in the complaint, and sets up as a defense, that the policy “ was by the mutual consent and sanction of -the said David W. Smith, and these defendants canceled and annulled from and after the 21st of May, 18.56,” .... - “which was the day when the said vessel, Anne E. Coxe, was reported.to have sailed from Mobile for Honduras,” and that no loss occurred while the policy was in force.
    ■ At the trial, the defendants holding the affirmative of the issue, called as a witness, A. B. Holmes, the - vice-president of the company, who gave evidence in relation to the application for the policy; produced the policy and the indorsement of cancellation upon it, which, as he said was made on the 28th of June, 1856, and reads thus: “June 21, 28, 1856. Pay return premium, and cancel this policy from May 21, ’56. $137.50. A. B. H., Y. P.”
    They then called E. C. Dixon, one of their clerics, who testified (among other things) thus: “I called on David W. Smith in reference to this policy, . . between the 20th and 25th of June. . . I told him the company wanted to cancel it; he said Mr. West had the policy. . . . That West would settle the whole matter, and all that he said about it was gospel, and I must go to him about it; I called on Lane, West & Co., the same day, and asked West what he was going to do about Smith’s policy. (Plaintiff’s counsel objected to any evidence of conversation with West; the objection was overruled, and plaintiff’s counsel excepted.) West said he was going to cancel it; that the company charged too high a rate for the voyage; he then gave me the policy and told me to cancel it from the day the vessel left Mobile for Honduras.” . .
    “ The witness Holmes, being recalled by defendants’ counsel, was again asked: When did the company learn of the sailing of the vessel from Mobile to Honduras ? (The plaintiff’s counsel objected to this question; the Court overruled the objection, and the plaintiff's counsel excepted.) A. About the 6th or 7th June, 1856; the day of sailing was reported to us, as the 21st of May.”
    When the defendants rested, the plaintiff examined Gr. W. Smith, a son of the insured (who was present at the conversation between Dixon and his father), in respect to such conversation. He testified inter alia, thus: “Dixon asked my father for his policy on the Anna E. Coxe; my father asked what he wanted it for; he said the company wanted five per cent moré.” . .
    R. Gr. Lane, a witness for plaintiff, on his cross-examination, said: “ I stated to Smith, the assured, that the company charged an additional five per cent, for the voyage from Mobile to Honduras, and he demurred to it, and said he was insured for a year; he did not say he would pay it; I told him he had better see to it.” . .

      Redirect: “The extra premium, claimed was for the voyage from Mobile to Honduras.” -No objection was made to the reception of any of this evidence.
    The case concludes thus: “Both sides having rested, the Court charged the jury, in substance, that the only question in the case was, whether the plaintiff had consented to the cancel-ling of the policy, either in person, or by any one who was expressly authorized to act for him.
    “The plaintiff’s counsel requested the Court to decide and instruct the jury as matter of law, that under the policy in question, the defendants had no right to require an extra premium for the voyage from Mobile to Honduras; but the Court refused so to decide and instruct the jury, and stated that the case did not involve any such question, to which refusal plaintiff’s counsel excepted.
    “ The jury found a verdict for the defendants.”
    The policy contained no warranty nor prohibition against the sailing of the vessel from Mobile to Honduras; nor any provision that if she did so, any extra or additional premium should be payable.
    Judgment having been entered on the verdict, the plaintiff appealed from it to the General Term.

      Wm. Allen Butler, for appellant.
    I. Upon the whole evidence at the trial the Court should have instructed the jury, as-prayed by plaintiff’s counsel, that the defendants had no right under the policy issued to David W. Smith, to require an extra premium for the voyage from Mobile to Honduras.
    1. It is true that this was not an issue expressly raised by the pleadings, but the evidence on the subject of the cancellation of the policy, as admitted by the Court, presented a state of facts which involved this question as an important, if not the controlling consideration in the case.
    2. The defense set up was a cancellation of the policy by mutual consent. The proof showed that about five weeks after the policy was issued, the defendants charged an extra rate for a voyage from Mobile to Honduras; (this evidence was admitted against plaintiff’s exception;) that the first time the subject of cancellation was brought to the notice of 'the insured, it was by the information from defendants that they wished to cancel it; that he was informed of their additional charge of five per cent, premium for the voyage, (see cross-examination of Lane by defendants’ counsel); and that he objected to the charge. All this evidence appeared by defendants’ witnesses under exceptions, or on the cross-examination of plaintiff’s witnesses. It did not support the issue raised by defendants, and show them as consenting to a cancellation of the policy, or as parties in a “mutual consent,” but as insisting upon a cancellation as matter of right, unless a new consideration was paid for the insurance by the extra premium claimed. Mor did the further proof on the part of defendants, in respect to plaintiff’s acts, show him as a party to a “ mutual consent,” but, at the most, as referring defendants as to their demand to West, and an acquiescence in the demand by West. The whole evidence on this subject, assuming that West was authorized to act for him, being as follows : “West said he was going to cancel it; that the company charged too high a rate for the voyage.”
    3. The evidence of the claim for extra premium, enforced by the alternative of cancellation if not acceded to, having been thus admitted and being in the case, the obvious and important inquiry for the determination of the question, whether the cancellation of the policy was the result of the mutual consent, concurrence and agreement of the parties, or of the arbitrary requirement of the defendants, was this: Had the defendants a right under the policy to charge the extra premium for the voyage in question?
    4. They had no such right. Mobile was not “ a foreign port in the Gulf of Mexico,” and Honduras is not in the Gulf of Mexico, or in any other waters prohibited in the policy.
    5. The reason assigned by the Court for refusing to charge as prayed, that the question was not “involved” in the case, did not meet the difficulty. The jury were left at liberty to assume, and doubtless did assume, from the form of the charge, that the defendants had a right to claim the extra premium. Their verdict cannot be accounted for on any other supposition.
    .6. The question, though not “involved” in the case as it stood on the pleadings, was involved in the case as it stood on the evidence under the rulings during the trial; If those rulings were right, the jury should have been instructed on the points which they admitted; if they were wrong, the plaintiff’s exceptions were well taken.
    ’ II. The exception to the rulings as to testimony were well taken. The evidence relating to the sailing from Mobile to Honduras, the rate charged, &c., was irrelevant and may .have influenced the jury. .(Worrall v. Parmelee, 1 Comst.; 521.)
    III. The verdict, if not clearly against the weight of evidence, is sustained by testimony so slight, of such inferior quality, (consisting entirely of parol admissions or declarations which are denied in the most positive manner), that the present exceptions should be sustained, and a new trial granted for the purpose of complete justice between the parties.
    A cancellation of a solemn contract, extorted as the alternative of yielding to an illegal demand, and then claimed to be by mutual consent, and proved by admissions, against the positive denial of the party alleged to have made them, should not be sustained, unless all the facts which operated upon the minds of the parties and conduced to the result, were fairly and fully before the jury; especially should it not be sustained if it be apparent from the whole case that the ends of justice may be subserved by further inquiry. (Kennedy v. N. Y. & H. R. R. Co., 3 Duer, 69; Murray v. Smith, 1 Duer, 412.) .

    IV. The judgment should be reversed and a new trial- ordered.

      Wm. D. Booth, for respondents.
    I. The plaintiff’s first exception was to the admission of evidence- of a conversation with Mr. West, of the firm of Lane, West & Co. The Court properly overruled the objection, because, • .
    1. Evidence had been given before that stage of the proceedings, showing West and his firm to have been the agent of Dayid W. Smith, the assignor of the plaintiff.

      a. Lane, West & Co.; applied for the insurance.
    5. They signed the application on which the policy was issued, and that application was in evidence.

      c. It had been proved that David W. Smith had informed the defendants that “Mr West would settle the whole matter.”

      d. And the defendants had been referred by Smith to him.
    2. All this evidence of agency had been given before the introduction of any conversation with the agent, and it was sufficient to establish the fact of his agency in the absence of any evidence to the contrary.
    3. The statement of the agent in the premises, and more especially where the matter had been specially referred to him by his principal, was entirely competent, and the Court properly admitted such statement in evidence, and the plaintiff’s objection was not well taken.
    II. The plaintiff’s second objection was to the admission of evidence proving the day of sailing of the vessel from Mobile to Honduras.
    1. The defense in this case was the cancellation of the policy from the day the vessel sailed from Mobile to Honduras.
    2. And it had already been proved that the defendants had been directed to cancel it from that day.
    3. It was, therefore, entirely relevant and competent for the defendants to show what that day was. It was material for the purpose of showing the date from which all their liability on the policy ceased, and the Court properly admitted the evidence; and the objection was not well taken.
    HI. The plaintiff’s request that the Court would instruct the jury, as matter of law, that under the policy the defendants had no right to require an extra premium for a voyage from Mobile to Honduras, was properly denied; and the exception thereto is not well taken.
    1. There was no question arising as to any claim for any extra premium.
    2. The policy was in evidence, and shows for itself.
    3. It was never contended or claimed that the defendants had any right to require any extra premium. The answer presents no such claim, and the case involved no such question, either as a question of law or fact.
    IV. The only questions in the case were, whether the policy had been canceled before the loss occurred, and whether the plaintiff had consented to such cancellation, either in person or by any one authorized to act for him.
    These questions were submitted to the jury; they were passed upon by them, and a verdict was rendered by them for the defendants; and the evidence fully sustained that verdict.
    The judgment should be affirmed with costs.
   Bv the Court.

Bosworth, J.

—This action comes before the Court, on an appeal from the judgment only. The appeal, therefore, presents only questions of law for our consideration.

Evidence, of conversations between the agent of the defendants and West, was properly admitted, after it had been proved that the agent had been referred by the insured to West, as the person who would settle the whole matter.

It was competent to prove on what day the vessel sailed from Mobile to Honduras, as the policy was to be canceled from the date of such sailing, if there was in fact an agreement for cancelling it.

It is not denied that the charge presented to the jury, the only question of fact necessary or proper to be considered or determined. That was whether the plaintiff’s assignor had consented to the cancelling of the policy, either in person or by any one who was authorized to act for him.

But it is insisted the Court erred in not instructing the jury that, the defendants had no right to charge an extra premium from Mobile to Honduras. The Court was requested to so charge, but declined for the reason, stated at the time to the jury, “that the case did not involve any such question.”

No, such allegation was contained in the answer, and the bill of exceptions does not show that the counsel for the defendants insisted before the jury, that the defendants had any such right.

A new trial cannot be granted for such a cause, unless it be true that it is the duty of the Court, to charge upon every abstract proposition contained in any request that may be made, although it does not appear that any such proposition was urged to the jury-

The jury were instructed, that the only question was that of the actual consent of the insured, to the cancelling of the policy. And when requested to charge that the defendants had no right to require an extra premium, the Court in effect said, that was a question with which the jury had nothing to do, that the case did not involve any such question.

The jury must have understood that they were not to consider any such question, and that it must be wholly dismissed from their consideration.

To make it error to refuse to affirm or negative, directly, a particular proposition, which the Court is requested to declare, when the determination of it, either the one way or the other, can have no natural influence upon the decision of any issue of fact made by the pleadings, or upon the rights of the parties upon any state of facts the jury can find, and that too when the jury are instructed that no such question arises in the case; it should at least appear by the bill of exceptions that such a proposition has been argued to the jury, and that justice requires the Court to instruct the jury in relation to it.

The reason assigned for refusing to charge the jury as requested, imports that the subject matter of the request had not been pressed upon their consideration.

The defense to the action was placed by the answer upon the fact of an actual consent to cancelling the policy, and not upon a right based upon any clause or provision in the policy.

And it does not appear that the jury were urged, to find the more readily that such consent was given, because the company had a right to insist upon an increased premium being paid. There is nothing in the terms of the policy which furnishes any grounds for such a pretense, and nothing in the case to show that any such ground was taken at the trial. Under such circumstances, we think, the judge, at the trial, when he stated to the jury that no such question was in the case, as that of the right of the defendants 'to make such a charge, stated enough to advise the jury that no such question could be properly considered by them, and that no error was committed in not directly affirming the truth of the proposition contained in the request.

We cannot enter into a consideration of the evidence, on this appeal, nor dispose of the questions of law, influenced by any views by which we might be governed on a' motion for a new trial on a case.

We do not understand the judge to have ruled, at the trial (as the plaintiff’s counsel now argues that he did), that evidence that the defendants charged an extra rate for a voyage from Mobile to Honduras was admissible. Ho such objection was taken. The judge, on the plaintiff’s objection, at one stage of the cause, excluded evidence that the defendants were notified of Lane, West & Go’s, intention to send the vessel on a voyage from Mobile to Honduras. But when enough had been subsequently proved to justify the inference that it had been agreed to cancel the policy from the date she sailed on such a voyage, he allowed evidence to be given of the time she so sailed. It was to the admission of that evidence that the plaintiff excepted.

What was said as to charging an extra premium, from Mobile to Honduras, is contained in the evidence given after the defendants had rested, and was given without objection. It formed no part of the conversations of which the plaintiff had given evidence, but was part of a conversation between Lane and the insured, at a time when no officer of the company was present, and of which, there was no attempt to prove, that any officer of the company had ever heard.

We think none of the exceptions are well taken. This being an appeal from the judgment only, we cannot enter into a consideration of the evidence, nor be influenced by any of the considerations which would be applicable to a motion for a new trial on a case.

Judgment affirmed.

       Although the question objected to was, according to the case as settled; “When did the company learn of the sailing of the vessel from Mobile to Honduras”? it is evident from the answer given, (to which no exception was taken or objection made,) and from the respondents’ points, and from the absence of any suggestion to the contrary in the points of the appellant, that the object of the inquiry was to ascertain on what day she in fact sailed. The appellant does not suggest, either in his points, or by anything said on the argument of the appeal; that he could, by any possibility, have been prejudiced in any way, by the answer given. When the Company ascertained the day on which she sailed, seems, in itself, to he wholly immaterial. When she did sail, might be very material, if it should be made a question whether the loss occurred before or after that event. It was competent to prove on what day she did sail; and as it.was not pretended nor suggested that she did not sail on the 21st of. May, the question in connection with the answer given to it, could not possibly have prejudiced the plaintiff, and we do not understand his counsel to now insist that it did.”


source: Caselaw Access Project

author: Pierrepont, J.

license: Public Domain

text:
    John La Farge, Respondent, v. The Exchange Fire Insurance Company of the City of N. Y., Appellants.
    1. Since the act of 1857, which allows parties to an action to testify in their own behalf, a plaintiff or defendant is not incompetent as a witness in his own favor, merely because the adverse party is a corporation.
    2. This result is not affected by the facts that the person who was secretary of the corporation at the time of the transaction in question died before the trial, and that none of its officers at the time of its incorporation, were such when the cause was tried.
    3. In an action to recover of a corporation the value of property transferred to it; it is not error to admit evidence of negotiations had, and of an agreement made, relative to the terms of such transfer, prior to the actual incorporation, with persons who soon after that and when it was incorporated, became officers of such corporation and with whom as such officers the transaction was completed; when the question is whether the transfer was made as security for a loan which the company was to make, or was made to be paid for, by issuing an agreed amount of its capital stock.
    (Before Woodruff and Pierrepont, J. J.)
    Heard, March 11;
    decided, June 12, 1858.
    This is an appeal by the defendants from a judgment entered on the report of Henry Nicoll, Esq., as referee.
    The action was brought in December, 1854, to recover from the defendants $5,600 (and interest), being the amount due upon a bond and mortgage which the plaintiff had assigned to them, and for which he alleged they were to issue to him shares of their capital stock to that amount, and which stock they refused to issue. When it was commenced, the defendants’ corporate name was “The La Earge Eire Insurance Company.”
    The complaint states that: First. The defendants are an incorporated insurance company. It was agreed between them, subsequent to the organization of the company, and the plaintiff, that the latter should assign to them a bond and mortgage made by one Orr and Wife for $7,500, on which $1,000 had been paid on which $6,500 was due, which amount was secured by a mortgage on property worth double that sum, and which bond and mortgage were fully worth that sum: [and the defendants in payment therefor, agreed to issue $6,500 of their capital stock as follows: $2,000 to Chas. E. Appleby, $450 to Eggleson and $450 to McCarty, and the balance to the plaintiff.] Said bond and mortgage bore date the 15th of July, 1852, and was payable on demand with interest semi-annually at 7 per cent.
    Second. The plaintiff in pursuance of said agreement, by an assignment dated the 14th of July, 1853, assigned said bond and mortgage to the defendants, and they still retain and claim to own the same absolutely, and have collected the interest which accrued subsequent to the assignment, and retained the.same to their own use.
    Third. The defendants thereupon issued stock to Eggleson & McCarty, to the amount of $450 each, but have failed and refused to issue any to Appleby or to the plaintiff, or to restore the bond and mortgage, or compensate the plaintiff for the same; and have issued to others their entire capital stock without the plaintiff’s consent, wherefore he prays judgment for $5,600 and interest thereon from the 14th of July, 1853.
    The answer admits all the allegations of the complaint except that: Eirst, it denies that the bond and mortgage were assigned on any such agreement as the plaintiff alleges.
    Second. It admits that ten shares of $50 each were issued to Eggleson & McCarty, severally, but denies that they were issued on any such agreement as is alleged.
    Third. It alleges that the bond and mortgage were assigned on plaintiff’s application for a loan of $6,500; that defendants accepted the application and paid him in full for said bond and mortgage.
    The referee found, specially, all the facts stated in the complaint, to be as therein stated, and on the 1st of December, 1857, ordered judgment in favor of the plaintiff for the amount claimed.
    On the trial, evidence was given of all the circumstances and negotiations connected with the assignment of the bond and mortgage, some of which occurred before the defendants were organized as a corporation, and were had with persons who became officers of it, at the time it was organized. Testimony as to negotiations before the defendants were incorporated, was objected to and admitted, and the defendants excepted to the decision.
    The plaintiff was admitted as a witness in his own behalf against these objections taken by the defendants, viz.;

      “ 1. That the testimony of one party cannot be admitted in his own behalf, when the other party is a corporation.
    “ 2. That such testimony cannot be received when the opposite party is a corporation, and the person or persons who were officer or officers of such corporation at the time of the transactions concerning which the party is called to give evidence, is or are not living.
    “ 8. That it was not the intent of the statute to give either party greater rights or privileges, than such party enjoyed before such statute, unless the same or similar rights or privileges are granted to the other party. The referee overruled the objections; to which ruling and decision of the referee the counsel for the defendants then and there excepted.”
    Before the testimony was concluded, it was shown that the first secretary of the company was dead, and that none of the persons who were its officers at the time of the transaction in question, were such officers when this suit was commenced, or when it was tried. When this evidence had been given, the counsel for the defendants moved to strike out the testimony of John Tin, Earge on the grounds, that it was now clearly proved that none of the officers of the company at the time of the transaction between the plaintiff and defendants were such officers either at the time of the commencement of this action or at the present time; and that the secretary of the company at that time was now dead. The referee denied the motion; to which ruling and decision of the referee the counsel for the defendants then and there excepted.
    No evidence was given tending to show that the bond and mortgage were assigned to the defendants on an application for a loan, or that anything had been paid for or ah account of the transfer, except that the assignment contained a clause acknowledging payment of $6,500; and excepting also the testimony given by the plaintiff tending to show, that the stock issued to Eggleson and to McOarty, to the extent of $450 to each, was issued in part payment therefor.
    Some other exceptions were taken, to which no reference is here made, as they are not alluded to in the opinion of the Court delivered on affirming the judgment.

      It appeared that the defendants were incorporated on the 9th of May, 1853, as an Insurance Company, under the act entitled “ An act to provide for the Incorporation of Insurance Companies,” passed April 10, 1849.

      J. M. Mason, for appellants.
    The referee erred in admitting any testimony of transactions occurring prior to the incorporation of the defendants, because:
    1. The allegation of the complaint is, that the agreement on which the action is based was made subsequent to the organization of the company, and this allegation is denied by the answer. This was one of the issues to be tried.

      2. Prior to the incorporation, there could be no person authorized to act for a company which did not exist." There could be no delegated power where there was no principal to make such delegation.
    3. The action or agreement of persons about to form a corporation, could no't in any way be binding upon that corporation after it acquired a legal existence.
    4. A corporation, formed under the general laws of the state, cannot exist until certain forms and requisites are complied with, and it is such compliance that creates it; among others, the payment for its capital stock. (Laws of 1849, ch. 308, p. 441.)
    He also contended, that the referee erred in admitting the testimony of the plaintiff in his own behalf, because: 1. The adverse party being a corporation, is not a party or person in interest “living,” within the meaning of the statute. (Code, § 399.)

      2. The subsequent portion of the section shows that it is the intent that the adverse party may have the opportunity of being examined in his own behalf.
    3. A corporation cannot be so examined.
    4. The fact that the officers of a corporation can be examined, does not bring a corporation within the provision of the statute. They are mere clerks of the corporation, and are to be regarded in the same manner as clerks of an individual.
    5. The statute did not intend to give any new rights to one party which were not given to another.

      6. This statute would not allow a corporation, to introduce its own books as evidence in its own behalf.
    7. But if the statute has force from the fact that the officers of the corporation can be examined, then it can only be enforced where the officers cognizant of the transaction are still officers. In this case, Westervelt, the president, had left the company in 1854, and Carroll, the secretary, left the company in December,' 1858, and died about a year before the trial.
    He also argued, that the action cannot be sustained on the ground, that the defendants have not shown affirmatively that they have paid for the bond and mortgage. This they were not called upon to do, as the complaint is not framed upon this basis. The action is simply a claim for money upon a failure to fulfill an agreement to issue stock.
    The judgment should be reversed with costs, and judgment ordered for defendants.

      A. %T. Willard, for respondent.
   By the Court.

Pierrepont, J.

—Before the recent statute, which enables parties to testify in their own causes, each member of a corporation could, (since the Code was enacted,) be a witness when the corporation was a party, and so the law now stands. '

Though a corporation, as such, cannot be examined, yet each member and each officer of it can be examined.

We think there was no error in admitting'the plaintiff. The plaintiff states that he assigned the bond and mortgage mentioned (upon which the amount due was $6,500), to the defendants, and that the mortgage was good, and that the defendants agreed to give that amount in the stock of the company; that he has received no consideration except the sum of $900, and that the defendants refuse to issue stock or to pay the balance of the $6,500. The plaintiff’s evidence is positive upon this point, and the referee has so found, and we see no evidence to warrant us in disturbing that finding.

Evidence was offered relating to negotiations about this mortgage, prior to the incorporation of the defendants; such evidence does not of itself prove a contract with the corporation; but as these negotiations were made with the persons who soon after composed the active managers of the corporation, the evidence was proper to explain the subsequent acts of the defendants relating to the same matter. Such prior negotiations, amounting to an agreement with the plaintiff, being adopted by the officers of the corporation as such, became in fact the contract of the corporation, and constituted the terms and conditions, upon which the bond and mortgage were assigned by the plaintiff.

La Farge testifies that he assigned the mortgage to the defendants ; that with the exception of $450 of stock issued to Mr. Eggleson, and $450 issued to Mr. McCarty, amounting in all to $900, he has received no other consideration whatever.

Upon this evidence we think the finding of the referee was correct.

Judgment affirmed with costs.


author: Woodruff, J.

text:
    James W. Wiltsie, Respondent, v. William L. Nobtham, Appellant.
    1. The pendency of an action for damages is no bar to the setting up of the same demand of damages as a counter-claim in a suit afterwards brought against the plaintiff in the first action by the defendant therein.
    2. Where a sale of chattels has been fraudulently made, and the title to the chattels sold has failed, and the purchaser has commenced an action to compel the vendor to surrender a promissory note and mortgage given for the consideration of the sale, to be canceled, and to recover damages for the fraud, the pendency of such an action will not prevent the purchaser, if afterwards sued on the note by the vendor, setting up the fraud, and failure of title, as a defense to the action so commenced by the vendor.
    3. A “ counter-claim,” as defined in the Code- of Procedure, or matter of “recoupement,” as understood before the Code, can only be used as a defense, where it exists, in favor of the defendant against the plaintiff in the action. Accordingly in an action on a note, by a transferee or assignee, a cause of action existing only against the payee, cannot be, set up as a counter-claim, although the plaintiff received the note from the payee after its maturity.

      4. But where the facts averred and sought to be proved affect the validity of the note itself in the hands of the payee, and show either a want or failure of consideration, they are admissible in favor of the maker in an action by one who received the note after its maturity; and, in such case, the pendency of an action brought in equity by the maker against the payee to compel the surrender of the note, to be canceled, and for damages, will not preclude the maker from using these facts as a defense, when, after the bringing of such suit in equity, and after the maturity of the note, the payee transfers the note to a third person who sues the maker thereon.
    (Before Woodruff and Pierrepont, J. J.)
    Heard, March 10th;
    decided, June 12th, 1858.
    This action was tried on the 22d December, 1857, before Mr. Justice Duer and a jury, and resulted in a verdict for the plaintiff, upon which judgment was entered, and the defendant appealed.
    The action was brought upon a promissory note, for sixteen hundred dollars given on the 16th November, 1855, at twelve months, by the defendant, to the firm of Lalouette & Ashfield, ( made payable to one of the firm, for their benefit, and by him indorsed and delivered to the firm) on and in consideration of the sale, to the defendant of certain fixtures and personal property in and connected with a coal yard, the lease whereof was at the same time assigned to the defendant. Although the sale and assignment was in one instrument, the fixtures and chattels mentioned in the schedule annexed, are expressly declared to be the consideration of the note, and the lease is assigned upon a separate and distinct consideration.
    The agreement of sale and the schedule therein referred to, are as follows, to wit:
    “Know all men by these presents, that we, P. H. Lalouette and H. Ashfield, doing business under the firm of Lalouette & Ashfield, in New York City, in consideration of a note for sixteen hundred dollars, (1,600) at twelve months from date, drawn by William L. Northam, do hereby grant, sell and deliver unto said Northam, all fixtures and appurtenances, in, upon and appertaining to the Coal Yard, known as 441 Grand street, and now occupied by said Lalouette & Ashfield, and described in the annexed schedule; and also, in consideration of one dollar, the receipt of which is hereby acknowledged, we do sell and transfer to the said Northam, the present lease of said yard, which has about 2 years to run, at its present rent, and do guarantee to him a renewal to him of said lease for five years, at a yearly rent of not exceeding two hundred dollars, advance, per annum, and at as much less as can be, and also the free privilege to remove all said fixtures at its expiration. If a renewal is not given, then Lalouette & Ashfield are to refund the one-half the loss on said fixtures, and further, in consideration of a note for $3,791.79 at six months from date, with 7 p. interest, p. annum, drawn by said Northam, we hereby sell and deliver unto said Northam, all the coal in said yard, being about 700 tons, and said Northam agrees to pay, in anticipation, on account of said notes, any funds he may have, a surplus not required in any manner in his business, and any such amounts are to be indorsed on his notes.
    “ In witness whereof, we have hereunto set our hands, this 16th day of November, 1855.
    “Lalouette & Ashfield.
    “Witness,
    “A. Ashfield.
    “Schedule. 2 offices, brick; 1 office desk; 1 sofa; chairs;' washstand; scales and weights; 2 carts and harness; 1 horse; 1 safe; screens and shovels; 1 sleighbells; sheds; fence around yard; paving sections; iron rods; hydrants; shop, corner Division and Ridge streets.
    “New York, November 16, 1855.
    “Lalouette & Ashfield.
    The defense set up in the answer, so far as it bears upon the right of the plaintiff to recover upon the note, is that the vendors represented that they had title to the fixtures and chattels. That they had no title to the most valuable portion thereof. That they knew when they sold the same, that they had no right to remove the same; that the defendant has been obliged to abandon the same, except one horse and cart of the value of $200, and that the consideration of the note has thereby failed.
    The answer further states that the vendors guaranteed a renewal of the lease of the yard, and represented that their lease had about two years to run, when in truth they knew that their lease would expire in less than eighteen months, and .that they had no right of renewal, and that in fact they did not procure a renewal, so that the defendant was, on or about the 1st day of May, 1857, compelled to surrender the premises — averring damages sustained thereby.

      And further, that the defendant commenced an action in June, 1857, in the Supreme Court to recover his damages and to compel the vendors to surrender the note, and a mortgage given to secure the same, to be canceled.
    The title of the plaintiff to the note is put in issue. And it is alleged that the transfer, if any, to the plaintiff was after the maturity of the note. And, also, that the suit is brought by the plaintiff in his own name, but in fact, for the benefit of Lalouette & Ashfield.
    On the trial it was proved that the note was sold to the plaintiff after it became due, and after the suit (mentioned in the answer) brought to compel Lalouette & Ashfield to surrender the note, to be canceled, had been commenced. The defendant then offered to prove the failure of the consideration of the note, and the other matters set up in the answer.
    The Court ruled that the defendant was precluded from availing himself of his said defense by reason of having commenced his said suit against the payees of the note, as in the answer averred.
    The other rulings of the Court necessarily resulted from the exclusion of the evidence, and, by direction of the Court, the jury rendered a verdict for the plaintiff for the amount of the note and interest.
    The case was ordered to be heard at the General Term, in the first instance, upon exceptions to the ruling of the Court.
    The plaintiff entered judgment on the verdict, and the defendant appealed.

      A. McOue, for the (defendant) appellant.
    I. The Court erred in directing the jury to find a verdict for the plaintiff.
    II. The Court erred in excluding proof of the several matters of defense set up by the defendant in his answer.
    1. The testimony of the plaintiff’s ■ witness ■ shows beyond all doubt, that the note in suit was passed to the plaintiff after maturity, and after a suit had been commenced by the defendant against this same witness and his partner in business, who were the payees of the note, and from whom the plaintiff in this action derives his title.

      2. The rule is well settled that the purchaser of a note past due, even for value, takes it subject to all equities existing between the original parties, touching the subject matter of the note. (Johnson v. Bloodgood, 1 Johns. C., 51; id., 331; Jones v. Caswell, 3 id., 32; Story on Pro. Notes, § 190; Greenleaf’s Ev., vol. 2, § 199; vol. 1, § 25.)
    3. The plaintiff took the note, not in the ordinary course of business, and with notice in fact that a difficulty existed between the defendant and the payees of the note, in relation to the note, and thus put on his guard; it was his duty to have inquired into the transaction as between the original párties.
    HI. Northam’s right to commence the action in the Supreme Court, against Lalouette & Ashfield, cannot be questioned, and if the note in suit had been passed to the plaintiff before, instead of after the commencement of the suit in the Supreme Court, Wiltsie, the plaintiff, would have been a proper, party to that suit, and might have been enjoined equally with Lalouette & Ashfield from negotiating said note, and might have been compelled to deliver up the note tó be canceled, if the plaintiff succeeded in establishing his equities. (Story’s Equity, vol. 2, § 700; Reid v. Warner, 5 Paige, Chy., p. 650.)
    IY. The suit in the Supreme Court is no bar to the defense sought to be established here. The plaintiff is not a party to that suit. Having taken the note after maturity, he took it subject to all the equities existing between the defendant and the payees, and to the extent that the defendant in this suit succeeded in establishing a defense to the note, to that extent the plaintiff would have his remedy over against the payees who indorsed and transferred the note to him. (Green v. Russell, 5 Hill, 183.)

      M J. Phelps, for the (plaintiff) respondent.
    I. The evidence offered by the defendant, was properly excluded.
    1. It is no defense to an action on a note, that it was given in part execution of a contract of purchase, which was induced by the fraudulent representations of the payee, if it appears that defendant, after knowledge of the fraud, has elected to go on, and avail himself of the contract, and has thus received the benefit of it.
    2. All the facts as to which fraudulent representations are alleged to have been made, are the subject of special covenants in the contract, upon which an ample remedy exists: and the responsibility of the covenantor is not questioned. The claim of actionable fraud in these particulars, is therefore precluded by the contract itself. So far from relying, to his detriment, upon the representations, the defendant has provided himself with a good covenant of their truth, and has availed himself of it, to recover his damages.
    3. There is no failure of consideration, upon the facts offered to be shown. So far as the particulars referred to entered into the consideration of the note, they are covered by the covenant of Lalouette & Ashfield. That constituted the consideration so far, and has not failed to afford an ample indemnity against any deficiency in the property purchased.
    4. Were the defense offered, otherwise admissible, the fact that the defendant had elected to avail himself of it by an independent action, as he might legally do, would preclude him from setting him up here. He can have the benefit of it but once. It is not denied, that the action brought gives him ample remedy. If he has sustained any loss, which might otherwise entitle him to some deduction from the note, the remedy he has chosen is a compensation, and the consideration of the note stands unimpaired. (Halsey et al. v. Carter, 1 Duer, 667.)
   By the Court.

Woodruff, J.

—The ruling had at the trial excluding the defendant’s proofs is sought to be sustained, in part, upon the idea that the defense as proposed to be proved on the trial was in the nature of a counter-claim, to establish damages in the defendant’s favor, which had the action been brought by the firm of Lalouette & Ashfield, the defendant might, but for the suit brought in the Supreme Court, have recouped and so defeated a recovery by them, and that the defendant having brought his action to recover those damages, had made his election to recover those damages by suit, which was then pending, and could not now avail himself of them as a defence or otherwise against the note.

If the correctness of the ruling turned upon this view of the question between the parties, we should feel constrained to say that the pendency of such a former suit for the damages sustained by the failure of the title to the chattels was no bar to the use of the same matter as a counter-claim; the defendant having a cause of action for damages may sue therefor, and if pending that suit he is himself sued on a cause of action in favor of the adverse party, no rule of law requires him to discontinue his suit or be barred of his defense. It is true he cannot recover the same damages twice, and therefore he cannot use them to defeat a recovery against him, and also in his own suit have a recovery in.his own favor. When "the claim to damages has once been established by a recovery or by defeating the action brought against him, that must terminate the litigation; and it .may be that the Court would not permit a defendant after having set up such a counter-claim as a defense and pending the litigation, to bring a new suit himself to recover for the same cause • of action. But if the Court will, in the exercise of a discretion to prevent needless litigation, stay the proceedings in such a case, it can never be held, we think, that the pendency of an action for damages is a bar to the setting up of those damages as a counterclaim in a suit afterwards brought against him by his adversary; Fabricottiv. Launitz (3 Sand.; 743), sustains these views; and a subsequent case in this Court, Fuller v. Reed and Reed v. Fuller (15 How. Pr. Rep., 236, and 6 Duer, 697), further affirms the same proposition.

But we apprehend that so far as the defense set up by the defendant in his answer is to be regarded as, a counter-claim, it was inadmissible upon another ground.

A counter-claim can only be used as a defense, when it exists in favor of the defendant and against the plaintiff, in the action in which-it is sought to be used. It must be a cause of action existing between the parties to the action itself (Code § 150), and this was always true of matter of recoupment. And accordingly a counter-claim cannot be set up in an action by an assignee, when it shows a cause of action against the assignor only. So it was held in Vasseur v. Livingston (4 Duer, 285), affirmed by the Court of Appeals (3 Kern., 248); and Gleason v. Moen (2 Duer, 639).

The case last cited is strikingly like the present. There the action was by an indorsee of a promissory note transferred after maturity, and the defendant claimed to recover his damages sustained by reason of a breach, by the payee, of the contract under which the note was given. And it was held that as the matters alleged created no right to recover damages from the plaintiff, the defense, viewed as a counter-claim, could not be sustained; although there the plaintiff received it with full knowledge of all the facts.

But the defense, as the same was offered to be proved on this trial, is not, we think, to be regarded as either a counter-claim, set-off or a recoupment. It was urged as a defense to the note itself. It is true that the answer sets up the defendant’s claim for damages as a counter-claim. For the reasons already given, no such claim could be allowed in this action, and evidence tending merely to establish a counter-claim would have been properly rejected. But the offer was to prove the matters alleged in his answer, as constituting a failure of the consideration of the note; matters amounting to such failure were alleged in the answer, and to that ground of defense, and to that alone, was the offer of evidence addressed. If the facts alleged in the answer, and offered to be proved, are established, they amount to a partial failure of the consideration of the note. This directly affected the validity of the note itself in the hands of the payees, and although a Iona fide indorsee for value, receiving the note without notice, before maturity, would not be affected by an impeachment of the consideration, the plaintiff receiving it after maturity, took it, subject to all defects impairing its legal validity in the hands of the payees themselves. This point is distinctly held in the case of Gleason v. Moen above referred to, and under a state of facts, substantially like those before us. See also, the cases there cited, and the1 same doctrine applied to an assignment of a chose in action not negotiable in Vasseur v. Livingston, supra.

The offer here was to show that the note was given for sundry chattels sold and delivered, and that the title to nearly all of those chattels was not in the vendors, and that the defendant lost the same by reason of such failure of title. To our minds this presents a case of alleged partial failure of consideration, which the defendant should have been permitted to prove if he was able.

It is urged that the entry by the defendant into the possession of the premises, and his subsequent prosecution of his action for damages must be taken as an affirmance of the whole contract, and the defendant must now be held to pay his note and rely upon his covenants for his protection.

We do not perceive the force of this suggestion. The defendánt has no covenants respecting the title to the chattels except such as are implied in the act of sale. Nor is this a case in which the defendant is seeking to affirm the contract on the one hand, and on the other rescind it and recover back the consideration. The contract, under which the note was given consisted of several independent particulars, one of which was a sale of the chattels for which the note was given. Another, related to a distinct matter, the sale of coal. Another related to the transfer of a lease and contained a guarantee that the lease should be renewed.

The suit which it is claimed operates to deprive the defendant of his defense is brought upon the very ground that the title to the chattels has failed, and prays that for that reason the note should be canceled, and we are now told that the pendency of such a suit would prevent the defendant’s alleging a failure of consideration if the payees were here prosecuting the note itself,

The contract in some of its parts has been so far executed as to be incapable of rescission; and, in that respect, it follows that if any damages for a breach of its covenants have been sustained by the defendant, they may be the subject of inquiry in the Supreme Court even though they should decree a surrender of the note to be canceled. ■ But we think that the defendant, being now sued on the note may use as a defense, the failure of consideration to the same extent as if he had commenced no such action.

On this ground, we think the judgment should be reversed and a new trial ordered, with costs to abide the event.

Ordered accordingly.


author: Pierrepoht,

text:
    Ernest Zachrisson v. Gustavus A. Poppe et al.

    1. Where the owner of property authorizes a broker to sell it, and the property (logwood) is at the time in bond and afloat, and such broker contracts to sell it for cash at a specified price per ton, “ to be delivered alongside the ship,” it is essential to a legal delivery of it that such entries be made by the vendor at the custom-house; and that such documents be furnished by him as will confer upon the purchaser the power to control it.
    2. Where in such a case, such vendor, though requested to do so, wholly neglects to make such entries, or furnish such documents, and by reason thereof the property is not placed within the actual and legal control of the purchaser, the vendor cannot recover from the purchaser the contract price.
    (Before Woodruff and Pierrepont, J. J.)
    Argued, March 1;
    decided, June 12, 1858.
    The plaintiff in this action is Ernest Zachrisson, and the defendants are Gustavus A. Poppe, William Poppe & Henry Schultz, composing the firm of Poppe & Co. It comes before the Court on an appeal by the defendants, from a judgment against them, for the amount of the plaintiff’s claim, entered on the report of a referee.
    The complaint alleges a sale and delivery by the plaintiff to the defendants, on the 29th of August, 1855, of 51 tons, 18 cwt. 2 qrs. and 18 lbs. of St. Domingo Logwood; and on the thirtieth of the same month, of 33 tons, 3 cwt. 2 qrs. and 4 lbs. of St. Domingo Logwood, of the value and at the price of $20 per ton, “ which the defendants then and there undertook and promised to pay in cash,” but have neglected to do, although often requested to do so; and prays judgment for $1,702.11, with interest from the 30th of August, 1855.
    The answer denies, formally, the several allegations of the complaint.
    On the trial before the referee it appeared, that in August, 1855, the plaintiff was the owner of the logwood in question; when he bought (as well as when he contracted to sell it to the defendants), it was afloat; proper entries having been made at the custom-house, to put it in bond. The plaintiff purchased it with the intention of exporting it to Stockholm, in the ship St. Andrew, and had caused the proper withdrawal entries, to enable him to do so, to be made at the custom-house.
    The St. Andrew not being of sufficient capacity to take all of it, he authorized Herman Manny, a broker, to sell what she could not carry (viz.: the logwood in question).
    Under this authority the 'broker contracted to sell it to the defendants, part on the twenty-ninth, and the residue on the thirtieth of August. The broker executed and delivered to the plaintiff a memorandum of each sale, which two memorandums read thus:
    “Few York, August 29th, 1855.
    “Mr. E. Zachrisson,
    “ Sold for your account to Messrs. Poppe & Co., 50 tons of Domingo logwood ex J. Jex, from Port au Prince, at $20 per ton S. P. cash, quality to be good, merchantable, and to be delivered alongside the ship.
    “Herman Manny,
    “ Broker in Dyewoods, Faval Stores, &c."
    “Few York, August 80, 1855.
    “ Mr. E. Zachrisson,
    “ Sold for your account to Mr. Poppe & Co., ab. 80 tons Dgo. logwood ex J. Jex, from Port au Prince, at $20 per ton S. P. cash, delivered alongside the vessel, quality to be good, merchantable.
    Herman Manny,
    “ Broker in Dyewoods, Faval Stores, &c.”
    “The defendants’ counsel objected to their admissibility, because they were not subscribed by the party to be bound or by his authorized agent, within the Statute of Frauds.
    “The referee admitted the same in evidence, reserving the question on the objection until the final decision of the cause; in making which final decision, the referee, without expressing any opinion on this objection, held that inasmuch as the plaintiff had alleged a sale and delivery, and must prove such allegation to be true to enable him to recover, the Statute of Frauds had no application. To which ruling of the referee, admitting the same in evidence, the defendants’ counsel excepted.”

      The signature of “Herman Manny” to them, is printed, not written.
    He testified, that he delivered contracts to each party, those “delivered to defendants were counterparts” of the above, “ except the word bought, in place of the word sold; and that these notes expressed the contract agreed upon between the parties.”
    It further appeared that the defendants, expecting a delivery of the logwood, had engaged the “ Augusta and Emma,” and the “ Fosca Helena,” then lying at pier 8, North River, to take, the former fifty, and the latter thirty tons, and ordered the log-wood to be sent alongside of those vessels, or to the pier at which they lay.
    A custom-house order was delivered to the defendants, with a view to enable them to obtain a withdrawal of the logwood from bond. The custom-house officers refused to act upon it, on the ground that no logwood then appeared on its books, as belonging to the plaintiff. The plaintiff was notified of the difficulty, and personally or through his clerks promised to obviate it, but did not do so, although he was frequently urged to do it, and as frequently renewed his promise.
    By the thirtieth, all the logwood had been sent to pier 8 and weighed, and some part of it put on board the Augusta and Emma, and the Fosca Helena. On that day, the plaintiff sent to the defendants, a bill as follows:
    “New York, August 30th, 1855.
    “Messrs. Poppe & Co., Bought of E. Zachrisson, 87 Wall st. “ Delivered alongside Augusta and Emma.
    Tons 51, 18, 2, 8, Sdgo. logwood,............... 1038 57
    “ “ “ “ “ Fosca Helena,................ 653 54
    “ 33, 3, 2, 4, D.
    Tons 85, 2,0,12, a $20, $1,702 11”
    The evidence tends to show that the defendants refused to pay the bill, on the ground that the logwood had not been placed within their control, but expressed a willingness to pay for the quantity actually on board, on being advised of its weight; and that on the morning of the thirtieth they notified the captains of these two vessels, to take no more on board without further orders.
    On the third of September, the defendants sent to the plaintiff, the following notice, viz.:
    “ New York, Sept. 3, 1855.
    “ Sir—Please take notice that your warehouse entry per Josiah Jex, from Port au Prince is not in proper order, so that it is impossible for us to withdraw the eighty tons of logwood you sold to us on said entry.
    “ If said warehouse entry is not fixed to-morrow before two o’clock, we shall deem the contract between you and us dissolved, and look upon you for all the damages that may arise out of this transaction.
    “Respectfully yours.
    “ Signed by Gr. Poppe,
    “ in the name of the firm.”
    From this time, both parties seem to have abandoned the log-wood to its fate, and that portion which had not been taken on board the two vessels, was carried to the corporation yard and there sold.
    The testimony, as to the efforts to withdraw the wood from the custom-house, and the interviews in relation thereto, between the agents of the plaintiff and the defendants and their clerks, was objected to by the plaintiffs. The referee admitted the evidence, “reserving” (as the case states) “the question on the objection.”
    The referee found and reported as facts:
    “That in August, 1855, the plaintiff was the owner of the logwood in question, and authorized his broker Herman Manny, to sell it.
    “ That under this authority the wood was sold to the defendants, in two lots, on the twenty-ninth and thirtieth of August, it then being afloat.
    “ That after the sale had been made, the plaintiff’s agent, by direction of the defendants, caused the logwood to be landed on the pier No. 8 North River, alongside of two vessels called the Augusta and Emma, and the Fosca Helena, and it was then delivered to the defendants.

      “ That freight for the logwood was engaged by defendants on these vessels, a portion of the wood was carried on board the vessels, and a part of it actually taken to Europe in each.”
    His conclusions of law were:
    1. “That the delivery of the logwood in question by the plaintiff to the defendants was actual and complete so as to vest the title in defendants, and make them liable in this action for goods sold and delivered.
    2. “ That the-testimony relating to the efforts to withdraw the wood from the custom-house is immaterial and should be excluded.
    3. That the plaintiff is entitled to judgment against the defendants for the price of the wood.”
    To which conclusions of fact and of law the said defendants duly, severally and separately excepted.
    The referee, in an opinion accompanying his report, after stating summarily the facts and that the logwood was lost, proceeds to say, “ and the question now is, upon which party shall this loss fall? And the answer to this question turns upon the point whether there was in fact a delivery of this wood to the defendants, and an acceptance of it by them ?
    Without attempting any review of the many adjudications bearing upon this mooted question, I think enough is shown by the testimony taken before me, to warrant the conclusion that both parties regarded the delivery as actual and treated it as complete. At the time of the sale the wood was afloat. The bulky and heavy character of the article precluded the idea of a manual delivery, and the sale note stipulates that the delivery was to be made alongside the vessel. The vendor naturally inquired where the purchaser desired the wood should be sent. The defendants gave the proper direction, and it was sent there accordingly; and it was then I think delivered to the defendants so as to become their properly.” . .... “What more could be required in the way of delivery? If A sells a horse to B and B directs that he shall be sent to C’s stable and he is sent there, is not the delivery complete ? So in this case, if the defendants direct the place to which they wish the wood sent, and it is sent, it is delivered to them and becomes absolutely their property. The vendor when he parts with the thing sold cannot repossess himself of it again, nor can the vendee when his own directions are complied with set up a non-delivery, although he may ever so much desire to be rid of his bargain. I do not see any reason for the assertion that the plaintiff, when the sale was made, undertook to enable the defendant to withdraw this logwood from the bonded warehouse, so that the defendants might have the benefit of the drawback on its exportation. There is no agreement to that effect in the sale note; no allegations are contained in the answer to -which any such proof could be pertinent, and the testimony so far as it relates to the efforts to withdraw the wood from the custom-house, and which testimony was objected to by the plaintiff's counsel, is immaterial and should be excluded. It is a hardship doubtless to the defendants to require them to pay for wood they never had any benefit from, but the hardship to the plaintiff would be still greater to compel him to bear the loss he was in no wise instrumental in occasioning. He sold the wood and delivered it at the place indicated by the defendants, thenceforth it became their property and was at their risk. An inundation that swept it from the pier, or a fire that consumed it, or any other of the many casualties by which it might be destroyed, could not in any way affect the purchaser’s obligation to pay for it.
    “I think the plaintiff is entitled to judgment for the value of the wood, with interest from the commencement of the action.”
    Judgment was entered on the report, and from that judgment the present appeal is taken.

      Mortimer Porter, for appellants.
    I. The referee erred in finding as matter of fact that “after the sale, the plaintiff’s agent, by direction of the defendants, caused' the logwood to be landed on pier 8 North River alongside of the two vessels, and that it was then delivered to the defendants."
    1st. The logwood had already been landed on the pier when the contract of sale was made.
    2d. There is no evidence that the defendants ever directed plaintiff to deliver the wood alongside these vessels. The only evidence on the subject is that of Mr. Maas, who says, “he thinks Mr: Manny gave him the names.

      3d. Mr. Manny was agent for making the sale, and nothing more. He had no authority to direct about the delivery.
    4th. Although the defendants engaged freight for logwood by the two vessels, they never directed the vessels to take in this wood; and none of it would have been taken on board, except for the interference and orders of plaintiff’s agents.
    5th. Defendants never accepted the delivery or exercised any acts of ownership over the wood. From beginning to end, they declined to receive it until the custom-house papers were fixed so that they could legally export it.
    6th. The plaintiff retained the possession, custody and control of the wood.
    7th. The wood was not weighed off to defendants. Maas says it was weighed after it was landed on the pier, and a bill sent to defendants, but the weighmaster is not produced, and. there is no proof of what the weight was. ' , ,; -
    II. There was no delivery to the defendants, actual and complete, so as to vest the title in them. There must be an", acceptance by the buyer, as well as a delivery by the seller. (2 R. S., 136, § 3; Outwater v. Dodge, 6 Wend., 397; Schindler v. Houston, 1 Comst., 261; Evans v. Harris, 19 Barb., 416; Dutihl v. Ritchie, 1 Dallas, 171; Baldey v. Parker, 2 Barn. & Cres., 37; Phillips v. Bristolli, id., 511; Story on Sales, §§ 276 to 279; Addison on Contracts, 2d Am. Ed., 1857, pp. 240 to 245; Maberly v. Sheppard, 3 Moore and Scott’s Rep., 443; Tempest v. Fitzgerald, 3 Barn. and Alderson, 681; Ives v. Polak, 14 How. Pr. R., 411.)
    III. The referee erred in admitting the sale notes in evidence. The exception to its admission was well taken. (2 R. S., 136, § 3; Davis v. Shields, 26 Wend., 341; James v. Patten, 2 Seld., 9, 12, 15.)
    IV. If the sale notes are excluded, then there is no evidence of any agreement to sell.
    V. The referee erred in excluding the testimony relating to the efforts to withdraw the wood from the custom-house. This evidence was pertinent to the question of delivery. It shows that both parties at the time acted upon the understanding that something more was to be done before the sale would be complete. No goods intended to be re-exported shall be reladen before an entry is made, with bond and affidavits, &c., and permit given. (1 U. S. Statutes at large, p. 45, §§ 32, 34, 35; p. 182, § 5; p. 413, § 6, vol. 3, 486; vol. 4, 410 to 442 ; Gillespie v. Durand, 3 E. D. Smith, 531.)
    VI. The referee cannot on the trial admit evidence de lene esse, and then reject it in his decision. (Allen v. Way, 3 Code Reporter, 243.)
    While he says that the sale notes are of no importance, they in fact contain all the evidence of the terms of the bargain to be found in the case. •
    VII. The judgment founded on the report of the referee should be reversed, and the case sent to a new referee.

      J. G.. Vose, for respondent.
    I. The contracts of sale were clearly proved by the testimony in the cause, and the referee was justified in his conclusion of fact in regard to such contracts.
    1. The witness Manny testified that he was a broker, and employed by the plaintiff to sell the logwood in question, and • that he did sell the same to the defendants upon the terms mentioned in the “ bought and sold notes ” which he delivered to the parties respectively.
    2. The bought and sold notes state clearly the terms of the contracts, and furnish the best evidence thereof. - ■
    Whether they were “subscribed” in the way and manner required by the Statute of Frauds is not material, as that question does not arise in this case. They were signed or executed in sufficient form and manner to bind the parties.
    3. The acts of the defendants prove that they regarded themselves as purchasers of the logwood under the above contracts.
    H. The testimony shows a delivery to and acceptance of the goods by the defendants.
    I. By the terms of the contract, the logwood was to be delivered alongside of certain vessels, to be named by the defendants. The vessels were -afterwards named and designated, and the logwood was delivered alongside of them, according to the contract. (Dawes v. Peck, 8 Term R., 330; Dutton v. Solomonson, 3 Bos. and P., 582.)
    • 2. .The defendants engaged freight in those vessels for the logwood, and in pursuance of such engagements or contracts of affreightment, part of the logwood was actually taken on board with their knowledge and approbation, and was carried away in them. This was a virtual acceptance of the goods. (Vincent v. Germond, 11 Johns., 313 (283); Outwater v. Dodge, 6 Wend., 397; Sprague v. Blake, 20 id., 61; McKnight v. Dunlop, 1 Seld., 537).
    3. The plaintiff also, at the defendants’ request, gave them the usual order for the goods at the custom-house, which was accepted and acted upon by the defendants.
    4. Nothing remained to be done by the plaintiff to render the delivery complete.

      a. It was not necessary, nor did the parties contemplate, that the wood should be again weighed. It had been weighed by the proper weighmaster, and his returns of the parcels separately delivered to the defendants with the bill for the logwood, and no objection was then made that it should be reweighed. There was no ground for the subsequent demand to have it weighed.

      b. The pretended difficulty in clearing the goods was not substantial or material. It was merely a neglect of the customhouse officer to report that all the wood had not been shipped, as previously intended. It was not a breach of any duty which the plaintiff owed. It did not interfere with the defendants’ possession of the wood. There was no proof of any damage occasioned by it.
    III. By the acceptance of the logwood the contract was so far executed that the defendants could not rescind the same. Certainly not without first returning and delivering back to the plaintiff that part of the logwood which had been taken aboard of the vessels, which they never did nor in any manner offered to do.
    If the plaintiff neglected to do what the contract required of him, the damages, if any, might perhaps be the subject of recoupment, but no such duty or damage is alleged or claimed in the answer.
    IV. The referee decided correctly in admitting the “ bought and sold notes ” in evidence.
    They were the best evidence of the terms of the contract, and were sufficiently executed to entitle them to be read. It is not ■necessary that a written contract should be actually “subscribed by the party to be bound thereby ” to make it valid, except in cases where the question arises under the Statute of Frauds, and even in those cases the contract must be received in evidence, in order that the Court may determine the question whether it is or is not properly subscribed.
    It is not a question of the admissibility but of the effect of evidence.
    V. The judgment of the referee should be affirmed, with costs.
   By the Court.

Pierrepoht,

J.—The sale note, in this case, was not subscribed by the parties to be charged thereby,” and the contract for the sale of the logwood is void by the Statute of Frauds (2 R. S., 136, § 3), unless it appears that the defendants accepted and received part of the goods “ or the evidences,” or some of them at least.

It is claimed by the plaintiff- that the delivery of his order upon the custom-house was a delivery of the goods, and that when the defendants received the order they accepted that as a delivery of the goods; and furthermore, that as some of the logwood actually went on board the vessels in which the defendants had engaged freight for.it, and as the rest of it was placed upon the dock where the defendants might have taken possession of it, and shipped it, that the delivery was complete and bound the defendants to pay for the wood.

The evidence would perhaps warrant the conclusion that the defendants might have taken actual possession of the logwood; and that they might have shipped it, provided there had been no interference on the part of the government; but it is entirely clear that until the plaintiff changed his entry, the defendants could not withdraw the wood or ship it without violating the laws of the United States. (1 U. S. Statutes at large, pp. 45, 182, 413; vol. 3, p. 486; vol. 4, pp. 410 to 442.)

A delivery by the plaintiff of an order, which did not give the defendants any legal control over the property mentioned in the , order, is not, in contemplation of law,- a delivery of such property. If the defendants had agreed to accept the plaintiff’s order upon the custom-house as a delivery of the goods named in the order, and to take their own risk of getting them withdrawn from the custom-house or of shipping them without any formal withdrawal, then' the defendants might be bound; but the evidence warrants no such conclusion, and it is plain that no acceptance of such delivery was contemplated.

We think the report of the referee erroneous, and that the judgment must be set aside, with costs to abide the event, and that the order of reference should be discharged.

Ordered accordingly.


text:
    Thaddeus R. Fletcher, Plaintiff, v. James T. Derrickson, James Gaunt and John Clapp, Jr., Defendants.
    1. Where a debtor, in consideration of forbearance of a debt owing by him, agrees to deliver to the creditor goods at a future day, at a stipulated price, to a specified amount, to be applied in payment of his debt to that extent, and breaks his agreement by neglecting to deliver, the creditor in an action against his debtor upon the agreement, is entitled to recover as damages for the breach thereof, the amount so agreed to be paid, although the market value of the goods is the same or even less than the price at which they were to be received.
    2. In an action on a guarantee of the performance of an agreement, the measure of damages, as against the guarantor, is the amount which the plaintiff would recover against the principal, if the action' were brought against him upon the agreement itself.
    3. Hence, where A. (a debtor) agreed to pay $2,000 in paper, at 3 J cents a pound, on certain future days named, on his indebtedness, and the defendants guaranteed the performance of the agreement, in consideration whereof the creditor agreed to forbear and to accept the paper in payment: Held, in an action against the defendants upon their guarantee, on the neglect of A. to deliver the paper, that the plaintiff is entitled to recover the full sum of $2,000, notwithstanding the market value of the paper when it should have been delivered, was not greater than the rate at which it was to be received.
    4. The rúle that, in an action by the vendee of goods against the vendor for refusing to deliver, the plaintiff can recover only the difference between the market value and the sum to be paid on the delivery, has no application to such a case.

      5. Where, on a purchase of property, promissory notes are given by the purchaser to the plaintiff, a third person, a creditor of the vendor, the money secured thereby, to "be applied when paid to satisfy himself and also other creditors, the plaintiff is a trustee of an express trust, and entitled to recover the whole amount; and for that reason when the payment of a por1 tion thereof in goods is guaranteed, he may recover the whole amount so to be paid from the guarantor, although his own debt has been already satisfied in part or in whole out of other notes.
    ( Before Woodruff and Pierrepont, J. J.)
    Heard, March 1;
    decided, June 26, 1858.
    This action was tried on the 12th of November, 1857, before Mr. Justice Slossoh and a jury. The jury found a verdict for the plaintiff, for nominal damages only, and on the plaintiff’s exception to the charge the case came to the General Term. The following are the facts appearing on the trial:
    On the 19th September, 1854, Jacob Maeek and another sold certain paper mills, &c., to Messrs. A. M. & D. P. Squires; and to secure the payment of a part of the consideration money, the purchasers gave to the plaintiff promissory notes, payable at various times, to the amount of $25,500 and a mortgage upon the premises so sold. It was agreed, as a part of the terms of sale, that these notes should be given to the plaintiff, and that he should apply the payments made to him, to the satisfaction of certain pre-existing incumbrances on the property, including a previous mortgage to himself, and when they were paid then the balance realized from the said notes should belong to Maeek. All the said prior incumbrances had been paid under this arrangement, except $3,400 held by one Bigelow and a balance, to the plaintiff on his said prior debt, of about $500 at the time of the trial of this action.
    On' or about the 9th day of May, 1855, the said A. M. & D. P. Squires, submitted to the plaintiff an offer, the terms whereof are expressed in writing, signed by the Squires, in the following words, viz.:
    “It is agreed between Thaddeus R. Fletcher of the first part and A. M. & D. P. Squires of the other part as follows: That the said Squires shall make and deliver to the said Fletcher, two thousand dollars in wrapping paper at three and a half cents per pound; the paper to be made out of hay or straw, as the principal material,” &c., &c. (describing the paper), “the first one

      thousand dollars to he paid in the month of October next, the other in the month of November next. And the said Fletcher on his part agrees that if James T. Derriclcson & Co. will sign the guarantee on the back of this instrument, he will accept of said paper and will apply the amount thereof he has in debts against the said Squires, falling due in June next, secured on property at Hubbells Falls, Essex, Yt., and voill suspend the payment of two thousand dollars due in June next, in the meantime.
    “ 9th May, 1855. A. M. & D. P. Squires.”
    Upon- the back of this writing the following indorsement was made, signed by the defendants:
    “To T. R. Fletcher, Esq., Sir: If you make an agreement with the Messrs. Squires as is within written, we hereby for value received, guaranty that the said Squires shall perform said agreement on their part.
    “ James T. Derricksoh & Co.”
    Upon the delivery of this agreement with the guarantee thereon so signed, and in consideration thereof, the plaintiff executed on his part an agreement to forbear the collection of the sum of $2,000 due in June, until the times therein mentioned for the delivery of the paper (October and November), and that the amount of $2,000 of wrapping paper when paid should be applied upon the debts he had against the Squires, due in June.
    The debts thus referred to, were the promissory notes which the plaintiff held under the arrangement first above mentioned.
    The plaintiff performed on his part by forbearance, as stipulated in the agreements.
    None of the paper was delivered at any time.
    The defendants were duly notified as well of the acceptance of their guarantee, as also of the non-delivery of the paper.
    The paper was shown to be worth, at the times when it should have been delivered, three and one-half cents per pound.
    This action was brought upon the defendants’ guarantee, and it was held on the trial that the paper being worth, on the days when it should have been delivered, the precise sum which the plaintiff had agreed to allow therefor, no damages were shown to have been sustained by reason of the breach of the agreement, and the jury were instructed to find a verdict for nominal damages; and the jury accordingly rendered a verdict for the plaintiff for six cents. To this ruling on the subject of damages, the plaintiff excepted. And upon this exception, the case came to be heard at the General Term, pursuant to an order, made on the trial that it be so heard, and that the judgment be in the meantime suspended. ,

      0. W. Prentiss, for the plaintiff.
    1. The guarantee was absolute for the .performance of the contract, that is, for payment of the debt. It was not for indemnity. The rule of damages is, therefore, the amount of the debt. (McGee v. Reon, 4 Abbott’s P. R., 8; Churchill v. Hunt, 3 Denio, 321; Clark v. Burdett, 2 Hall, 197.)
    II. The rule of damages is the same against the guarantor as against the person for whom he guarantees, viz., the amount of the debt. The guarantor’s liability may, however, be larger. (W. W. Story on Cont., 2 ed., 740.)
    III. There is less reason for the guarantor to claim the rule of damages adopted by Justice Slosson, than for an indorser of a note or bill to claim it when the indorsement has been taken as collateral security or in payment of a precedent debt.
    IV. The guarantor, being a subsequent mortgagee, has the benefit of the mortgage security of the plaintiff by paying the debt guaranteed, to that amount. He would be-entitled,, if hé had no mortgage, to the benefit of the securities in plaintiff’s hands.
    V. There is no resemblance between the contract guaranteed and a purchase and sale of cotton, or the like, on time, at a fixed price, where the difference between the contract and the subsequent risen or fallen price is the rule of damages. The contract there is executory on both sides; here it is executed on the plaintiff’s side. The guarantor’s contract was simply that the principal should pay the debt of the plaintiff in a particular manner. The price fixed was merely descriptive of the quality of the paper. (Brown v. Curtiss, 2 Comst., 225.)
    VI. “ The guarantor will be bound to the full extent of the terms of his agreement, and they will be construed against him and in favor of the guarantee as far as their reasonable import will allow.” (W. W. Story on Cont., 2 ed., 741; Walrath v. Thompson, 4 Hill, 200.)

      E. J. Phelps, for the defendants.
    I. It is a well settled rule, that in actions upon contracts for the future delivery of goods, at a specified price, the measure of damages is the difference between the contract price and the market value, at the time the goods should have been delivered. (Sedgwick on Damages, 260; Dey v. Dox, 9 Wend., 129; Davis v. Shields, 24 Wend., 322; Beals v. Terry, 2 Sandf. S. C., 127; Kipp v. Wiles, 3 Sandf. S. C., 585.)
    II. This rule applies to the present case. The paper was worth in market, when the contract required its delivery, just the price agreed to be allowed for it. The notes on which it was to be applied in payment, were fully secured by mortgage, and, so far as appears, were perfectly good, independent of the mortgage. The plaintiff has therefore sustained no loss, unless in the forbearance for a short time to proceed in the' collection of his notes. And this is compensated, in legal contemplation, by the interest accrued on them in the meantime.
    No attempt was made at the trial to prove any damages.
    lit. The case bears no analogy to that of a guarantee for the payment of a note. The contract of the defendants was for the delivery of wrapping paper, at a given price. How that price was to be paid, whether in cash or by allowance (on a good note, is quite immaterial. The measure of damages is the plaintiff’s loss. And he has lost nothing.
    IV". Judgment should be rendered on the verdict, that the defendants recover their costs. (Code, §§ 304, 305.)
    V. At any rate, plaintiff could only recover the $500 due to himself.
   By the Court.

Woodruff, J.

—It was not denied nor doubted, on the argument, nor, so far as appears on the trial, that the agreement with the indorsement thereon signed by the defendants, constituted a valid, binding contract of guarantee by the defendants, that the Messrs. Squires should perform the agreement on their part, according to its legal import.

The breach of that agreement by the Messrs. Squires, and notice of such breach to the defendants being proved, the only question raised was, what damages the plaintiff is entitled to recover.

Whatever damages the plaintiff would have been entitled to recover against the Messrs. Squires for the breach of their agreement, the plaintiff was entitled to recover from the sureties who guaranteed its performance. The obligation of the principal and that of the sureties were plainly co-extensive and concurrent, and their liability respectively the same. The defendants’ guarantee, when accepted, was absolute and unconditional.

The agreement of the Messrs. Squires was, we think, when properly construed, an undertaking to pay to the plaintiff two thousand dollars, in paper of a particular description, at certain specified times, and to be measured for the purpose of ascertaining the quantity at three and one-half cents a pound.

Payment of a money demand was the primary object of the agreement; it provides that the first one thousand dollars “ shall be paid ” in October, the other in November, and the amount shall be applied upon money demands to become due, and payment of which are to be forborne to corresponding dates.

We cannot discriminate between this agreement and a more simple promise, sometimes called a promissory note, by which the maker promises to pay a sum named, in chattels, on a day named and at a specified rate. And to such an agreement, the rule of damages upon breach of an agreement between vendor and vendee, where the price has not been paid, has no application. Heiein we think consists the error in the defendants’ claim on the trial. The case was likened to such an agreement, and inasmuch as the vendee in such case recovers only the difference between the contract price and the market value, it was held that there being here no difference the damages are nominal only\

This is not the proper view of the rights of the parties. For a sufficient consideration the Squires had agreed to pay in paper the sum of two thousand dollars; that sum had already been advanced to them and was in their hands; it matters not that the plaintiff held other security for the same indebtedness; to hold, that this would affect the plaintiff’s title to recover upon this agreement according to its terms, is practically, to say that the agreement itself is without consideration, for plainly, if it be of binding force at all, it is a security that the plaintiff shall have the two thousand dollars and have it in paper.

The construction given to it on the trial was, that the defendants guaranteed, not that the two thousand dollars should be paid, and paid in paper, but that the plaintiff should have whatever profits he would be entitled to, if paper should rise in the market to a higher price than three and one-half cents.

This is indeed the practical result of an agreement between vendor and vendee, where the price is not paid, not because that is the construction of the agreement, but because that gives to the vendee all the beneficial results contemplated by it, in the form of full compensation for the breach. Not so where the agreement to deliver is upon a past consideration. Such an agreement, made on such mutuality as renders it binding, gives title to the whole value of the subject to be delivered.

Again, the holder of an. existing debt, however secured, may require and receive security therefor, with such guarantee for the payment as he may be able to obtain, and if he obtain such guarantee upon a valid consideration, he may enforce against the surety the payment of the whole debt. The theory upon which this case was disposed of, would enable the surety in such latter case to say, “if the debt guaranteed by me had been paid according to the terms of the new security, you must have applied the amount upon the previous indebtedness; it not being paid your claim upon such previous indebtedness remains in full force; you have therefore lost nothing by the failure of my principal to pay the new note or obligation, which was guaranteed by me, and your damages are therefore nominal."

It is true in the present case, that the plaintiff holds in full force against the Squires the original debt, and the mortgage security he held therefor. But he stipulated for and obtained additional security. In order to obtain that additional security, he agreed to forbear, and did forbear; he also consented to receive payment in paper instead of money. The security he so obtained, was a guarantee of the payment of the debt, and that guarantee he is entitled to enforce.

We recur therefore to the observation that the true construction of the agreement is, that it is an undertaking to pay a specific sum of money in chattels, at a rate agreed upon, and on a future day named. And the fact that when the payment is made, it will discharge a money demand already existing, although it made a new and sufficient consideration necessary to support the agreement, does not alter its construction or legal effect, when its binding character is established or conceded.

The rule of damages in such a case, is not, as we believe, open to discussion in this Court. There has been formerly some conflict of views upon the question, whether the rule of damages is the value of the specific articles agreed to be delivered, or the sum which was agreed to be paid in such articles. But in no case that has fallen under our observation, has it been claimed that the plaintiff’s damages were not measured by one or the other of these standards.

In Gleason v. Pinney (5 Cow., 411), where it appeared that the value of the articles in which payment was to be made, was less than the sum to be paid, it was held (in opposition to the opinion of the Chief Justice reported at page 152,) that the plaintiff was entitled to recover the value of such articles.

And in Clark v. Pinney (7 Cow., 681), where the articles in which payment was to be made, had risen in the market, it was held that such a contract was to be treated like a contract of purchase by a vendor who paid the purchase money in advance, and that the plaintiff was entitled to recover the highest price which the articles bore in the market, between the time when they should have been delivered and the day of the trial.

But the first named case came under review in the Court of Errors (see 5 Wend., 393), and on an unanimous reversal by that Court of the judgment below, it was held that although the value of the articles was less than the sum to be paid, the plaintiff was entitled to recover the latter; and the opinions there apply the same rule as the measure of damages, whether the articles are worth more or less. They treat the agreement as made in favor of the debtor, and as giving him the option to pay according to the very terms of the agreement in chattels if he so elect, but if he neglect to avail himself of the privilege, leaving him liable for the sum mentioned to be paid, and for that only. (See 2 J. R., 235; 3 Comst., 88.)

It makes no difference upon the facts stated in this case, whether the defendants are held liable for the sum agreed to be paid, or for the price of the paper; the amount is precisely the same.

The case last mentioned is conclusive, we think, that upon the facts proved, the plaintiff was entitled to recover two thousand dollars with interest from the times when by the terms of the agreement it should have been paid.

It was argued by the defendants’ counsel, that at most the plaintiff could only recover five hundred dollars, upon the ground that inasmuch as his original mortgage debt had been reduced to that sum, he had no personal interest in the contract save to that extent, and therefore could have sustained no greater damages.

The plaintiff was made, by the original arrangement between himself and Squires and the vendors of the mortgaged property, a trustee to collect the purchase money, and apply it to the payment of several parties. The notes were given to him, and the property was mortgaged to him. The agreement under consideration was made with him, and the guarantee was to him. He was therefore a trustee of an express trust, although the instrument sued on was made with him for the benefit of others as well as himself. It was his right and his duty to enforce the agreement, for the benefit of all who were interested. He was, we think, clearly entitled to maintain the action in his own name, and no objection was suggested by the answer, either that the suit was not brought by the real party in interest, or that other parties should have been joined with him. If such an objection could have been properly taken, it was waived.

There must be a new trial, costs to abide the event.

Ordered accordingly.