text:
    THE PEOPLE OF THE STATE OF NEW YORK ex rel. THE DELAWARE, LACKAWANNA and WESTERN RAILROAD COMPANY, Appellant, v. ALEXANDER REID and Others, Assessors, and HENRY WALKER, Supervisor of the Town of York, Respondents.

      Taxation — assessment against a leased railroad in the possession and control of the lessee — residence of the lessee for the purpose of taxation — method of establishing 'the proper assessed valuation of a railroad.

    In a proceeding taken to review an assessment it .appeared that the Delaware, Lackawanna and Western Railroad Company was a foreign corporation incorporated under the laws of the State of Pennsylvania, conducting a large system of railways, including the road of the New York, Lackawanna and Western Railway, which was a New York State corporation with a road extending from Binghamton to Buffalo; that the former corporation had leased the road of the latter for the full term of the latter’s corporate existence, and for the full term of any renewal or renewals of the franchise,' agreeing to pay certain rentals and all taxes and assessments, and that the former company was in full possession of the leased road.

      Held, that, for the purpose of an assessment for taxation, the Delaware, Lackawanna and Western Railroad Company, the lessee, was a resident of the town through which the leased railroad passed, and was properly assessed as such.
    That although a foreign corporation, yet, in view of the fact that it was operating the leased road, it might for the purposes of taxation have several residences, and was, for this purpose, a resident of the town in question.
    What facts are necessary to establish a residence by a corporation, considered.
    In order to show that the assessment was unequal the relator called many witnesses to show the value of the farms in the town. The referee, to whom the matter was referred, in order to reach the assessable value, first divided the rent paid by the lessee to the lessor by the number of miles of the leased road; this sum he capitalized at six per cent; from this capitalization he made deductions for the cost of equipment, the value of wharfage, cattle and coal yards, and the amount of bonds and mortgages for terminal improvements, the remainder he reported as subject to tax.

      Held, that this method of arriving at the value of the property subject to taxation was a satisfactory and correct one.
    Appeal by tbe relator, The Delaware, Lackawanna and Western Railroad Company, from a judgment of the Supreme Court, entered in the office of the clerk of Livingston county on the 12th day of September, 1891, dismissing upon the merits, and with costs, a writ of certiorari issued to review an assessment in the town of York, with notice of an intention to bring up for review upon the appeal so much of an order of said court, entered in said clerk’s office on the 27th day of October, 1890, as directed that the evidence to be taken under said order, with the opinion of the referee, be returned to the court at a Special Term to be held on the last Monday of February, 1891; also to bring up for review on the appeal so much of an order of said court, entered in said clerk’s office on the 6th day of March, 1S91, as directed that the relator must close its testimony on or before the 1st day of May, 1891.
    The case was tried by the court at the Monroe Special Term in May, 1891.

      Charles J. Bissell, for the appellant.

      J. B. Adams, for the respondent.
   Lewis, J.:

This is the proceeding by the relator to review an assessment of so much of the railroad known as the Delaware, Lackawanna and Western Railroad Company as is situated in the town of York, county of Livingston. The assessment sought to be reviewed was for the year 1890, the assessed valuation being $174.960 It was duly referred to a referee to take evidence and report to the court with his opinion, first, as to the actual value of the real property assessed to the relator in the town of York; and, second, as to whether the relator’s property was assessed at a higher proportionate valuation than the other real and personal property in the town of York, and, if so, whether the relator has sustained injury by reason of such unequal assessment.

Upon the report of the referee the issues were brought to trial at a Special Term of the Supreme Court in the city of Rochester; and the court having thereafter duly made and filed its written decision thereon, dated June 29, 1891, wherein it was found as facts that the actual value of the real property which was occupied by the relator in the town of York in the months of June and July, 1890, was the sum of $624,482, and that such property was not assessed at a higher proportionate valuation than the other real and personal property in the town for that year, it was adjudged that the writ of certiorari be dismissed. The relator appealed to this court and alleges as the grounds of error, first, that the assessment directly and personally to the relator was without jurisdiction, and the assessment is void. The New York, Lackawanna and Western Railway Company is a corporation organized under the Laws of the State of New York; it constructed and equipped the railroad in question, which extends from the city of Binghamton to the city of Buffalo, and when constructed and equipped the entire road, including the real estate, superstructures, locomotives, rolling-stock, franchises, and, in short, everything pertaining to a fully equipped and furnished railroad, was leased by said corporation to the relator by a written lease dated October 2,1882, for the full term of the corporate existence of the lessor, and during the full term of any and all renewals of the corporate franchise that might at any time thereafter be made. The relator agreed to operate and manage the road during the life of the lease and pay to the lessor certain rentals therein provided for, and, in addition thereto, the relator agreed to pay and discharge during the life of the lease all taxes and assessments levied or imposed upon the leased property. The relator took possession of the leased property, and it thereupon became a part of its great system of railroads, and at the date of the assessment complained of the relator was in- the full possession of the entire road, including the portion thereof in the town of York. The New York, Lackawanna and Western Railway was evidently organized for the purpose of constructing and equipping the road, with the expectation and intention, when that was accomplished, of executing the lease mentioned.

The relator contends that as the New York, Lackawanna and Western Railway is a domestic corporation organized under the laws of this State, and the owner of the road, the assessment should have been made against that company, and not against the relator, a corporation organized under the laws of the State of Pennsylvania, and operating the railroads solely by virtue of a lease thereof; and contends that the relator was in no sense a resident either of the town of York or the State of New York, and that the assessors had no jurisdiction to assess this property directly to it, and thereby create and charge it with a personal liability for the payment of the tax. If both companies were residents of the town of York at the time the assessment was made, it was proper to assess either; if the owner did not reside in the town and the occupant did, the assessment should have been to the occupant; if neither of them resided in the town, the property should have been assessed as non-resident lands. (Stewart v. Crysler, 100 N. Y., 382.) The relator contends that the New York, Lackawanna and Western Railway, being the .owner of the road in question, was, for the purposes of taxation, a resident of each town and county through which its road passes, and we are referred to the case of ..the Buffalo and State Line Railroad Company v. Supervisors of Erie County (48 N. Y., 93), as an authority holding that doctrine. That rule, however, applies only in cases where the corporation is by its agents occupying and operating the road, as stated by Earl, Commissioner, in 48 New York, 101: “A corporation for many purposes lives, moves and has its being in its agents, and wherever they are in possession of its real estate, carrying on its corporate business, it may be supposed to exist and reside, without departing from legal precedents or violating the spirit or letter of the law.” The New York, Lackawanna and Western Railroad company’s principal place of business was, in the year 1890, and still is, in the city of Binghamton, New York. It was not at that time operating the road ; had no agents in the town of York, and, therefore, under the rule .above referred to, was not a resident of that town.

The relator was, through its servants and agents, at the time the assessment was made, carrying on its corporate business in that town, and was in the possession of the property assessed. • If its being a foreign corporation precludes it from being a resident of the town of York, then the property should have been assessed as non-resident lands. While it is true the relator was incorporated under the laws of the State of Pennsylvania, it was operating the railroad in question located in this State. While a natural person can reside in but one place at a time, it is, as we have seen, different with a corporation. It may for some purposes exist and be a resident in different places at the same time, as stated by Earl, J., in 48 New York (supra): “ While corporations, in their general aspect, are mere ideal existences, without body or soul, yet they will be considered inhabitants, residents, citizens when the general spirit and purpose of the law require it.”

The relator, to all intents and purposes, so far as the management and control of the property and franchises of the railroad, was a resident, owner and occupant of the property assessed. It was in the same sense and for the same reasons a resident of the town of York that the New York company would have been a resident of that town had it been then operating the road. Where the owner does not reside in the county in which the land assessed is situated, the same mode of assessment is pursued without regard to whether he be a resident of this or of some other State. We think the relator should be held, for the purposes of taxation, to have been a resident of the town of York, and that the assessment was properly made. To hold otherwise would lead to great embarrassments in the collection of taxes for the support of the government. If, under the circumstances, the property,of the company in the town of York must be assessed as non-resident property, it would practically result in the authorities being unable to collect the taxes. Giving the construction we have to the statute, works no injustice to the relator, for whether the property be assessed to it or to the New York, Lackawanna and Western Railway, the relator must ultimately pay any and all taxes lawfully assessed upon the property in question!

The second point made by the appellant is that the finding of the court upon the question of the value of the relator’s real property in the town of York was based upon erroneous considerations, and that the finding does not represent the true value of the relator’s real property. The hearing before the referee took a very wide range; the testimony taken was very voluminous. It was derived almost entirely from witnesses called by the relator.

After being put into narrative form, and evidently much condensed, it covers more than 400 printed pages. With a view of establishing that the assessment was unequal, the relator called witnesses to testify as to the value of a very large proportion of the farms in the town of York, the quality of their soil, the kind and condition of the improvements were in great detail investigated. Many citizens were called and subjected to searching examinations as to their personal property, including their securities, their household furniture, etc., with a view of showing what proportion of personal property in the town had been assessed.

The taking of the testimony before the referee extended over a period of seventeen months. After taking this large mass of testimony, the referee adopted a very simple and obviously correct method of arriving at the value of the property in question. The property assessed formed a part of a great railroad. To assess the portion of it passing through the town of York, consisting of a narrow strip of land, with its ties, rails, bridges, dej>ots, etc., ignoring the fact that it formed a part and portion of the entire system of a great railroad, would have been very absurd.

Had the assessments through the entire length of the road been made upon- that theory, the assessed valuations of the property would aggregate but a nominal sum, and would result in the road, which as a whole is worth many millions of dollars, practically escaping taxation. Inquiries as to the value of the land for farming purposes afford very little, if any, assistance in the inquiry.

There are many embarrassments and difficulties in applying the usual and familiar rules of assessing property to railroads. ' Railroad property is of a somewhat anomalous character. The courts have approved, in assessing railroad property, of resorting to the method of estimating its value by its earning capacity; and the situation of the road in question is exceedingly favorable for the adoption of this rule. The road is owned by the New York, Lackawanna and Western Company. It is occupied by the relator, th e owner receiving rents for the use of the property. The lease secured to it a permanent rental without any probability of decrease in the rent in the future, but a strong probability of an increase. Under such conditions the rentals would seem to furnish a satisfactory criterion for fixing values.

The referee ascertained from the reports to the Board of Railroad Commissioners the rentals the owner had been receiving for the period of four years next preceding tbe year 1890, and found that they amounted during that period, annually, to the sum of $1,470,000; and from the same source learned that, for the year ending June 30, 1890, it received $1,487,333.33. By dividing that sum by the length of the leased road, he found the average rental represented by each mile, which sum he capitalized at six per cent; and, after making proper deductions for the cost of equipping the road, the value of wharfage, cattle and coal yards, coal trestles, and the amount of bonds and mortgages for terminal improvements, he reported that, in his opinion, the portion of the road in the town of York was worth $624,482. The Special Term adopted his conclusions as the most feasible and satisfactory means of arriving at the value of the property. There was much more testimony taken, bearing, as we think, very remotely upon the questions under investigation. There was sufficient evidence to sustain the findings. If, as contended by the relator, the referee was not required to make special findings of fact, that he did so does not concern the relator. The very onerous and important duties performed by the referee were for the purpose of aiding the court in deciding the questions before it. The court was not bound to adopt the findings of fact made by the referee.

We have examined the exceptions to the admission and rejection of evidence argued in the appellant’s brief. Had a jury been the tribunal passing upon the questions, the exceptions might be worthy of some consideration. But, considering the nature of the inquiry, and that the evidence was taken for the information of the trial court, and not finding that any evidence was rejected which was material to the subject under investigation, we find nothing in the exceptions calling for a rehearing of the matter.

The judgment and orders appealed from should be affirmed, with costs.

Dwi&ht, P. J., and MacombeR, J., concurred.

Judgment and orders appealed from affirmed, with costs.


source: Caselaw Access Project

author: YaN BeuNT, P. J.: O’BrieN, J.

license: Public Domain

text:
    CAROLINE B. POWERS, as Administratix, with the Will Annexed, of HOLLIS L. POWERS, Deceased, Respondent, v. FRANCIS W. SAVIN and Others, Appellants.

      Bmdenee — entries in a loan-booh of a broker — against one’s interest — made subsequently —and by an assignee for creditors — answer setting up an independent issue not raised by the complaint.

    In an action brought by the administratrix of Hollis L. Powers the complaint alleged that Powers had certain shares of railway stock in the hands'of the firm of Bogart & Co., and that that firm without authority had pledged them with the firm of Savin & Vanderhoof for a loan, and demanded judgment against Savin & Vanderhoof for a surplus beyond the advances made upon the stock by Savin & Vanderhoof.
    It appeared that Bogart, Jr., sent these securities to Savin & Vanderhoof, and at the same time made a memorandum of the loan on a New York Stock Exchange “ticket,” which memorandum he testified was correct. At the same time he made a memorandum on the loan envelope of the collaterals contained therein. In order to identify the stock pledged with that owned by Powers the loan-book of Bogart & Co. was admitted in evidence. These memoranda did not agree, the entry on the loan-book containing, and the entry on the envelope not containing, the initials “H. L. P.” The entry on the loan-book was made some days after the transaction, and after the firm had failed. The New York Stock Exchange ticket was lost.
    The person who called off, as was claimed, to the bookkeeper of Bogart & Co., who kept the loan-book, the substance of the “ticket,” was not produced as a witness upon the trial.

      Held, that the testimony in regard to the entries on the loan-hook was not sufficient to justify their being received in evidence.
    That as Bogart & Co. were not parties to the action, as the entries were made after the assignment by the firm, and as the person who made the entries knew nothing of the facts to which they related, the entries were not admissible, as being against their own interest. (O’Brien, J., dissenting.)
    That as the entries were made after Bogart & Co. had failed, and were made by their assignee, they were not the entries of the firm, nor made in the usual course of business.
    Under section 1304 of the Code of Civil Procedure, providing, among other things, that a judgment may grant to a defendant any affirmative relief to which he may be entitled, a defendant cannot tender an independent issue between himself and a co-defendant which was not raised by the complaint. (Per O’Brien, J.)
    Appeals by the defendants, Francis W. Savin and Elislia W. Yanderhoof, composing the firm of Savin & Yanderhoof, and by John Wheeler, as assignee for the benefit of the creditors of O. M. Bogart & Co., from a judgment, entered in the office of the clerk of the city and county of New York on the 9th day of December, 1891, in favor of the plaintiff for $4,300, and interest and costs, after a trial before a referee.

      Thadcleus D. Kenneson and John Uotman, for the appellants.

      L. G. Waehner, for the respondent.
   YaN BeuNT, P. J.:

This action was brought by the plaintiff, claiming the ownership by her testator of 300 shares of Chicago, Milwaukee and St. Paul stock, which had been pledged, with other securities, by the firm of O. M. Bogart & Co., without right or authority, with the firm of Savin & Yanderhoof as collateral for a loan of $50,000, which securities were subsequently sold; and judgment is demanded for the surplus realized upon such sale over the amount of said loan.

Mr. Justice O’BeieN, in his opinion, states the questions presented by the pleadings to be:

First. ITad Hollis L. Powers, the plaintiff’s testator, title to the stock ?

Second. Did Bogart & Co., without his consent, authority or right, pledge such stock ?

T'hw'd. Can the firm of Savin & Yanderhoof hold the stock or apply the surplus realized upon the sale thereof, upon account of any other indebtedness due them from Bogart & Co. as against the plaintiff ?

Fourth. Is the defendant Wheeler, upon the facts proven, entitled to judgment for the surplus realized upon the sale of other securities pledged for a second or other loan made by the firm of Bogart & Co. ?

We concur in the conclusion arrived at by Mr. Justice O’BeieN as to the third and fourth of these questions. In view of the conclusion reached by us as to the first, it is entirely unnecessary to decide the second. And we cannot concur in the conclusion arrived at by him as to the first.

It appears from the evidence that, almost immediately after the pledge of the stoclc in question, Bogart & Co. made a general assignment for the benefit of creditors to the defendant Wheeler; and the attempt is made to identify the St. Paul and Milwaukee stock pledged for the debt of Slavin & Vanderhoof as stock belonging to the plaintiffs testator by entries now appearing upon the loan-book of Bogart & Co. And the determination of the question now under discussion depends upon whether such entries were admissible in evidence or not.

It appears that Bogart, Jr., sent the securities which were pledged to Savin & Vanderhoof, and made a memorandum of the loan on a Stock Exchange ticket called “tickets,” which memorandum he testified was correct, and at the same time he made a memorandum on the loan envelope of the collaterals therein contained. These memoranda were the only memoranda made of the loan in the first instance. The slips were not produced upon the trial, but evidence was introduced showing that they were made for temporary purposes only, and that, when entries were made therefrom into the books of the firm, no attention was thereafter paid to them. There was no evidence that these particular memoranda had been lost, although there was some to the effect that a search had been made for them; and in response to a notice to produce, a statement was made by one of the attorneys that a search had been made for them, but they could not be found. It does not appear with certainty what was done with these memoranda. And there is no evidence as to what was put upon the slips ; Mr. Bogart’s best recollection was that he placed them in an envelope; and that the envelope was with the books and was left for the cashier, Townsend, to enter in the loan-book. Townsend remembers nothing about the original memoranda, although the entries were made by him in the loan-book. Such entries were not made contemporaneously, but after the failure of Bogart & Co., and after Townsend had come back from being absent, which he states might have been a week after the failure. Townsend testified that he either copied the memoranda from slips (temporary Stock Exchange slips) or that they were called off to him. And it does not appear that there was any other source from which he could get the entries.

As Mr. Justice O’BbieN has shown, the learned referee states that the memorandum of entries on the envelope correspond with the entries in the loan-book; and that in this a grave error was committed, because in that part of the entry which is most material to this action there is a fatal discrepancy, the entry on the envelope not containing the initials II. L. P.,” which appear opposite the entry in the loan-book in relation to the 300 shares of St. Paul stock, and which has been held to indicate that the stocks in question were the 300 shares of St. Paul stock belonging to the plaintiff’s testator.

The evidence of this entry in the loan-book is claimed to be admissible because of the rule laid down by the Court of Appeals as to the admission of account books in The Mayor v. Second, Avenue Railway Company (102 N. Y., 572). But a brief examination of that case will show that the condition of the proof was entirely and essentially different from that which appears by the record in the case at bar. The case cited was an action by the mayor, etc., of New York to recover from the Second Avenue Railroad Company for work and labor and materials for which the railroad company was claimed to be liable. The work done and the materials furnished related to the pavement of the streets in and about the rails of the defendant’s railroad. In order to prove the time spent in the doing of this work, the plaintiff called as a witness the foreman who had charge of the work, under whom were two gang foremen, each having charge of a separate gang of laborers. The chief foreman kept a time-book in which was entered the name of each man employed. He visited the work twice a day, and while there took on the time-book the time of each man as reported to him by the gang foreman, who did not see tbe entries; and be also marked tbe men’s names as be saw tbem and knew tbeir faces. Tbe gang foremen testified that they correctly reported to the chief foreman tbe names of tbe men who worked; and if any did not work full time they reported that fact also. And the main foreman testified that be correctly entered tbe reports in tbe time-book as reported to him in tbe usual course of business each day. And it was held that, with such evidence, tbe books were admissible, because tbe gang foremen were testifying of tbeir own knowledge as to tbe correctness of tbe reports made by tbem to tbe main foreman, and the main foreman testified that in this time-book be correctly entered tbe reports as made to him.

Under such condition of proof tbe court held tbe evidence to be admissible, but in the case at bar the evidence was essentially different. In tbe first place there is no evidence as to what Bogart, Jr., entered upon the slips, and in view of the fact of the entry upon tbe loan envelope tbe presumption would seem to be that tbe letters “ H. L. P.” did not appear upon tbe slip. And, further, the bookkeeper Townsend, who made these entries, bad no recollection as to whether be entered tbem from tbe slips or from somebody who called tbem off to him. Therefore, we do not know that even what was upon the slips was entered in these books. The person who called off these entries is not produced, and there is a very decided link missing which was supplied in the case cited. And in view of the fact that it was claimed that the entries upon tbe slips and the envelope corresponded the inference would be that, as the letters “ H. L. P.” did not appear ujjon the envelope, they did not appear upon the slip, and Townsend must have got his information somewhere else. How, we do not know, except, perhaps, it may have been from the inspiration of this somebody who made the announcements to Townsend for entry, whether from the slips or not does not appear.

But Mr. Justice O’BeieN has come to the conclusion that upon another principle these entries are admissible, viz., that they are declarations found in the books of Bogart & Co. against their interest in respect to the ownership of these 300 shares of stock. And attention is called to' the rule laid down in Greenleaf on Evidence, that “ there are two classes of admissible entries, between which there is a clear distinction in regard to the principle upon which they are received in evidence; and one of the classes consists of entries made against the interests of the party making them; and these derive their admissibility from this circumstance alone. It is not, therefore, material when they were made. The testimony of the party who made them would be the best evidence of the- fact; but if lie is dead, the entry of the fact made by him, in the ordinary course of business and against his interest, is received as secondary evidence in a controversy between third persons.” And attention is also called to the case of Adams v. Bowerman (109 N. Y., 23), where the entries in a firm’s books as to its solvency were admitted for the purpose of proving the insolvency of that firm in an action to .which they were parties.

Now, it seems to us that this principle has no application whatever to the case at bar. If Bogart & Co. were suing here, or were the defendants in this action, it is possible that the principle might apply, but probably not, as the person who made the entries is alive; but in the present case the party making the entry is not only alive, but upon being called shows that he knows nothing about the facts to which the entry related. But when we take into consideration the fact that these books were not Bogart & Co.’s books at this time, and that they were being written up that the assignee might ascertain the condition of the estate of which he was the assignee, it is clear that such entries were not made in the ordinary course of business, and that the title of Bogart & Co. to this stock could not be impeached or impaired thereby. It is no duty of an assignee to confess judgment,'or to make admissions in reference to the liabilities of his assignors, which would be the result of the admission in evidence of an entry of this description.

In the face of the evidence showing the circumstances under which this entry was made; showing that the party who made it had no knowledge whatever of the transaction; showing that a material part of the entry, as far as this case is concerned, seems to have been evolved out of his own imagination, it certainly cannot be the law that upon such an entry the title of property can be disposed of.

We think, therefore, that it was error to admit these entries in evidence; and because thereof the judgment must be reversed and a new trial ordered before another referee, with costs to appellants to abide the event.

Andrews, J., concurred. '

O’BrieN, J.

(dissenting):

This action was brought by plaintiff claiming that her testator was the owner of 300 shares of the stock of the Chicago, Milwaukee and St. Paul Railroad, which, without right or authority, were pledged by the firm of O. M. Bogart & Co., with whom said shares were deposited, with the firm of Savin & Vanderhoof, as collateral, with other securities, for a loan of $50,000, which securities were subsequently sold; and the judgment demanded is the surplus realized by the sale of the pledged property over the amount advanced by the said pledgees to the pledgors thereof, O. M. Bogart & Co. The latter firm, almost immediately after the pledge of the stock in question, made a general assignment for the benefit of creditors to the defendant Wheeler.

The questions presented by the pleadings were:

First. Had Hollis L. Powers, plaintiff’s testator, title to the stock ?

Second. Did O. M. Bogart and Co, without his consent and authority or right, pledge such stock ?

Third. Can the firm of Savin & Vanderhoof hold the stock or apply the surplus realized upon the sale thereof upon account of any other indebtedness due them from O. M. Bogart & Co. as against the plaintiff ?

Fourth. Is the defendant Wheeler, upon the facts proven, entitled to judgment for the' surplus realized upon the sale of other securities pledged for a second or other loan made by the said firm of Bogart & Co. ?

The evidence, we think, establishes the fact that, if competent proof was presented to prove Powers’ title to the stock, the referee was justified in concluding that the same was pledged by Bogart & Co. without right or authority.

In respect to the right of Savin & Vanderhoof to apply the surplus to any other indebtedness than the specific loan made on the faith of the securities, this question has been settled by this court upon the former appeal, holding that they were “ entitled to reimburse themselves for payments made on the strength thereof, but not to a greater extent.”

The solution of the question as to whether the defendant Wheeler was entitled to a judgment for the surplus realized upon the sale of the securities pledged for the second loan must depend upon whether or not in this action the rights, as between the defendants to such surplus, can be determined.

Section 1204 of the Code of Civil Procedure provides : Judgment may be given * * *. for or against one or more defendants. It may determine the ultimate rights of the parties on the same side, as between themselves; and it may grant to a defendant any affirmative relief to which he is entitled.”

In construing this section it has been held that a defendant cannot tender an independent issue between himself and a co-defendant which is not raised by the complaint. (Lansing v. Hadsall, 26 Hun, 619; Payn v. Grant, 23 id., 134; Hall v. Ditson, 5 Abb. N. C., 198; 55 How. Pr., 19.) The complaint alleged that Powers had in the custody and possession of Bogart & Co., who were bankers and brokers engaged in business in this city, 300 shares of St. Paul stock, and that, without his knowledge and consent, they pledged the said stock, together with other stock of the defendant, to Savin & Vanderhoof for a call loan of $50,000. It appeared by the evidence that the surplus realized over and above' the amount of the loan of $50,000 upon the sale of the collateral was $4,300, and it was to reach this sum that the plaintiff brought this action. The evidence, however, showed, as the amended answer of the defendant Wheeler alleged, that there were two separate and distinct loans of $50,000 made by Savin & Vanderhoof to Bogart & Co. upon entirely •different securities, and that the stock claimed by Powers was included in the collateral pledged as security for the first loan of $50,000. It appeared that there resulted from the so-called first loan, for which the plaintiff’s securities were pledged, a surplus of $4,300, and from the second loan the sum of $3,518.75; and it is for this latter amount, upon the evidence, that the defendant Wheeler, as assignee, insists that he is entitled to a judgment.

We do not think that the independent claim for which the defendant Wheeler may have a cause of action against Savin & Vanderhoof, which is entirely independent and in no way connected with the demand of the plaintiff, can be litigated, or the rights of the parties determined in this action. The contest between the latter firm and Wheeler over the surplus on the second loan has no connection whatever with the contest waged between the plaintiff and the defendants over the surplus on the first loan. The subject-matter in both suits is entirely separate and distinct, and we do not think that section 1204 was mtended to give any such right as to permit one defendant to litigate a separate and distinct claim which he might have against another co-defendant with respect to a matter with which the plaintiff lias no concern, and with reference to which no allegation is contained in his complaint.

Another position taken by the defendant Wheeler has already .been disposed of adversely upon the former appeal, namely, that plaintiff’s testator would only, be entitled to such proportion of the surplus arising out of the loan in which his 300 shares of St. Paul stock entered as the proceeds of such stock on sale bore to the whole value of all the securities in that particular loan. This leaves us to briefly consider the first, most important, and, upon the evidence, the most difficult question presented as to whether the evidence offered to support proof of plaintiff’s title to the stock was competent. The title to such stock may be said to rest mainly, if not entirely, upon entries from the loan book of O. M. Bogart & Co., which, if competent with- the other evidence in the case, would be sufficient to justify the conclusion reached by the referee; but the absence of such entries from the record would necessitate the conclusion that the burden placed upon the plaintiff of proving title had not been sustained. The testimony bearing upon such entries shows, in brief, that Bogart, Jf.; who sent the securities to Savin & Vanderhoof, made memoranda of the loans on a stock exchange ticket called “tickets,” which memoranda he-testified were correct; that these memoranda on the tickets or slips were the only memoranda made of the loans in the first instance.

These memoranda were not produced upon the trial, the evidence showing that they were made for temporary purposes only, and that when entries were made therefrom into the books of the firm no attention was thereafter paid to them. These particular memoranda were not shown, however, to have been lost, although evidence was given that a search was made for them, and in response to the notice to produce, a statement was made by one of tbe attorneys that a search had been made for them, but they could not be found.

It nowhere appears that these memoranda were handed to the bookkeeper, and that the entries in the books objected to were copied therefrom. Bogart, Jr., stated that he had no present recollection of what he put on the slips; nor does he know whether they came into the possession of Mr. Townsend after he made them, and who it is conceded made the entries in the book. His best recollection was that he placed them in an envelope, and that the envelope was with the books, and that they were so left for the cashier Townsend to enter in the loan book. Townsend remembers nothing about the original memoranda, and his testimony shows that the entry by him in the loan-book was not made contemporaneously but was made' after the failure of Bogart & Co., and after Townsend had come back from being absent, which he states might have been a week after the failure.

The referee in stating his reason for the admission of this loan' entry in evidence, so far as the facts for its admission were ' concerned, summarizes them quite correctly.

“ The testimony seems to me to show that Mr. Bogart made slips of the transaction and that the slips cannot now be produced ; that he had charge of the negotiation of the loans and that slips were made in the usual course of business, and at the same time he made a memorandum on the loan envelope of the collaterals therein. The transaction is entered in the loan-book of O. M. Bogart & Co., in Mr. Townsend’s handwriting, and the loan-book is shown to be the loan-book of O. M. Bogart & Co.; and that the memorandum on the loan envelope, made at the time of the transaction, corresponds with the entry in the loan-book, in Mr. Townsend’s handwriting. Mr. Townsend testifies that he either copied the memorandum from slips (the temporary Stock Exchange slips) or that it was called off to him, and it does not appear that there was any other source from which Mr. Townsend could get the entries. In other words, there is no evidence to show that there was any other memorandum except Bogart’s slips from which Mr. Townsend could have made the entry in the loan-book, and the memorandum or entries on the envelope correspond to the entries in the loan-book.”

It should be remembered, however, in. this connection, that the correspondence between the memorandum on the loan envelope and the entry in the loan-book is not complete.

In the loan-book entry, at the left of the “ Three hundred St. Paul,” are the initials “ II. L. P.,” which it was testified were the initials of and stood for Iiollis L. Powers, and were set opposite to this entry to indicate that the 1300 St. Paul stock belongs to him; and it is upon this entry that the proof- of the title to this stock, being in Hollis L. Powers, depends. Upon the loan envelope sent to Savin & Vanderhoof the 300 St. Paul stock is mentioned, but there is nothing thereon to indicate either by the letters H. L. P. or by any other initials or mark, to whom such stocks belonged. This evidence, the respondent claims, is admissible upon the rule laid down by the Court of Appeals as to the admission of account hooks in the case of The Mayor v. The Second Avenue Railroad (102 N. Y., 572).

A reading of the opinion in that case will show that the court was impressed with the view that it was extending the rule as to cases in which account books in favor of the party will be admitted; and, solely upon the facts appearing in that case, such evidence was held to be competent.

It is unnecessary for us, in view of the conclusion at which we have arrived, to point out the distinction appearing in regard to the facts in that case and the one at bar, which we think are sufficiently clear and distinct to justify the view, were it not for another principle which we think applicable to such evidence, that it should not have been received because incompetent. In other words, had the evidence, in this case objected to, been entries in favor of Bogart & Co., which was the question presented in The Mayor v. Second Avenue Railroad Company (supra), it would have been error to receive such entry. Here, however, the entry is resorted to by the plaintiff, and is relied upon as a declaration against Bogart & Co. in respect to the ownership of these 300 shares of stock; and, as whatever rights the defendants can assert were derived from Bogart & Co. alone, they are equally admissible against such defendants.

In Greenleaf on Evidence (14th ed., § 120), it is said: “ There are two classes of admissible entries, between which there is a clear distinction, in regard to the principle on which they are received in evidence. The one class consists of entries made against the interest of the party making them, and these derive their admissibility from this circumstance alone. It is, therefore, not material when they were made. The testimony of the party who made them would be the best evidence of the fact; but if he is dead, the entry of the fact made by him in the ordinary course of his business, and against his interest, is received as secondary evidence in a controversy between third persons.”

This distinction, between entries in favor of and entries against the person in whose books the entries are made, finds support in the case of Adams v. Bowerman (109 N. Y., 23), where, in an action against a sheriff for an alleged unlawful taking, the latter justified under process against the firm from which plaintiffs acquired title, alleging that said firm acquired title by purchase on credit induced upon false representations as to its solvency; and it was held that the books of the firm were proper evidence against plaintiff upon the question of solvency, and knowledge thereof on the part of the members of the firm, and that the rejection of such evidence was error. This case we regard in principle as applicable to the question here presented.

The title or right of the defendants to these 300 shares of stock were derived through Bogart & Co., and entries in their account books, if shown to have been made in the regular course of business, even though not contemporaneous, would be admissible, not in their favor, but as against them and those claiming under them. The suggestion that upon the fact appearing these entries were made after the failure, and when the firm had ceased to do business, we regard as being without force, for the reason that in connection with that fact it appears that subsequent to the failure the bookkeepers of Bogart & Co., were for some days engaged in making up and balancing the same with a view of determining the status of that firm, and the entries objected to were made in the course of such business.

Where a failure occurs, and matters relating to the business of a failing individual or firm are not entered upon their books, it is customary in the ordinary course of business to have such matters and entries relating thereto inserted for the purpose of determining the condition of the firm. We think, therefore, that the referee correctly ruled in admitting such entry.

It is unnecessary for us, in view of the former appeal, and the facts appearing upon the two trials, to advert further to the law or facts which control many of the subsidiary questions raised upon this appeal, it being sufficient, after having disposed of the principal questions presented by this appeal, to say that, after an examination of the voluminous record, and the other objections made to the affirmance of the judgment, we do not regard any of them as well taken, and our conclusion is that the judgment appealed from should, in all respects, be affirmed, with costs.

Judgment reversed and new trial ordered before another referee, with costs to appellants to abide the event.


author: O’Brien, J.:

text:
    ROBERT A. DAVIS, Respondent, v. CATHARINE B. SEAMAN AND ANOTHER, ADMINISTRATORS OF CATHARINE M. WETHERBEE, Deceased, Appellants.

      Evidence — boohs of account constitute a transaction with a deceased person — Code of Oiril Procedure, sec. 829.
    Upon the trial of a claim against the estate of a deceased person, referred under ' the statute, the claimant, a physician, sought to establish the rendering of the services by his hooks, and was allowed to testify-that he kept correct books.

      Held, that, within section 829 of the Code of Civil Procedure, the books constituted “apersonal transaction or communication between the witness and the deceased person,” and that his evidence was incompetent against the administrators of the deceased person.
    Appeal by the defendants, Catharine B. Seaman, as administratrix, and John M. Baker, as administrator, of Catharine M. Wetherbee, deceased, from a judgment of the Supreme Court, entered in the office of the clerk of the city and county of New York on the 2d day of June, 1891, in favor of the plaintiff for $440 and costs, after a trial before a referee appointed pursuant to the provisions of the statute relating to disputed claims against decedent’s estate.

      A. M. <& O. Card and W. E. Steiger, for the appellants.

      George W. Hopkins, for the respondent.
   O’Brien, J.:

The plaintiff’s claim was for professional services alleged to have been rendered defendants’ intestate between June 22, 1888, and January 22, 1889, amounting to $500. The referee to whom the claim was referred found in favor of the plaintiff in the sum of $440; and from the judgment entered upon the referee’s report this appeal is taken.

The question presented is, whether the conclusion reached by the referee was founded upon any sufficient and competent evidence. The burden was upon the plaintiff of showing employment, professional services, and the extent and value thereof. To establish these, the only evidence offered by plaintiff was his books of account and the testimony of one A. S. Differ. What is necessary to be established ordinarily before books are admissible in evidence has been clearly stated in Vosburgh v Thayer (12 Johns., 461), which has been frequently referred to and followed. Where, as here, however, it is proposed to introduce a book of account as against the representatives of a deceased party, the additional fact must be kept in mind that section 829 of the Code prohibits the claimant from testifying concerning a personal transaction or communication between the witness and the deceased person.” As said in Knight v. Cunnington (6 Hun, 105): “ Where, therefore, a plaintiff desires to establish his case against a deceased debtor by resort to his books * * * he must establish his employment, if his claim be for services rendered, by competent evidence; and then by proof that he keeps correct books of account, and that his debtors have settled with him finding them to be correct, he may be enabled to put them in evidence. * * * It may be said also that the plaintiff’s right to prove the correctness of his books himself, or to- make any statement with regard to them, against a deceased person is extremely doubtful, -x- * * q^e |)00lc certainly relates to a communication or transaction with the deceased, and is, as already suggested, the very foundation on which, his claim rests.”

In the case of Knight v. Cunnington the court said that it was unnecessary to examine the question as to whether the plaintiff could prove the correctness of the books himself, because the testimony was not objected to, nor was the question presented upon proper- exceptions. Here, however, the objection and exception were properly taken, and the testimony of plaintiff in proof of the correctness of his books was received over the defendants’ objection.

Exclusive of plaintiff’s testimony, two witnesses were examined, patients of the plaintiff, who testified to having made payments for professional services rendered by the doctor to their families. The first witness, one Hackett, testified that the doctor presented him a bill which conformed to the amount which he had agreed to pay for certain services to be rendered, and that he had paid the bill when presented. He testified: I never saw any books of account that belonged to the doctor, never examined any books, and any payments I made, I did not make because lie presented a bill; I made an agreement with him for the confinement; I paid him every time he came, after that one dollar for every visit.” It is true this witness testified that he saw books of account, and that when he went for medicine he saw the doctor write it down in the book; but he stated that he never examined the book.

It is difficult to reconcile the witness’ testimony; nor is it necessary, because it did not tend to establish the facts necessary, upon the authority of Vosburgh v. Thayer (supra), to make the books of the plaintiff admissible.

The other witness, Nicholson, testified that he never saw any books, and that any settlements made were without reference to the plaintiff’s book of account.

"We are thus left in this case with the plaintiff’s evidence alone to support the books of account, which, if eliminated from the case, would leave it barren of any evidence in favor of plaintiff’s claim against the deceased.

The respondent, in support of the view that the testimony of plaintiff as to the correctness of the accounts is competent against the representatives of a deceased person, cites McGoldrick v. Wilson’s Executor (18 Hun, 443). It will be seen, however, by an examination of that case that the testimony of McGoldrick was not objected to, and that several witnesses were examined who „ were employed by McGoldrick in the business, and who testified in regard to the manner in which the accounts were kept, which was. in effect, that memoranda were made on a slate and then transferred to an account book, and it was held that such an account book was admissible in evidence because there was nothing in the case which would create a suspicion “ in regard to the honesty or accuracy with which the accounts were kept.” Here, however, as already stated, the objection was taken to the admissibility of the books of account, and their correctness was not supported by other witnesses. We think, therefore, in view of the character and kind of testimony adduced to support the correctness of the book of account offered, that the referee erred in receiving it.

We have already said that, exclusive of this book, there was, no other evidence in the case to support the claim. It is true that one Diller was examined, who testified that he and the doctor both lived in the house with Mrs. Wetherbee during the spring and summer of 1888, during which time she had been more or less sick ; that she went to bed on the twenty-second of September and died on the twenty-second of January. This witness does state that Dr. Davis was there from about the nineteenth of January until the time she died, and that she had a number of prescriptions filled that the doctor had ordered. He also testified that up to the last year of her life Mrs. Wetherbee was a remarkably healthy woman ; that she used to call upon the doctor, but whether such calls were social or professional he could not tell, but that he saw them together, he could not recollect the number of times.

Taking into consideration the fact that the doctor lived in the same house with the deceased, that they were frequently together, and that even this witness is unable to determine whether the calls made by the deceased upon the doctor, or by the doctor upon the deceased, were professional or social, this testimony is stripped of any weight or force, except so far as it relates to the visits which he testified he knew the doctor made professionally between the 19th of January and the date of her death on January 22, 1889. We think, too, having in view the fact that this witness and the doctor were living in the same house with the deceased, and the questions that arose in respect to their exact relations, that in favor of the representatives of the deceased some greater latitude should have been allowed the latter upon cross-examination by the referee.

We are of opinion, therefore, that not only was it error to have received the book of account, but that an examination of the entire record presents no such satisfactory proof as could justify a finding by a referee or by this court that the burden which was placed upon tlie plaintiff of establishing his claim had been made out by satisfactory competent evidence.

We think, therefore, that the judgment appealed from should be reversed, and the claim. referred to another referee, with costs to appellants to abide the event.

YaN Brunt, P. J., and Barrett, J., concurred.

Judgment reversed and claim referred to another referee, with costs to appellants to abide the event.


author: O’BeieN, J.:

text:
    JOHN W. COCHRANE and Others, Executors and Trustees of ADAM W. SPIES, Deceased, Respondents, v. CORNELIA ELIZABETH SCHELL, Appellant, Impleaded with Others, Defendants.

      Will — trust—its surplus income — it passes to the persons entitled, to the next eventual estate — the court will not pass upon the rights of persons not in esse — ■ 1 R. 8., m. p. 726, sec. 40; 728, sec. 55, sub. 3.
    The ninth, clause of a will devised the residue of a testator’s estate to his executors and trustees, in trust, to collect and receive all rents and income, and after the payment of taxes and charges to pay certain amounts annually to his daughter and to certain grandchildren. The tenth clause gave a power of sale over the property, both real and personal.’ The twelfth clause, as modified, provided that upon the death of his daughter Sarah Ann his executors and trustees should transfer all his estate, both real and personal, “then remaining in their hands,” to his eight grandchildren, share and share alike, and their issue.
    The income of the residuary estate very largely exceeded the sum ordered paid to the annuitants; and the will contained no direction as to the disposition to be made of this surplus income.
    The Revised Statutes provide that when, in consequence of a valid limitation of an expectant estate, there shall be a suspension of the power of alienation or of the ownership, during the continuance of which the rents and profits shall be undisposed of, and no valid direction for their accumulation is given, such rents and profits shall belong to the persons presumptively entitled to the next eventual estate.

      Held, that the trust created by the ninth clause of the will was valid, being within the statute authorizing the creation of a trust “to receive the rents and profits of lands and apply them to the use of any person during the life of such person,” and vested the whole residuary estate in the trustees during the life of the daughter, and that there was no unlawful suspension of the power of alienation or of ownership.
    That the validity of the trust was not affected by the failure to specify what disposition should be made of the entire income.

      That to hold otherwise would nullify the provision of the Revised Statutes above quoted relative to income undisposed of.
    That the surplus income, both real and personal, passed to the persons who were, at the time of the application to the court, entitled to the next eventual estate, i. e., the eight grandchildren.
    That the court, upon an application by executors and trustees for instructions, should confine them to the facts as they stand at the time, and should not by its judgment declare rights which may be subject to change from the coming into being of persons not at the time in esse.

    Appeal by the defendant Cornelia Elizabeth Schell from a judgment of the Supreme Court, entered in the office of the clerk of the city and county of New York on the 19th day of February, 1892, and from said judgment, as subsequently amended, by an order dated March 7, 1892.
    The judgment construed the will of Adam W. Spies, deceased, and was entered after a trial at the New York Special Term before the court. The defendant Schell also appealed from the order amending the judgment!
    Also an appeal by the defendants, Sarah Ann French, Adam W. Spies Cochrane and Arthur De Witt Cochrane, from certain portions of said judgment.
    The will contained, among others, the following clauses:

      Winth. All the rest, residue and remainder of my estate, both real and personal, I give, devise and bequeath to my executors and trustees hereinafter named, and to the survivor and survivors of them, and their successors, in trust nevertheless, to collect and receive all rents of my - real estate, and all interest, dividends and income from my personal estate; and after paying all taxes, insurance and other legal and necessary expenses thereon, to pay thereout to my daughter Sarah Ann, the widow of William B. Kip, during her natural life, the sum of ten thousand dollars per annum. I further direct my said executors and trustees to pay to Adam W. Spies Cochrane, a child of my deceased daughter Hilah, the sum of three thousand dollars annually until the death of my daughter Sarah Ann; and that they further pay therefrom to my granddaughter, Cornelia Elizabeth Schell, the sum of three thousand dollars annually until the death of my said daughter Sarah Ann; and. that they further pay thereout to Arthur De Witt Cochrane, a child of my deceased daughter Hilah, the sum of one thousand dollars annually until he shall arrive at the age of twenty-five years, or until the death of my said daughter Sarah Ann, whichever event shall first hajjpen; but in ease the said Arthur De Witt Cochrane shall arrive at the age of twenty-five years before the decease of my said daughter Sarah Ann, then I direct my said executors and trustees to pay over to him, from and after said age of twenty-five years, the sum of three thousand dollars annually until the death of my said daughter Sarah Ann; said payments to my three grandchildren to be made in quarter yearly payments, and to be free from the control of any husband of my said grand-daughter.

      Tenth. I hereby authorize and empower my said executors and trustees, and the survivors and survivor of them, during the contimiance of the above trust and for the purposes above mentioned, to sell and dispose of any and all of my real estate at public or private sale, to let or lease the same, and to sell, assign and transfer any or all of my personal property for the purposes of carrying out said trust, they to reinvest the proceeds thereof in their names as such executors and trustees; but I hereby direct that they shall not invest in any stocks or bonds of any manufacturing or metal mining company, but shall invest in good bonds and mortgages on productive real estate, Northern State bonds, United States securities and the bonds of trunk lines of railroads earning and paying dividends on their stocks, I hereby giving and granting to my said executors and trustees full power and authority to change from time to time said bonds and securities into non-taxable securities, when in their judgment such change will enure to the benefit of my estate.

      Twelfth. At the death of my said daughter Sarah Ann, to close this trust, I direct that my executors and trustees convey and transfer all of my estate, both real and personal, then remaining in their hands, to such of my grandchildren as shall then be living (excepting my said grand-daughter, Sarah Ann French), viz.: Arthur DeWitt Cochrane, Adam W. Spies Cochrane, Cornelia Elizabeth Schell, Henry Spies Kip, Garret Berg Kip, William Rulofi Kip and Florence Adele Kip, equally, share and share alike; and I ^hereby give, devise and bequeath the same to such seven grandchildren, but if any of said seven grandchildren shall die previous to the decease of my daughter Sarah Ann, leaving issue, him, her or them surviving, then I direct that such issue shall take the share to which their parent would have been entitled hereunder (if living) under this clause of my will; said shares to be received by said grandchildren or their descendants free from any control or claim of any husband that she or they may have at any time.
    The second codicil contained, among others, the following clauses:

      Third. I hereby direct my executors and trustees, out of the rents of my real estate, interest, dividends and income from my personal property mentioned in the ninth clause of my said last will and testament, to pay to said Sarah Ann French the sum of three thousand dollars annually until the death of my daughter Sarah Ann; said payments to said Sarah Ann French to be made in quarter yearly payments and to be free from the control of her husband.

      Fourth. I hereby direct that my said grand-daughter, Sarah Ann French, shall be included in the division of my estate as mentioned in the twelfth clause of my said last will and testament, and shall share therein equally with my other seven grandchildren, I hereby directing that said twelfth clause of said will shall apply to her and her heirs as though she had been originally named therein.
    The defendant Sarah Ann French served an answer in the action admitting the facts stated in the complaint and submitting her rights to the judgment of the court.

      Jewries Otis Hoyt, for the proponent, appellant.

      Frcmle L. Hall, for the plaintiffs, respondents.

      Charles Steele and Walter G. Gilson, for the defendants, respondents.
   O’BeieN, J.:

The object of this action was to obtain a judicial construction of the last will and testament of Adam W. Spies, deceased, and particularly of the ninth and twelfth paragraphs of said will as the same are modified by the third and fourth paragraphs of the second codicil thereto, with a view to having a determination of the persons to whom surplus of income in the hands of the executors and trustees should be given.

As most of the questions arising upon this apjaeal are dependent for their solution upon the view to be taken as to the scope of this action, a preliminary statement of what is sought by the complaint is rendered necessary.

The complaint alleges that Adam W. Spies died in May, 1891, leaving a last will and testament, by which the plaintiffs were appointed executors and trustees; that all the above-named defendants are the only heirs-at-law and next of kin, and the only persons entitled to share in the income or distribution of the estate under the terms of the will; that the principal of the estate largely exceeds the amount of the specific bequests made by the said will, together with any probable claims against it; that the amount of income largely exceeds the payments directed to be made; and that the plaintiffs are in doubt as to the rights of the several defendants under the provisions of the will, and especially as to the proper and legal disposition of any surplus of income from the said estate remaining after the payments therefrom directed by the said will to be made, and as to their duties as executors and trustees in respect thereto.

AVliile, therefore, the object sought by the action might, at first blush, be regarded as an attempt to obtain a construction of the entire will, it is evident that the primary and essential purpose was to have a determination in respect to the proper and legal disposition of the surplus of income. The facts showing an existing doubt in regard to a present question, we do not think that the court would have any right to extend the scope of the action beyond a determination of such present existing question. In other words, the executors have only a right to ask the opinion of the court as to their present existing duties — what they shall now do, not what they may or shall hereafter do upon any future facts. The plaintiffs were, therefore, entitled 'only to instructions and an opinion from the court as to their duties to-day. That such must be the rule is evident when we consider the character and nature of the action, and remember, as is well exemplified in this ease, that a broader rule would result in passing upon the rights of parties not before the court, and, perhaps, still unborn.

For the purpose of guiding these executors and trustees in the discharge of their duties, and of disposing of the question presented, it was undoubtedly necessary for the learned judge below to so far consti'ue the will as to reach a determination as to the persons who would be entitled to the next eventual estate, it being conceded that the persons so entitled should receive the surplus income. While, therefore, a number of questions were presented to the trial judge, just as they are presented upon this appeal, for discussion, the real ones involved relate solely to the validity of the trust to plaintiffs and a proper judicial determination of the persons to whom they may properly pay over the surplus of rents and income which may remain after the payment of the annuities provided in the will. That this view of the limited scope of this action is correct is enforced by the pleadings, and particularly by the failure of any of the defendants, as against each other, to ask for any affirmative relief, or, with that object in view, to serve, as required by the Code, their answer upon their co-defendants. We are of opinion, therefore, that, whatever may be the determination as to these questions, the judgment as amended, adjudging that the testator’s residuary estate was vested absolutely in remainder in the eight grandchildren, and that the surplus income of the estate, in case of the death of any grandchild during the continuance of the trust created by the will, is payable to the heirs and next of kin of such grandchild, should be so amended as to exclude any such determination thus made, and should be confined solely to a determination whether the trust under the will was valid, coupled with the direction to the trustees to distribute the surplus income among those entitled thereto.

To determine these questions resort must be had to the will and codicils. By the ninth paragraph, all the residue of the testator’s estate, both real and personal, is given to his executors and trustees thereinafter named, and to the survivor and survivors of them and their successors, in trust, to collect and receive all rents of the estate and all interest, dividends and income from the personal estate, and after paying taxes, insurance and other legal and necessary expenses thereon, to pay thereout to the daughter and to the grandchildren named certain amounts annually. By the tenth paragraph, power of sale is given to the executors covering all the property granted to them by the ninth. The twelfth paragraph, as to which the principal question arises, is as follows:

Twelfth. At the death of my said daughter Sarah Ann, to close this trust, I direct that my executors and trustees convey and transfer all my estate, both real and personal, then remaining in their hands, to such of my grandchildren as shall then be living (except my said grand-daughter Sarah Ann French), viz. : Arthur De Witt Cochrane, Adam W. Spies Cochrane, Cornelia Elizabeth Schell, Henry Spies Kip, Garrett Berg Kip, William Rudolph Kip, and Florence Adele Kip, equally, share and share alike, and I hereby give, devise and bequeath the same to such seven grandchildren; but if any of said seven grandchildren shall die previous to the decease of my daughter Sarah Ann, leaving issue him, her or them surviving, then I direct that such issue shall take the share to which their parent would have been entitled thereunder (if living), under this clause of my will said shares to be received by said grandchildren or their descendants, free from any control or claim of any husband that she or they may have at any time.

By the fourth paragraph of the second codicil he directs that his grand-daughter Sarah Ann French shall be included in the division of his estate as mentioned in the twelfth clause, and share therein equally with his other seven grandchildren.

It, therefore, appears that, until the death of the defendant Sarah Ann Kip, the testator has provided for the distribution of but $20,000 of the annual income, which, in the evenf of the arrival at the age of twenty-five years by the defendant Arthur De Witt Cochrane, would be increased to the amount of $22,000. The court below found that the testator’s residuary estate consisted of real estate of the value of $1,000,000, yielding an income of about $30,000 and personalty amounting to $2,000,000, yielding an income of about $60,000, making the annual net income of the residuary estate about the sum of $90,000, thus leaving, after the payment of annuities, a surplus of about $60,000 every year undisposed of.

Whatever doubt may have existed as to what rule prevailed at common law, the statutes of this State make provision for the disposition of surplus income in certain cases as follows : “ When, in consequence of a valid limitation of an expectant estate, there shall be a suspense of the power of alienation, or of the ownership, during the continuance of which the rents and profits shall be undisposed of, and no valid direction for their accumulation is given, such rents and profits shall belong to the persons presumptively entitled to the next eventual estate.” (1 R. S., 126, §40.)

With respect to the excess here, neither the will nor the codicils contain any provision for its disposition; and the question whether the statute applies is to be determined by the conclusion to be reached as to whether, in consequence of a valid limitation of an expectant estate, there is a suspense of the power of alienation or of the ownership.

On the one side the position is taken that, as to his residuary estate, the testator died wholly or partially intestate; while, on the other, it is as strenuously insisted, as found by the learned judge below, that the grandchildren took a vested estate in remainder in such residuary estate. This latter view assumes that the trust created by the ninth and tenth paragraphs of the will is valid and vests the whole residuary estate in the trustees during the life of Mrs. Kip, just as the contention of the appellant is predicated, upon the theory that no valid trust was created, and no estate was vested in the executors and trustees. Among the four express trusts provided by statute is one to receive the rents and profits of lands and apply them to the use of any person during the life of such person, or for any shorter time.” It would seem, therefore, that the testator did what the statute permitted him to do; and the only argument urged against the validity of the trust results from a failure to direct the disposition of all the income. It is evident, however, that the testator deemed it requisite that all his residuary estate should be devoted to the execution of the trusts, and there is no right or power in the court to assume the responsibility of deciding otherwise. If the argument thus urged against the validity of this trust is to prevail, it would follow that, unless a fund can be set apart which shall produce exactly the amount of the annuities, and no more, the trust would he invalid. That such is not the law has been determined by the cases of Hawley v. James (16 Wend., 61); Leggett v. Perkins (2 N. Y., 297); Haxtun v. Corse (2 Barb. Ch., 506).

In the first case (p. 159) it was said : “ It can make no difference whether the trust extends to all the rents and profits of an estate, or is confined to some specified sum of money. It is not necessary that the trustees should have a discretion as to the amount to be applied * v * the (jonor may settle that for himself.”

Besides these cases, however, a consideration of the purpose sought to be effected by the statute relating to the disposition of surplus income shows that cases may arise where all the income is not disposed of during the continuance of the trust. If, therefore, a failure to dispose of the entire income would render a trust pro tanto invalid, there would be no income to dispose of, and a case could not arise to which the statute would be applicable. This would be, in effect, to hold that the statute regulating the disposition of surplus income was nugatory and useless, because applying to a contingency that could never happen. It is plain, therefore, that the trust is not invalid, merely because there may be income from the trust estate beyond the amount required to pay the annuities provided by the will. Besides those already referred to, the statute has been applied in the following cases where questions in respect to undisposed income under a trust have been presented. (Cook v. Lowry, 95 N. Y., 103; Pray v. Hegeman, 92 id., 508; Barbour v. De Forest, 95 id., 13; Horton v. Cantwell, 108 id., 255.)

This being a case, therefore, where the statute will apply, it remains to determine who are the persons presumptively entitled to the next eventual estate, because to such must be paid over the surplus income. We think, upon a reading of the will and codicils, that these persons, at the present time, are the eight grandchildren to whom the expectant estates are given; this conclusion applying to the income from personalty as well as to the rents and profits from the realty.

It will thus be seen that we agree with the conclusion reached by the learned trial judge as to the disposition to be made of the surplus income, the only criticism to be made relating to the determination of questions not properly within the scope of the action; our conclusion being that the decree should be limited to declaring that the trust under the will was valid, and directing that the trustee should distribute the present surplus income equally among the eight named grandchildren. We think that to this extent the judgment should be affirmed, and in other respects should be modified, thus leaving the other questions as to the interests of the parties to be determined when they arise, the costs of the appeal to all parties to be paid out of the fund.

Yan Brunt, P. J., and Barrett, J., concurred.

Judgment modified as directed in opinion, and as modified affirmed, the costs of the appeal to all parties to be paid out of the fund.


text:
    FRANCES E. GODINE, Plaintiff, v. HENRIETTA KIDD, Impleaded with Others, Defendants.

      Specific performance — contract of adoption — adequacy of consideration — pa/rt performance — personal transactions and communications— Code of Ovoil Procedure, sec. 829 — Latos of 1873, chap. 830; 1887, chap. 703.
    In an action of ejectment it appeared that, in 1844, Elizabeth Knapp and Edwin Knapp, her husband, adopted one Henrietta Dillon, an infant, with the consent of her parents, the Knapps promising by parol to bring Henrietta up as their daughter, give her their name, make her their heir, and that the property they might have at their decease should go to her in case she should survive them. In 1849 one Parscyl devised the premises in question to the Knapps as tenants by the entireties. Henrietta Dillon lived with the Knapps until 1890, took and was married under the name of Knapp to Richard R. Kidd, and did not know until after marriage that they were not her parents. Edwin Knapp died in 1887, and subsequently, in 1890, Elizabeth Knapp died intestate.
    In an action brought for the partition of the premises which had been so devised to Knapp and his wife a defense was interposed by Henrietta Kidd, in effect demanding the specific performance of the agreement made at the time of her adoption.

      Held, that the defense was tenable.
    That the question was one of contract, and was not controlled by the laws of this State, passed in 1873 and subsequently, giving heritable qualities to an adopted child.
    That as the existence of the contract was proved by undisputed evidence, and as its enforcement would not result in injustice to third persons, and was not against public policy, the contract should be enforced.
    That a consideration was made out, of benefit to the promisors, by reason of their having obtained the privilege of supervising Henrietta’s education, and of treating her as a daughter, and also of harm to the promisees in parting with their child. That the adequacy of the consideration would not be weighed.
    That, so far as the contract related to real estate, part performance took it out of the statute of frauds.
    That the mother of Henrietta was a competent witness as to the contract.
    That section 829 of the Code of Civil Procedure did not apply, since, although the contract of adoption was, in fact, made by the mother with the Knapps, Henrietta did not in any sense derive her title or interest in the property from her mother by assignment or otherwise, but did obtain the same from the Knapps.
    Exceptions of the defendant Henrietta Kidd, taken upon a trial at the New York Circuit before the court and a jury, at which the court directed a verdict for the plaintiff that she, as a tenant in common, was entitled to the possession of one-fourth of the premises described, in the complaint, and for forty dollars damages for mesne profits, and also directed that the exceptions be heard in the first instance at General Term.

      Elliot Williams, for the plaintiff.

      Warren Higliley, for the defendant.
   O’Brien, J.:

The plaintiff, claiming to be the owner of a one-fourth interest in the premises in West Washington Place, brings this action to eject the defendant who is in possession of the premises. The complaint alleges that one Elizabeth Knapp died in June, 1890, being, at that time, seized in fee of the property; that her title thereto was derived through one William Parscyl, who died seized and possessed of the lot of land, on the 11th day of May, 1849, leaving a last will whereby he devised the same to Edwin Knapp and the said Elizabeth Knapp, his wife, and the survivor- of them. Edwin Knapp died July 4, 1887, leaving Elizabeth Knapp, his wife, surviving, who thereupon became seized in fee in her own right of the premises in question, and continued in possession thereof until the time of her death; that she having died intestate, the plaintiff, who was a niece of said Elizabeth Knapp and one of her heirs, became entitled to one undivided fourth part of such real estate. In answer to the claim thus made the defendant alleged, as a defense, that in April, 1844, her mother, with the consent and approval of her father, gave and surrendered her, then an infant of the age of one and a half years, to the said Elizabeth and Edwin Knapp, for and ip consideration that they then and there promised and agreed to adopt and bring her up as their daughter, give her their name, make her their heir, and that the property they might have at their decease should go to her in case she should survive them; that in pursuance of such agreement she w^as immediately taken by the Knapps, and lived with them and so continued until the time of their deaths, and was at all times treated by them as their daughter, bearing their name and being by them given in marriage under the name of' Henrietta Knapp to Richard R. Kidd.

Upon the close of the evidence the court directed a verdict for the plaintiff (ordering the exceptions to be heard in the first instance at the General Term), upon the ground that the equitable defense set up was not sufficient to exclude the heirs-at-law. It was thus assumed by the learned trial judge, just as the evidence warranted, that an agreement substantially as set forth in the defense was established. It was made to appear that Mr. and Mrs. Knapp, who were childless, made application to the mother of the defendant, when the latter was but eighteen months old, for permission to take and bring the child up, agreeing to treat her as their own daughter and in all respects to make provision for her as their own child, including a disposition of their property in her favor at their death. The agreement, so far as any obligation was imposed on a child towards parents, was fulfilled by the defendant; and, so for as concerns that part of the agreement by which the Knapps were to leave her their property, this was partially performed by the will made in favor of the defendant by Mr. Knapp who at the time claimed, and supposed himself to be, as did Mrs. Knapp, the owner, not only of the personal property which, by the terms of his will, went to the defendant, but also of the real estate, in which, however, together with his wife, he only took an estate by thé entirety; which left the property in such position that it did not pass, as he intended it should under the terms of his will, to the defendant, but passed to his wife by reason of her surviving him.

Were it not for this misapprehension on the part of the Knapps as to the person who had the right to devise the property, no question would now be presented, because the evidence abundantly shows that the husband assumed that he had carried out the agreement by leaving all Ids property to the defendant and to his wife who survived him; under the like impression, that the property had been so devised that after her life estate it would go to the defendant. Mrs. Knapp died leaving no will. It thus happens that by reason of intestacy the property will descend to her heirs-at-law, unless the agreement which was set up by the defendant is sufficient to justify her retention thereof.

In effect, the defense seeks to obtain a specific performance of the agreement made by the Knapps with the parents of the defendant at the time of her adoption; and there being no real dispute upon the facts, the question is, whether a contract made in this State in 1844, between the parents of a child and its adopters in consideration on tlae one hand of an agreement to take the child and bring her up as their own and give her the property they might have on their death, and on the other the surrender of the child by its parents, and the child growing up and serving and caring for her new parents until their death, can be enforced.

The adverse view upon this question taken by the learned trial judge was undoubtedly due to the importance attached by him to the laws passed in this State with reference to the adoption of children. Tie correctly says that “ the’ law of this State, until the year 1873, never recognized such a thing as the adoption of children who were not the offspring of the parents. In 1873 an act was passed by which, in a certain sense, the relation of parent and child was established between the child of a stranger and a married man and woman with the mutual consent of both. In 1887 that was enlarged, so that a child adopted had heritable qualities and might take the property of the father or mother to the exclusion of those who otherwise would have been the heirs-at-law, provided there were no natural children of the persons adopting the child.”

While, therefore, the act of 1873 must be regarded as the first formal enactment providing for statutory adoption, and thus, beyond question, legalizing the same, this very act (chap. 830, Laws of 1873), by its thirteenth section, recognizes the fact that' adoptions had taken place prior thereto, because it provides that nothing herein contained shall prevent proof of the adoption of any child heretofore made according to any method practiced in this State from being received in evidence,” etc. While, therefore, adoption was not known to the common law, and was never in any way regulated by statute in this State until 1873, its existence prior to the latter date was undoubtedly recognized. We think, however, that the learned trial judge was unduly influenced by a consideration of the provisions relating to statutory adoption in determining the question presented for his consideration. It was not one as to whether there had been a formal adoption pursuant to some law or statute, which would have entitled the defendant by virtue thereof as an adopted child to succeed to the property of the adopting parents; but, as already said, the question was whether an agreement such as has been here established can be enforced in equity.

In the case of Gall v. Gall (handed down herewith) this question has been considered by this court; and the views expressed by Mr. Justice Talcott in Shakespeare v. Markham (10 Hun, 322) have been referred to with approval. It was in the latter case said.: “ There is upon the authorities no doubt that, in a case where a certain and definite contract is clearly established, even though it involves an agreement to leave property by will, and it has been performed on the part of the promisee, equity in a case free from all objection on account of the adequacy of the consideration, or other circumstances rendering the claim inequitable, will compel a specific performance.” Again, the courts require clearest evidence that a contract founded on a valuable consideration, and certain and definite in all its parts, should be shown to have been deliberately made by the decedent.

In his able review of the authorities in the Gall case, Mr. Justice Barrett says it is true that those in which performance have been enforced were principally cases where specific property Was agreed to be devised or bequeathed upon an adequate consideration. ITe further states: “We have found no case in this State where an agreement to leave the whole of one’s estate, real and personal, to a particular person has been enforced. On the contrary, there are cases where specific performance of such a contract has been refused.” He says: “ It is vitally important that the statute of wills should be maintained in its integrity. * * * So important are these provisions with respect to testamentary disposition that it has been doubted whether, in any case, especially when the contract is sought to be established by parol testimony, so patent a means for their evasion as bills for specific performance should have been allowed. It is certain, however, that in this class of cases the ordinary rules which govern in actions to compel the specific performance of contracts, and which furnish reasonable safeguards against fraud, should not be extended, but should be rigidly applied. These rules require that the contract be certain and definite in all its parts ; that it be mutual and founded upon an adequate consideration, and that it be established by the clearest and most convincing evidence. * * * That the remedy is a matter of judicial discretion, and that relief should be withheld where a decree for specific performance would work injustice to innocent third persons, or where it would be contrary to public policy.”

Upon .the application of these principles in the Gall case, it was held that the contract sought to be enforced “ was not established with reasonable certainty. It was not made with parents for the benefit of an infant, but directly with an adult.”

It will thus be seen that, while the courts are reluctant to enforce such contracts where there is the slightest suspicion of fraud, or the slightest doubt as to the existence and certainty of the contract, yet the law recognizes that specific performance will be decreed of a definite contract founded upon an adequate consideration which is established by the clearest proof. Where, therefore, the act of adoption is based upon a contract, it is not the law or statute regulating adoption that is to prevail, but the law relative to contracts. (Wharton on Conflict of Laws, § 251.)

Applying the principles thus laid down for our guidance, the conclusion to be reached in this case must necessarily depend upon the character and strength of the evidence adduced to sujiport the contract alleged. In respect thereto, we have no more difficulty than did the learned trial judge in arriving at the conclusion, upon the testimony, that Mrs. Kidd, while an infant, was adopted by Mr. and Mrs. Knapp and “made substantially and virtually their child.” The agreement made between these people and the mother of Mrs. Kidd, showing a complete surrender of the child'to them on condition that they should have the care and custody of the child, free from any control or interference on the part of the parents, and upon their death should leave her their property, is clearly established. We have not only direct testimony as to the terms of the agreement, but all the surrounding circumstances unequivocally support its existence. So complete was the control vested in the Knapps that from 1844 to the date of Mrs. Knapp’s death, in June, 1890, the defendant never knew but that she was actually the child of Mr. and Mrs. Knapp, and it was only after her marriage that she became aware of the fact that she was the child of other parents.

The enforcement of the contract here will not result in injustice to any third persons, nor is it against public policy; but in view of the literal way in which it has been performed, upon the part of the defendant’s parents and her own, it would be an extreme hardship, and both inequitable and unjust, if she were now prevented, after all these years of performance on her part and that of her parents, from enforcing it. Even though we should assume, therefore, that none of the arrangements between the parties was of original binding obligations upon the defendant’s parents, yet the subsequent performance and fulfillment thereof by defendant and her parents, so that thereby the Knapps actually got all they bargained for, would furnish a sufficient consideration to support their promises as effectually as if the agreement had been of original binding obligation. What the Knapps bargained for was, at the very least, forbearance by and on the part of defendant’s parents of some of their rights, and was an adequate and sufficient consideration for their promises and undertakings. It has frequently been held that the consideration for a contract or promise need not be adequate in point of value. If there be any consideration, the court will not weigh the extent of it; it has no means of scrutinizing the varied hidden motives and reasons that may have influenced the parties and induced them to enter into the contract, nor can it determine upon the prudence or propriety of the transaction. Where an offer is accepted by the party doing the act which forms the consideration, and when the promisor has had the benefit of the consideration for which he bargained, it is no answer in an action brought for a performance of the agreement, to say that the promisee was not bound by the contract; it is enough if the promisee did it on the faith of the undertakings of the promisor, and upon showing that the latter got the benefit of it. As said by Leake on Contracts (p. 613): “ The adequacy of the consideration is for the parties to consider at the time of making the agreement; not for the court, when it is sought to be enforced.” Here, with the consent of the defendant’s parents, the Knapps obtained the privilege of supervising and directing the defendant’s education, her life, habits and tastes, the formation and development of her character, and the privilege of treating her as their own daughter, and of being regarded and loved by her as her parents. They at the time were childless, and were no doubt actuated by the same feelings and instincts which ordinarily move lonely and childless people to adopt as their own the child of others; and that there was resultant benefit to them is abundantly established by the evidence. The defendant not only regarded them as her parents, but in all respects conformed to the strictest requirements of an affectionate and dutiful child.

Upon these facts, who would question the worth, adequacy and sufficiency of the consideration received by the adopting parents ? Lives that are drear and blank are thus oftentimes cheered and animated and filled with new hopes and ambitions, fresh impulses and awakened energies. These are the contributions of youthful love and affection and cormpanionship to childless old age. But whether or not the results expected from adopting the defendant were in all respects realized, this in no way affects the adequacy of the consideration moving from the parents of the defendant and supporting the promise made by the Knapps. On the part of the parents and on the part of the defendant it was fully and completely performed, and all of the youth, early womanhood and a considerable portion of her married life, the years intervening between 1844 and 1890, were devoted by the defendant in performing those filial duties of affection and care which, according to all the evidence in the case, is shown to have been that of a loving daughter towards aged and, in their latter years, sickly parents. A contract which has been thus established, entirely free from doubt or suspicion, founded upon an adequate consideration, which has been fully performed on one side, and the intention to perform which on the other was only rendered abortive by a mistake as to the situation and ownership of the property, should be enforced in its entirety, unless some settled principle of law or equity would prevent its enforcement.

As already stated, there is abundant law to sustain the view that “ where a certain and definite contract is clearly established, even though it involves an agreement to leave property by will, and it has been performed on the part of the promisee, equity in a case free from all objections on account of the adequacy of the consideration or other circumstances rendering the claim inequitable, will compel specific performance.”

Though recognizing this well-settled law, the plaintiff insists, in addition to the other objections to defendant’s right to retain the property, which have already been discussed, that there are two insuperable objections to her obtaining any relief. The first is, that as the property in question is real estate, and the agreement set up in the answer is a parol agreement, supported entirely by parol testimony, it cannot be enforced, because void by the statute of frauds, not being in writing. The answer to this, however, is that a verbal agreement that has been performed by one of the parties, though made with reference to real estate, is taken out of the statute of frauds and is valid in law.

The second objection goes to the admissibility of the evidence of defendant’s mother (which was the direct testimony offered as to the terms of the contract), upon the ground that such evidence was incompetent under section 829 of the Code of Civil Procedure. This section provides that, upon the trial of an action, a person from, through or under whom a party derives his interest or title, by assignment or otherwise, shall not be examined as a witness in behalf of the party succeeding to his title or interest, against a person deriving his title or interest from, through or under a deceased person, concerning a personal transaction'or communication between the witness and the deceased person. We fail, however, to recognize any force in this contention, because we do not see that the defendant derived her interest or title by assignment or otherwise from her mother; but, on the contrary, her rights were obtained under a contract made, it is true, by the mother, but under the terms of which she derives from the Knapps her title and interest, if any, in and to the property. Were this a contract made by defendant’s mother for her own benefit, which had been assigned to the defendant, then there might be some force in the suggestion. But it is clear that this is a case where the contract was made by the mother on behalf and for the benefit of the child ; and her interest was in no way derived from or received through her mother. We think the test of this objection is to be found in a consideration of whether or not the mother could have maintained any action for • this property, or whether she'at anytime, or under any circumstances, would have any interest therein. We think it reasonably certain that the conclusion to be arrived at must be that the mother could not maintain an action to enforce the contract for her own benefit, nor had she any interest at any time in the property to which the defendant succeeded. There is abundant authority to sustain the position that a person for whose benefit a contract is made may maintain an action thereon, although the consideration was one between the promisor and the third person. (Todd v. Weber, 95 N. Y., 181.)

Upon the law, therefore, as applied to the facts of this case, we are of opinion that there was no valid objection to the enforcement of the contract, and upon the undisputed facts it was error on the part of the trial judge not to have granted the defendant’s motion for a dismissal of the complaint.

The defendant’s exceptions, therefore, to the refusal to rule in her favor should be sustained and the judgment reversed and a new trial ordered, with costs to defendant to abide the event.

Yan Brunt, P. J., and Barrett, J., concurred.

Judgment reversed and new trial ordered, with costs to defendant to abide event.

      Reported, post p. 600.