author: Daniels, J.:

text:
    JOHN S. PROUTY, Respondent, v. THE MICHIGAN SOUTHERN AND NORTHERN INDIANA RAILROAD COMPANY, JESSE HOYT and others, Appellants.

      Foreign corporations—Jurisdiction of the courts of this State over—Preferred stock— Dividends— Actions against consolidated corporations.

    The provisions of section 437 of the Code of Procedure, relating to actions against foreign corporations, do not limit the jurisdiction of the courts of this ■State to cases in which the cause of action has arisen, or the subject, or some property to be acted upon, is situated within this State.

      Sowed v. Chicago &S. W B. B. Co. (51 Barb., 378), overruled in its construction of section 437 of the Code.
    Construction given to statutes relating to the issuing of preferred stock, and the validity of the issue considered.
    When a certificate of stock provides that the stock is “ entitled to dividends at the rate of ten per cent per annum, payable semi-annually out of the net earnings of said company,” and is “ also entitled to share pro rata with the other stock of the company, in any excess of earnings over ten per cent per annum, and the payment of dividends as aforesaid” was thereby guaranteed; held, that the right of the stockholders to receive this ten per cent dividend, so guaranteed, was not limited to the net earnings of the year in which it was agreed that the distribution of these net earnings should' be made, but that the certificate of guarantee was, in substance, a pledge of all the future earnings of the road for the payment of this yearly ten per cent dividend.
    The failure of the corporation, for want of net earnings, to make the dividends on the days when they fell due, did not relieve it from its obligation to make them when the necessary earnings should afterward be realized.
    In an action in a court of equity, brought by one of a class of persons, on behalf of himself and all others similarly situated, the rule is, that all persons composing the class, may come in under the decree and prove their rights and obtain satisfaction equally with the plaintiff, being thereafter in all respects treated as parties to the suit.
    An objection that stockholders should have been made parties to the suit, held untenable under the decision in Thompson v. Brie B. B. Co. (45 M. Y., 468).
    Statutes of other States cannot for the first time be read upon the hearing of an appeal.

      Cutler v. Wright (33 N. Y., 473-474) disapproved; SuntY. Johnson (44 N. Y., 37) followed. The question as to who is a proper party defendant, in an action brought on an obligation of one of several consolidatied corporations, after their consolidation, discussed.
    Appeal from a judgment against the defendants, entered upon the report of a referee, and from an order for such judgment.

      v'' This action was bi'ought by the plaintiff, claiming to be the owner of 484 shares of preferred stock, issued by the defendant, the Michigan Southern and Northern Indiana Railroad Company, a foreign corporation, on his own behalf and that of other holders of such preferred stock, to compel this foreign corporation and its directors, among other things, to apply its future net earnings to the payment of dividends in arrear upon such stock. The following is a copy of the certificates of the preferred stock:

    In witness whereof, the said company have caused the same to be registered, and this certificate to be signed by their President and Treasurer, and countersigned by their Secretary.
    Dated at New York, this day of 185
    President.
    Treasurer.

      The referee found that this defendant should be restrained from declaring dividends, or making other disposition of the funds of the corporation, till the amount in arrear and unpaid on the preferred stock, should be paid. That a reference should be ordered, to advertise and give notice to other preferred stockholders to come in and prove their claims, etc. This report was confirmed by the court.

      James Matthews, for the appellants.

      Laeien Birdseye, for the respondent.
   Daniels, J.:

This action was brought by the plaintiff, a resident of the State of New York, on his own behalf, and on behalf of others having like grounds of complaint, against the corporate defendant, a railway corporation organized and existing under the laws of the States of Ohio, Michigan and Indiana, to secure the payment of dividends, agreed to be paid by such defendant upon certain shares of preferred and guaranteed stock issued by it in the year 1857. By the terms of the certificates issued, it was stated that the stock was “ entitled to dividends at the rate of ten per cent per annum, payable semi-annually in New York, on the first days of June and December in each year, out of the net earnings of said company,” and was “ also entitled to share pro rata with the other stock of the company, in any excess of earnings over ten per cent per annum, and the payment of dividends, as aforesaid,” was thereby guaranteed.

The ten per cent dividends upon the- stock, were not paid from the time when it was issued until on or about the 1st day of July, 1863. And neither then, nor at any time since, was any payment made of the dividends in arrear. The object of this action was the recovery of those arrears, and the judgment has provided for that, by requiring the net earnings of the company to be applied to their payment.

It was urged upon the trial, and the objection was again taken on the argument of this appeal, that the court had no jurisdiction over the cause of action presented by the complaint, because the railroad company was a corporation, formed and existing under the laws of other States, and the other defendants proceeded against, were its directors. Numerous adjudged authorities were referred to, in support of, as well as against, the objection, most of which it will be unnecessary to consider. For neither of them, when properly limited, directly sustains or defeats it.

The jurisdiction of this court over actions against corporations created under the laws of other States and countries, has been defined and declared in very plain terms by statute; and it cannot be necessary to look very much beyond them, in order to ascertain and determine the design of the legislature in its enactment. By that statute, it has been provided, and the provision has been in force during the entire pendency of this action, that an action may be maintained in this, and certain other courts, by a resident of this State, against a corporation created by or under the laws of any other State, government or country, for any cause of action. This is a broad and unqualified provision, containing nothing justifying the restriction placed upon it by the Special Term, in deciding the case of Howell v. Chicago and North-western Railway Co. And that must have been afterward the conviction of the learned judge who decided that case, for it was at a court held by himself, that the order was made in this cause, directing that judgment should be entered upon the report made, by the referee. If that was not so, then this case is so far distinguishable in its facts from that, as to render the decision then made inapplicable to the objection now urged against the jurisdiction of the courc. The case of Whitehead v. Buffalo and Lake Huron R. R. Co., has no bear, ing upon the point presented, because the plaintiff in it was not a resident of this State, and his right to maintain his action, depended upon the other provision contained in the section. The language used by the legislature is full and explicit; and, like all other statutes, should be construed according to the fair import of its terms, in order to carry into effect the object of its enactment. And as so construed, it includes the present action.

It is further objected, in support of the appeal taken from the judgment, that the stock, upon which the dividends aré claimed, was issued without authority. The corporation issuing it was formed by the consolidation of two pre-existing corporations, operating a continuous line of railroad from Toledo, in the State of Ohio, to Chicago, in the State of Illinois, known as the Michigan Southern and Northern Indiana Railroad Companies. Before the consolidation, by section 20 of an act of the legislature of the State of Indiana, approved May 11, 1852, it was provided that, “ for the purpose of providing means for the payment of its debts, and for the construction of its road, materials or equipments, such company may issue a preferred stock to an amount not exceeding one-half of the amount of its capital, with such priority over the remaining stock of such company, in the payment of dividends, as the directors of such company may' determine, and shall be approved by a majority of the stockholders.”

And this provision was applicable to the Northern Indiana Railroad Company, one of the constituents of the consolidation.

By another act, passed by the legislature of the State of Michigan, approved March 28th, 1850, and applicable to the Michigan Southern Railroad Company, it was enacted by sections 3 and 4, that the company, for the purpose of providing means for the payment of its debts, and for the construction, extension and completion of its railroads, shops, depots, buildings and equipments, might “ create and issue shares of guaranteed stock, to be denominated ‘construction stock,’ to such an amount as it may determine, not, (with the original stock) to exceed the amount of their capital stock allowed by law, which construction stock shall be entitled to such dividends, and payable at such place, and in such manner, and with such preference over the remaining stock of said company, in the payment of dividends, as the directors of said company may determine, and as shall be approved by the holders of a majority of the stock represented at their annual meeting.”

Section 5, of an act passed by the legislature of the State of Ohio, approved March 3d, 1851, conferred general and unrestricted authority on the Northern Indiana Railroad Company, created by its provisions, to consolidate with any railroad company, then or afterward formed or incorporated in the States of Michigan or Indiana, under any name mutually agreed upon, from which time it was to become a portion of such company. And by section 2, of an act of the legislature of Illinois, approved February 28th, 1854, which was before the consolidation was effected, it was provided that any intersecting railroad companies, having continuous lines, should be authorized to consolidate their property and stock with each other, and by the name agreed upon, should “be a body corporate and politic,” with “ all the powers, franchises and immunities, which the said respective companies shall have, by virtue of their respective charters, before sush consolidation.”

The act of the legislature of the State of Indiana, approved February 23d, 1853, allowing railroad companies of that State to “intersect, join and unite their railroad with any other railroad, con structed or in process of construction,” in that “ or in any adjoining State at such point on the State line, or at any other point,” '“mutually agreed upon,” was equally as full and unrestricted. For it provided that it might be done, and the companies consolidated, “ upon such terms as may be by them mutually agreed upon, in "accordance with the laws of the adjoining State, with whose road or roads, connections are thus formed; provided their charters authorized said railroad to go to the State line, or to such point of intersection.”

By section 50, of an act of the legislature of the State of Michigan, approved February 13th, 1855, which was also before the consolidation, it was still further provided, that any railroad company in that State, having a continuous or connected line with any other railroad company, might consolidate with such company, either in or out of that State, into a single corporation; and that “ such new corporation shall possess all the powers, rights and franchises,' conferred upon such two or more corporations, and shall be subject to all the restrictions, and perform all the duties, imposed by the provisions of their respective charters, or laws of organization,” not inconsistent with the provisions of that act. And by another act, enacted and approved at the same time, by which the particular consolidation of the Michigan Southern and Northern Indiana Railroad Companies was explicitly authorized, it was provided, that “ all the franchises, property, powers and privileges,” then “ enjoyed by the Michigan Southern Railroad Company, and all the restrictions, liabilities and obligations, imposed upon said two corporations by virtue of their respective charters, and all contracts by and with either or both of said corporations, shall appertain to said united corporation, in the same manner as if the same had been contained in, or acquired under, an original charter, or made by or with said consolidated corporation.”

Under and pursuant to these various provisions, an agreement was entered into by the different companies, for their consolidation into one corporation, on the 25th of April, 1855, with the consent of their respective stockholders. And, by the agreement then made, it was provided and agreed, that “ all and singular their several and respective franchises, privileges and immunities,” should henceforth “ be the estates, property and effects, franchises, privileges and immunities of” the consolidated company, to all intents and purposes; ” and that it should “ have all the powers, franchises, immunities, property and privileges,” enjoyed by the said parties of the first part, or the said parties of the second part,” which included the constituent companies, or which either of the said respective companies of the said first and second parts have, or had, by virtue of their respective charters,” before the execution of such agreement.

Under these statutory provisions, and the stipulations contained in the agreement made by the consolidating companies, there seems to be no room, whatever, for doubting the power of the new corporation to issue preferred and guaranteed stock, provided it was done with the consent of its stockholders, and it did not exceed the prescribed limits of the capital of the consolidated corporation. The power was fairly given to the constituent corporations, both by the laws of Indiana and Michigan. For no essential difference can exist between preferred stock, having priority over the remaining stock in the payment of dividends, and stock to which that preference may be guaranteed. In the one case, the agreement to preserve the preference and pay the dividend before dividends may be paid on the common stock, is to be clearly implied, while in the other it is explicitly expressed. The obligation is substantially the same in each instance. And, for that reason, there was no practical difference in this respect, in the authority conferred upon either corporation, concerning the right to issue such stock.

The admitted, as well as undenied, allegations of the complaint, showed that the capital of the consolidated corporation was fixed at the sum of $12,000,000, of which $3,000,000 remained unissued when the preferred and guaranteed stock was provided for and issued. This stock did not exceed that amount, and its issue was unanimously provided for and authorized by the Stockholders, at their regular annual meeting in April, 1857, and by the action of the board of directors. This action was made the subject of some criticism by the defendants’ counsel, because it was taken to carry into effect the resolution adopted on the subject by the stockholders. But it is not justly subject to question; for, in any view which may be taken of it, the board did provide for and sanction the creation and sale of this stock, precisely in the form in which it was offered to the company’s stockholders. The latter were the only persons who could by any possibility be injuriously affected by it, because it postponed their right to dividends, until the stipulated ten per cent should be paid, out, of the net earnings of the company, on the new stock undér the guaranteed preference given to it, when they unanimously consented to relinquish their right to dividends until the stipulated ten per cent per annum should be paid upon the new stock. That would seem to be sufficient to remove all objection to its validity, even if it had not been specially authorized by the statutes referred to, and the agreement made for the consolidation, as long as the company, at the time, possessed the power to issue stock to the additional extent of $3,000,000. What its form should be, could only be important to the owners of the preceding stock, and when they waived their right to dividends in its favor, no ground for complaint could exist in favor of other persons, or of the corporation issuing the stock. The provisions of the statutes requiring the dividends to be equally distributed among the stockholders of the company, in no way affect the validity of the guaranteed stock; they were made to secure the observance of the ordinary rights of the stockholders ; and it was contemplated that such rights might be surrendered by them, in the provisions made for preferred and guaranteed stock, which were rendered dependent on the assent of a majority of the ordinary stockholders. Their rights were subject to this qualification, and they unanimously accepted it in favor of the stock afterward issued.

As no reason exists for doubting the validity of the preferred and guaranteed stock, it becomes necessary to consider whether the holders of it are entitled to their stipulated dividends out of the net earnings of the company, for years succeeding those in which, by the terms of the certificates, they were rendered payable. The circumstances existing at the time when the stock was provided for and issued, and which may properly be considered in its construction, warranted the expectation that the dividends, rendered payable on the first days of June and December of each year, by the terms of the certificates, could not be paid in the financial condition in which the company then was. For its floating debt was larger than the amount which could be realized from the sale of the preferred stock created for its payment on the terms upon which it was offered to the stockholders of the company. It was reasonably to be inferred, therefore, that there would not at once be any fund available for the payment of the stipulated preferred dividends, inasmuch as the earnings of the company would probably be all required for the payment of its floating and pressing indebtedness. So that it could hardly have been the design of the corporation, in issuing the certificates for the guaranteed stock, to limit their holders’ right to dividends to the net earnings of the year, in which it was agreed the stipulated distribution of them should be made.

The language used in the certificates, embody the same conclusion. For, while the ten per cent dividends are expressly made payable out of the net earnings of the company, it is also agreed by the guaranty following, that the dividends shall be paid in that manner. The undertaking is explicit, that the holders of the stock shall receive their annual ten per cent out of the company’s net earnings. It was clearly designed that they should have that’amount for each year upon their investment. And as they could receive it only from the net earnings of the company, and it was certainly intended they should have ten per cent per annum, at least, upon the investment, if those earnings proved insufficient for the payment at the times mentioned in the certificates, it must have been designed that they should be afterward paid, whenever the net earnings of the company would permit that to be done. There could have been no other or different object for the positive stipulation, that the holders of the stock should receive ten per cent per annum for their money. Although an investment in stock, it was substantially a loan to the company, to relieve it from pressing necessities. And it could hardly have been induced, under the circumstances, on terms as favorable to the borrower, without the guaranty that all the net earnings were rendered liable for the payment of the annual dividends mentioned in the certificates. And by that, the company positively agreed that they should be so paid. Its apparent object was to render the ultimate payment uncontingent, whenever the net earnings proved sufficient to enable the company to make it. That, though not in the express terms of the certificate, is its import and spirit. And it must have been so understood by the persons purchasing the stock. They had the right to assume that to be the character of the obligation created by it, and the company should be held to its performance in that way. 1/XIn substance, it constituted a pledge of the future net earnings of the company, for the payment of the yearly ten per cent dividends. /, That was its main expectation and purpose. It is true, that, by its terms, it contemplated the creation of a sufficient fund to enable }/ the company to pay during each year. But, if that expectation failed, nothing was inserted in the certificate, discharging the company from all future obligation of payment, when the fund should be sufficient to make it. The stipulations for the payment, and. the guaranty that the dividends should be paid out of the net earnings, as stipulated, are consistent with the existence of no other design, than that the holders of the preferred shares should receive their ten per cent per annum, in case the net earnings proved equal to that end. The holders were given an interest in the clear profits of the company, equal to the ten per cent which it was agreed they should receive from that source. The dividends mentioned, are payable, generally, out of the net earnings of the company. And it would be doing more than what it was agreed should be done, if the court should limit the right to payment, to the earnings of any one particular year. The substantial obligation of the corporation, was to pay ten per cent per annum on the stock, out of the net earnings of the company. And the days on which the dividends were to be made, were alone contingent upon its ability to make them. The failure, for want of net earnings, to make the dividends on those days, did not exonerate the corporation from the general and paramount obligation to make them, when the earnings neces-. sary for that purpose should afterward be realized.

A somewhat similar point was presented for the construction of an act of parliament providing for preferred stock, in the case of Henry v. Great Northern Railway Co. There was no obligation to make payment of the stipulated dividends at any particular time, in that case, beyond what might be inferred from the undertaking that they should constitute a particularly specified sum per year. It could reasonably be inferred from that circumstance, that the obligation at least existed, to make the dividends annually. For that was the apparent purpose of the defendant, according to the form and import of the stock issued. But the court held that the stockholder was not deprived of his right to dividends, because the earnings, out of which they were expected to be made, were not realized during the year in which, by the terms of the stock issued, they ought to have been paid. On the contrary, the stock was held to be “ a charge on all accruing profits, at the stipulated rate, before anything is divided among the ordinary shareholders. This is, substantially, interest chargeable exclusively on profits.” A similar conclusion was maintained in Taft v. The Hartford, Providence and Fishkill R. R. Co., where the action failed, because no net earnings had been received.

From these and other authorities, a recent text writer deduces thev principle, that, unless there is some agreement to the contrary, preference shareholders are entitled to be paid their dividends to the amount guaranteed, before the other shareholders receive anything, so that if the profits, divisible at a given time, are not sufficient to pay the guaranteed dividends in full, the deficiency must be made good, out of the next divisible profits, the ordinary shareholders taking nothing until all arrears of guaranteed dividends have been paid to the preference shareholders.” The principle is certainly warranted by the terms used in creating and selling the stock, and it sustains what must have been, at the time, the reasonable expectations of both the parties. It is right and just, and ought to be maintained in the application made of it by the learned referee in the present case.

No reason exists for the objection, that the plaintiff has deprived himself of his right to have the net earnings applied to his payment of the dividends claimed in this action, by the acquiescence in their distribution among the general stockholders. For it appears by his own evidence, and is not contradicted by the defendants’ witnesses, but found to be true by the referee, that the plaintiff protested against that disposition of the net earnings of the company, and demanded his dividends on his guaranteed stock. That, he stated, he was very particular to make each time.

When the action was commenced, the corporation existed precisely the same as it had done from the time when the consolidation was effected, in the year 1855. It was alleged that a further consolidation was contemplated, but it did not appear to have been consummated by anything shown in the case, until after the referee had made his report. For that reason, the proceedings up to that time, cannot be deemed unwarranted, by another consolidation, even if one actually took place before the report was in fact made. Up to that time, no evidence of its existence was given in the action.

The action was professedly brought by the plaintiff on his own behalf, and on that of the other owners of the preferred and guaranteed stock, having similar grounds of complaint. This was the proper form to be adopted, under the circumstances constituting the canse of it. The case of Williston v. The Michigan Southern and Northern Indiana R. R. Co. failed, because an action at law could not be maintained, and for the further reason that the courts of that State had no jurisdiction of an action against the defendant, in the present form, because it was a foreign corporation. And the same conclusion was declared, as to the impropriety of an action at law, in Chase v. Vanderbilt and others, by the Superior Court; but that such an action as the present one was proper, was conceded in the disposition which was made of Williston's case. The actions referred to in the English courts, were also brought in this form, and apparently assumed as free from objection in that respect. The same thing is maintained by Story’s Eq. Pleading; also by McKenzie v. L'Amoureux, Bouton v. City of Brooklyn, Hammond v. Hudson Rimer Iron and M. Co. and Cady v. Conger. And the relief awarded by the report, is substantially the same as was decreed in Henry v. Great Northern Railwag Co. (supra).

So far as the other owners of the guaranteed stock are concerned, the relief awarded, precisely conforms to the settled practice of courts of equity. The rule in these courts, is, that “the other creditors may come in under the decree and prove their debts before the master (now the referee), to whom the cause is referred, and obtain satisfaction of their demands, equally with the plaintiff in the suit, and under such circumstances they are treated as parties to the suit.”

The decision made in Kilbourne v. Allyn, by the General Term of the third department, is not in conflict with this practice, or the right, in a proper case, to maintain such an action. For the facts did not bring the case within the law relating to this class of actions. And if they had, the disposition made of it was entirely improper, for the relief had been awarded to other persons, without bringing them in under the judgment, and without any opportunity being afforded to them, or any desire being indicated by them, to become parties to the action, or to avail themselves of the benefit of the judgment recovered.

The objection that the stockholders should have been made parties to the action, appears to be untenable.

No good reason seems to exist, for denying the plaintiff interest on the dividends he was entitled to receive, from the time the net earnings were appropriated to the holders of the common stock by the corporation. The earnings should have been first appropriated to the dividends on the guaranteed stock. That would have given its holders the indemnity for the loss, for which they are now to be compensated by interest. And they are entitled to interest for that purpose.

The judgment authorized by the report, will simply restrain the further misappropriation of the dividends to the common stock, until the arrears, with interest on the guaranteed stock, shall be paid out of the net earnings of the company. And, in that respect, it will be as favorable to the defendants, as they had any reason to require that it should be. Nothing less than what has been directed, would provide the owners of the guaranteed stock with the relief they were entitled to have awarded.

The order made after the referee’s report, substituting the Lake Shore and Southern Michigan Railroad Company as the defendant, had no effect on the plaintiff’s right to proceed with the action against the present defendants ; for, before judgment was entered, it was reversed upon appeal, and that as effectually removed it from the case as though it never had in fact been made.

After the reversal of that order, an application was made upon the same and other papers, for leave to enter judgment upon the report of the referee, and to have a further reference, to bring in other parties in interest. The order was made, allowing judgment to be entered, and directing the reference applied for. From the plaintiff’s own papers, however, it was shown that the Michigan Southern and Northern Indiana Railroad Company had previously consolidated with the Lake Shore and Buffalo and Erie Railroad Companies. This, it was stated and shown by the plaintiff, was done pursuant to laws, of the States of New York, Pennsylvania, Ohio, Michigan, Indiana and Illinois. But what those provisions were, was not in fact shown, beyond those contained in the law of this State, which, however, have no application to the obligations forming the plaintiff’s cause of action in the present case. It must be assumed that the consolidation mentioned, was lawfully effected, for that is stated to be the fact, in the plaintiff’s papers; and from them, it appears that the preceding corporations have merged in, and formed, one single corporation, owning and operating a line of railroad from Buffalo to Chicago. By this merger, the preceding corporations ceased to exist, according to the papers now before the court, on the appeal taken from the order; and all their property, franchises, rights and privileges, have become vested in the new corporation, formed by the final consolidation.

Although all the rights of creditors, and liens upon the property of either of the corporations, were, by the terms of the consolidations, preserved unimpaired, that gave the plaintiff no power to proceed against either of the constituent corporations; for he is not a creditor, and had no lien upon the property of the corporation, within the meaning of these terms. They related to specific liens upon tangible property, and not mere equities, in the nature of charges upon earnings, like those existing in the plaintiff’s favor. These were otherwise provided for, by the stipulation that all just debts, guaranties, liabilities and obligations, existing against either corporation at the time of the consolidation, should be assumed, provided for, paid and discharged by the consolidated company; and that all contracts and agreements between either of the companies and any person or persons, should be carried out by the new company.

The changes made, appear to have been sanctioned by the votes of the requisite number of stockholders, and to have been entirely lawful and proper; and they necessarily ended the existence of the constituent corporations, and the plaintiff’s right to proceed to judgment against the one sued by him.

In order to avoid this result, the statutes themselves have been referred to, upon the present appeal from the order. But, notwithstanding the very general provision of the Code, prescribing the proof of the laws of other States, they cannot be considered by the court, because they were not read on the hearing, when the application for the order was made. If they provide for the continued existence of the old corporation, for the purpose of securing satisfaction of the demands against it, they should have been read, or otherwise brought to the notice of the court, when that application was heard. They cannot, for the first time, be read upon the hearing of an appeal from the order, which their provisions might have justified, if they had there been made to appear. A different rule was suggested as proper, in the case of Cutler v. Wright. But it was not afterward approved or followed. On the contrary, it was held in Hunt v. Johnson, that the laws of other States could not, for the first time, be read upon the hearing of an appeal. They are required to be produced before the court entertaining the original application. The consequence is, that no authority for proceeding in the case against the preceding corporation, appears before the court. For that reason, as the corporation issuing the stock has ceased to exist, by merger in a new corporation, which has assumed all the obligations of its predecessors, the future proceedings should have been against the consolidated company. The order made on the application for leave to enter judgment, and for a reference under the judgment, was unauthorized, and it, as well as the judgment entered in pursuance of it, should be reversed, with costs. But, as the proofs made of the consolidition, simply affected the plaintiff’s right to the order itself, and the proceedings had under it, the preceding proceedings in the action cannot be affected or disturbed by such reversal. An order should also be entered, denying the motion, but without prejudice to a renewal of it, upon further papers showing the continuance of the corporation, if that can be done, for the purposes of the action.

Lawrence and Donohoe, JJ., concurred.

Ordered accordingly.

       Code, § 427.

       51 Barb., 378.

       18 How., 218.

       McCluskey v. Cromwell, 1 Kernan, 593, 601, 602.

       3 Jurist (N. S.), 1133.

       Id., 1137; 1 De Gex & Jones, 606, 637.

       8 Rhode Island, 310;

       See also Crawford v. North-eastern Railway Co., 3 Jurist (N. S.), 1093; Stevens v. South Devon Railway Co., 9 Hare, 313.

       Lindlay on Part. (2d ed.), 781.

       13 Allen, 400.

       7th ed., §§ 94-103.

       11 Barb., 516.

         15 id., 375.

       20 id., 378.

       19 N. Y., 256.

       Story’s Eq. Plead, (supra), § 99, page 104; Hallett v. Hallett, 2 Paige, 15, 19.

       Thompson v. Erie Railway Co., 45 N. Y., 468.

       Adams v. Fort Plain Bank, 36 N. Y., 255; Dana v. Fiedler, 2 Kernan, 41.

       22 N. Y., 472, 474.

         44 N. Y., 27.


source: Caselaw Access Project

license: Public Domain

text:
    STEVEN DILLON, Plaintiff in Error, v. THE PEOPLE, Defendants in Error.

      Stolen property — identity of—presumption arising from, possession of— statement of prisoner as to how he obtained, possession — when must be proved false by prosecuting

    The plaintiff in error was convicted of grand larceny, for stealing a quantity of pig-iron. The agent to whom the iron was sent to be sold, testified that it bore the marks, and presented the appearance, of the iron in his possession, some of which had been taken away from the premises where it was deposited, and some from a boat, having a portion of it on board, during the night, in the early morning of which the defendant was arrested. He further testified that he identified the iron when he saw it in the following afternoon. Held, that his testimony, together with the fact that the iron was found in the defendant’s boat, upon the river, at half-past three o’clock in the morning, and his subsequent statement that he had purchased it of a canal boat captain for fifteen dollars, when it was really worth fifty-two dollars, were sufficient to justify the submission of the identity of the property to the jury.

      The defendant’s counsel requested the court to charge the jury, that the mere possession of the property stolen, was not prima facie evidence of the commission of the larceny by the defendant. The court declined so to charge. Held, no error. That the request must have been designed to relate to the defendant’s possession, as that had been shown by the evidence, and that such possession was so recent and so suspicious, that it was consistent with no other rational conclusion than that of guilt.
    The defendant’s counsel requested the court to charge that where a man, in whose possession stolen property is found, gives a reasonable account of how he came by it, the prosecution was required to show the account to be false. The court declined so to charge. Held, no error. That the rule only applied to those cases in which considerable time has elapsed between the taking of the property and the discovery of the fact of possession, and where a reasonable account of how the prisoner came by the property was given to those finding him in possession; and that the account, given by the defendant as to the manner in which he obtained possession of the iron, was, under the circumstances of the case, entirely unworthy of belief.
    Weit of error to the Court of General Sessions of the city of liew York, to review the conviction of the plaintiff in error of the crime of grand larceny in stealing a quantity of pig-iron.
    The facts are stated in the opinion.

      Peter Mitchell, for the plaintiff in error.

      JBenj. K. Phel/ps, District Attorney, for the defendants in error.
   Daniels, J.:

The defendant, Steven Dillon, was convicted of the crime of grand larceny, in the Court of General Sessions, and sentenced to he imprisoned in the State prison, for the term of five years. Exceptions were taken in his behalf, to the charge given the jury, and to refusals on the part of the learned recorder, to charge as requested by the defendant’s counsel. After judgment, a writ of error was issued, for the purpose of securing a review of such exceptions. The first was taken to the refusal of the court to take the case from the jury, on the ground that the description of the identity of the property, was too indefinite, vague and uncertain, to convict the defendant upon, and not sufficient in law to be submitted to the jury.

The property charged to have been stolen, was twenty-eight bars of pig-iron. And the evidence of the agent having it in charge, and who was the sole agent here at the time for its sale, was, that it bore the marks, and presented the appearance, of the iron in his possession, some of which, he testified, had been taken away from the premises where it was deposited, and from a boat having a portion of it on board, during the night, in the early morning of which the defendant was arrested. His testimony was, that he did identify the iron, when he saw it- early in the following afternoon, by its marks and looks. This, with the fact that it was found in the defendant’s boat upon the river, at half-past three o’clock in the morning, and his subsequent statement that it was bought o-f a canal boat captain for fifteen dollars, when the uncontradicted evidence was that its value was about fifty-two dollars, were sufficient to justify the submission of the question of the identity of the property to the jury. The case in this respect, was entirely different from the authority relied upon by the defendant’s counsel in support of this objection. The proof in that case did not show that the property, found in the defendant’s possession, had been stolen at all, and the witness who was alleged to be its owner, could not identify it, so as to distinguish it from the same kind of property sold to his customers residing in the same vicinity as the prisoner. While, in the present ease, the evidence of the agent showed that a larceny of the iron had been probably committed; that the quantity taken was similar to that found in the prisoner’s possession; that it had the marks and appearance of the iron in the agent’s custody; and that no other iron of that description, was, at the time, probably on deposit, or for sale in the vicinity. The proof was sufficient to render it the duty of the court to submit the identity of the property to the jury.

The comments of the court on the evidence given by the same witness, that, on being shown the iron the next day, he recognized it beyond any doubt, as being the property which had been taken away from his possession, was also excepted to. Ho request for its modification in any respect, was made on the part of the defendant. And it is certainly true, that the statement made, was fully as strong as the evidence of the witness would justify. He did not, in words, say that he recognized the property as his beyond any doubt, but it is not difficult to perceive that he intended as much as that by the statement which he made. He testified that he did identify the iron as that which he was sure he saw, the night before, on the boat at his dock. That he had received it about a week before, and knew it by its being new iron, the color of the sand used by the company that manufactured it, the shape of the pigs, and the letters upon it. That he would be pretty certain about it, without the letters, but not as certain as with them. The fair inference from his statements, was, that the iron, found with the defendant, was a part of that sent to him for sale, and which had been carried away during the preceding night. And no reason exists for supposing that he entertained the least doubt as to the correctness of his statements. They were made with a sufficient degree of positiveness, to justify the comment made upon them by the learned recorder.

The defendant’s counsel requested the court to charge the jury, that the mere possession of the property stolen, was not prima facie evidence of the commission of the larceny by the defendant. This the court refused to do, and the defendant’s counsel excepted. The request must, of course, have been designed and understood to relate to the defendant’s possession, as that had been shown by the evidence given in the course of the trial. There was no dispute as to the facts constituting that portion of the case. The larceny appeared to have been committed sometime during the night, and the property was found by the police, in the possession of the defendant and another person with him, in a small boat managed by them, at half after three o’clock in the morning. The possession, at that unseasonable hour for lawful traffic, was, within the authorities, sufficient to maintain the presumption of the defendant’s criminal agency in procuring it. It was so recent, and so suspicious, that it was consistent with no other rational conclusion, than that of guilt. “ Generally, wherever the property of one man, which has been taken from him without his knowledge or consent, is found upon another, it is incumbent upon that other, to prove how he came <by it; otherwise the presumption is that he obtained it feloniously.” This was cited with approbation, in the case of the State v. Furlong (supra), and its accuracy as a general legal proposition, is sustained by the decision made in the case of Knickerbocker v. The People.

As the proposition was first stated by the court, concerning the presumption arising from the fact of recent possession of stolen' property, it was rather too decided against the defendant. For it is a presumption of fact; one which the jury may act upon, and not one which by law they are required to follow. But it was afterward qualified, and submitted to the jury in that form. The court, upon that subject, responded to the request of the defendant’s counsel, that it was presumptive evidence, and further charged, that stolen property, immediately afterward found in possession of a party, afforded the presumption that the person having the possession, had stolen it. The case was finally submitted to the jury upon that proposition, and it was as favorable to his case as the defendant had any legal right to require.

The court also declined to charge the proposition, presented by the defendants’ counsel, that where a man, in whose possession stolen property is found, gives a reasonable account of how he came by it, the prosecutor was required to show the account to be false That may be true, as to a large class of cases where considerable time has elapsed between the taking and the discovery of the fact of possession, but, to bring the case, upon this point, within the rule relied upon by the defendants’ counsel, as it is stated in the authority cited by him, it is necessary that it should appear that a reasonable account of how the possessor came by the property, should be given to those finding him in possession. In the present case, nothing of that kind was done. For, according to the evidence of the policeman who made the arrest, the defendant gave no account of his possession, until he and the other person arrested were at the police court, sometime after the arrest' had been made. The defendant himself swore that he told the policeman, at the time of the arrest, that he had bought the iron. When or where he claimed to have bought it, he did not state that he disclosed. What he said he he stated himself, gave no reasonable account of the manner in which he obtained possession of the iron, and, under the circumstances attending his detection and arrest, it was wholly unworthy of belief. Even if the proposition, as the court was requested to charge it, had been accurate, it was not raised by the evidence given in the case. Beyond that, the prosecutor cannot be required to show that the defendant’s statements are false, when given in exculpation of what seems to be a guilty possession, as long as the circumstances attending it, are such as to indicate that they are not true. The question is one for the jury, who would ordinarily acquit on the faith of them, where they appeared to be probable, but would reject them under circumstances throwing grave suspicions upon their truth. No arbitrary, unbending rule exists upon this subject, applicable to all cases of possession of stolen property. What the law requires, is, that the defendant’s statement should be credited where it appears to be probable, and consistent with the facts. While, on the other hand, the jury is not only at liberty, but it is their duty to decline to adopt and act upon it when it is inconsistent with other facts proved, tending to establish guilt, and it is suspicious and improbable in itself There is nothing in the case, from which the defendant’s conviction can be held to have been improper, and the judgment should therefore be affirmed.

Davis, P. J., and Brady, J., concurred.

Judgment affirmed.

       State v. Furlong, 19 Maine, 225.

         2 East’s Crim. Law, 656.

       43 N. Y., 177.

       Regina v. Crowhurst, 1 Car. & Kir., 370.


text:
    THE DUTCHESS COUNTY INSURANCE COMPANY, Respondent, v. ALBERT HACHFIELD and others, Appellants.

      Bonds—when negotiable — Stolen—rights.qf bona fide purchaser of.

    Bonds were issued by the city of Poughkeepsie, payable “ to the said-his executors, administrators and assigns.” Held, That these terms, following the space left for the insertion of the name of the payee or holder, were sufficient to render them negotiable.
    This action was brought to recover five of these bonds which had been feloniously stolen from the plaintiff, their lawful owner, shortly before they were purchased by the defendants. At the trial, the defendant’s counsel requested the court to charge, that if “ Hachfield & Co., purchased these bonds in the open market for full value, and in the usual course of business, without notice or suspicion, they were not bound to make a close and critical examination in order to escape the imputation of bad faith in the purchase.” The court declined so to charge, and left it to the jury to say how much of an examination they were to make. Held, that this was error, and that, as it was not cured by the charge which was still more unfavorable to the defendant, that the judgment should be ■reversed, and a new trial granted.

    Appeal from a judgment in favor of the plaintiff, and from an order denying a motion made on the judge’s minutes for a new trial.
    The facts are stated in the opinion.

      Coles Morris and Michael H. Ca/rdozo, for the appellants.

      Albert Stic&ney, for the respondent.
   Daniels, J.:

This action was brought to recover the possession of five bonds, issued by the city of Poughkeepsie, for the sum of $1,000 each. They were payable in blank, with the addition, following the blank, of the terms, ‘‘ his executors, administrators, or assignees,” etc. And these terms, following the space left for the insertion of the name of the payee or holder, were sufficient to render them negotiable, under the mercantile law of the State, as it now seems to be settled.

The evidence showed that these bonds had been feloniously stolen from the plaintiff, their lawful owner, shortly before they were purchased by the defendants. And that imposed the obligation upon them, of proving, to the satisfaction of the jury, that their purchase was made for value, and in good faith, before they could establish a title to the bonds, superior to that of the plaintiff, as the preceding owner. Where fraud or illegality in the negotiation of commercial paper is shown, the law presumes a want of consideration in the transfer. It supposes that the original party, not being able to sue upon the instrument himself, has handed it over to another, to sue upon it for his benefit. This presumption, so raised by the law, must be rebutted by the holder, showing affirmatively that he gave value. It is not quite correct to say that the onus of proving value, is cast upon the plaintiff; but the plaintiff being presumed to stand in the shoes of the party from whom he took the instrument, and to be his agent for the purpose of carrying out the fraudulent or illegal intention, is bound to get rid of that presumption.”

Proof was given by the defendants, tending to overcome the presumption, arising out of the circumstance that the stolen bonds were found in their possession, by showing that they were purchased by them for a valuable and adequate consideration, without notice of any infirmity in the title of their vendor. And it is upon the disposition, which the court made at the trial of the questions arising upon this proof, that the main effort is made by defendants’ counsel, to sustain their present appeal.

After the charge had been delivered to the jury, the defendants’ counsel requested the court to instruct them, that if “ Hachfield & Co. purchased these bonds in the open market, for full value, and in the usual course of business, without notice or suspicion, they were not bound to make a close and critical examination, in order to escape the imputation of bad faith in the purchase.” The court declined to charge this proposition, and left it to the jury to say how much of an examination they were to make; and the defendants excepted to the refusal. This exception is the only one required to be considered in connection with the charge of the court, because the preceding request, though in the main correct, was finally coupled with an untenable proposition, and, for that reason, properly refused. The proposition presented by this exception seems to be faultless. For, if the defendants did, as it contemplated, purchase the bonds in the open market for value, in the usual course of business, without notice or suspicion, then they were not bound to make either a close or critical examination, either of the bonds, or into their history, in order to escape the imputation of bad faith in the purchase. The terms made use of, did not complete or finish the idea pointed at by the words notice or suspicion; 'but as the whole controversy hinged upon the question whether the defendants’ purchase was made in good faith, what was really intended by their use, was clear and conspicuous. It was, in substance, without notice or suspicion of the robbery, by which the plaintiff was divested of their possession. That was, under the circumstances, their clear implication; and, with that construction, the proposition which. the court declined to charge, was sound in all respects. For it presented the case of a purchase for full value, in the ordinary course of business, without notice or suspicion of the robbery creating the infirmity of title. And that was all which the law required to be established, to protect the defendants as the owners of the bonds. Under those circumstances, if they had been submitted to, and found as proved by the jury, the defendants were not bound to make any examination or investigation whatever, to escape the imputation of bad faith in their purchase of the bonds. For they were of themselves sufficient to show a purchase in good faith, for value, and in the usual course of business. And the law requires no more than that, in order to vest the buyer with the title to negotiable securities.

There was nothing in the charge, which avoided the effect of the refusal to submit this proposition to the jury. That was still more unfavorable to the defendants’ title. For it required them to satisfy the jury, that the bonds were purchased by them in the ordinary course of business, “ and that they did not procure them in such a shape as would put a prudent man upon inquiry ; ” and that “they bought them and paid for them, without reason to suppose that there was anything wrong about them.” “That where parties act in good faith, in the purchase of securities, in the open market, without any attending circumstances which would call for inquiry, or put a party upon his guard, the purchaser would be protected,” etc. And it was further added: “ If you find from the evidence and the surrounding circumstances, that Hachfield & Co. bought these bonds in good faith, without any reason to suppose that Kendrick had wrongfully come into possession of them, then they are protected.” These were the prominent portions of the charge, stating what the defendants were required to establish, in order to succeed in their defense. And they required too much of them, because it was clearly to be implied from what was said, that a purchase for value, and in good faith, was insufficient, in case there was enough shown to put the defendants upon inquiry, or upon their guard, or arouse their suspicions that the seller had wrongfully acquired possession of the bonds; while all that the law requires to protect the purchaser, is, that the purchase shall be for value, in good faith, and in the ordinary course of trade. And these propositions were not corrected by the general statement, afterward made, that the defendants were to be protected if they bought the bonds in good faith, because the preceding qualifications of the general proposition were in no sense withdrawn or restricted. The jury were left with the impression, conveyed by the charge, that, in addition to good faith in the purchase and value paid for the securities, the defendants were bound to satisfy them, that it was made under circumstances that would not put a prudent man upon inquiry, or cause him' to suppose there was anything wrong, or put him upon his guard, or lead him to suppose that the bonds were not regular. To correct these qualifications, at least, the proposition the court declined to charge, was required. And its refusal must have been decisive with the jury, that a purchase for value, in good faith, and in the usual course of business, was not in itself sufficient for the protection of the defendants.

A new trial cannot be ordered for misdirection in the charge, for the simple reason that it is not one of the grounds which, under the Code, can be considered, in support of a motion made for that purpose upon the minutes of the court. For that reason, the effect of these directions is no otherwise before the court on the present appeals, than they are appropriate for consideration upon the effect of the refusal to charge as requested by the defendants. In that respect, they have been examined, to show that the proposition declined, was not included in anything which had been said. And, as it had not previously been submitted to the jury, and was right and proper" for their consideration, the court should have charged it, when the request was made. The refusal to do so was error, and, for that reason, the judgment should be reversed, and a new trial ordered, with costs to abide the event.

Davis, P. J., and Beady, J., concurred.

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

       Brainerd v. N. Y. & Harlem R. R. Co., 25 N. Y., 496; White v. Vermont and Mass. R. R. Co., 21 How. (U. S.), 575; Michigan Bank v. Eldred, 9 Wallace, 544, 551-552.

         Farmers’ Bank v. Noxon, 45 N. Y., 762.

       Fitch v. Jones, 32 Eng. Law and Eq., 134, 137, 138.

       Welch v. Sage, 47 N. Y., 143; Belmont Branch of State Bank of Ohio v. Hoge, 35 N. Y., 65.

       Welch v. Sage, supra; Goodman v. Simonds, 20 How. (U. S.), 343.

       Code, § 264.


text:
    THE FIRST NATIONAL BANK OF NEW YORK, Respondent, v. THEODORE W. MORRIS and another, Appellants.

      Accommodation draft accepted to be used in another State—when usurious — Sureties of corporation — usury cannot be pleaded by.

    The Lenox Glass Company, a corporation residing and doing business in the State of Massachusetts, drew a draft on the firm of D. S. Schank & Sons, of which the defendants are members, which firm then resided and carried on business in the city of New York. The draft was accepted by the firm for the accommodation of the drawer, and subsequently discounted by it in Massachusetts, at a rate which was, according to the laws of New York, usurious.
    The draft was subsequently transferred to the plaintiff, which brought this action thereon. Held, that it was entitled to recover; that the defendants, by accepting the draft for the accommodation of the drawer, became simply sureties for its payment, and hence neither they, nor their principal, the corporation, could, under the laws of this State, interpose usury, as a defense in an action upon the draft.

      Semble,'ihai, by the acceptance of the draft for the accommodation of the drawer, the inference would seem to be natural and proper, that it must have been intended that the drawer could use it in any manner which might be lawful at the place of its residence, and that the fact of its being discounted at a rate, lawful there, but usurious here, would not affect its validity.

      Jewell v. Wright (30 N. Y., 359) criticised and doubted; Bank of Georgia v. Lewin (45 Barb., 340) and Bowen v. Bradley (9 Abb. [N. S.], 395) approved.
    Appeal from a judgment in favor of the plaintiff, entered upon the trial of this cause by the court without a jury. The facts are stated in the opinion

      Wm. A. Beach and A. C. Brown, for the appellants.
    The draft was usurious. (Lee v. Selleck, 33 N. Y., 615 ; Curtis v. Leavitt, 15 id.. 227; Jewell v. Wright, 30 id., 259; Cope v. Alden, 53 Barb., 350.)

      Charles A. Peabody, for the respondents,
    cited Balme v. Wombough (38 Barb., 352); Hyde v. Goodnow (3 N. Y., 266); Merchants’ Bank v. Spalding (12 Barb., 302); Chapman v. Robertson (6 Paige, 627); Miller v. Tiffany (1 Wallace, 298).
   Daniels, J.:

The judgment in this action was for the recovery of the amount due upon a draft, drawn by the Lenox Glass Company, in Massachusetts, on the firm of D. S. Schank & Sons, then residing and carrying on business at the city of New York, and accepted by them, for the accommodation of the drawer. The defendants were members of that firm, and defended the action on the ground that the drawer of the draft procured it to be discounted for its benefit, at what, under the laws of this State, was a usurious rate of interest. But the draft was discounted by a banking institution in the State of Massachusetts, at a rate of interest which, by the laws of that State, was legal and valid; and that institution transferred it to the plaintiff. The point in the case is, whether the defense of usury was, under the circumstances, sustained.

By the acceptance of the draft for the accommodation of the drawer, the inference would seem to be natural and proper, that it must have been intended that the drawer could use it in any manner which might be lawful at the place of its residence; for, without that privilege, it is obvious that the drawer could not be secured the full benefit of the paper accepted. Its business was in another State, and the presumption would be, that the acceptance was procured to be used where that was transacted, and its ordinary corporate functions were exercised; and from such a design, a valid use of the paper there, ought to be maintained by the courts of this State. The usury laws of this State were in no way in force there, and, properly speaking, had no relation to the use there made of the paper. It was accepted to be used by the drawer, carrying on its corporate operations there, and no restriction imposed as to what should be done with it. The drawer was entitled to make any lawful use which it could of the acceptance, and one mode of making such use of it, was, to render it available for the drawer’s benefit, in any way in which that could be done cousistently with the laws of the place, under which, as a corporation, it existed. But it is claimed in behalf of the appellants, that the right of the drawer to use the acceptance, was subject to the disability imposed by the usury laws of this State, because the acceptance was made in this State, and hy its terms rendered the bill payable here; and the decision made in the case of Jewell v. Wright, is a direct authority in favor of the correctness of that position. Under ordinary circumstances, it would be the plain duty of this court to follow that authority, while it remained apparently in force, although differing from the propriety of the conclusion maintained hy it. But, since it was made, the learned justice who prepared the opinion upon which the case was decided, has, with the concurrence of his associates at General Term, silently disregarded its authority, The same thing was done upon a full consideration of the case, by the Superior Court of Buffalo, at General Term. The doctrine on which the case stood, was there fully examined by the late Judge Hasten, with his accustomed learning and ability, with the result that it was opposed to the preceding authorities on the subject, and probably decided under a clear misapprehension. When that case was decided, Judge Davies prepared an adverse opinion, characterized by his usual thoroughness, learning and ability, in which he maintained the principle, since acted upon in this court and the Superior Court of Buffalo, under the preceding authorities applicable to it. This opinion is published in a note to Bowen v. Bradley, and is entitled to consideration and weight in the disposition of this case. Still, it may well be doubted whether a proper sense of decorum is consistent with the position that the decision in Jewell v. Wright, as long as it has not been overruled by the court pronouncing it, can properly be disregarded by this court.

But as the defendants, now complaining of the .judgment, accepted the draft for the accommodation of the drawer, they became simply sureties for its payment. The drawer appears to have been a corporation, and as such could not defend an action upon the draft drawn by it, on the ground of usury, under the laws of this State; and the same disability affected the defendants as its sureties.

The judgment appealed from was right, and it should be affirmed.

Davis, P. J., concurred.

Judgment affirmed.

       Seneca Co. Bank v. Neass, 3 Com., 443.

       30 N. Y., 259.

       Bank of Georgia v. Lewin, 45 Barb., 340.

       Bowen v. Bradley, 9 Abb. (N. S.), 395.

       9 Abb. (N. S.), 400.

       Pitts v. Congdon, 2 Com., 352, 354.

       Rosa v. Butterfield, 33 N. Y., 665; Belmont Branch Bank v. Hoge, 35 id., 56.


author: Baetiels, J.:

text:
    THE PEOPLE OF THE STATE OF NEW YORK, Respondents, v. THOMAS C. CHALMERS, Impleaded, etc., Appellant.

      Chapter 848, Laws 1860 — bond given by assignee under — sureties on — liability of.

    The defendants are sureties upon a bond given by one De Camp, in pursuance of chapter 848, Laws 1860, for the faithful discharge of his duties as assignee, under an assignment made by insolvent debtors for the benefit of their creditors. Certain judgment-creditors of the assignors subsequently brought suits, in which judgments were recovered setting aside the assignment as to them on the ground of fraud, and directing the assignee to pay over to them certain sums in said judgments mentioned. The assignee having failed to comply with the terms of the judgments, this suit was brought. Held, that the defendants were not liable. The object of the bond required by the statute is to render general assignments by insolvent debtors more efficient, and to secure the full and faithful application of the debtors’ property to the discharge of the creditors’ demands, according to the directions contained in the assignment, and it is no part of the design of the statute to defeat the assignment, or to provide means, or secure the ends, by which that might be accomplished.
    Appeal from a judgment in favor of the plaintiff, entered upon the verdict of a jury.
    On October 81, 1865, Mary A. Halsey and Oscar P. Horthum, comprising the firm of Hals.ey & Horthum, of the city of Hew York, executed and delivered to A. L. De Camp, a general assignment for the benefit of their creditors. On Hovember 14th, 1865, the defendants in this action executed a bond to the people of the State of New York, in the penalty of $25,000, pursuant to section 3, chapter 348, Laws of 1860, conditioned for the faithful discharge of the duties of said Be Camp as such assignee, and for the due accounting for all money received by him as such assignee. Certain creditors of Halsey & Northum subsequently commenced suits, in which judgments were recovered, setting aside the assignment as fraudulent as to them, and directing that the property in the hands of the assignee should be applied toward the payment of such judgments. On the foot of these decrees, setting aside the assignment, an order of reference was made on the 4th of March, 1871, referring it to a referee to take the accounts of Be Camp, as assignee, and report the amount of property which came into his hands for which he was liable. The referee found that he was chargeable with $15,402.29, and Be Camp having failed to pay over this amount, as directed by the court, this action was brought against the sureties on the bond.

      F. N. Bangs, for the appellant,
    cited Douglass v. Howard (24 Wend., 35); Jackson v. Griswold (4 Hill, 522); McMicken v. Webb (6 How. [U. S.], 292); McClusky v. Cromwell (1 Kern., 598); Shellington v. Howland (53 N. Y., 374); Smith v. The U. S. (2 Wall., 236).

      Nelson Smith and B. K. Pheljps, for the respondents,
    cited Henriques v. Hone (2 Edw. Ch., 119); Mackie v. Cairns (5 Cow., 547); Rapelye v. Prince (4 Hill, 119); Bridgeport Ins. Co. v. Wilson (34 N. Y., 275); Methodist Churches v. Barker (18 id., 463); Leavitt v. Dabney ( 9 Abb. [N. S.], 373); Gelston v. Hoyt (13 Johns., 561); Dorr v. Birge (8 Bar., 351); Wood v. Young (5 Wend., 620).
   Baetiels, J.:

This action is upon a bond, given by the defendants under chapter 348, of the Laws of 1860, for the faithful discharge, by the principal, of his duties as assignee, under an assignment made by insolvent debtors for the benefit of their creditors, and for the due accounting for all moneys received by such assignee. That is the form prescribed by the statute for the condition of the bond, and it strictly conformed to the requirement in that respect made. The assignee accepted, but never consummated or completed, the execution of the trusts created by the assignment; for creditors of the insolvent assignors, who were dissatisfied with the disposition which the assignment made of the debtor’s property and its proceeds, assailed it as fraudulent, under judgments recovered by them, and that was finally held to be its character. And for that reason, it was held inoperative and void, as to their demands. This effectually subverted and annulled the entire assignment, and wholly defeated the objects proposed to be accomplished by it, because the amount due upon the judgments under which it was assailed, greatly exceeded all that the assignee received under it for the purposes of the trust, And that was diverted from the trusts mentioned in the assignment, and appropriated to the payment, as far as it might prove sufficient for that purpose, of the creditors’ judgments against the assignors, and the costs of the proceedings taken by them. This necessarily ended all the rights, duties and functions of the assignee, under the assignment. His duties, afterward, wholly appertained to the application to be made of the property, in conformity to the judgments. From that time, they became his guide, and defined the duties he could be required to perform. They resulted in finding the debtor’s property in his possession, applicable to the payment of the judgment creditors’ demands, and his only obligation was to appropriate it as they required him to do that. In that he has failed, and, on account of that failure, the present action was brought against the assignee and his sureties upon the bond given for the faithful discharge of his duties, and the due accounting for the moneys received by him. And the first, as well as the most important question arising upon the present appeal, is, whether that failure was a violation of the condition of the bond. That was answered at the circuit in the affirmative, and the sureties of the assignee were accordingly held liable for his failure to comply with the terms of the creditors’ judgments. In no other way could their liability be maintained, for it is only where the assignee fails, or refuses to perform the decree or order made against him, that an action can be brought upon the bond.

The bond was given pursuant to a statutory requirement, and the liability of the sureties in it, can, consequently, be no broader than the purposes designed to be promoted by the terms and spirit of the statute. To that extent, the sureties are clearly bound, but no farther than that. And for the purpose of determining the measure of their liability, an examination of the spirit, design and terms of the statute, will become necessary. Its main object and purpose appears to have been, to render general assignments by insolvent debtors, more efficient and certain, in the execution of the design for which the common law permitted them to be made, and to secure the full and faithful application of the debtor’s property, to the discharge of the creditors’ demands, according to the directions contained in the assignment. It was no part of the design of the statute to defeat the assignment, or to provide means, or secure the ends, by which that might be accomplished. Neither did it provide or interpose any obstacle, not previously existing, in the way of creditors, dissatisfied with its provisions, disposed to assail it and attempt its subversion. Their remedies remained precisely as the law had before provided them. They were in no respect accelerated, diminished or affected by this statute. Its general scope and object w.as to secure a faithful application of the debtor’s assets, under the terms and provisions of the assignment, and in that way to protect both debtors and creditors against the waste, improvidence, negligence and infidelity of the assignee, in the execution of the trusts created by it. To promote that end, the statute begins by providing for certain formalities to be observed in the execution of the assignment, denominating the assignee’s estate a trust, and requiring a schedule of the debtor’s property to be made and filed under the solemnity of his oath. And then follows the requirement, that the assignee shall, with sufficient sureties to be approved by the county judge, enter into a bond, of the nature of that given in this instance, “ before he shall have power or authority, to sell, dispose of, or convert to the purposes of the trust, any of the assigned property.” And after the lapse of one year, upon the petition of any creditor of the assignors, the assignee may be required to show cause before the county judge, why an account of the trust fund, created by the assignment, should not be made. And that officer, on the hearing, is authorized to decree payment of such creditor’s proportional part of such fund. This provision is an important one to be considered in this case, because it is for the default of the assignee to comply with what may be required from him by the order' or decree which may be made, that his sureties are rendered liable. And it is apparent that it is directed only to the proper application of the trust fund, according to the terms of the assignment. Ho judgment is rendered necessary, to warrant the proceedings of the creditor, as it is where the object is to assail the assignment as unlawful, and subvert and destroy its trusts. But all that is necessary is, that the creditor shall be entitled to a proportional part of the trust fund, provided by it for his benefit. And this necessarily assumes the validity of the assignment itself, for in no other way, consistently with the terms used, could the creditor be entitled to a proportional part of the fund mentioned. The remedy is clearly provided for, and confined to, those creditors claiming a benefit under the terms of the assignment itself. And that design is still further exhibited by the provisions made, concerning the action which may be brought upon the bond. For it is only when the assignee shall, omit, or refuse, to perform any decree or order made against him, for the payment of a debt out of the trust fund, by a judge or court having jurisdiction, that the bond can be ordered to be prosecuted. The default for which that can be done, is limited to the non-performance of the decree or order requiring payment to be made out of the trust fund, provided for, and contemplated by the assignment. And it clearly presupposes the continuance and execution of the trusts mentioned in it. This purpose is still further manifested by the disposition which the court or judge is required to make of the amount collected on the bond. For the only use which, according to the terms used in the act, can lawfully be made of that, is, that it shall be applied in satisfaction of the debts of the debtor, “ in the same manner as the same ought to have been applied by” the assignee; and that is, as it was directed by the assignment. For, under all proceedings provided for by the statute, no obligations are considered beyond those arising out of that instrument. They are all prescribed for the apparent and only purpose of securing a faithful execution of the trusts declared by the assignment. It is for their sole protection that the bond was prescribed; and to render that entirely efficient, the proceedings mentioned were provided. The terms in which the condition of the bond is required to be expressed, sustain the same result; for they require the sureties to become bound only for the faithful discharge of the duties of the assignee, and the due accounting for all moneys received by him. The duties referred to,.are no other than those arising out of the assignment, and the moneys simply those received by him as assignee, in the ordinary course of the execution of such trusts.

The object and design of the statute in providing the bond, are reasonably clear and well defined; and it is the duty of the court to carry them into effect, as they are manifested by the law. It cannot, properly, be so far enlarged by construction, as to impose upon the sureties an obligation which it was not its purpose to require them to bear; particularly, as neither the law nor the terms of the bond, contain anything which requires that to be done. Sureties are favored by the general rules of construction, so far that their undertaking on behalf of their principal, is not to be extended beyond the fair and obvious import of the terms, under the circumstances, made use of for the purpose of expressing it. Their undertaking, by the bond in suit, was, that the assignee should faithfully discharge the duties devolving upon him in that capacity, and account for the moneys received by him in the same relation. They in no sense became liable for his duties and omissions in the new capacity, arising out of the complete subversion of the assignment and all the trusts it contemplated and provided for, by the action of creditors proceeding in hostility to it, and in defiance of its provisions. Consequently, the omission or refusal to perform the decree or order, for which alone an action may be maintained upon the bond, under the terms of the statute providing for it, was not shown upon the trial of this cause. The contingency, on which the liability has been rendered dependent, never has arisen, and no judgment against the sureties was warranted by what appeared in the case. For this reason, the other objections to the recovery will not require consideration. The judgment should be reversed, and a new trial ordered, with costs to abide the event.

Davis, P. J., and Bbadt, J., concurred.

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

       Laws of 1860, 596, § 5.

       Laws of 1860, 596, § 4.

       Id., p. 596.

       Holmes v. Carley, 31 N. Y., 289, 290, and cases cited.

       Martin v. Thomas, 24 How. (U. S.), 315, 317.


author: Dasiels, J.:

text:
    HERMAN BACHARACH and JOSEPH ROSENTHAL, Respondents, v. ALFRED E. LAGRAVE, Impleaded, etc., Appellant. JAMES B. ADRIANCE and others, Respondents, v. ALFRED E. LAGRAVE, Impleaded, etc., Appellant.

      Skctradition treaty—surrender of fugitive from justice under—rights of—not liable to arrest in a civil action.

    The defendant, who had been brought into the United States as a fugitive from justice, under the extradition treaty with France, was arrested in a civil action. After such arrest, he gave bail and was discharged. Held, that by so doing, he did not waive his right to apply to the court to have the order of arrest vacated, on the ground that he was not, under the circumstances, liable to be arrested in such action.

      Petrie v. Fitzgerald (1 Daly, 401) distinguished; Williams v. Bacon (10 Wend., 636), doubted.
    Where a fugitive from justice is surrendered under an extradition treaty, it is for the single and special purpose of being tried for the crime, mentioned in the proceedings taken against him, and for none other. As to all other matters, he is entitled to the protection of the laws of the country surrendering him, so far as his personal liberty would have been secured by them, in case no removal of his person had been made. And, after the purposes of justice are satisfied, as to the particular offense for which he was surrendered, he is entitled to return to the country from which he was taken.
    A person who has been surrendered under an extradition treaty, is not, while in the custody of the government to which he has been delivered up, and for a reasonable time thereafter, subject to be arrested in a civil action.
    Appeals from orders of the Special Term, denying motions to set aside orders of arrest.
    The defendant was brought into the United States as a fugitive from justice, under the extradition treaty existing between this country and France. Upon his arrival in New York, a number of his creditors commenced actions against him, in which they obtained orders of arrest. Lagrave then applied to have these orders of arrest set aside, on the ground that he was unlawfully brought into this country, the crime for which he was surrendered not being .provided for in the treaty, and that his creditors had unlawfully conspired together to bring him here, in order that they might arrest him in civil actions to be commenced by them. His motion was granted, and the orders were set aside. The case is reported in 14 Abbott (H. S.), 333, and 45 Howard, 301, the opinion being delivered by Mr. Justice Fancher, where the facts of the case are fully stated. Subsequently, the plaintiffs in the above entitled actions, who were in no way concerned in bringing Lagrave into this country, commenced these actions, and in them obtained orders of arrest. The defendant then moved to set aside these orders, and the motions were denied. The decision at Special Term is reported in 15 Abbott (H. S.), page 275, and in 47 Howard, page 73, Lawrence, J., delivering the opinion.
    From these orders the defendant appealed.

      Charles W. Brooke, for the appellant.

      I). M. Porter and L. A. Could, for the respondents.
   Dasiels, J.:

The defendant applied to have the order for his arrest vacated, because he had been brought into the United States, as a fugitive from justice, under the extradition treaty existing between this .country and France. He was arrested under the order before he could return to France, and while he was still in custody. After such arrest, he gave bail on the criminal charge, and in that manner secured his discharge. This circumstance is now relied upon, by way of answer to his application, as a waiver of his right to the relief asked for. And many authorities are cited by the plaintiffs’ counsel, holding that an appearance in the action, even though informal, will be attended with the effect of waiving irregularities in the means made use of to bring the defendant into court. That principle, as a general proposition, is very well settled, but it does not follow from it, that the deféndant’s application should be denied for that reason. What he particularly complains of now, is not the means or process by which he was brought into court, but the restraint imposed upon his person by the order of arrest. And among all the authorities relied upon, but one in any way affects the consideration of that point,and that is the case of Petrie v. Fitzgerald. In that, it was held that a party, arrested on the way from court, which he had attended as such, waived his right to be discharged, on the ground of his privilege, by giving bail in the action. This was held by the court, as the result justified by the authorities, although very well considered cases were referred to, inconsistent with that view. And the conclusion was sustained, because the order was not assailed, but the arrest made under its authority, at a time when it could not be enforced.

In the present case, the order is assailed not simply on the ground of a mere privilege, but because of the implied guaranty, afforded by the treaty, that the defendant should be freely allowed to return to the country from whence he was brought, in pursuance of its provisions, for the sole and only purpose of being tried upon a specified criminal offense. Such a claim, it was held in the case of Williams v. Bacon, was not within the rule privileging suitors and witnesses from arrest whilst going to, attending at, and returning from, court. And while the application, then made for the discharge of the order and the arrest under it, was denied, it was not done because the right had been in any way jeopardized or lost by the proceedings taken in the case.

The provision of the Code upon this subject, is comprehended in very general terms. It allows a party arrested on an order, to apply on motion to vacate the order of arrest at any time before judgment, and even after that, where the arrest may be made less than twenty days before its recovery. These provisions contain no restriction, as to the ground on which the application may be made, and the right secured by them is in no way rendered dependent upon the circumstance, that no appearance may have previously been made in the action by the applicant, bf either do they discriminate in any respect, as to the grounds on which the discharge of the order may be applied for. The remedy is general in its nature, sufficiently so to include the protection of every possible right, the defendant may be able to show in favor of his exoneration from the proceeding taken to arrest him. And, under its general nature, the motion may be made and maintained, whenever it can be successfully shown that no right to the order and arrest, under the circumstances, existed, after bail has been given, even though that may not be done in support of a mere personal privilege. Modern legislation in this State has been repeatedly changed, for the purpose of facilitating the right of arrested parties to secure their discharge on bail; and afterward, also, by motion, where the right of arrest can be shown not to exist. And it is the duty of the courts to place no needless obstacle in the way of parties applying for the benefit of the provisions made in their favor, but to maintain and apply them in the spirit that has led to their enactment. Under these provisions, no reason is apparent for including one case within them, and excluding another from them, where the party arrested can show a positive right to be set at liberty. They were enacted for the purpose of protecting persons in the complete enjoyment of that right, when its existence can be satisfactorily maintained, without discrimination as to the peculiar reason on which it may appear to depend. Whether this should extend so far as to include the protection of a mere personal privilege, after bail has been given, and a discharge secured in that manner, it is not designed at this time to decide. But where the law has secured an absolute right to exemption from arrest, the case is manifestly different, and within the protection of the provisions of the Code, allowing the motion to be made after bail has been given.

The objection must therefore be considered and disposed of, which has been presented in the defendant’s behalf: whether an order for his arrest was proper, under the circumstances shown in suppbrt of the present application. It may be properly assumed, in the disposition of it, that he was a fugitive from justice, residing in the French Republic, and only amenable to the laws of this State, by force of the extradition remedy provided for by the treaty. Without the provision made, he could not have been brought here from that country. And that provided that it could be done only in a prescribed and particularly enumerated class of cases. The effect of such a specification, according to well settled principles of construction, is, to exclude the remedy from all but the enumerated cases. As to those not mentioned, the negative is as effectually implied, as though it had been expressly delared.

For that reason, when the defendant was extradited, it was for the purpose of answering the crime mentioned in the proceedings taken against him, and for no other purpose whatsoever. As to all other matters, being beyond the reach of the laws of this State, he was absolutely entitled to his freedom. He was extradited foi a single special purpose, that of being tried for the crime, for the commission of which he was removed from the protection of the laws of France. Beyond that, he was entitled to the protection of those laws, so far as his personal liberty would have been secured by them, in ease no removal of his person had been made. In the language of the treaty, he was delivered up to justice ” because he was accused of one of the crimes which it enumerated. And it was implied in his surrender, that he should be at liberty to return again to France, when the purposes of justice had been performed in the charge made against him. The nature of the treaty, as well as good faith with the foreign power entering into it, will permit of no other construction. That power consented, by the provision made, to surrender the person, entitled in all other respects to its protection, for trial and punishment, on a particularly specified charge; and for no other end or object whatsoever. Without the provision made, he could not be extradited at all, and by that, it can only be done for a clearly defined object. And it therefore becomes the duty of the power, to which the surrender may be made, faithfully to secure its proper observance. For some purposes, that has been expressly provided by the act of congress, requiring the president to take all necessary measures for the protection of the extradited person against lawless violence, until the final conclusion of his trial for the crimes or offenses specified in the warrant, and until his final discharge from custody or imprisonment, for or on account of such crimes or offenses, and for a reasonable time thereafter, It is true, that this provision does not, in terms, include the present case, for it only extends to acts of lawless violence, but it is cogent evidence of the spirit of the obligation, resting upon the public authorities, to restrict the restraint imposed simply to the crime charged and mentioned in the treaty. The obligation is no greater to protect the party from lawless violence, than it is to protect him from all other detentions of his person. After the purposes of justice are satisfied, as to the particular offense for which the party may be surrendered, then his right to return again to the protection of the laws he was deprived of for the single object allowed by the treaty, is clear and absolute.

A different construction would involve consequences which no State, having authority to protect its citizens or subjects, would be willing to submit to; for it would allow embarrassments and hardships, that it could not be contemplated, the authorities receiving them should be at liberty to inflict upon them. If the extradited person can be subjected to any farther restraint, than may appropriately appertain to the offense for which, under the terms of the treaty, he may be removed, he may be indicted and tried on criminal charges for which no surrender of his person could lawfully be required; and if that could be done, political offenders, seeking refuge in one country, could be returned on other charges, and then subjected to trial on accusations of that character, contrary to the policy of all civilized countries. Our own citizens are deeply interested in maintaining a construction of treaty stipulations, which will be sure to avoid such abuses. And if a detention and trial for another offense would not be proper, it would seem to be clear that an arrest of the person at the private suit of another, must be denied by the same principle. It is a consequence arising out of the implication that, as to all but the extraditable offense, the accused shall enjoy the unrestrained liberty of returning to the country, from which he was taken by force of the treaty provisions. Any different construction would be entirely unreasonable, and no enlightened nation would be willing to submit to it. It would be an abuse of the power provided for, allowing extradition only for clearly defined and particularly enumerated charges; and, by necessary implication, limiting it to those charges. If the power of detention and restraint is extended beyond them, then there is no obvious limit to which it cannot be carried ; and a person brought into the country, under the treaty for one purpose, may be detained here indefinitely for an entirely different purpose. ISTo people are more interested in denying such a latitude of oppression than our own; for, otherwise, our citizens could be forcibly taken abroad upon one charge, and detained there, on the abandonment of that, upon others for which their extradition would never be consented to or allowed.

The principle in the case is an important one, and it necessarily grows out of the treaty stipulations made with other countries. They are part of the supreme law of the State, superior to those of its own enactment, by an express provision of the Constitution of the United States. And it is the duty of the courts to maintain its observance. That cannot be done by allowing extradited persons to be arrested and restrained at the suits of private persons, unless they elect to remain in the country after their discharge from the proceedings provided for by the treaty. Until such election, the person is entitled to his full liberty, for the purpose of regaining his former habitation; and an arrest in a private action is entirely inconsistent with the preservation and enjoyment of that right. Process, in no way interfering with that privilege, may be properly sustained ; but certainly, nothing going beyond that.

The case of Williams v. Bacon, arising under the Constitution and laws of the United States, relating to the removal of offenders from, one State to another, may not harmonize with the views here expressed. If it does not, then it must be regarded as unsound, as it may very well be. Certainly, no other principle than that securing immunity from arrest for causes not provided for by the treaty, can either fairly or reasonably be deduced from its purposes and provisions. And if this authority is inconsistent with that idea, then it should not be regarded as binding.

The order appealed from in this case, and that in the suit of Adriance and others, argued with it, must be reversed, with ten dollars costs in each appeal, and orders entered, setting aside the orders of.arrest, etc.

Davis, P. J., and Beady, J., concurred.

Orders reversed in each case, with ten dollars costs.

       1 Daly, 401.

       Id., 407.

       10 Wend., 636.

       Code, §§ 204, 183.

       Vol. 8, U. S. Statutes at Large, 582, art. 1; id., 617.

       Vol. 15, U. S. Statutes at Large, 337, § 1.

       U. S. Const., art. 6, § 2.

       10 Wend., 636.