author: By the Court.—Speib, J.

text:
    FREDERICK A. CHASE, Plaintiff and Appellant, v. CORNELIUS VANDERBILT, AUGUSTUS SCHELL, JAMES H. BANKER, AZARIAH BOODY, ALBERT KEEP and WILLIAM H. VANDERBILT, Directors, &c., impleaded with The Lake Shore and Michigan Railroad Company, Dependants and Respondents.
    I. Equitable belief.
    1. What is not a foundation for.

    1. A claim for the recovery of an ascertained debt is not.

      a. What is an ascertained debt'in this connection.

    1. Where certain payments are to be made out of net profits, and the complaint alleges that sufficient net profits were made and received to make the payments, the obligation to pay the amount agreed to be paid is a legal liability, and furnishes no foundation for any equitable relief.
    H. CORPORATION.
    1. Consolidated.

      a. Power of.

    1. A consolidated corporation has no power to declare a dividend, as such, of the earnings made prior to the consolidation by one of the companies which was merged in the consolidation, or dividends on the stock of that company out of the earnings of the consolidated one.

      a. Specific performance by.

    1. Such corporation cannot therefore be decreed specifically to declare such dividends.

      a. Therefore, where the sole ground of equity juris diction shown by the complaint is that of specific performance in this respect by such a corporation, there is no equity in the complaint, and an - ' INJUNCTION ISSUED ON IT ItUST FALL.
    3. Directors of—what not a cause of action against,

      a. An action will not lie against the directors of a consolidated company, to compel them to make dividends of earnings made prior to the consolidation by one of the consolidating companies, or to declare dividends on the stock of such company out of the earnings of the consolidated.
    3. Foreign corporation—Jurisdiction.
    1. When the cause of action has reference to the obligations and business of a foreign corporation in a foreign State, the courts of this State have no jurisdiction'. a. They cannot obtain jurisdiction by acting on its directors.

    HI. Parties dependant—who not proper.
    1. Stockholders of ,a corporation in the case above put are not.
    Before Monell, Ch. J., Curtis and Speir, JJ.

      Decided May 2, 1874.
    Appeal by plaintiff from an order sustaining a demurrer to a complaint.
    The complaint alleges that the Michigan Southern & Northern Indiana "‘Railroad Company, a corporation created under the laws of Michigan, Ohio, Indiana and Illinois, issued certain stock evidenced by certificates in the following form:
    “The Michigan Southern & Northern Indiana Railroad Company.
    “No. [Vignette.] Shares.

      “Guaranteed Ten Per Cent. Stock.

    “This is to certify that F. A. Chase is entitled to fifty shares of one hundred dollars each in the guaran-; teed capital stock of the Michigan Southern & Northern Indiana Railroad Company, denominated construction stock. Said stock is entitled to dividends at the rate of ten per cent, per annum, payable semi-annually in New York, on the first days of June and' December in each year, out of the net earnings of said company ; and is also entitled to share pro rata with the other stock of the company in any excess of earnings over ten per cent, per annum; and the payment of dividends as aforesaid is hereby guaranteed. The said stock is transferable only on the books of the company, at their office in the city of Hew York, by the said stockholder in person, or by his attorney, on the surrender of this certificate.
    “In witness whereof, the said company have caused the same to be registered, and this certificate to be signed by their president arid treasurer, and countersigned by their secretary.
    “ Dated at Hew York, this 15th day of. June, 1857.
    “ Edwin C. Litchfield,
    “ John A. C. G-ray, “President.
    ‘ ‘ Treasurer.
    “Countersigned, and prior certificate canceled, this 15th day of June, 1857. . J. M. Hepburn,
    “Secretary
    “Transfer made and registered this 15th day of June, 1857. 1 James H. Edsall,
    “ Transfer Clerk.”
    That during the half year prior to December 1, A. D. 1857, and in each half-year thereafter down to June 1, 1863, the said company realized net earnings from its said business to an- amount more than sufficient to have paid semi-annual dividends of five per cent, on the amount of the said guaranteed stock so issued as aforesaid ; but that no such dividend, and no dividend whatever, was declared or paid by the said company thereon, from the"date of the issue thereof, until on or about the first day of July, A. D. 1863, at or about which time the said board of directors declared and announced a dividend of five per cent, on said construction or guaranteed stock then outstanding, payable on August 1,' 1863, for the six months prior to that date ; and the same was paid accordingly to the t|ien holders of such stock; that during the period between June 1, 1857, and February 1, 1863, the said directors of the said company neglected and omitted to declare or pay any dividend whatever on the said guaranteed stock ; and that during the interval aforesaid, dividends to the amount of fifty-six and two-thirds per cent, of the par value of guaranteed stock accrued, and the same was . suffered by said company to remain unpaid and in arrears.
    That the said directors, in announcing and paying said dividend on the first day of August, 1863, applied and appropriated the same to the percentage or interest which had accrued upon said stock during the last period of six months, ending on that day, and refused to apply the same, or allow it to be applied by the shareholders receiving the same upon the percentage for any previous period of six months, or upon the said aggregate accrued as aforesaid, of fifty-six and two-thirds per cent.
    That after the said date of August 1, 1863, and down to the time of the consolidation hereinafter mentioned, the said company regularly declared and paid the said percentage or dividends of five per cent, for each successive period of six months upon said stock, but always insisted upon applying and appropriating it in the same manner as aforesaid.
    That about the month of July, 1864, said guaranteed stock had been reduced, by cancellation and otherwise, to about twenty-one thousand eight hundred and thirty-six shares, of the nominal value of two million one hundred and eighty-three thousand six hundred dollars, upon which the percentage of five per cent, for the last previous six months would be one hundred and nine thousand one hundred and eight dollars. That at that date, an amount of surplus earnings and profits had been accumulated and realized by said company, sufficient to pay, in addition to all the then pressing liabilities of said company, the said sum of one hundred and nine thousand one hundred and eighty dollars; and also to leave besides a balance in hand of about seven hundred and forty-three thousand eight hundred and ninety-one dollars and eighty-seven cents, which sum, or so much 1 thereof as was required, might, and this plaintiff insists, ought to have been applied to the payment or reduction of the said arrears of fifty-six ancL two-thirds per cent, accrued upon said preferred stock prior to said year 1863.
    But the said corporation, and its board of directors, then in office, utterly refused so to apply or appropriate the same, or any part thereof; that the said plaintiff was, on June 15,1857, and still continued to be the holder ot fifty shares of stock for which he held a certificate, in above form ; that said stock was issued pursuant to a resolution of the stockholders of said company, and to a resolution of the directors thereof, and to a report of the directors to the stockholders; and was subscribed for by plaintiff, or those from whom he claimed, on the basis of certain subscription proposals; that in the year -1869, pursuant to certain acts of the legislatures of Pennsylvania, Ohio, Michigan, Indiana and Illinois, the said corporation, the Michigan Southern .and Northern Indiana Railroad Company, was merged and v consolidated with the Lake Shore Railway Comyany, a corporation created under -the laws of Pennsylvania and Ohio, and that the consolidated company thus formed, took the name of the Lake Shore and Michigan' Southern Railway Company; that afterward, pursuant to certain acts of the legislature of the State of New York, and to the provisions of certain laws of Pennsylvania, Ohio, Michigan, Indiana and Rlinois, the Buffalo and Erie Railroad Company, a , corporation created under the laws of New York and Pennsylvania, was merged and consolidated with the Lake Shore and Michigan Southern Railroad Company, and the corporation thus formed assumed the name of the Lake Shore and Michigan Southern Railroad Company ; that the company thus formed owned and operated lines of railroad, which, taken together, formed a continuous line of railroad extending from the city of Buffalo through the States of Hew York, Pennsylvania, Ohio, Michigan, Indiana, and Illinois, to Chicago, in the State of Illinois.
    That, according to the provisions of the said several statutes above mentioned and referred to, the rights of all the creditors of, and all the liens upon the property of the said corporation, The Michigan Southern & Horthern Indiana Railroad Company, were to be and were preserved unimpaired, and that by the said agreement of consolidation, first hereinbefore mentioned, all just debts, guarantees, liabilities and obligations existing against either of the said companies, parties to said agreement, at the time of the taking effect of the said consolidation were to be, and were by said agreement, assumed, and to be provided for, paid and discharged by the said consolidated company; and all contracts and agreements existing between either of the said parties to the said agreement of consolidation and other companies, or with any person or persons, were to be carried out and performed by the said consolidated company; and the holder of shares of either of the said companies was to be entitled to receive, on the surrender of his certificate for the shares so held by him, a certificate for an equal amount of stock in shares at par in said consolidated company, which company was without delay to issue such certificates on demand of any such stockholder; and that by the terms of said agreement of consolidation, secondly hereinbefore mentioned, all just debts, guarantees, liabilities and obligations existing against either of the said companies parties thereto, at the time of the taking effect of said last mentioned consolidation, were to be and were thereby assumed, and were to be provided for, paid and discharged by the said consolidated company; and all contracts and agreements existing between either of the parties to said last mentioned agreement and other companies, or with any person or persons, were to be carried out and performed by the said consolidated company, the defendant corporation in this action ; and that every stockholder in each of the said companies, or in either of the companies forming the said corporations, which by said agreement were consolidated, was to receive in place of the stock at that time held by such stockholder, a proportionate share of the capital stock of the said new or consolidated corporation, upon surrendering to be canceled to the said new corporation the certificate or certificates of,stock held by such stockholders respectively; and there was not in such distribution to be any difference made in the relative value of the capital stock of either of the said companies; and the said new corporation was, without unnecessary delay, after the perfection of its organization, to ' issue to the stockholders of the said two companies parties to the said agreement, or to holders of stock in the companies, forming the companies which by the said agreement were consolidated, in proportion to their respective interests, certificates of stock in the said new or consolidated corporation, so to be formed as aforesaid; and. that such new certificates of stock have been issued by the said defendant to the holders or many of the holders of stock in the corporations so as aforesaid previously existing, and so consolidated as aforesaid.
    That the said defendants, Cornelius Vanderbilt, Augustus Schell, James H. Banker, Azariah Boody, William Williams, Henry B. Payne, Amasa Stone, Jr., Stillman Witt, William L. Scott, Charles M. Bead, John A. Tracy, Albert Keep and William H. Vanderbilt are the directors of said corporation, and the said James H. Barker is the treasurer thereof. That said corporation has an office and place of business in the city of New York for the registry and transfer of its stock, and the management of its business, or portions thereof, at which office meetings of said directors are held. That the said treasurer performs the* functions of his office, or some of them, at and in the said city of New York. That the said defendants Cornelius Vanderbilt, Augustus Schell, James H. Banker, Azariah Boody, William Williams, Henry B. Payne, Amasa Stone, Jr., Stillman Witt, William L. Scott, Charles M. Read, John A. Tracy, Albert Keep and William H. Vanderbilt are severally holders and owners of shares of that portion of the capital stock of the said defendant The Lake Shore & Michigan Southern Railway Company not entitled to any preference or priority in the payment of dividends, and known or denominated as common or unpreferred stock, and that they, or some of them, were, prior to such mergers and consolidations as are herein set forth, the holders and owners of shares of that part of the capital stock of -the said corporation The Michigan Southern & Northern Indiana Railroad Company, known as the common or unpreferred stock thereof, and which, by reason and in consequence of such mergers and consolidations as aforesaid, has become, and now is, a portion of the capital stock of the said defendant corporation the Lake Shore & Michigan Southern Railway Company, known as the common or unpreferred stock thereof, and which is not entitled to any preference or priority in the payment of dividends. That the number of holders of shares of the said common or unpreferred stock of and in the said defendant corporation The Lake Shore & Michigan Southern Railway Company is very great, numbering many hundreds ; that many of them are unknown to the said plaintiff, and cannot with diligence be ascertained by him ; that many of the same reside without the State of New York, so that is wholly impracticable to bring them all before the court as parties defendant to this action; wherefore, in place of joining all the holders of the common or unpreferred stock of said corporation The Lake Shore & Michigan Southern Railway Company as defendants in this action, the said Cornelius Vanderbilt and the other individual defendants above named are joined as defendants therein, as such holders of shares of the common or unpreferred stock of said corporation, and as representing all other like holders and owners of shares of the common or unpreferred stock thereof, and so that they may represent and defend for the benefit of all such other stockholders.
    That since such formation of the said corporation, the Lake Shore & Southern Michigan Railway Company, the said defendant in this action, such defendant, and the directors thereof, have realized net earnings from the business of said corporation to an amount more than sufficient to have paid the said arrears of dividends upon all the said guaranteed or construction stock of the said original corporation, the Michigan Southern & Northern Indiana Railroad Company, then or still outstanding, together with the interest thereon, from the time when the said several installments of such dividends in arrears became, by the agreement for the issue thereof, due and payable, and which were legally and properly applicable thereto, but have at all time© neglected, omitted and refused to pay over the same, as or for said arrears of dividends, or for the interest thereon, and have used and applied all the net earnings of said existing corporation for purposes other than the payment of said arrears of dividends and interest; and that they have, from time to time, declared regular semi-annual dividends, at and after the rate of four per cent for each half-year, upon the capital stock of the said corporation, The Lake Shore & Michigan Southern Railway Company, which included, and by means whereof there was paid, a dividend upoL i-he eiock of the said Lake Shore & Michigan Southern Railway Company, issued in place of, and which represented, the common or unpreferred stock of the said Michigan Southern & Northern Indiana Railroad Company, and that the dividends so paid by the said Lake Shore & Michigan Southern Railway Company, upon the stock thereof, issued in place of, and which represented originally the said common or unpreferred stock of the said Michigan Southern & Northern Indiana Railroad Company, exceeded many times the amount which would have been necessary to pay, satisfy and discharge all the arrears of dividends, together with interest thereon, due or owing to the said guaranteed or construction stock of the said Michigan Southern & Northern Indiana Railroad Company, so issued as aforesaid—all of which dividends were so paid by the said Lake Shore Michigan Southern Railway Company, in violation of the rights and interests of the said plaintiff, and of all who stood in the same position with the said plaintiff, and were entitled to the like rights as holders of shares of the said guaranteed or construction stock so issued as aforesaid; and prayed that the court determine, adjudge and decree that the plaintiff was and is entitled to receive semi-annual dividends at the rate of ten per cent, per annum upon all the said guaranteed stock so held by him, from the time of the original subscription therefor, to wit, from the first day of June, 1857; and was and is entitled to receive interest on the sums to which the said several dividends would have amounted from the time when the said payments ought severally and respectively to have been made, and was and is entitled to such payments, whether the net earnings of the said Michigan Southern & Northern Indiana Railroad Company were in each year sufficient to enable the said company to make said payments out of said net earnings or not; or if it should be held that the plaintiff could not legally compel the said company to make such payments from year to year, except out of its net earnings, then that an account be taken and stated by, and under the direction of, this court, and that the net earnings of the said company in each year, for and during the whole of the period last aforesaid, might be ascertained, stated and adjudged: and that thereupon it might be declared and adjudged that the net earnings of said company were sufficient in each of said years to have paid, and that therefore the said company, and the directors and officers thereof, ought to have paid such dividends of ten per cent, per annum, semi-annually, on the'first days of June and December in each year, from and • after June 1, 1857.
    But if, on such accounting, it should be found that such net earnings were not sufficient for and during any year or years, or part thereof, to pay thereout such dividend, then that it might be adjudged and declared by the court that said plaintiff vjas and is entitled to such dividends, together with interest on the same from the several times when the same ought respectively to have been paid, out of the future or subsequent earnings of said company, before any part of the same could be paid as dividends to any holder of any of the common or unpreferred stock, or applied in payment or satisfaction of any claim or demand against, or liability or obligation of, the said company, created after the issue of said guaranteed or construction stock; and that the said corporation, the Lake Shore & Michigan Southern Railway Company, and the said directors and treasurer thereof, hereinbefore named as defendants, and their successors in office, might be, by the judgment and decree of this court, required and compelled specifically to perform the said contract and agreement, so as aforesaid' made and entered into by the said Michigan Southern & Northern Indiana Railroad Company in reference to the said guaranteed or construction stock, and be thereupon adjudged to pay to the said plaintiff the amount of the said dividends so in arrears as aforesaid, together with interest on the said several installments of the said dividends, for the periods for which the same ought to have been paid ; and then prayed that the defendants might be restrained by a temporary injunction and by final judgment, from declaring or paying any dividend or dividends whatsoever upon so much and such part of the capital stock of the said Lake Shore & Michigan Southern Railway Company, as has been issued in place of, or which represents, the said common or unpreferred stock of the said, corporation, the Michigan Southern & Northern Indiana Railroad Company, as the same existed at the time of the. first consolidation hereinbefore mentioned, until the said claims and demands of the said, plaintiff and all other persons, holders of any of the said shares of the guaranteed or construction stock hereinbefore mentioned, who have rights similar to those of said plaintiff and are entitled to like relief, shall be paid, satisfied and discharged in full.
    The defendants, Cornelius Vanderbilt, Augustus Schell, James H. Banker, Azariah Boody, William Williams, Albert Keep and William H. Vanderbilt, directors of said corporation, and the said James H. Banker, as also treasurer of said corporation, demurred to the complaint Upon the following grounds, viz:

      First. That the court has no jurisdiction of the subject of the action, or to grant or decree the relief or judgment sought to be enforced or .recovered in this action, or of the persons of these or either of these defendants.

      Second. To so much of the amended complaint as charges these defendants or either of them, with any obligation or liability to declare or pay any dividend or dividends alleged to be in arreár or unpaid, for the period between June 1, 1857, and February 1, 1863, upon the plaintiff’s stock mentioned in the amended complaint, or that charge or seek to hold these defendants or either of them with any obligation, liability or duty for or on account of any failure or neglect of the Michigan Southern & ¡Northern Indiana Railroad Company, or its directors or officers, to declare or pay any dividend or dividends upon the guaranteed or construction stock, or upon any stock mentioned in the amended complaint, for the period aforesaid, or for any other period, or that charge or seek to hold these defendants or either of them with any obligation, liability or duty to apply the net earning or earnings or any part thereof, of the defendant corporation to the payment of any dividend or dividends upon the plaintiff’s stock, for or during the period aforesaid, or for or during any period.

      Third. To so much and such portions of the amended complaint as charge or seek to impose upon these defendants or either of them any obligation, liability or duty to perform any contract, covenant, agreement, act or acts of the Michigan Southern & Northern Indiana Railroad Company, or its board of directors, directors or officers, in relation to the declaration or payment, or failure or refusal to declare or pay any dividend or dividends in arrear or otherwise, upon the plaintiff’s stock or upon any stock mentioned in the amended complaint, for or during the period between June 1, 1857, and February 1,1863, or for any other period prior to the creation of the defendant corporation as a corporate body.

      Fourth. To so much and such parts of the amended complaint as charge or demand that these defendants or either of them be compelled to apply the earnings of the defendant corporation to the payment of any dividend or dividends that ought or might have been paid out of the earnings or net earnings of the Michigan Southern & Northern Indiana Railroad Company, during the period between June 1, 1857, and February 1, 1863, or during any other period, or that charge or seek to compel these defendants or either of them to apply the earnings or net earnings, or earnings or any part thereof, of the defendant corporation, to the payment of any sum or dividend, ascertained upon any accounting mentioned in the amended complaint to be due, unpaid or in arrear.

      Fifth. To so much and such parts of the amended complaint as allege or demand that the plaintiff is entitled to any judgment, order, decree or other relief against these defendants or either of them, either as a board of directors, directors, treasurer, successor or successors, or otherwise.

      Sixth. That there is a defect of parties defendants in this, that these defendants are improperly joined as defendants with the defendant corporation, the Lake Shore & Michigan Southern Railway Company, and that all the stockholders in the defendant corporation have not been joined either as parties plaintiffs or defendants in this action.

      Seventh. That the amended complaint does not state facts sufficient to constitute a cause of action.
    The demurrer was sustained at special term with leave to plaintiff to amend the complaint.
    The plaintiff appeals.
    Birdseye, Cfloyd & Baylis, attorneys, and Luden F. Birdseye, of counsel for appellant, urged:—I.
    The parties demurring are proper parties to the present action, on the simple ground that they are holders of shares of the common stock, which may possibly be injuriously affected by the decision in the action, and that they are to defend for the benefit of other parties, who are very numerous, and all of whom it is impracticable to bring before the court (Code, § 119 ; Crawford v. Northeastern R. Co., 3 Kay & J. 723; Corry v. Londonderry & Enniskillen R. Co., 29 Bear. 263; Coates v. Nottingham Water Works, 30 Id. 86.; Smith v. Cork & Bandon R. Co., Irish Rep. 3 Eq. 356 ; Maughan v. Leamington Gas Co., 15 Weekly Rep. 333 ; Matthews v. Great Northern R. R. Co., 5 Jurist N. S. 284; Sturge v. Eastern Union R. Co., 7 De G. M. & G. 158 ; Henry v. Great Northern R. Co., 1 De Gex & J. 606; Cramer v. Bird, L. Rep. 6 Eq. 143; Richardson v. Larpent, 2 Younge & C. 507 ; Lovell v. Andrew, 15 Simons, 581; Bailey v. Birkenhead R. Co., 12 Bear. 433; Carlisle v. S. E. R. Co., 1 McN. & G. 688; Fawcett v. Laurie, 1 Drewry & S. 192).
    II. The present directors and treasurer of the present corporation are, as such-, necessary and material parties to obtain the relief sought in this action. A material part of that relief is, or may be, to enjoin and restrain those defendants, as directors and treasurer, from declaring or paying any dividends upon .the common stock of this corporation, until the arrears of dividends upon guaranteed stock are paid and satisfied.
    III. A cause of action does exist against the individual defendants demurring, as directors. It appears that the payments in question were of the technical nature of u-dividends,,:i to the payment of which, the act of the board of directors in declaring the dividend and making it payable, was essential. And the declaration of the dividends by the directors is essential, and therefore the directors are proper parties defendant in this action.
    IV. The' parties demurring are also proper parties defendant, on the ground that the dividends in question are withheld, needlessly, improperly, and in violation of the contract which the original corporation had made and violated, and which the present corporation assumed, and has also violated. It was held by the supreme court of Connecticut, in Pratt v. Pratt, 33 Gmn. 446, that a corporation and its directors are trustees, and as such may be called into a court of chancery, either for an account, or to restrain them from mismanagement of the corporate property, or for the purpose .of compelling the corporation and its directors to declare dividends from its surplus earnings, where such dividends are needlessly and improperly withheld.
    V. Specific performance of the contract set out in the complaint; [whichever it be; whether that set out in the stock certificate to pay the dividends out of the net earnings; or the broader contract (to make these payments absolutely), previously made, as above set forth], can be decreed.
    VI. The possibility of a dividend put of the net earnings of the M. S. & N. I. R. R. Co., has not passed away by the mergers and consolidations.
    VII. The eguaranty of payment by the M. S. & N. I. R. R. Co. extended to all net earnings, to wit: those for subsequent years, as well as for each current period of six months or one year; and the payment out of such subsequent net earnings, for any other purposes than the satisfaction of arrears of dividends, might be enjoined in equity (See plaintiff’s points in Prouty v. M. S. & N. I. R. R. Co., pp. 25-34, and cases there cited, viz.: Litchfield v. M. S. & N. I. R. R. Co., per Babhabd, J., in New York Transcript, September 14, 1865; Williston v. M. S. & N. I. R. R. Co., 13 Allen [Mass.] 400; Taft v. Hartford, Providence & Fishkill R. R. Co., 8 R. I. 310 ; Bates v. Androscoggin & K. R. R. Co., 49 Me. 491; Rutland & Burlington R. R. Co. v. Thrall, 35 Vt. 536; Lindley on Part: 655; Stevens v. South Devon R. W. Co., 9 Hare, 313; S. C., 21 Law Jour. Rep. Ch. N. S. 816 ; 12 Eng. L. & Eq. Rep. 229 ; Sturge v. Eastern Union Railway Co., 7 De Gex McN.
      & G. 158 ; S. C., 31 Eng. L. & Eq. R. 406 ; Crawford v. N. E. Railway Co., 3 Jurist N. S. part 1, p. 1093 ; S. C., 3 Kay & J. 733 ; Henry v. Great Northern Railway Co., 3 Jurist N. S. part 1, p. 1117; S. C., 1 Kay & J. 1; affirmed on appeal, 3 Jurist N. S. part 1, p. 1113; S. C., 1 De Gex & Jones, 606; Matthews. v. Great Northern Railway Co., 5 Jurist JJ. 8. part 1, p. 284 ; Corry v. Londonderry & Enniskillen R. Co., 29 Beav. 263; Smith v. Cork & Bandon R. Co., 3 Irish Eq. JJ. 8. 356).
    VIII. If the plaintiff cannot have equitable relief, of the character sought in the present action, against the present corporation, what redress can he ever obtain ? In none of the cases, English or American, has it ever been held that where the contract was for the payment “dividends,” qua dividends, the stockholder could recover the amount due him, as an ordinary debt, or as damages for the non-performance of a contract. In McLaughlin v. Detroit & M. R. R. Co. (ubi supra), the sum sued for was “interest” and not “dividends.” In Bates v. A. & K. R. R. Co. (ubi supra), the stock certificate stipulated for “the payment of six dollars per share semi-annually and the court held that, upon the true construction of the vote for the issuing of the preferred stock, its language was precisely equal in meaning. In each of these cases, therefore, a judgment was rendered, as at law, and for damages. But, after a somewhat careful examination, it is submitted that these are the only two reported cases, at all even kindred to the one in suit, in which judgments against corporations, as in actions at law, and as for the recovery of damages, have been permitted. In all the other cases, the proceedings have been in equity, and have, in substance, required the declaration, as well as the payment, of dividends (See cases above cited).
    IX. If, prior to the mergers, no right of action existed against the M. S. & N. I. R. R. Co., for the recovery of damages, as damages, in consequence of the failure to declare the dividends which are in arrears, and to order and make payment of the same (as is in substance adjudged in the Prouty case, and admitted by Sedgwick, J., in his opinion), what different cause of action for damages, as damages, has arisen, or now exists, against" the present corporation, the L. S. & M. S. R. Co., by reason of the mergers and consolidations of the M. S. & N. I. R. R. Co., with others, out of which the present corporation has derived its existence ? Prior to the consolidation, the right of action as to these dividends was equitable.

      X. If, when the obligation now in suit was that of a foreign corporation, of such a' character that the act of its directors in declaring the dividends and ordering payment of the same, was essential to the stockholder’s remedy, and the joinder of such directors as defendants in the action was absolutely essential to authorize a court of equity in this State or Massachusetts to entertain jurisdiction of the action (as was held in the first suit of Prouty v. M. S. & N. I. R. R. Co., decided by Sutherland, J., at the special term of the supreme court, in 1868, and in Williston v. the same, 13 Allen, 400), does the fact that the corporation, then sued as a foreign corporation, has now availed itself of the laws of New York, and become a corporation, existing not only under the laws of other States, but this State, and is now owning, operating and controlling an immense property, almost wholly beyond the territory of New York, render the directors of the changed corporation, as the same now exists, unnecessary or improper parties defendant in this suit, so that, either on their demurrer or that of the corporation itself, it can be adjudged that they are improperly joined as defendants, because no cause of action exists against them % The property of the old corporation, out of the earnings of which, as defendants contend, the moneys due plaintiff arise and are to be paid, is still beyond the limits of this State, and may perhaps be accessible only by control over the persons of the directors of the corporation. It is not in the month of such directors to say, that no cause of action can ever arise against them, and no relief be granted, as against them, in this suit, even though they do not appear to be absolutely necessary and essential parties defendant.
    XI. For, even if, since the merged or consolidated corporation has obtained .a legislative authority in this State to exist as a corporation here, the new corporation is the only absolutely necessary defendant, so that a sufficient recovery might be'had in a suit against such corporation as, sole defendant, still, the directors of such a corporation, which also exists under the laws of many other States, and the greater part of whose property and assets is beyond the territory o'f this State, and the jurisdiction of its courts, are at least proper parties defendants in this action. There is the same distinction here between necessary and proper parties; between those whom the plaintiff must join as defendants, and those whom he may, at his election, join as defendants; as is above shown in relation to making the holders of common or unpreferred stock parties defendant in their character as stockholders.

      Matthews <& Foley, attorneys, and of counsel for respondents, urged :—I.
    The complaint, stripped of its superfluities and verbiage, in which the real cause of action is buried, charges, in substance, that the Michigan Southern & northern Indiana E. E. Co., being a corporation created under the laws of certain States other than this State, duly authorized the issue and issued its certain certificates of guaranteed ten per cent, stock, a copy of one of which certificates is set out in the complaint in each case; that the plaintiff is the owner of a certain specified number of shares, either by original award or purchase, or both ; that the Michigan Southern & Northern Indiana R. R. Co. realized net earnings sufficient either in whole or in part, during the interval between 1857 and 1863, or subsequently, to pay the dividends in arrear for such interval (this allegation is unnecessary, if it be true, as the plaintiff insists, that dividends were payable independently of net earnings); that the Michigan Southern & Northern Indiana R. R. Co. failed to pay, and the defendant company, both by merger and covenant, assumed and became bound to pay ; that there is due the plaintiff a certain sum for which, with interest, he demands j udgment. That is all that is material to present the questions involved, to entitle the plaintiff to recover. The dividends in arrear became an ascertained debt against the old company, long before the merger with defendant company, who is only liable upon the ground of its assumption, and the existence of the debt.when such assumption was made. Looking at the cases in any aspect, there is no foundation for any equitable relief. It is simply, and entirely, an action at law, and cannot be maintained upon any other theory. It is merely a legal, demand, if it is anything—a liability growing out of an obligation to pay. We submit, that this is not a case calling for the equitable powers of the court; that the case must be dismissed with costs. (Note: The court will remember that the plaintiff’s counsel, upon the argument, substantially conceded want of jurisdiction in the court, but asked to be let off without costs.) We refer to the following adjudged cases, illustrative of the rule for which we contend : Howe v. Peckham, 6 How. Pr. 232; Cropsey v. Sweeney, 27 Barb. 310; S. C., 7 Abb. Pr. 129 ; Madison Avenue Baptist Church v. Same, 26 How. 72 ; Benefit Life Ins. Co., &c. v. Supervisors, 32 Id. 359. This case was decided by the court of appeals. See cases cited at length in a note to the case, pages 367 and 368-Heywood v. City of Buffalo, 14 N. Y. 537; Livingston v. Hollenbach, 4 Barb. 10; Thatcher v. Dusenbury, 9 How. 32; Boston v. City of Brooklyn, 15 Barb. 375 ; Craig v. Hyde, 24 How. 313 ; Kempshall v. Stone, 5 John. Ch. 193 ; see also Hatch v. Cobb, 4 Id. 559 see also to the same effect Geer v. Kissam, 3 Edw. Ch. 130; Morss v. Elmendorf, 11 Paige, 278 ; Bank of Utica Dill, 1 Id. 466; see note under section 427, pages 648-9 of Voorhies' Annotated Code (ed. 1870), and under same section of pages 778-9 of Waifs N. Y. Annotated Code, where the cases are collected as to jurisdiction of foreign corporations, and Waifs Pr. vol. 1, p. 122-3.
    II. Bearing in mind that whatever obligation was ever contracted had its origin as against a foreign corporate body, and that this defendant company is only liable, if at all, upon the ground that it, not‘its directors, assumed that original obligation, the next question is, do the complainants state a cause of action as against them? We earnestly insist that they do not. The directors have contracted no obligation in the matter with which they can be personally charged. Ho foundation is laid upon which any judgment or other relief can be pronounced, as against them. They are, as regards this alleged guaranty, directors of a new and different corporation (see opinion of court of appeals, at the end of these points). They cannot be compelled to declare a dividend or dividends of a former company for past years. They cannot be compelled, under any circumstances, to. apply the present net earnings of this new company to the payment of dividends in arrear of the old company. As before stated, these dividends in arrear had ripened into a debt long before the present company had an existence.' As well might they be compelled to declare a dividend to liquidate any other obligation of the old company. As well might the directors be joined as parties in every case against a railroad company. What can these directors be compelled to do in this case, any more than in any other ordinary case against the company? They may be ont of office next year, but the corporation, in legal contemplation, never dies. If the company is liable, it must respond, not the directors or their successors (Smith v. Poor, 40 Me. 415; Smith v. Poor, 3 Wares’ U. U. Rep. [Me.] ; French v. Fuller, 23 Pick. [40 Mass.] ; Smith v. Hurd, 12 Metc. 371-383-4).
   By the Court.—Speib, J.

The plaintiff’s counsel contend that the contract between the parties, as set forth in his complaint, was for ah absolute payment of the dividends specified at the time fixed, without regard to the question of “net earnings.” He claims that this contract between the plaintiff and the original corporation—the Michigan Southern & Northern Indiana Railroad Co.—is evidenced—

By the resolution of the stockholders, passed, at their annual meeting, in 1857.

By the resolution of the directors, immediately thereafter.

By the report of the directors to the stockholders, of May 6, 1857.

By the proposals for subscription, and by the subscriptions for the stock, all of which are set forth in the complaint. ,

In either aspect of the case—whether the demands were made payable out of the “net earnings of the company,” as certified to the plaintiff in his stock certificate, or whether the dividends specified were to be paid absolutely—the liability growing out of the alleged obligation is purely a question of law. It is charged that the net earnings were, in 1864 and 1865, and prior thereto, largely in excess of the amount necessary to liquidate the dividends in arrear. It, therefore, became an ascertained debt against the old company before the merger with the defendant’s company, and its liability is based upon its assumption and the existence of the debt when such assumption was made. It is a liability growing out of an obligation to -pay a legal demand, and there is no foundation for any equitable relief. • If the defendant’s corporation, or its directors, became bound, and assumed any obligation, it was for a specific sum of money only. The obligation to pay being established, there can be no dispute about the amount to be paid.

The liability of the defendant depends upon the fact as well as the legal obligation assumed or incurred, and both must be established before the plaintiff can be entitled to any judgment. It clearly appears that this liability, whatever it was, was a debt existing before the creation of the present defendant company, so that the liability of the latter depends entirely upon the liability incurred by the old company, and that was fixed, if ever, before the alleged merger, and must be settled as q question involving the obligations of the old company and its business.

The plaintiff has not, I think, made out a case falling under any acknowledged head of equity jurisdic tion, and the court has- not the power to administer the species of relief asked for (Heywood v. City of Buffalo, 14 N. Y. 537). It is well settled that no relief can be administered in equity when the remedies at law are adequate for the attainment of justice (Benefit Life Ins. Co. v. Supervisors, 32 How. Pr. 359).

It seems to me that the examination into the question of the foundation of the plaintiff’s right to any judgment must inevitably extend beyond the jurisdiction of this court, and must have reference to the obli-. gations and business of a foreign corporation in a foreign State. The examination of the questions involved relate to subjects beyond, and over which this court has no control (Williston v. Michigan Southern & Northern Indiana R. R. Co., 13 Allen, 400; Whitehead v. Buffalo & Lake Huron Co., 18 How. Pr. 218; Howell v. Chicago & Northwestern Railway Co., 51 Bard. 378.

Does the compaint state a cause of action against the directors of the company \ I do not see any ground or foundation upon which any judgment or other relief can be pronounced against them. They have contracted no obligation in the matter .with which they can be personally charged. With respect to this alleged guaranty they are directors of a new and different corporation. Under no circumstances whatever could they be compelled to apply the net earnings of this new company to the payment of dividends in arrear of the old company (see opinion in Prouty v. Lake Shore & Michigan Southern Railway Company, 52 N. Y. 363). If the company is liable it must respond, not the directors or their successors. They may cease at any time to hold office ; but the corporation in legal com templation never dies.

The learned judge in his opinion at spécial term, pertinently remarks that the only ground alleged for an injunction is in connection with the plaintiff’s right'to a specific performance, and if it appears ■ on the face of the complaint that the defendant corporation has never had the power to specifically perform the contract, there is no equity in the complaint, and an action for damagés is all that is left to the plaintiff. As the case stands, the Lake Shore & Michigan Southern Railway corporation have no legal right or power, either to declare a dividend, as such, of the earnings of the Michigan Southern & Northern Indiana Railroad Company, or to declare a dividend on the stock of that company out of the earnings of the consolidated company, while the plaintiff calls for a specific performance by the making of such dividend. The complaint shows that the present • defendants cannot do anything which will give the plaintiff the dividends he claims, and it follows that an injunction against them will not permit his getting such dividends through this action. These defendants are not necessary or proper parties, and the complaint states no cause of action against them.

The defendants demurring, must have judgment on the demurrer, with costs.


source: Caselaw Access Project

author: By the Court.—Sedgwick, J.

license: Public Domain

text:
    GUSTAVUS A. FUDICKAR, Plaintiff and Appellant, v. THE GUARDIAN MUTUAL LIFE INSURANCE COMPANY, Defendant and Respondent.
    ARBITRATOR’S AWARD.
    1. Action to set aside.
    1. Presumptions in suppoi't of the awa/rd.

      a. Where all the proofs and proceedings taken by and had before the arbitrator, are not put in evidence, and a state of facts which would support his rulings in the admission and rejection of evidence and his decisions on questions of fact and law arising before him, might possibly have existed, the court will assume they did exist, and were established before the arbitrator.
    3. Error by arbitrator, what is not such as to call for setting aside his award.

      a. Where a rule was adopted at the hearing of the arbitration that no person who was expected to be a witness should be in the room during the examination of the other witnesses, and after one A. had been examined, who testified against one of the parties to the arbitration, a request by such party for leave to introduce a person Who had been in the room during the examination of A. (but who was not then expected to be called as a witness), to prove that A., after he had finished his evidence and had left the room where the arbitration was held, had said that .he expected, by his evidence so given, to be revenged on the party against whom he testified, and the ahswer of the arbitrator to such request, that under the rule he could not permit such person to be examined, even if error, is not such an error as would lead to a setting aside the award.

      b. The sending by the arbitrator to one of the parties asking for a statement of what items should have been allowed, what credited, and what were objectionable in his view, and the receipt of the statement asked for, which contained not only dates, amounts and specifications of what the amounts were charged and credited for, but also remarks as to the merits of the case, such sending and receipt being without the knowledge or consent of the other party, who, as soon as apprized of it, objected to the proceeding, whereupon the arbitrator informed him that he should not consider the statement, and on the trial of the action to set aside the award, testified, that he did not consider it; the sending of the letter and receipt of the statement does not constitute error for which the award will be set aside.

    Bxjt,

      Waiver. Even if it were material error, acts of the party (after being informed by the arbitrator that he was about to send for the statement) in calling to see if it had been received, and after its reception, examining it, abd making no objection to its reception but only claiming the right of offering proof in refutation, which the arbitrator acceded to in the event of his concluding to consider it as evidence, but the arbitrator did not consider it as evidence,'and so informed the party, waived it.

    3. Stipulation that either party may read from a written record of the proof s and proceedings before the arbitrator such parts thereof as he desired to put in evidence on the trial, —Effect of.
    1. Where the plaintiff reads in evidence a portion of .such proofs, and the defendant either reads none or only a part of the remaining portion, if the omission to read the portion not read constitutes a defect in plaintiff’s case, defendant may take advantage of such defect notwithstanding the stipulation.

    II. CONTRACT—RESCISSION OF.
    1. Justification of rescission.—Evidence in support of.
    1. Acts and transactions prior to the contract may be received, a. Where, after the making of the contract, one party does things which the other maintains justifies a rescission, such other party is at liberty to show the purpose and character of those things by proving, that before the making of the contract, the party doing the things, while acting as his agent, commenced a series of acts which ended in an injury to him, through the use of powers given by the contract, and yet in violation of its provisions.
    HI. Corporation.—Wrongful ' combination of officers with AGENT.
    1. Duty of officers.

    It is to recede from their position and insist- that the agent should perform his duty.
    3. Waiver of breaches, or affirmation of a contract with knowledge of prior breaches.

      a. No such waiver or affirmation can arise from acts done pursuant to a wrongful combination between the officers of a corporation and one of its agents, nor from any transaction between them under such combination.
    Before Monell, Ch. J., Curtis and Sedgwick, JJ.

      Decided May 2, 1874.
    Appeal by plaintiff from judgment of dismissal, entered oma decision made on a trial by the court without a jury.
    This action was tried at special term by the court without a jury, and the trial resulted in a dismissal of the complaint.
    From the judgment of dismissal the plaintiff appeals. *
    The action is to set aside the award of an arbitrator, to whom were submitted all controversies between the plaintiff and defendant. The award of the arbitrator was contained in a long document, made by him. He did not confine himself to a statement of his decision as to the rights of the contestants ; but prefaced that decision by a discussion of facts, given in evidence before him. On the trial of this action, the plaintiff did not offer in evidence the whole of the proceedings, And all the testimony, before the arbitrator; but a part of them appeared before the special term. It appeared that the plaintiff was the agent of the defendant, under a special contract made April 1, 1869, which was. as follows:
    “ This agreement, made April .1, 1869, between the Guardian Mutual Life Insurance Company of New York and G. A. Fudickar, witnesseth: That the said G. A. Fudickar has been appointed superintendent of agencies for said company in the States of Virginia, West Virginia, North Carolina, South Carolina, Florida, Georgia, Mississippi, Louisiana, Missouri, Kansas, and the counties of Erie, Niagara, Schenectady, Albany, in the State of New York, and the cities of Chicago and Milwaukee, and of the German • department of the States of New York and New Jersey, with the sole right of collecting, or having collected, premiums therein, and with the sole right of appointing and removing agents and genei'al agents in said districts.'
    ' “ Furthermore, he shall have the right to accept the premiums on policies all cash, or one-half loan against the policy, but whenever he takes half loan he shall charge the average interest for five years in advance. He shall make a report of all business .monthly, and shall settle accounts "quarterly.
    “ The company agrees to furnish all necessary supplies, to pay postage and express charges, and to comply with the laws of said States, pay all national, State and local taxes, as now in force in said States : one-half of such office rents as have been or may be agreed to, and such signs for agents as the company approve ; also for the insertion of good advertisements in prominent newspapers to the extent approved by the company.
    “The said Fudickar shall devote his time and atten- ' tion in a faithful manner to developing and extending the business of the company in the districts aforesaid, ■in accordance with the rules and regulations of the company. He shall exercise such supervision over the agents of his appointment as shall insure the faithful performance of their duties, and be responsible for the same. He shall receive as his compensation therefor thirty-six and one-half per cent. (36|) of the amount received in cash and loans for the first year’s premiums, and ten per cent, upon all renewal,- cash and loans, to be continued to the said Gr. A. Fudickar during his life, and in case his mother, Caroline Fudickar, shall survive him, then the said renewal commissions shall be continued to her during her life.
    “In addition thereto, he shall receive an allowance, which may be discontinued at the option of the company, for traveling expenses, of ninety dollars ($90) per month for the States of Hew York and Hew Jersey, fifty dollars ($50) per month for the States of Missouri and Kansas, and fifty dollars ($50) per month while actually traveling in the Southern States. It is expressly understood and agreed that in case any laws or regulations shall hereafter be passed in any of the States, counties or cities herein mentioned, as in the judgment of- the officers of the company render it inexpedient to continue business in any of them, the said officers shall have the power to discontinue their business and agencies in any-such case.
    “All contracts with agents under this agreement in aforesaid districts and places shall not be valid unless countersigned by said Gh A. Fudickar as superintendent as aforesaid, or by such other person as he may designate.
    “The appointment of agents and their compensation, although emanating from the company, are understood to be the appointments of the said Gh A. Fudickar, and the commissions and the expenses of their agencies will be charged to his .account, except as hereinbefore provided.

      “ This agreement being in lieu of sundry previous ones, revokes them all from this date, except that the renewal commissions upon business obtained under them (ten per.cent.) is to be continued in the same manner as provided in the contract.
    “The company, by the hand of their president and secretary, do acknowledge the aforesaid agreement to be binding on them for the term of five (5) years from . this date; but if this contract should cease to be in force, said Gf. A. Fudickar’s interest in the business of-the agents appointed by him shall not be affected by the change, but he shall further be entitled to all the renewals of the business done previous to such change.
    ‘ ‘ Signed and sealed on the day and in the year above mentioned. The apportionment in the city of Milwaukee relates only to the German department.
    “ W. H. PEOKHAM, President.

    [l. s.] W. T. HOOKER, Secretary.

    G. A. FUDICKAR.”
    The defendant had refused to allow the plaintiff to act as their agent under this contract, and had rescinded or annulled the agency, or had attempted to do so. The plaintiff claimed that this was a violation of his rights. • The arbitrator among other things, decided that the plaintiff was justly dismissed, and therefore, was not entitled to damages for his dismissal by the company.
    The plaintiff maintains in this action that the award should be set aside, for palpable and gross mistakes of law, on the part of the arbitrator, specified as follows :
    1. In that “he based his decision on several matters which occurred before the contract of April 1, 1869, was entered into.”

      2. In that he held “ that certain matters which had been known to the officers of the respondent for many months before the latter claimed the right to rescind its contract with appellant, and after the knowledge of which the officers made supplementary agreement with him, constituted sufficient legal ground for such rescission.”
    3. In that the arbitrator (in response to the plaintiff asking leave to introduce a person who had been in the-room during the examination of one Baldenecker, who had testified against the plaintiff but who was not then expected to be a witness, to prove that said Baldenecker, after he had finished his evidence, and had left the room where the arbitration was held, had said that he expected thereby to be revenged upon the plaintiff), stated that he could not permit him to be examined under the rule by which parties who were expected to be examined were excluded from the room.
    4. In that he decided that the defendant 16 justly dismissed the plaintiff,” and that therefore he was not entitled to damages for such dismissal.
    5. In that he decided as a mere matter of law “ that the appellant was not entitled to any payment or commission. upon first premiums, of business done or yet to be done, subsequent to his dismissal, or to future commission upon such of the business introduced by him, as might; be renewed or continued in the company, nor to any sum of money in lieu of renewal commissions.”
    6. In that, after the case was closed, the arbitrator sent to the company a letter asking them to have prepared a statement of what should have been allowed as commissions, what charges should have been credited, and what charges were objectionable in the view of the company, which letter stated that the evidence showed commissions and charges in several instances were not on the books, and that, after the statement asked for was sent, the arbitrator wished to see the books; in response to which letter a statement of the kind asked for was sent, which contained not only dates, amounts and specifications of what the amounts were charged and credited for, but also remarks as to the merits of the. case.

      Joseph B. Flanders, attorney, and with Augustus J. Beguier, of counsel for appellant, urged, among other things :—I.
    Among the grounds upon which it is well settled that courts of equity will set aside awards, are corruption, partiality or gross misconduct, on the part of the arbitrator (Herrick v. Blair, 1 Johns. Ch. 101 ; Roosevelt v. Thurman, Id. 230 ; Van Cortlandt v. Underhill, 17 Johns. 405 ; Perkins v. Giles, 53 Barb. 342; S. C., in court of appeals, manuscript opinion; Wood v. Aub. & Roch. R. R. Co., 8 N. Y. 160). 1. Damages awarded may be so enormous as to induce a conviction that the arbitrator must have been corrupt or grossly partial (Butcher of Croyden’s Case, 3 Ch. 76 ; 2 Vern. 251 ; l Eq. Cas. 59 ; Van Cortlandt v. Underhill, above cited). 2. If excessive damages would induce such conviction, then extreme inadequacy of damages, or a refusal to allow to a party in making up the award that to which he is indisputably entitled, would be sufficient ground for entertaining the- same conviction (Spettigue v. Carpenter, 3 Peere Williams, 361). 3. So, too, proceeding contrary to the principles of natural justice, as if without reason, they will not hear a witness (Morgan v. Mather, 2 Ves. Jr. 15 ; Van Cortlandt v. Underhill, above cited ; Ligon Ford, 5 Mumford, 10 [supreme court of appeals of Va.] ; see also Spettigue v. Carpenter, 3 Peere Williams, 361). So, too, the arbitrator having a personal interview with one of the parties in relation to the subject matter of the submission, or receiving the testimony of a witness on one side, or examining the books of any paper or written statement of one of the parties, without the presence or consent of the other party (Underhill v. Van Cortlandt, above cited; Walker v. Frobisher, 6
      Ves. Jr. 70; Burton v. Knight, 2 Vern. 515; Lord Lonsdale v. Littledale, 2 Ves. Jr. 450 ; Medcalfe v. Ives, 1 Atk. 63; Harvey v. Shelton, 7 Beav. 455 ; In the matter of Hick, 8 Taunt. 694; Emery v. Owens, 7 Gill [Md.] 488; Knowlton v. Mickles, 29 Barb. 465 ; McMahon v. N. Y. & Erie R. R. Co., 20 N. Y. 467 ; Collins v. Vanderbilt, 8 Bosw. 313 ; Jenkins v. Liston, 3 Gratt. [Va.] 235 ; Conrad v. Massasoit Ins. Co., 4 Allen [Mass.] 120). 5. Even in the case of referees, though their conduct be held free from all actual corruption or partiality,.such practices are declared to be such misconduct as requires their reports to be set aside upon grounds of public policy (Yale v. Gwinits, 4 How. Pr. 253 ; Dorlon v. Lewis, 9 Id. 1 ; Roosa v. Saugerties & Woodstock Turnpike & Pl. R. Co., 12 Id. 298).
    II. The conduct of the arbitrator in this case, as shown by the evidence, discloses more flagrantly than any case recorded in English or American judicial history, the qualities so uniformly and severely condemned by the cases cited in the last preceding point.
    III. It is also well settled that a court of equity will set aside the award for a palpable mistake of law or of fact (Carneforth v. Geer, 2 Yern. 705 ; Ridout v. Pain, 3 Atk. 494; Kent v. Elstob, 3 East, 18 ; Richardson v. Nourse, 3 Barn. & A. 237; 5 Com. L. 269 ; Ames v. Milward, 8 Taunt. 637; 3 Com. L. 234 ; Chase v. Westmore, and Westmore v. Forbes, 13 East, 357 ; Morgan v. Mather, 2 Ves. Jr. 18; Aubert v. Maze, 2 Bos. & P. 375; Wohlenburg v. Lageman, 6 Taunt. 251; 1 Eng. C. L. 376 ; Herrick v. Blair, 1 Johns. Ch. 101; Roosevelt v. Thurman, 1 Id. 220 ; Campbell v. Western, 3 Paige, 138 ; Perkins v. Giles, 53 Barb. 347).
    IV. There are some cases in conflict with the above and breaking in on the current of decision; but it is submitted that these are exceptional, the questions in some instances arising in actions at law, in others under special statutes, and that the exceptional cases coming in conflict with the positions taken on behalf of the appellant in this action, are too few in number, and were decided with too little consideration of principle and authority, to entitle them to any weight in opposition to the adjudications and opinions cited in support of those positions. Among these cases see Winship v. Jewett, 1 Barb. Ch. 173; Jackson v. Ambler, 14 J. R. 105; Mitchell v. Bush, 7 Cow. 185 ; Giles v. Austin, court of appeals.
    V. Holding that matters which had been known to the officers of the respondent for many months before the latter claimed the right to rescind its contract with appellant—and after the knowledge of which the officers made supplementary agreements with him, thereby expressly affirming the contract in the face of the alleged breaches—were sufficient legal grounds for such rescission ; whereas the law is well settled, that circumstances which would warrant a rescission must be acted upon promptly after coming to the knowledge of him who would rescind, or they are deemed waived or condoned (Lawrence v. Dale, 3 Johns. Ch. 23 ; McNevin v. Livingston, 17 Johns. 436-7; Lawler v. Selden, 11 How. Pr. 526 ; Monahan v. Story, 2 E. D. Smith, 393 ; Hunt v. Singer, 1 Daly, 209).
    VI. Refusing to receive the testimony of Hartog in impeachment of the respondent’s witness, Baldenecker. a. The fact that the appellant had not previously asked Baldenecker, while under cross-examination, or re-called him for the purpose of asking him, if he had said, giving time, place and persons present, what it was proposed to prove by Hartog that he had said, was no ground for excluding the testimony of. the latter, inasmuch as the respondent’s objection to his testimony was not placed upon that ground, which could have been obviated if that objection had been raised (McDonald v. North, 47 Barb. 530). b. The reason assigned by the arbitrator in his volunteer objection to Hartog testifying, and upon which grounds his testimony was excluded, was insufficient, as the rule imposed by the arbitrator, that all persons who were to be witnesses should be excluded from the room, except when testifying, applied, from its very nature, exclusively to witness who were to testify to transactions which occurred before the trial commenced, relating to the merits of the controversy, and could not possibly apply to a witness called to prove a fact which had occurred while the trial was in progress.
    VH. Holding, as a legal conclusion, that the appellant “was justly dismissed, and therefore is not entitled to damages for Ms dismissal by the company,” in other words, that the respondent had a right to rescind the contract, without the consent of the appellant, for alleged breaches of its provisions on his part, was error. “ Generally, no contract can be rescinded by one of the parties, unless both can be restored to the condition in which they were before the contract was made. If, therefore, one of the parties has derived an advantage from a partial performance, he cannot hold this, and consider the contract rescinded ; but must do all that the contract obliges him, and seek his remedy -in damages” (2 Pars, on Cont. 192-3 [3 ed.]; Weaver v. Sessions, 6 Taunt. 154; Franklin v. Miller, 4 Ad. & Ell. 599; Hunt v. Silk, 5 East, 449; Beed v. Blandford, 2 Y. & J. 278 ; Dubois v. Hud. & Del. Canal Co., 4 Wend. 285 ; Tipton v. Feitner, 20 N. Y. 431 [see opinion of Selden, J.] ; Utter v. Stuart, 30 Barb. 23 ; Hunt v. Singer, 1 Daly, 209).
    VIII. Holding further, as legal conclusions : “That he (the appellant) is not entitled to any payment as commissions upon first premiums of business done, or yet to be done subsequent to his dismissal,” or “to future commissions upon such of the business introduced by him as may be renewed or continued in the company ; nor to any sum of money in lieu of commissions,” was error. These conclusions were arrived at in the face of the express and unqualified provisions of the principal contract.
    IX. In his eighth finding of fact the judge who tried this cause manifestly erred in point of law in holding “that the alleged error of the arbitrator, in sending to the defendants and procuring from them extracts from its books, was cured and waived by the plaintiff by his subsequently, with knowledge of said fact, attending upon said arbitrator and allowing him to proceed with his award, to a final decision, without having revoked or withdrawn from said arbitration, and that he is estopped by his said action from alleging any error of the arbitrator in this respect.” 1. This clearly implies that the judge held that it was then legally in. the power of the appellant to revoke the submission, and it is evident that it was upon the ground of non-revocation by the appellant that the judge decided that the misconduct referred to of the arbitrator “was cured and waived,” and that the appellant was thereby estopped from alleging any error in the arbitrator in that respect.” 2. The statute expressly provides that “ neither party shall have power to revoke the power of the arbitrators after the cause shall have been finally submitted to them, upon a hearing of the parties, for their decision” (Rev. Stat. part 3, ch. 8, tit. 14, § 23; 2 Edm. Stat. 564, 2 ed). 3. The appellant duly excepted to this finding. 4. It is manifest that the judge would not have decided as he did had he not. erred as to the power of the appellant to revoke the submission, but would have set aside the award upon the ground of the misconduct of the arbitrator, as charged and proved, had he not, under a mistake of law, adjudged the appellant estopped from setting up such misconduct. 5. This alone presents a sufficient ground for the reversal of the judgment,

      X. The exception was well taken by the appellant to the ruling of the judge, allowing the arbitrator to testify as to his mental action upon the statement unauthorizedly procured by him from the respondent between the close of the trial before him and the making of his award, a. “It has been said by many of the judges that it is impossible for the courts, or even for arbitrators themselves, to say what influence such statements (ex parte) may have had upon them. We must go upon the general rule which condemns such a practice” (Knowlton v. Mickles, 29 Barb. 471).
    XI. The exceptions were well taken to the ruling of the judge in reference to the questions which were allowed to be put by the respondent to the arbitrator as to bias or partiality. 1. Arbitrators cannot, more than jurors, be allowed to testify as to the conditions or operations of their minds while acting as such. 2. Partiality in arbitrators consists in action and not in mental condition. 3. The arbitrator may have intended to be perfectly upright and impartial—which is, however, in this case, conclusively disproved—and yet his conduct be most partial and reprehensible. We claim that in this case both the intent and the conduct have been in unison, and that they make up a case of misconduct unparalleled in judicial history.
    XII. The fact that the whole of the testimony taken before the arbitrator was not put in evidence at the trial in this court, does not warrant any presumption which can aid the respondent. This is not a case in which any presumption or intendment can be indulged to sustain the award, as is sometimes allowed in support of a judgment in a case on appeal. 1. At the commencement of the trial “it was agreed that each party should read in evidence such portions of the testimony before the arbitrator as he desired to be in the evidence in this case.” a. Under this arrangement the appellant put in such portions of the evidence before the arbitrator as in the judgment of his counsel established the facts which they deemed it material to prove to make out his case. Si, as thus introduced, that evidence, standing by itself, and in itself considered, does establish those facts, ike appellant is entitled to the full benefit and effect of such evidence, b. If the respondent could have explained, qualified or contradicted that evidence by other evidence which was given before the arbitrator, it wa-J incumbent upon its counsel to read it. So far as there is any presumption, it is that what the appellant proved to have been sworn to before the arbitrator was true. It is the further presumption, that if the respondent could have explained, qualified or contradicted it, by reading other evidence that was taken before the arbitrator, it would have been done. Its very neglect to attempt it makes the presumption strong that it was beyond its power to read any such evidence. c. Every rule of evidence requires that a party to a trial who has an opportunity to contradict what his adversary has proved, and neglects to do it, so neglects because such a contradiction is beyond his power. It is presumed that men in such cases are mindful of their interests, and do all in their power to protect what they conceive to be their rights. If, in such a case, they do not contradict damaging testimony against them, the presumption is that it is because they cannot, and then applies the familiar maxim, that “when no such fact appears, it is presumed not to exist” (United States v. Wilkinson, 12 How. [ U. S.] 253 ; Broom Leg. Max. 125, 6 Am. ed.).
    Miller, Beet and OpdyTce, attorneys, and Livingston K. Miller, of counsel for respondents, urged:—I.
    Error of the arbitrator would afford no sufficient ground of interference. In suits to set aside awards, the doctrine of error has no place (Caldwell on Arbitration, 373, 374, 384; Knox v. Symonds, 1 Ves. Jr. 369; Morgan v. Mather, 2 Id. 21; Goodman v. Sayres, 2 Jac. & W. 249; Van Cortlandt v. Arrowhill, 17 Johns. 408, 411, 415, 420; 2 Story Eq. §§ 1451, 1454, 1455, referring to Chase v. Wetmore, 13 East, 358).

      II. As to the alleged error in the arbitrator’s deciding that the plaintiff had no claim to commission: 1. There was no error, (a) Plaintiff broke his contract. It is a dependent contract. Faithful performance was a condition precedent to any recovery. He is proven to have been grossly unfaithful. If this is so, the condition precedent to his recovery had been broken by him. He had forfeited his contract. He who violates a contract can claim none of its benefits. It is no answer to this to say true, he had broken his contract, but he kept it faithfully for one year, and, therefore, is entitled to the renewal commissions of that year’s policies. Hot at all. It was a five years’ contract, and one year’s fidelity will not cover four years’ breaches. Partial performance is no ground for any recovery. Huntington v. Chaflin, 10 Bosw. 262; Lautry v. Parks, 8 Gow. 63; Marsh v. Rulesson, 1 Wend. 514; Sickels v. Patterson, 14 Id. 257; Bonesteel v. Mayor, 22 N. Y. 162; Walker v. Willard, 29 Id. 375; Niblo v. Binsee, 44 Barb. 54; Smith v. Brady, 17 N. Y. 172; Tompkins v. Dudley, 25 Id. 272; Husted v. Craig, 36 Id. 221; Chase v. Hogan, 3 Abb. Pr. N. S. 57; Ellen v. Topp, 6 Exch. 424). (b) It is to be presumed, however, that the arbitrator allowed the plaintiff the benefit of this contract, and of these commissions, for renewals, as upon a continuing contract, for plaintiff introduced evidence, and the arbitrator received, it as to the value of these renewals on the commutation principle,' and acted on it; he considered the evidence, and, as every intendment must be' in support of the award, we say there is but one conclusion to arrive at, viz.: that after allowing plaintiff these renewal commissions on the commutation basis .the balance against plaintiff, over and above all this amount, exceeded two thousand dollars, and the arbitrator so found, (c) In either event, the award is right, but, right or wrong, it was one of the matters left to the arbitrator, and whether it was a question of law or fact his decision is final.
    III. That testimony *to impeach Baldendecker was properly excluded. The arbitrator was clearly right in conscience. His reasons may be right or wrong—we think they are right—but technically he was right in refusing to allow an impeachment on a collateral question, to which the witness sought to be contradicted, had not been questioned. Authorities on this point are needless.
    IV. This was no error in the arbitrator sending to defendants for a statement from their books. This error, if an error, was one in plaintiff’s favor. He had proved no account for commissions or renewal policies. This the arbitrator sent for. Was this error ? Observe, the statute does not make the reception of improper evidence "ground of error. It is only its exclusion. Therefore, we say:—{a) If improperly admitted, it is no eiror. (&)• If the books were not in evidence, the arbitrator had a right to call for them, (c) And, finally, any error in this respect, if it was an error, was waived by plaintiff. The plaintiff took the chances on this evidence, and, having acquiesced in its receipt, cannot now complain if it resulted to his disadvantage.
    V. We submit that none of the errors alleged are grounds sufficient, at common law, or under the statute, to impeach, or set aside, the award. We select a very few from many authorities (Emmett v. Hoyt, 17 Wend. 410; Smith v. Cutler, 10 Wend. 589; Viele v. Troy & Bost. R, R. Co., 21 Barb. 382; see pp. 395-6; Dater v. Wellington, 1 Hill, 319; Batler v. Mayor, Id. 489; Perkins v. Giles, 53 Barb. 342; affirmed in court of appeals, 50 N. Y. 228 ; Moorewood . Jewett, 2 Robt. 496; Ott v. Schroeppel, 1 Held. 482 Trumbull v. Martin, 37 How. Pr. 20; Burchell v. Marsh, 17 How. [ U. S.).
   By the Court.—Sedgwick, J.

The various alleged errors will be considered in their order.

As to the first.

The arbitrator no doubt did, in the prefatory part of the paper, which contained the award, discuss such matters, and did find that, in respect of them, the plaintiff was in fault. No doubt they influenced his mind in making Ms decision. But the plaintiff must show that he had no right to consider them. All the presumptions are in favor of the award. There was an omission to show all the facts that were before the arbitrator. If evidence were given that, after the making of the contract, the plaintiff did certain things which the defendants maintained justified his discharge, or the rescinding of the agreement, the defendants were at liberty to show the purpose and character of such things, by proving that, before the making of the contract, the plaintiff had, while acting as agent, commenced a series of acts, which ended in an injury to the defendants, through the use of powers given by the contract, and yet in violation of its provisions. The plaintiff, by the contract of April, 1869, agreed to “devote his time and attention in a "faithful manner to developing and extending the business of the company.” The company had a right to show that he had not devoted his time in a faithful manner to their interests, but had sought Ms own instead. His former transactions were competent evidence on this point, and such former transactions could properly have been considered by the arbitrator. He did make such use of the occurrences before the contract, although in a certain way he disclaims passing upon the plaintiff’s intention, while he “decides upon the character of his acts.” As the plaintiff does not show that these things were admitted before the arbitrator, by a clear and gross mistake of law, the award should not be set aside on that ground.

As to the second.

This does not correctly state the law, in so far as it includes the case of the officers of a company, by a wrongful combination with an agent of the company, allowing the latter to depart from his obligations. In such case it would be the duty of the officers to recede from their position, and to insist that the agent perform his contracts. But the arbitrator does not say the plaintiff was properly dismissed on these grounds alone. He says that these facts, and others which he alludes to, are “not an unfair presentation of a great mass of incidents brought out in the course of the arbitration.” The testimony as a whole, which we have not before us, may not only have shown other and sufficient evidence to support the arbitrator’s position and argument, but may have shown that the officers did not affirm the contract in face of the alleged breaches, excepting that officer who, as the arbitrator thinks, was acting wrongfully in connection with the plaintiff against the company.

As .to the third ground.

Even if there was error here, yet it is one that would not lead to a reversal, if it appeared on a bill of exceptions, or in a case. The form of the request, and what, the arbitrator said, does not present a legal exception, even if an award could be set aside for error simply.

As to the fourth ground.

The plaintiff has not affirmatively shown that the arbitrator committed a mistake in thus deciding. So far as the reasons for this conclusion were given, they tend to support it; and whether they were of themselves sufficient to that end, is unimportant, because the arbitrator shows that he relied on other facts. What these other facts were does not appear, and we cannot presume, but it must be shown at least that the evidence, as a whole, was not sufficient. It is manifest that the contract was not incapable of rescission by the defendants, if the plaintiff had given a sufficient cause. for it.

As to the fifth ground.

It does not appear - that the arbitrator made this decision as a mere matter of law. His decision in this respect may have been from facts given in evidence; payments on account; a release ; a special agreement as .to them. Without having the same case before us that the arbitrator had before him, we cannot hold that it did nof justify his decision on these points.

It will be well right here to consider the effect of a certain stipulation made on the trial. The plaintiff claims the effect of such stipulation to be, that if the defendant could explain, qualify, or contradict those portions' of the proof before the arbitrator which were read in evidence on behalf of the plaintiff, by other portions of the proof before the arbitrator, the burthen of introducing such other proof fell on him.

The stipulation in question was, “that each party should read in evidence such portions of the testimony before the arbitrator as he desired to be in evidence in this case.” This stipulation did not .take from the plaintiff the burthen of sufficiently proving his case. If the omission of a part of that evidence from the plaintiff’s case constituted a defect in that case, there was nothing in the stipulation to prevent the defend-’ ants taking advantage of the defect.

As to' the sixth ground.

. The learned justice at special term found as a fact that this alleged error of the arbitrator was cured and waived by the plaintiff, by his subsequently, with knowledge of the fact, attending upon the arbitrator and allowing him to -proceed with his award to a final decision, without having revoked or withdrawn from said arbitration, and that he is estopped by such action from alleging any error of the arbitrator in that respect.

The evidence upon which this finding was made was conflicting. The plaintiff testified, that the extracts from the books, were procured by the arbitrator, after the matters in controversy had been submitted for his determination. That they were so procured without the knowledge or consent of the plaintiff, and when procured, were objected to by him'.

But the arbitrator, who was examined as a witness, testified, that previous to sending for the extract, he •informed the plaintiff of his intention to do so ; that the plaintiff called several times to ascertain if they had been received. When they were received, the plaintiff saw and examined them.. He made no objection to their being received, but claimed the right of offering proof in refutation, which the arbitrator told him he should have, in the event of his, the arbitrator’s deciding to consider the extracts as evidence. Subsequently the arbitrator informed the plaintiff, that he had nottaken the extracts into consideration, and had wholly ignored them.

The evidence of the arbitrator was sufficient to justify the finding at the special term ; and as the learned justice must have disregarded the plaintiff’s evidence, we should not, upon well understood principles, disturb the conclusion, unless it is manifestly unsupported.

But independently of this, the plaintiff’s evidence, even if it was not contradicted, would not, in my opinion, furnish a sufficient reason for vacating the award.

A court of equity, following the statute (2 Rev. Siat. 542, § 10), will vacate an award for any misbehavior of the arbitrator, “by which the rights of any party shall have been prejudiced.” If the alleged misconduct was of a nature not calculated to, or which did not in fact, influence the judgment of the arbitrator, it cannot be claimed, that any right of a party has been injuriously affected.

In Smith v. Cutler.(10 Wend. 589), the court say : “ The terms misconduct and misbehavior, as used here, imply an intention to do wrong.” Therefore, if it cannot be seen that there was such intention, no prejudice to the rights of the party can be claimed.

In Herrick v. Blair (1 Johns. Ch. 101), the arbitrators, after a witness had been examined, and they were left to deliberate, called the witness again, and without the presence or knowledge of the parties, examined him as to matters material to the controversy ; it was held by the chancellor, that nothing was done from which misconduct could be inferred.

It did not appear that the witness did more than to explain his former testimony, and the proceeding, although an irregularity, was considered too slight and immaterial to call on the court to interfere and set aside the award.

In Turnbull v. Martin (2 Daly, 428), it was objected that the arbitrators had received ex parte affidavits, but the court did not consider it such misconduct or misbehavior as would justify setting the award aside. And they say, that the statute by those terms, contemplates acts evincing unfairness, or contrary to all the principles of a just proceeding.

And in Wood v. Auburn & Rochester R. R. Co. (8 N. Y. 160-168), it was held that a charge of corruption or partiality of arbitrators, must be plainly made out. There it was proved, that the plaintiff had interviews and made statements to one of the arbitrators before he was chosen, calculated to favor his case. But it was considered insufficient to establish the charge.

The arbitrator not only informed the plaintiff that he should not consider the evidence, but testified that lie did not consider it in making Ms award. This, if believed, must render the irregularity, if it was such, too slight and immaterial to justify any interference by the court.

The plaintiff failed, I think, to establish by proof that there had been any misconduct or misbehavior of the arbitrator by which the rights of the plaintiff were prejudiced. Nor was there any act of the arbitrator from which any such misconduct could be inferred. The burden of establishing this was upon the plaintiff, and having failed to do so, the judgment for the defendants was proper.

This court might have refused to entertain this action on the ground, that as the submission required the judgment on the award to be entered in the supreme court, the remedy should have been sought in that court (Toppan *. Heath, 1 Paige, 293). But the objection was not taken- below, and will not be considered here.

There were exceptions to evidence, which I have considered, but do not think any of them well taken.

The judgment should be affirmed, with costs.


author: By the Court.—Sbeir, J.

text:
    JOHN O’MAHONY v AUGUST BELMONT AND ERNEST B. LUCKE. Thomas J. Barr, Receiver, appellant, and Ernest B. Lucke, respondent.
    I. Bbceivbbs.

      1. Two or more over the same property.

    1. When a receiver has been appointed by one court and has obtained possession of the property or fund over which he was appointed, he cannot be' in any manner interfered with by a receiver subsequently appointed, or by any proceeding whatever had, in any other action brought in any other court.

    2. The court that first appoints a receiver has the sole disposition of the fund or property received by him as such, and is bound in the exercise of its judicial powers to make administration thereof, either by restoring it to the party from whom it was taken, or by delivery to the party who in the regular course of litigation in its own court, and in the action in which the receiver was appointed, should be adjudged to be entitled to it.
    3. A subsequent order of receivership made ex parte, cannot prevent a determination in the first action of the rights, of the receiver therein appointed and the parties thereto, in the fund or property obtained by the receiver under the order of receivership therein.
    2. Obtruding into office of receiver.

      1. When one obtrudes himself in an action, and has himself pro- , cured his appointment as receiver, despite and contrary to the wishes and desires of the parties to the litigation, he is bound
    to restore the fund received by him under the order intact, and cannot relieve himself from this liability by showing that he deposited it in a safe and proper savings bank which had subsequently become insolvent.
    Before Van Yobst and Speib, JJ.

      Decided May 2, 1874.
    Appeal from order directing receiver to pay moneys.

      Thomas J. Barr was appointed receiver in the above entitled action (for the order of receivership, and the nature of the action, see ante, p. 223). As such receiver, he instituted proceedings against the defendant Lucke, as for a contempt in not paying over certain moneys of which he claimed to be receiver, the result of which was that defendant Lucke paid over the money. This action was dismissed on being called for trial, no one appearing for the plaintiff.
    The judgment entered on such dismissal contained no disposition of the fund in the receiver’s hands.
    Thereafter, the defendant Lucke instituted proceedings for an accounting by the receiver. And on such accounting, an order was made adjudging that the receiver be charged in favor of defendant Lucke, with twenty-seven thousand six hundred and nintey-five dollars and nine cents, and credited with three thousand sixty-seven dollars and seventy-eight cents, and that he also be charged with the referee’s fees on the accounting.
    On this proceeding, the court held that Mr. Barr had improperly obtruded in this action, and had himself procured his appointment, despite of and contrary to the wishes and desires of the parties to the litigation. (From the order made in the accounting, the receiver appealed, and the order was affirmed ; see ante, p. 223).
    After the above order on the accounting had been made, defendant Lucke applied for an order that Mr. Barr should pay over to him the difference'between the amounts with which he was charged, and that with which he was credited, and also the amount of. said referee’s fees.
    In opposition to this motion, Mr. Barr showed that Thomas 1ST. Dwyer,' having obtained a judgment against said O’ Mahony, and execution thereon having been returned unsatisfied, commenced in the supreme court a judgment creditor’s action against Mm, August Belmont and Ernest B. Lucke, alleging in the complaint (among other things) that said O’Mahony had a large sum of money to wit, fifteen thousand dollars and over, to his credit in the hands of said Belmont & Go., and that said O’Mahony had commenced an action in his own name against said Belmont & Co. in this court for the recovery of the money, and praying (among other relief) for an injunction and a receiver; that in this action in the supreme court, that court made an order, ex parte so far as Belmont and Lucke were concerned, appointing him, and Mr. Barr, as receiver, that he duly qualified as receiver thereunder; that said order of the supreme court was as follows : ■
    CAPTION.

      Special Term at Chambers, June 1, 1870.
    Present, Albert Caedozo, Justice.
    [ Title of Court and Parties. ]
    “ On reading and filing the summons and complaint in this action, and the affidavit of the plaintiff, and after hearing Mr. William A. Boyd for the plaintiff, and in support of the motion, and Mr. Stephen D. Stephens, Jr., for. the defendant, John O’Mahony : “Now, bn motion of the said William A. Boyd, attorney for the plaintiff,
    “It is ordered, that the defendants, John O’Mahony, August Belmont and Ernest B. Lucke, their and each of their agents, attorneys and servants, be and they are hereby firmly enjoined and restrained from paying over, taking, disposing of, or in any way parting with the money now in the control of, or now pr lately on deposit, to the credit of the said O’Mahony, in the hands of August Belmont and Ernest B. Lucke, composing the house of August Belmont & Co., in the city of New York; and if the said parties, or either of them, voluntarily or involuntarily parted with the actual custody of the said money prior to the making of this order of injunction, then that they and neither of them shall in any manner consent or connive that the said money, or any part thereof, be, whether by action at law or in equity, or any legal or other proceeding, diverted from being applied to the payment of the judgment procured, and which may be procured in the above entitled action; and that they and each of them do absolutely desist and refrain from doing and allowing, or permitting to be done or to occur any act, omission or default, by which the said sum of money, or any part thereof, may be diverted, lost, incumbered, or in any manner impaired, so as to deféat- or lessen its appropriation to the judgment recovered by the plaintiff, or which may be recovered by him in this action.
    “And it is further ordered and decreed, that Mr. Thomas J. Barr, of the city of New York, be and he is hereby appointed the receiver of the said fund so deposited, or lately on deposit in the hands of the said defendants, August Belmont and Ernest B. Lucke, being the firm of said Belmont & Co., to the credit of the said defendant, John O’Mahony; that is to say, the sum of fifteen thousand dollars and upwards, with the power and authority of receivers in such cases.
    “ And it is further ordered, that the said receiver give the requisite security as such receiver, which shall be his bond, in the penal sum of two hundred and fifty dollars, with surety, to be approved by a justice of this court; and all other questions are hereby reserved.”
    Mr. Barr also introduced, in opposition to the motion, proof to the effect that the money paid to him as •receiver in this action, by defendant Lucke, was the money of Belmont, and that it was paid by him as Belmont’s agent.

      He also showed, in opposition, that he deposited the money received from Luche in a savings hank, which at the time of such deposit was solvent, but had since failed, and was then in the hands of a receiver, who had declared a dividend of twenty-five per cent, and no more; that at the time of such deposit he had, and continued to have, and at its failure still had on deposit in said bank a large amount of his individual money; that he had no knowledge, information, intimation, suspicion, or reason to suspect that said bank was in an embarrassed condition, or about to fail, in time to enable him to withdraw the deposits made as aforesaid before its failure; that in fact he had no intimation, suspicion, or reason to suspect that said bank was in an embarrassed condition, or about to fail, until after its failure had taken place.
    Mr. Barr also claimed that the order of receivership in the supreme court covered the money received by him from Lucke.
    On the hearing of the motion, counsel for the receiver insisted:

      First. That the receiver should not be compelled to pay over the money, because he then held it as receiver in the said case in the supreme court.

      Second. That at all events' he should only be required to pay from time to time such dividends as he might receive from said savings bank.
    The motion was granted, and from the.order entered thereon the receiver appeals.

      James Henderson, attorney, and S. Jones, of counsel, for appellant, urged the above points made at special term.
    Bowdoin, Larocque and Macfarland, attorneys, and W. W. Macfarland, of counsel, for respondent.
   By the Court.—Sbeir, J.

This is an appeal from an order, made at the special term, requiring that' the receiver, Thomas J. Barr, pay over the money received by him in this action to the defendant Luche.

This court has already decided, both at the special and general terms, that this receiver should account to the defendant Luche, who alone was served, and appeared in this action,' for the sum paid by him to the receiver, with interest.

There are only two objections urged by the counsel for the appellant, on this appeal, against the order made below. One ■ is that the receiver should not be compelled to pay over the money in question to Luche because he now holds it, as receiver, in the case in the supreme court, of Dwyer v. O’Mahony, Belmont apd Luche.

It is hot necessary to inquire how, or by what proceedings the receiver got possession of the fund in this action. This court has decided that the order appointing Mr. Barr receiver was unauthorized and illegal, and was a trespass on the rights of property. He has now the possession of this fund thus acquired. Is the objection raised any sufficient reason why he should not pay it over ? I thinh not. At the time the order in the Dwyer suit, in the supreme court, was made, the funds were in the possession of Mr. Barr, as receiver in this court, in this action. This court, having jurisdiction of this fund, and over the officer holding it, could not be interfered with, in any manner, by any proceedings in any other action, brought in any other court. It had the sole disposition of the fund, and was bound, in the exercise of its judicial powers, to make administration thereof by-restoring it to the party from whom it' was taken, or by delivery to the party who, in the regular course of .litigation, in its own court, and in this action, should be adjudged to be entitled to it (Williams v. Benedict, 8 How. [ U. S.] 107).

Barr had given a bond for the performance of his duty, and would be liable to an action if he disposed of the fund without the authority of the court from which he received his appointment,1 and to which he was accountable.

But assuming that the supreme court had the right to take possession of this fund, the proceedings had before it could have uo binding force on these defendants, Belmont and Lucke. The order there made was without notice to these defendants. Had such an order been made in this suit, it would be no answer to an application, by either of them, for a judicial determination of their rights as to their interest in this money.

Again, the order in the supreme court appointed Mr. Barr “the receiver of the said fund so lately deposited, or lately on deposit, in the hands of the said defendants, Belmont and Lucke, to the credit of the said defendant, John O’Mahony.” This court has decided “that the money paid to the receiver was the money of Belmont & Co., and came directly from their funds,” and that no such money as is claimed by the order was ever deposited with Belmont & Co. to the order of O’Mahony. It is, therefore, quite clear, from a cursory reading of the order entered in the Dwyer suit, that the fund sought to be transferred to the receiver thereby was not the same fund which came to his hands through Mr. Lucke. Even had the court, or the parties procuring the order, intended to reach these moneys, the fact still remains—their purpose was not accomplished.

The remaining question, whether the receiver should pay over to the defendant, or his attorneys, the sums specified in the order appealed from, or ■ should be entitled to the deductions claimed by his counsel, requires but little consideration. It has been already adjudged that it was the duty of the receiver to make ' restitution without deduction of any sum. He was not a stranger to the proceedings which culminated in the transfer of these funds to him, or in the extraordinary proceedings which led to his appointment. In the words of the decision of Judge Vax Vorst, “The receiver has voluntarily placed himself in the position he now occupies.” He should not, therefore, complain of the legal consequences resulting from that position.

The order appealed from is affirmed, with costs.