author:
      O’Brien, J.:
      VaN BeuNt, P. J.:

text:
    Edward S. Farrow, Respondent, v. Holland Trust Company and Others, Appellants.

      Conspiracy — equity ■ — participation of an officer of a corporation in a swindling scheme — corporate remedy by a stockholder’s suit toilere the corporation does not sue •— misjoinder of causes of action —•usury in buying paper from a corporation.

    Application oí the principle that a suitor in a court of equity must come therein with clean hands.
    The participation of an officer of a corporation in a swindling scheme does not deprive the corporation of the right to attempt to recover hy all legal means the moneys out of which it has been unlawfully and wrongfully swindled.
    The complaint in an action charging the defendants with fraud and conspiracy set out two causes of action, one for grievances of the plaintiff individually, and the other for injuries inflicted upon the corporation of which he was a stockholder and an officer. The judgment granted by the trial court decreed relief upon both causes of action. The cause of action in favor of the plaintiff was predicated upon the theory that by false representations lie was induced to assign to certain of the defendants, without consideration, two mortgages, together with certificates of stock of, and claims against such corporation, one of which mortgages, it was stated, waiS assigned as collateral security only, and was alleged in the complaint to have been since assigned to another person by the plaintiff, subject to such first assignment.

      Held, that with respect to such mortgage the plaintiff had no right to bring- an action and obtain a judgment directing the same to be reassigned to him ;
    That, in the absence of proper allegations excusing the failure of the corporation to bring a suit in its own behalf, the plaintiff was in no position to sue or obtain judgment in behalf of such corporation;
    That two separate and distinct causes of action, one in favor of the plaintiff and one in favor of the corporation, could not be tried in such an action, nor could the rights of the corporation or of its creditors be adjudicated therein.
    No matter what the discount may be, usury cannot grow out of buying paper from a corporation, even where the paper is made for the corporation’s accommodation.
    Appeal by tbe defendants, Holland Trust Company and others, from an interlocutory judgment of tbe Supreme Court in favor of the plaintiff, entered in tbe office of tbe clerk of the city and county of New York on tbe 20th day of July, 1892, upon a decision of tbe court rendered after a trial at tbe New Fork Special Term.

      George H. Van Hoesen, for the appellants.

      Alexander S. Bacon, for the respondent.
   O’Brien, J.:

Seldom is the court called upon to pass upon a record containing so many and conflicting questions of fact as are here necessary to be resolved in order to determine what relief, if any, should be accorded to the plaintiff.

Such a determination, involving an examination into the transactions of individuals and their relations to a company projected -for the purpose of fostering a large land scheme, renders it impossible to reduce the facts into anything like a brief statement. Starting-out with fair prospects of success, the company met with misfortunes until such time as the money of the original projectors was exhausted, when resort was had to divers plans to raise funds, to secure which required the making of notes, the execution of mortgages, and the marketing of the same, in order to keep the enterprise alive, and all of which, when catastrophe has come, are now the subject of inquiry and question, demanding, that they may be understood, the examination of a most voluminous record. Apart, moreover, from the loss of money involved, much more important is the loss of character, which, if the charges made could be sustained, -would result to some of the individuals and corporations who became interested in the enterprise. The importance of the. case, therefore, not only in a monetary sense, but from the charges made of fraud, abuse of trust and conspiracy, can alone justify the tiresome recital of facts which we are compelled to enter upon.

The record shows that the plaintiff, in 1886, was the owner of 3,076 acres of land in Ocean county, N. J., the title to 2,586 of which had been transferred in July, 1889, to John B. Larner, a lawyer, of "Washington, D. C. A portion of Lanier’s land, containing 311 acres, known as Barnegat Park, had been surveyed and laid off in streets by plaintiff under Larner’s employ, and lots sold to various parties, when, in August, 1889, the Barnegat Park Company was organized as a corporation under the laws of New Jersey, with a capital stock of $300,000. Larner became president, and plaintiff secretary and treasurer. In October, 1889, the portion of Barnégat Park remaining unsold, viz., 303 acres, was conveyed by Larner to the company, Larner taking in full payment of the land 2,996 shares of the stock (all of the stock of the company except four shares). By various deeds of conveyance the company also obtained title to about 6,000 acres of land, including that formerly owned by plaintiff, and, in addition, the company bolds quit-claim deeds to certain other land which has never been surveyed, but which plaintiff states contains about 8,000 'acres, the title to which has never been traced on the public records.

’ Lamer wishing to retire from the presidency, Marcus W. Conic-ling, the plaintiff’s partner, came in as president, and Lamer sold all his stock to plaintiff and Conkling, retaining only a small mortgage interest in the company, under an unrecorded mortgage dated March 14, 1890. Plaintiff was an officer in the United States army. Conkling, as president, and plaintiff, as secretary and treasurer, com tinued the business of the company, which was selling lots. A hotel called The Pines,” was built and opened, and efforts were made to sell lots to officers in the army and navy, the design being to make the park an army and navy resort. They made some sales, but on the installment plan. The purchaser of a lot would make a small payment in cash, and give his notes, maturing at intervals of a month or three months. A deed of the property would then be made to the purchaser, containing what in New Jersey is known as a vendor’s lien clause for the unpaid balance of the purchase money. Indorsed on the note was a statement of the amount of the purchase price, the amount of cash paid, and that the remainder was secured by vendor’s lien; this was signed by the maker of the note. The note was then offered for discount, and, if taken, the deed was to be deposited with the note.

In the latter part of 1889, Conkling individually, and on behalf of the Barnegat Company, opened an account with the Holland Trust Company; and in April, 1890, the plaintiff, having prepared the way in a letter written to Conkling, which was shown to Yan Siclen, the secretary of the trust company, proposed to open an individual account with the trust company under conditions thus stated in his letter:

“I inclose the $1,125 note, previously referred to, for consideration.
“ It lias occurred to me that I might open a personal account with Holland Trust. I could then from time to time submit to you items which I personally receive on sales of lots for individuals — not company sales. For instance, I have to-day sold for Oapt. Snyder Lot No. 9, Block 25, and on tliis sale I have a 4 mos. note, $500. I Lave tills note subject to a 10$ off the face. On all this paper I can divide tlie discount • — ■ making it 5$ off on such as you can conveniently handle. I have heretofore used this paper in Baltimore. If you think well of this idea let me know, and I will send yon some funds and open account.”

April 22, 1890, Yan Siclen replied:

“ Lieut. E. S. Farrow :
“My Dear Sir.— In regard to your personal account, we can from time to time take some of those notes as indicated by you in yours of 21st; I understand that they will always be notes of officers of army or navy, & the first liens on property sold, and for not over half the prices actually received from sales. So, you can, if you please, open such account.”

April 26, 1890, Van Siclen wrote to plaintiff :

“ Yours of the 24-th received with three notes inclosed, which I have discounted, and placed $1,145.36, net amount, to the credit of your personal account.
“ I will occasionally take notes of civilians, where at least onelialf cash has been paid upon the property; but you must always give me lot and block numbers, prices, and correct address of maker.”

April 28, 1890, plaintiff replied:

“My dear Mr. VAN SioleN.— Yours of the 26th at hand this morning. All right. I will from time to time send you some items of paper made by civilians for lots bought from me personally. I have a large quantity of this paper which will soon be within 4 mos. of maturity. I am not in need of the proceeds of these discounts, therefore, whenever I send ^ou such items, you need not trouble to submit them t’o your l)oard, unless you think your board at such times would desire them. I will always reinvest the proceeds of such discounts in .Park Company paper, or in company lots, which I can either hold until maturity, or rediscount at a profit, when such paper comes within 4 mos. limit. These lots I can always sell for cash & good notes.”

And on April 30, 1890, plaintiff wrote to Yan Siclen:

“ I inclose some notes for personal account. Take any you may desire, and either return me the balance or keep them until such time as you might desire them. * * *
“ Tbe inclosed Stanton notes are ‘ Civilian ’ notes. Stanton lias just purchased the two cottages opposite the hotel, and is to-day moving into same for permanent residence.”

Besides notes given for genuine sales of land, what plaintiff calls accommodation notes,” with the accompanying vendor’s lien, were prepared, signed by employees of the Barnegat Company, laborers, and others of no responsibility.

In July, 1890, one Orson Adams became connected with the company, and August 13th was made president on the strength of representations that he would bring into the company $50,000, and Conkling became vice-president.

Plaintiff claims that he never negotiated any of the so-called accommodation notes himself, but that he prepared the deeds accompanying some of them and sent them to the New York office, where loans were obtained upon them. As to others, where he did not know the makers, and assumed that they might be accommodation makers, he prepared the deeds, but did not deliver them, but that on every note of that character made to his knowledge he now holds the deed in trust. As against this, he testifies that all such paper made to his knowledge was intended for the Holland Trust Company only, because that was the only place where such paper was understood to be acceptable, and that for every accommodation note legitimately discounted by Yan Siclen or the Holland Trust Company he delivered with the note the vendor’s lien deed ; but that they got some notes they did not legitimately discount, and for them they have not got the deeds. It would appear that the difference between legitimately and not legitimately discounting a note lay in the fact whether plaintiff or some other person, as, for instance, the president of the company, presented the note. As to particular accommodation notes called to his attention, he says they were prepared with his full knowledge and consent; that the amount was designated by defendant Yan Siclen, who received a bonus of fifty dollars each on their discount. If plaintiff is to be believed, Yan Siclen was not as particular about the high grade of the notes he or' his company discounted as his letters indicate, but knew that many of the notes received from plaintiff were accommodation notes, the makers of which had merely gone through the form of buying lots and had paid no money down, and were not expected to pay the notes at their maturity; a bonus being attached to each note of that kind, which Yan Siclen was to get, and the more there were of them the better Yan Siclen was suited. Though most of the so-called accommodation notes representing fictitious sales of land were marketed subsequent to the connection of Adams with the Barnegat Company in July, 1890, it is a significant fact, as shown by plaintiff’s own evidence, that from the very first some sales, as well as notes which were subsequently discounted through Conkling & Farrow by the trust company, were not bona fide.

Yan Siclen denies that he knew the character of any of the so-called accommodation notes, or that any of the bonuses were for his personal benefit, and says he did not find out till January, 1891, that any of the notes were accommodation notes, when Schramme, a creditor, accused plaintiff, in Yan Siclen’s presence, of having made these, sham notes, and that plaintiff then silently admitted their untrue character. Yan Siclen then requested a statement from plaintiff of the amounts of such notes as the Holland Trust Company held; this the plaintiff promised to furnish, and soon afterwards gave Yan Siclen a list in his own handwriting, which has been offered in evidence.

1 Large quantities of such notes were discounted by Ladenburg, Thallman & Co., Southern National Bank, People’s Trust Company, Kaufman Simon and Yan Siclen. It is claimed by plaintiff that these’notes, or some of them, were stolen from him by Adams, the president of the Barnegat Company, .and James A. Simmons, who was a friend of 'Adams. That this version is not entirely correct, and that plaintiff’s other statement is true, that from the first fictitious notes were used, is evidenced by a note made as far as back as March 26, 1890, which states, over plaintiff’s own signature, that a large part of the purchase price on six lots had been paid by the maker, who turned out to be a poor retired aimy officer, and who, plaintiff testified, “ went through the ceremony of buying lots.”

In August, 1890, the defendant Schramme, who was then connected with the firm of. Ladenburg, Thallman & Co., began discounting notes for the Barnegat Company; the proceeds were handed over to Simmons, who presented the notes. When the checks came back Schramme'found that they went to the Barnegat Company. Those notes were not paid. The plaintiff having told him in January, 1891, that the notes Ladenbnrg, Thallman & Co. held were good notes, all made by army officers, Schramme endeavored to find the makers by writing to them at the addresses written by plaintiff on the notes, but could find out nothing. Schramme testifies that he told the plaintiff he suspected the notes were bogus, and that the latter, after first reiterating that there was a mistake and that the notes were all army officers’ notes and would be made all right, confessed that he had manufactured the notes under orders from Adams and Simmons.

The notes discounted by Kaufman Simon for the Earnegat Company were presented, as Simon testifies, in every instance by Conk-ling. Simon claims that the company was indebted to him on notes and checks in the sum of $15,000. Plaintiff and Conkling admit an indebtedness of the company to Simon of $11,000.

As a result of the discounting business, Adams failing to contribute any money, and a note of his to the company having gone to protest, the finances of the company got in a very bad way, and sales of property had ceased. It was proposed by Adams, the president, to raise money by bonding the company. Conkling testifies that Adams and James A. Simmons, Adams’ friend, proposed a $500,000 trust mortgage, with the Holland Trust Company as trustee, and that they brought in Mr. Edward H. Murphy, a New Jersey lawyer, to draw it up. Yan Siclen says he was first spoken to about the $500,000 mortgage in September, 1890. However, before the trust mortgage scheme was accomplished, $35,000 was borrowed from the Holland Trust Company, secured by a mortgage dated October 23, 1S90, and recorded October thirtieth, due one day from date. Plaintiff says the two mortgages were talked of rather at the same time, the $35,000 mortgage being repi’esented as a mere temporary expedient until the bonding arrangement could be effected, that being a matter which required a little more preparation, and that he inferred, the $35,000 mortgage was not to go on record. Conkling testifies that the negotiations were conducted entirely by Murphy and plaintiff, but he is positive not only that the $500,000 mortgage was first talked of, but that it was drawn and executed and delivered to Murphy to be recorded before the other, and that when the $35,000 mortgage was recorded he supposed the trust mortgage had already been recorded.

These statements of plaintiff and Oonkling are flatly contradicted by the terms of an agreement dated December 18, 1890, to which they were parties and which bears their signatures, which recites that the $35,000 mortgage “ is the first mortgage on the property of the company, and the same is duly recorded ; ” and the first stipulation of said agreement is that the $500,000 trust mortgage shall be placed of record. The inconsistency between their statements as to the order in which the mortgages were to be recorded and this evidence furnished by the written agreement is nowhere satisfactorily explained, thus leaving the record in that condition that the conclusion is forced upon us that both Farrow and Oonkling knew, or were in a position to have known, before they made the statements, that their evidence was false.

Oonkling also testifies that after the bonding plan was agreed upon, Murphy and Simmons suggested that, as it was necessary to raise money immediately, and as the Holland Trust Company was one of the largest creditors of the Park Company, in order to protect itself, it should be induced or forced to advance $35,000 on mortgage to pay off the pressing creditors and avoid disaster; that he and plaintiff agreed to it; that Yan Siclen refused to advance the $35,000, or to allow his company to do so, but an aiyangement was made for the trust company to advance $10,000, which was done, and a chattel mortgage given on the hotel for $10,000 ; that a few days later, not satisfied with $10,000, these men forced the trust company to make it $35,000, and the mortgage was executed. Yan Siclen’s testimony on this subject is, that the Holland Trust Company first advanced $10,000, and afterwards the amount was increased to $35,000, to pay off lienors On the hotel; that the Barnegat Park Company’s note was taken for $35,000, and a mortgage on the real estate furnished for $35,000 as security for the note, and a chattel mortgage for $10,000 on the furniture, also given as joint collateral.

In connection with this $35,000 mortgage a statement of the condition of the company was drawn up, signed by Adams and Conk-ling, and submitted to the Holland Trust Company. It represented that there were no mortgages of any description on the property of the Barnegat Company; that the hotel property cost about $81,000; that the total amount of bills against the hotel was about $5,000, and against the furniture about $14,000, “ for which the maker holds the company’s notes which are paid at maturity whenever due; ” that this' statement is made for the purpose of obtaining, from the trust company an immediate loan of $10,000. The statement concludes as follows:

“We would add that the hotel property and furniture is insured for $'70,000, the policy for which will also be handed over to you, it being resolved by the company to make you its trustee in the matter of a mortgage bond issue of $500,000- to be arrcmged for. It is further undei’stood that any moneys advanced by you are to be paid, if not sooner, from the first sales of the bonds which are to accompany said mortgage as per previous arrangements.”

From this documentary evidence it would appear that the $500,000 trust mortgage was a transaction arranged subsequently to. the $35,000, contradicting Conkling’s oral evidence on this point, and confirming defendant’s contention that the $35,000 ivas understood to be a prior lien, created to meet immediate necessities, and to be paid off out of the proceeds of the first sales of bonds under the $500,000 trust mortgage.

The trust mortgage for $500,000 was drawn, dated November 1,, 1890, with the Holland Trust Company as trustee, with the object of issuing bonds thereunder, from the proceeds of sale of which the. creditors of the company should be paid and the company set on a¿ sound footing.

Eefore the trust mortgage was recorded, however, and on December 20, 1890, a directors’ meeting of the Barnegat Park Company was held, at which were present Adams, Farrow and Conklin g. By virtue of a resolution passed at said meeting, mortgages were prepared by Murphy, as attorney for the Barnegat Company, one to> plaintiff for $32,000, one to Kaufman Simon for $15,000, one to the New York Improvement Company for $33,000, and a trust mortgage, with Conkling as trustee, in favor of certain creditors, to wit::

Ladenburg, Thallman & Co........................ $21, 000’

Southern National Bank.......................... 8, 000

Holland Trust Company........................... 40, 000

E. S. Farrow.................................... 45, 000

Aaron Raymond................................. 6, 000

People’s Trust Company.......................... $6, 000

R. I. Harrison................................... 4,

Edward Wetmore................................ 5, 000

E. W. Lancaster.................................. ■ 1,000

■O. W. Yan Siclen................................ 5, 000

Lord Taylor................................... 6, 000

$147, 000

A declaration of no set-off against tlie Simon mortgage, certifying that it was “ a good, valid and existing lien, and based on a full and proper consideration, and the Barnegat Park Company bad no defense thereto either in law or equity,” was made by the Barnegat Park Company, signed by Adams as president and Farrow as treasurer, and Farrow acknowledged his signature thereto on the witness stand.

These five mortgages are all dated December 16, 1890, and were recorded December twentieth, at twelve m. The first four mentioned state that they are concurrent liens, and are in all respects to pro rate with each other upon the lands of the company, 'due one day from date. By the terms of the resolution authorizing their creation, the said mortgages were -to come equally as to priority immediately after the first mortgage of $35,000 already held by the Holland Trust Company.

The $500,000 trust mortgage was recorded at seven-thirty 3?. M., December twentieth, seven and a half hours after the five mortgages above mentioned.

The mortgage to the New York Improvement Company was assigned by that company to Murphy as security for money loaned by him to Simmons. The laborers employed by the improvement company at the park being unpaid, and rioting for their money, the Holland Trust Company advanced $3,500 to pay the laborers on account, and took the mortgage as security for such advance.

By agreement made December 18, 1890, between the Barnegat Company, Yan Siclen as trustee, and the mortgagees named in the five mortgages above mentioned, it was agreed that the Barnegat Company should record the $500,000 trust mortgage; that stock equal to the indebtedness of the company to each of the creditors should be issued to them; that said five mortgages, after being recorded, should be assigned to said trustee, together with satisfaction pieces executed on the condition that said mortgages should be canceled and satisfied of record on payment to the mortgagees named or assigns, as their interest might appear, and that the stock should be delivered to and held by the trustee until the provisions of this agreement were performed; that the company should deliver to said trustee sufficient stock to enable .him to hold a majority of the stock of the company ; that the Holland Trust Company should be fiscal agent and hold all bonds for sale at eighty, and get a commission of five per cent on sales of bonds made by it or through its agents. It was further agreed that the proceeds of said bonds should be applied, after providing for the ordinary expenses of the company, to the payment of the company’s mortgage indebtedness; further, that the trustee should receive as compensation $25,000 in cash, to be retained from proceeds of sales of bonds, and a like amount of bonds, Independent of any sum paid to the Holland Trust Company for its services connected therewith. This agreement was signed by plaintiff, Yan Siclen, Conkling, individually and as trustee, the New York Improvement Company, Simon and the Holland Trust Company. '

Yan Siclen testifies that it had been his intention to have the $500,000 mortgage made a prior lien to the concurrent mortgages, but that Murphy having, in the interests of his clients, recorded the concurrent mortgages ahead of it, he made other arrangements when he was confronted with this condition ; that he learned from Murphy that those five mortgages had been executed ahead of the $500,000 trust mortgage, and when he heard of it he sent for plaintiff and told him he must secure the Holland Trust Company for the advances made to him and the park company by assigning his mortgage to the Holland Trust Company as collateral, which plaintiff agreed to, and also agreed to assign the Farrow and Conkling mortgage, which he owned, as additional collateral. These assignments, dated December 20, 1890, were put in evidence by plaintiff. They were not acknowledged until February 16, 1891. Plaintiff gives a different version, and says he did not know in what order the mortgages were recorded until some time afterwards, but that his assignment ■of the mortgages was made about the time of their execution, with satisfaction pieces in pursuance of the agreement above referred to of December eighteenth, and that in January, 1891, another assignment was demanded, which was given, and dated back to the original date in December.

On December 20, 1890, Adams, by request, resigned as president of the company; the plaintiff at the same time resigned as treasurer, retaining the office of secretary. R. B. Roosevelt, Jr., succeeded as president and defendant Sehramme as treasurer; and on January T, 1891, Roosevelt, Jr., Farrow, Conkling and James L. Phelps, the latter a clerk in plaintiff’s employ, were elected directors.

Simon, in accordance with the agreement of December 18th, executed a satisfaction piece of his mortgage and delivered it to Van. Siclen as trustee, receiving from the trustee a receipt therefor, with the condition inserted in the receipt that if the mortgage was not paid within a reasonable time the satisfaction piece should be returned to him. Simon testifies that when his mortgage was given to him he was told that there were three or four other mortgages, and that on his suggestion it was agreed between himself, Conkling, Farrow, Murphy and Simmons, that his (Simon’s) mortgage, should be a second lien and the other concurrent mortgages third, the $35,000 being a first lien; that then, Sis mortgage being second, he proposed to the Holland Trust Company either to buy the $35,000 mortgage from them or that they buy his $15,000 mortgage, and that several weeks after the tender they agreed to take his mortgage, and paid him $15,000 for it. For some reason it was objectionable to plaintiff that Simon should buy the $35,000 mortgage, for, on January 1,1891, he wrote to Van Siclen as follows: “ Look out for Simon; he wants to pay you the $35,000 ; he now has the money on hand to do it, and’ he will do his best to get control.”

January 24, 1891, plaintiff wrote to Van Siclen as follows:

“If Messrs. Roosevelt and Sehramme will contribute $12,500 each at once to the treasury of B. P. Co., give them each $25,000 of the first mortgage bonds of the company, also $15,000 Simon bonds. A resolution to this effect will at once be passed. As soon as this $25,000 is paid in the B. P. Co. pay off the Simon mortgage, $15,000, pay Edward D. Murphy $5,000, and expend the remaining $5,000 for pressing company bills. When the Simon $15,000 is paid off return to Farrow & Conkling the $11,Y00 belonging to Farrow & Conkling, now held by Simon as collateral, also recover '’for 13. P. Co. $2,600 worth of diamonds likewise held by Mr. Simon as collateral.”

Plaintiff says he was coerced by Yan Siclen to write this letter; that he wrote it at Yan Siclen’s dictation in the office of the Holland Trust Company.

The $25,000 was advanced by the Holland Trust Company and Ladenburg, Thallman & Co., and the money expended as indicated in the letter.

January 7, 1891, the Barnegat Park Company adopted, at a directors’ meeting, a resolution that, in order to fulfill a former agreement, this company at once pay to Mr. George ~W. Yan Siclen $25,000 in first mortgage bonds of the Barnegat Park Company, and $25,000 in cash; and as at the present time there is not sufficient cash in the treasury to pay said amount, to give him $50,000 in first mortgage bonds of the Barnegat Park. Company as collateral to secure said payment of $25,000 in cash.

By agreement dated January 17,1891, the agreement of the 18th of December, 1890, wherein Yan Siclen as trustee was recited as party •of the second part, and certain creditors as party of the third part, was rescinded by the creditors in said agreement named, and J anu■ary 20, 1891, at a directors’ meeting of the Barnegat Park Company, a resolution offered by Conkling, and seconded by the plaintiff was unanimously passed that said agreement, so far as Barnegat Park Company was concerned, was rescinded and annulled, upon Mr. Yan Siclen assenting thereto.

In and by virtue, of the same resolution, the Barnegat Park Company was empowered to execute an agreement wherein the company was named as the party of the first part, and Yan Siclen and Schramme as the party of the second part, and said agreement was accordingly entered into; by which it was agreed by said company, in order, if possible, to avoid the necessity for foreclosure of the •existing mortgages against the company, that there should be created two descriptions of bonds, to wit, first mortgage bonds to the amount of 8800,000, and (2) income bonds to the 'amount of $200,000, for both of which classes of bonds the Holland Trust Company was to be trustee, said bonds to be sold at a price thereafter to be agreed upon, and five per cent to be paid or allowed Yan Siclen and Schramme therefor; and Yan Siclen and Schramme agreed to advance the following sums on the following terms and-conditions:

(1) Fifteen thousand dollars to procure an assignment of the Simon mortgage, together with all his collateral therefor.

(2) Five thousand dollars to be paid to Murphy and to procure an assignment of his claim therefor, together with all collateral security held by him.

(3) Five thousand dollars to be advanced to the company for the purpose of carrying on its future business, out of which sum $1,000, said to have been heretofore advanced by Yan Siclen for account of the company, was to be paid him.

It was further agreed that $50,000 of the first mortgage bonds shall be forthwith delivered by the Holland Trust Company to Yan Siclen and Scliramme in compensation for their services in the matter of this agreement; that $5,000 of first mortgage bonds be delivered to Yan Siclen as in payment of services by him hitherto rendered to the Barnegat Company, and that $15,000 of said bonds be delivered to the party of the second part to pay for the $5,000 furnished by them under this agreement for carrying on the future business of the company ; further, that Yan Siclen be paid $5,000 of the income bonds as a balance of compensation due for services, in full to date of this agreement; and that as compensation for the joint benefit of the persons composing the party of the second part they receive $65,000 of said income bonds for all services to be rendered by them .in carrying out the objects of this contract.

Although the parties differ as to whether what are described as the concurrent mortgages were to be placed on record prior to the $500,000 mortgage or subsequently thereto, it is evident that, with knowledge of all the facts as to the actual order in which they were recorded, this agreement of January 17, 1891, was entered into. An attempt to carry out its terms was made, and the failure resulting hastened the collapse of the company. Each one was left to protect his particular interests in the best way that he conld, and the first step seemingly taken was that of January 23, 1891, in a suit brought by Schrannne and Yan Siclen to foreclose the $32,000 mortgage which, according to its terms, had been assigned by plaintiff as collateral security for his indebtedness. Subsequently creditors’ meetings were held, a report of the condition of the company presented, and an effort made to induce the creditors and those-holding mechanics’ liens on the property to extend the time of payment and to take notes secured by first mortgage bonds as collateral.. This effort was likewise abortive, and again the affairs of the company were thrown into inextricable confusion.

The causes of this last failure to effect a settlement with creditors are said to have been not only the existence of prior purchase-money mortgages amounting to about $G,000, which antedated the first, mortgage of $35,000 given to the Holland Trust Company, but the-inability of the company to prove title to more than about 6,000-acres of land, and the unwillingness of those holding mechanics’’ liens to cancel the same. It is unnecessary for us to determine the-cause, the result being that a settlement was not effected, and then followed a series of litigations by the Holland Trust Company and by Yan Siclen and Schramme against the Barnegat Company and the plaintiff, as well as this action by the plaintiff, which was brought in July, 1891, directed principally against the Holland Trust Company, Schramme, Murphy and Yan Siclen, charging a conspiracy on their part to wreck the Barnegat Company and defraud it, and to-deprive the plaintiff and other creditors of their property by trick and device, by resorting to various means to obtain the property of the Barnegat Company free and clear of all mortgages and judgments.

The learned trial judge concluded that these charges were in the main sustained ; that the various transactions in which the defendants took part were in furtherance of a scheme or conspiracy to defraud the plaintiff and the other creditors of the Barnegat Company, and decided that all the mortgages, stocks, securities, vouchers and papers assigned to any of the defendants should be retransferred to plaintiff, except one mortgage to the Holland Trust Company for $35,000, and the others canceled as void; and fearing that sufficient; justice Avould not thus be done to plaintiff, by a finding which was-, not, however, included in the judgment, declared that the plaintiff; had been damaged by the defendants to the extent of $150,000.

In all this the learned judge seems to have lost sight of the very-prominent part which the plaintiff took in every transaction, excepting the actual placing by Adams and Simmons of some of the-spurious notes with the trust company, proven to have been fraudulent. He it was who cunningly laid the plan by which, working upon tlie cupidity of Yan Siclen, he induced him to forget the duty •which he owed to the trust company of which he was an officer, and to advance its moneys upon false securities. The result is that the trust company now holds worthless notes to the amount of about $46,000, which it purchased from the park company, some with and some without plaintiffs indorsement. The makers of such notes were either myths or totally irresponsible persons; and these were secured by pretended vendors’ liens, which were fictitious and sham. In this way the trust company, By Farrow and those who can Be justly regarded as his accomplices, has been swindled out of that ■amount of money.

In this condition of the record, we are unable to conceive how any relief could be accorded to one standing in the position of this plaintiff, coming as he has done into a court of equity, his hands soiled with his fraudulent acts, resulting in injury to third parties. It has ever been a saintary principle of courts of equity that suitors must come therein with clean hands; and the application of this principle to the facts here appealing should have impelled the trial judge to turn the plaintiff out of court. As shown, from the very formation -of the Barnegat Company down to the time that it passed into the receiver’s hands, its affairs were dishonestly conducted by Farrow and Colliding and those whom they associated with them in the ■control of the company. And that this is true is shown by the plaintiff’s own answers to the questions put to him with respect to the very beginning of the company’s operations, wherein he admits that the sales and notes given, even in those early days, were not always bona fide. When it was impossible to sell lots, and there were no notes to dispraso of, this in no way prevented those in charge of the company from getting clerks and laborers in their employ, and men working at the life-saving stations, to sign such notes, which were sold under representations that they were the notes of army ■officers given in part pmyment for lots purchased. These to the amount -of $100,000 at least were sold, and banks and financial houses, as well as the Holland Trust Company, were thus victimized. It is true that plaintiff insists that it was Simmons and Adams who p>ut such pmpier upon the market, and he claims that it was stolen from the office of the Barnegat Park Company; but he does not deny that he knew of the existence of such paper, and no explanation is offered why there should be such paper in existence in the office of the company, whence it could be stolen and passed off upon innocent purchasers. But in addition in this record will be found a list of the names and makers of some of the bogus notes that the park company used to get money from the trust company furnished by Farrow himself. And so with respect to the mortgages which are now assailed. Those were devised and arranged for as another means of raising money, when the sale of spurious notes was no longer possible.

The participation of Yan Siclen, who was an officer of the trust company, did not deprive the latter of the right to attempt to recover by all legal means the moneys out of which it had been unlawfully and wrongfully swindled. And yet it was upon the evidence adduced by the plaintiff, who was a party and privy to the injury inflicted upon the trust company, that a finding was made which, in effect, held the trust company chargeable with fraud and powerless to hold or enforce the meagre securities in its possession other than the $35,000 mortgage.

If, however, we Avere to assume that the plaintiff ought not to be turned out of court, but had the right to present his grievances and those of the company to a court of equity, there are many other serious objections to the judgment entered. The complaint sets forth two separate and distinct causes of action —• one for grievances of the plaintiff individually, and another for injuries inflicted upon the Barnegat Company. ' The judgment decrees relief upon both causes of action. The cause of action in favor of ]Dlaintiff was predicated upon the theory that by false representations he was induced to assign, without consideration, two mortgages, together with certain certificates of stock of and claims against the Barnegat Company to certain of the defendants.

One of these mortgages, namely, the one for $32,000, which it is stated was assigned as collateral security only, it is alleged in the complaint has been since assigned to another by the plaintiff, subject to the said assignment as collateral. With respect to this mortgage, we fail to see by what light the plaintiff can bring an action and obtain a judgment directing that the same should be reassigned to him.

So as to the second cause of action, with respect to injuries inflicted upon the Barnegat Park Company. Iii the absence of proper-allegations excusing the failure of the Barnegat Company to bring a suit on its own behalf, the plaintiff is in no position to sue or obtain a judgment on behalf of such company. The complaint and the proof are entirely barren of any facts showing that the company lias been requested to bring such a suit, or that the situation of the company with respect to its control is such that the plaintiff as a stockholder-is entitled to maintain such an action on its behalf. It will be noticed, moreover, that the plaintiff does not claim to sue on behalf of the company, and yet he is permitted on its behalf to have judgment nullifying and declaring void its corporate acts.

The sweeping character of the judgment is further evidenced when we consider its bearing upon the Simon mortgage for $15,000, which was transferred to the Holland Trust Company. The latter, it is conceded, paid in the plaintiff’s presence and at his request, and on the faith of a certificate signed by him that it was a valid and subsisting security, the full amount-therefor. And yet in this action the plaintiff is awarded, on behalf of the corporation, a judgment decreeing that this mortgage is void.

We think, too, that whatever reflections may be made upon the defendant Van Siclen, whose conduct throughout was most reprehensible, this should' not unjustly bear upon the trust company, which ought not to be held responsible for all his acts and thus be depi’ived of the security it received for money advanced. Th^t in some of his acts he represented and bound the trust company is clear, but regard being had to his individual relation to some of the transactions, we think the court erred in holding that he acted as an officer and agent of the trust company in all the transactions of which the plaintiff complains.

It will be seen that we are also unable to agree with the judge below in his opinion that the record fails to disclose any action or representation of the plaintiff calling for condemnation by the court. Far from regarding him blameless, we think his plan for raising the money necessary for “ the development of his ideas ” by procuring the discount of worthless notes pretended to be given in part payment for lots, was a canker which so gnawed the roots of the enterprise that disaster was inevitable and might have been reckoned with upon the inception of such methods.

In addition there are many errors in the findings, some of which only it will be necessary to point out. Although the evidence was uncontradicted, the court refused to find that there were prior mortgages covering parcels of the land, which were-created prior to the ownership of the Barnegat Company. And in the finding that the notes on which the Barnegat Park Company obtained money from the trust company are usurious, the error is apparent when we recall the rule of law that, no matter what the discount, usury cannot grow out of buying paper from a corporation, even where the-paper is made for the corporation’s accommodation.

It is unnecessary for us to discuss the numerous findings and conclusions, because we regard one salient feature which pervades the-whole record, and which has already been alluded to, as fatal to the interlocutory judgment. This consists of the effort to try two separate and distinct causes of action, one in favor of plaintiff and one in favor of the Barnegat Park Company, in a suit brought by this-plaintiff, and in such an action not only to accord to the plaintiff such relief as he might, upon the evidence, have been entitled to,, but also in effect to destroy all the corporate acts of the corporation and adjudicate as to the amounts and priorities of claims against it,, which by the interlocutory judgment are directed to be tried before-a referee.

The Barnegat Park Company is a New Jersey corporation, now in the hands of a receiver appointed by the Court of Chancery of that State. It is not claimed that it has any assets in this State, its-property consisting exclusively of lands in New Jersey. Yet by the judgment, in the absence of the receiver as a party to the action,, and at the suit of a plaintiff who has no right to maintain such an action on the company’s behalf, the court assumes such right, without declaring the corporation insolvent, and requires creditors to-prove their claims before a referee, under the penalty of having all claims ad judged void that are not so proven.

Our conclusion, therefore, is that this judgment should not be-permitted to stand, but in all respects should be reversed and a new tidal ordered, with costs to appellants to abide event.

Follett, J., concurred.

VaN BeuNt, P. J.:

I concur in the conclusion reached, by Mr. Justice O’BRiBN.

It is difficult to see upon what basis the learned court below arrived at the judgment which was entered in this action.

It appears from the evidence that very early in the history of this .•enterprise the plaintiff began the manufacture of fraudulent securities, because as far back as March, 1890, and shortly before the plaintiff •opened his individual account with the defendant, the Holland Trust ■Company, we find that fictitious notes were issued stating over the • plaintiff’s own signature that a large part of the purchase price of certain lots had been paid by the makers of the notes, who, the plaintiff testified, liad simply gone through the ceremony of buying the lots without playing a cent.

It further appears that the plaintiff made and negotiated (for .although he denies the latter fact, yet it is piroved beyond peradventure) notes made by the employees and laborers of the Barnegat Company, which notes were represented to be the notes of the purchasers •of lots who had piaid part of the purchase price, and that the company held vendors’ deeds as security for the notes. This is the class of securities which the cupidity of the Holland Trust Company and its secretary induced them to take -without making the slightest investigation in regard to their validity, the whole course of business being of a character which savored rather of the methods of reckless speculation than of those which are supposed to belong to a .so-called trust company. ,,

"We find further, upon an examination of this record, that the testimony of the plaintiff, standing by itself, is totally unworthy of ■credit, because in so many instances it is contradicted by the documentary evidence introduced upon the trial. Instead of the plaintiff and the Barnegat Company being robbed through a conspiracy, it would seem that the Holland Trust Company and others were ¡swindled to a large extent by means of these fraudulent securities. And when they attempt to recover by some means the money which they had advanced upon the fraudulent and false' representations of this plaintiff, it is held in this action to have been part •of a conspiracy to rob the Barnegat Company and to deprive the plaintiff and their creditors of their property by trick and device.

It cannot be doubted that the Holland Trust Company had the right to attempt to,enforce the securities given to it for a portion of the money which it advanced, since the money had been advanced in the vain hope of saving that which they had already hazarded in the enterprise. This certainly proved no conspiracy on their part to-rob the Barnegat Company. It should rather be charged against the plaintiff and his co-laborers who manufactured these fraudulent securities, and induced divers persons to take them. It seems that the fraud initiated by the plaintiff and his associates was the source' of all the unbusinesslike transactions with which this enterprise-seems to bristle.

The claim upon the part of the plaintiff, that the Holland Trust Company was guilty of bad faith in recording the mortgage of $35,000, seems to be entirely refuted by the agreement signed by the plaintiff and Coukling in respect to the trust mortgage, where it is expressly recited that the $35,000 mortgage is the first mortgage on the property of the company and the same is duly recorded. At this time the trust mortgage had not been executed, and yet the recording of this mortgage is one of the frauds of the Holland Trust Company by which it was seeking to rob the Barnegat Company,, recording an instrument given for money which it had advanced, and then endeavoring to collect the money.

But it is useless to multiply instances. Whatever fraud the-record discloses, it also shows that the plaintiff was a little deeper in it than anybody else connected with this action. For such a person to call upon a court of equity to restrain one of his victims, from attempting to retrieve itself is a spectacle which has not been exhibited, to my knowledge, in a court of justice before.

It is clear that the plaintiff has no right to the intervention of a court of equity, and the judgment should be reversed, and a new trial ordered, with cost to appellants to abide event.

Follett, J., concurred.

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


source: Caselaw Access Project

author: PARKER, J.:

license: Public Domain

text:
    James B. Smith, Respondent, v. Phebe G. Molleson, Appellant.

      Bond of indemnity — consideration therefor — estimates of work performed, how a/nd by whom computed.

    The letting of a contract on condition that the persons to whom it is awarded shall furnish security for the faithful performance thereof, furnishes a good consideration to sustain a bond given as such security.
    The surety to a contract is released by a substantial change thereof by the parties thereto without his consent.
    A contract was made whereby the contractors agreed to and with their employer to furnish, cut, set and clean all the new granite work which the employer had .agreed to furnish in the alteration of a certain building, it being provided therein that payment for the work was to be made in monthly payments, not to exceed eighty per cent of the estimated value of the work performed on the building, and by a final payment. The contract did not, however, in terms provide by whom such estimate should be made.

      Held, that, under the circumstances, the contract authorized payments based on an estimate of work actually performed, including stone wholly or partially ready for setting, as well as stone set;
    That in the phrase "performed on the buildings,” the word “on” meant “in reference or relative to; ”
    'That it was fair to presume that the estimates were to be made by the architects having charge of the work.
    Appeal by the defendant, Phebe Gr. Molleson, from a judgment •of the Supreme Court in favor of tlie plaintiff, entered in the office of the clerk of the city and county of New York on the 10th day of April, 1893, upon the verdict of a jury directed by the court after .a trial at the New York Circuit.

      William C. Beecher, for the appellant.

      Jacob F. Miller, for the respondent.
   PARKER, J.:

In October, 1888, the plaintiff entered into a contract with the city of New York to enlarge the American Museum of Natural History in Manhattan square. The contract' provided that certain portions of the building exposed to view on the exterior should be faced with granite.

Shortly thereafter plaintiff made a contract with Pratt & Molleson to furnish, cut, set and clean all the new granite work which, plaintiff had contracted to furnish.

Pratt & Molleson gave to plaintiff a bond in the penal sum of :$6,000, conditioned that they would faithfully perform their contract. This they did not do. Hence this action against their surety, who assigns two grounds of defense : 1. That the bond is without consideration to support it. 2. That the plaintiff and Pratt & Molleson varied the terms of the contract.

Touching the question of the want of consideration, it appears that before the contract was made between the plaintiff and Pratt & Molleson, it was agreed that if the contract should be awarded to •the latter, security for faithful performance on their part should be furnished by them.

Plaintiff so testifies, and the senior member of the firm who were the principals, in the bond conceded it.

In accordance with their promise, the making of which was a condition precedent to the awarding of the contract, they presented to the plaintiff the bond in suit, which recited the making of the •contract between Smith and Pratt & Molleson, and briefly described flie work which Pratt & Molleson had therein covenanted to perform, and the compensation to be paid therefor, and it was conditioned that Pratt & Molleson should faithfully perform their contract, or that they should pay such sum of money as the other party io the contract should suffer by reason of a failure of performance, not exceeding $6,000.

It is apparent that the parties to the contract, as well as the surety on the bond, understood that the giving of the bond was requisite in order to secure to Pratt & Molleson the contract, and that the purpose of it was to secure Smith against loss in case of a failure of performance.

■ The letting of the contract to Pratt & Molleson on condition that they should furnish security for their faithful performance of the ■contract, furnished a good consideration to sustain the bond given. This proposition is sufficiently supported in the reasoning of the court in Erie County Savings Bank v. Coit (104 N. Y. 532-536).

The second defense is sought to be founded on that principle of the law of suretyship which gives to a substantial variation of a •contract by the parties to it, without the consent of the surety, the ■effect of releasing him.

The contract provided that Smith should pay to Pratt & Molleson for the work which they covenanted to perform the sum of $30,000, “ as follows : In monthly, payments not to exceeed eighty per cent (80 c/o) of the estimated value of the work performed on the building ; the final payment to be made when the work is all complete, and after the expiration of thirty days, and after all the drawings and specifications have been returned to J. C. Cady and Co., Architects.”

The variation of which defendant mainly complains is, that the-plaintiff paid to Pratt & Molleson from time to time sums of money which aggregated more than eighty per cent 'of the estimated value of the work actually performed on the building. So that at the time when the plaintiff took the contract away from Pratt & Molleson, because of their failure to perform its conditions, there had been paid to them a greater sum than was due for work and material actually in the building.

It is undisputed that Pratt & Molleson were not possessed of funds requisite to the carrying out of the contract in accordance with its provisions, and from the inception of the work almost, the plaintiff from time to time made to them moderate advancements, on account of the work which they had actually performed, with the pui’pose in view of enabling them, if possible, to fulfill their agreement. The advancements thus made never at any time exceeded eighty per cent of the value of the stone on hand and the work done thereon.

Bxiefly stated, if the contx*act only authorized payments not to exceed eighty per cent of the materials furnished and work done on such stone as was actually set in the building, plaintiff made an overpayment, but if it authorized a payment of eighty per cent of the work actually performed, whether on stone set in the building or those not set, but wholly or partially ready for setting, then the payments were not'in excess. In construing this provision of the contract, it should be borne ixr mind that while it was intended to. secure to the contractors a portion of the contract price from time to time as the work proceeded, it was also intended as a protection to the .plaintiff against the payment of so large a sum as to leave the amount remaining unpaid insufficient to insure performance on the part of the contractors. Thus the monthly payments were lim- ■ ited to a sum not exceeding eighty per cent of the estimated, value-of the work performed.

Now, the granite which the contractors were to furnish had to betaken out of the quarries in Nova Scotia, thence conveyed to Niantic, Conn., where it was cut and put in readiness to be set in the-building, and then taken to New York and placed in position as the work progressed.

Necessarily, therefore, the larger part of the expense of the contractors in performing their work was incurred before the stone was set in the building. The fact that a provision for monthly payments to be based on estimates furnished shows that the parties to the contract appreciated that it was necessary for the contractors that payments should be made at short intervals to enable them to go on with the work. Having this purpose in view, it was but reasonable and apparently in furtherance of their general object to-authorize payments based on work actually performed, including stone wholly or partially ready for setting as well as that set. This is the construction of the contract which the parties themselves by their conduct gave to it before any of the stone was set. After the stone had been taken from the quarries in Nova Scotia „tO' Niantic and cut, the -contractors applied for a payment on account, and the plaintiff, accompanied by one of the architects superintending the construction of the building, visited the yard at Niantic where the stone was being dressed, examined it, made an estimate-of its value, and on that basis an advancement to the contractors of a sum less than eighty per cent of the estimated value was made.

Defendant contends that the construction thus placed upon it by the parties, and which seems to be the one intended by them, cannot prevail, because the language employed is that monthly payments are “ not to exceed eighty per cent of the estimated value of the work j>erformed on the building.”

That the meaning of the phrase is that estimates shall be based solely on stone actually set. That work done in preparing it for setting, and delivering it on the ground, is not work “ performed on the building.” This construction, in the light of the circumstances surrounding the making of the contract, and the conduct of the parties thereunder, seems to,us too narrow. ,,

Webster in defining on,” gives as one of its meanings, “ in reference or relative to.” Adopting this meaning, and the provision so reads as to authorize an eighty per cent payment based on the estimated value of the work performed in reference or relative to the building.

This accords with the apparent intention of the parties as disclosed by the circumstances surrounding the making of the contract, and tlieir action under it. And it is at the same time a reasonable construction, for the greater part of the labor performed and expense incurred by the contractors took place prior to the actual setting of the stone in the building.

But defendant calls attention to the fact that the eighty per cent was to be based on the estimated value, and she insists that the estimates were to be made by the architects, and that the estimates which they did make were based on stone actually in the building, so that, assuming the construction we have given to the contract to be the true one, still the payments were unauthorized by reason of ■an absence of proper estimates. The jdaintiff’s contract with the ■city did not provide for monthly payments based on estimates, but, ■on the contrary, that plaintiff should not be entitled to demand payment for any portion of the work until it should be entirely completed.

The agreement further provides, however, that if the commissioners should direct, the architects should make estimates from time to time of the value of the work performed, upon which the commis.sioners could make payments in their discretion, not exceeding eighty per cent, provided the value of the work certified in such estimates should amount to $20,000.

But when the plaintiff came to sub-contract the granite work to Pratt & Molleson, he agreed to make monthly payments, and without reference to the value of the work performed.

Now, the estimates to which defendant refers were made by the architects under the contract between plaintiff and the city, and they were delivered to the commissioners of the department of public parks having the matter in charge.

It is clear, therefore, that it could not have bgen upon such estimates that the parties intended to base monthly payments.

Nowhere in the agreement between plaintiff and Pratt & Molleson is it provided in terms by whom the estimates should be made. But it is fair to presume, we think, that it ivas expected that the architects would make them.

The plaintiff testifies that1 Mr. Berg, one of the firm of J. O. Cady & Co., architects, had substantial charge of the building, and that Alfred B. Sharpe was superintendent in charge'of the building-under them, and that Mr. Sharpe made with plaintiff examinations of the work done by Pratt & Molleson, and that occasionally Mr. Berg made examinations also. Sharpe testified : I superintended the work for Cady & Co., reporting- to them. I was called upon to go up to Niantic to investigate the amount of granite that might be found there, to find out for J. C. Cady & Co. how much was there. * * In reference to the contract of James B. Smith, * * * I may have gone a dozen times. * * * I went through the yard and examined the amount of granite that was there and calculated how much was there and reported * * * In a way I reported it to Mr. Smith also. I did so more to govern his control with the contractors than anything else — to urge the work and partly in regard to payments. * * * My report to Mr. Smith was in the nature of a voucher to Mr. Smith, and in the nature of orders from J. C. Cady & Company to push the work. I made one report as to the amount of granite in the place at Niantic, and another as to the amount that was actually put in the building.” The testimony quoted is supported by other testimony in the case, ■and shows that the formal estimate made by the architects, in accordance with the contract between this plaintiff and the city, and filed with the commissioners, was only intended as a basis for the commissioners to determine what, if any, amounts should be paid to the plaintiff as the work progressed. It did not include anything except materials actually put in the structure. Eor the purposes of ■such an estimate it was wholly unnecessary to go to Niantic and •determine the value of the stone there and the work done thereon. Such an examination and estimate Avas only valuable as betAveen Smith and his sub-contractors, Pratt & Molleson.

It furnished a basis for the eighty per cent payment to them, which was authorized, as Ave have observed, by the terms of the contract. And the estimates thus made and acted upon by both parties constitute a reasonable compliance with tbe provisions of tlie agreement.

Tlie judgment should be affirmed, with costs.

Yan Brunt, P. J., and O’Brien, J., concurred.

Judgment affirmed, with costs.


author: Van Brunt, P. J.:

text:
    Richard Thornton Wilson and Others, Appellants, v. Lewiston Mill Company, Respondent.

      ■Statute of Pauds — insufficient written memoranda — locus contractus — laws of a foreign State — Statute of P’auds of Maine.

    When a person in transmitting a bid for tlie purchase of personal property acts for the proposed vendor, and for no one else, his letter to such, vendor containing the bid is not a sufficient memorandum or note to satisfy the Statute of Frauds.
    When a transaction took place in Maine, and a bid for the purchase of personal property was there made to the plaintiffs’ agent, and the property in question, if sold, was to be delivered there, the fact that the acceptance of the bid by the plaintiffs was mailed from New York will not make the contract a New York contract; such contract is to be governed by the laws of the State of Maine.
    It seems that to satisfy the Statute of Frauds of the State of Maine, there must be a written memorandum containing within itself or by reference to other written evidence, the names of tlie vendor and vendee, and all the essential terms and conditions of the contract expressed with such reasonable certainty that all its terms may be gathered from the written evidence without any aid from parol testimony.
    Appeal by the plaintiff, Richard Thornton Wilson and others, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the city and county of New York on the 6th day of March, 1893, upon the verdict of a jury directed by the court after a trial at the New York Circuit.

      Treadwell Cleveland, for the appellants.

      Edward B. Hill, for the respondent.
   Van Brunt, P. J.:

This action was brought to recover damages for a breach of an alleged contract for the purchase of cotton. The answer consisted of a general denial, a defense that the contract was void under the-Statute of Frauds of Maine, and also that according to the custom of the cotton trade no contract was ever made.

Upon the trial the defendant offered evidence tending to show that one Hawley, an employee of the plaintiffs, being at Lewiston in the State of Maine, on Saturday, November 1, 1890, called at defendant's place of business and saw the president and treasurer of defendant, and had a conversation with them in reference to the sale of cotton to them, and that they requested Hawley to communicate with his firm and aslc for an offer to sell cotton for a little later shipment than customary, the payment to coiné in February, and that the same day he wrote to his firm requesting them to send an offer to the defendant (which letter was excluded and an exception taken to the ruling); that on Monday, November third, the plaintiffs telegraphed the defendant as follows :

“Nov. 3rd, 1890.
“ To Lewiston Mills, Lewiston, Maine:
“ We will sell five hundred Middling and five hundred strict Middling January shipment, ten one-lialf landed, based on January Contracts nine sixty three.
“ E. T. WILSON & CO.”

That Hawley, on that day subsequently to the receipt of the telegram by the defendant, saw the president and secretary of defendant, and after some conversation they authorized him to transmit a bid to the plaintiffs of ten and three-eighths cents, and that the defendant gave him until Wednesday, November fifth, to accept the offer ; that Hawley then -wrote to the plaintiffs among other things as follows : “ They did, however, too late in the day to telegraph you, make me a bid of lOfc. for 500 B-C Mid and 500 B-C strict Mid, terms and conditions same as those mentioned in my letter of Saturday * * * yon are to reply to the Lewiston Mills Wednesday morning that <on Wednesday morning plaintiffs telegraphed as follows:

“ JDay Message. Nov. 5, 1890.
<£ To Lewiston Mills, Lewiston, Maine:
££ Your offer accepted. Ten three-eighths five hundred Middling and five hundred Strict Middling, January shipments, delivered Lewiston.
££ (Signed) K. T. WILSON & CO.”

' And also wrote tlie defendants a letter on the same day as follows:

“New York, Nov. 5, 1S90.
“ Lewiston Mills Co., Lewiston, Maine:
“Dear Sirs.— We hereby confirm our sale to you of 500 B-0 Midd. landed Lewiston, January shipment, Cash on arrival at lOf per lb., and 500 B Cotton, St. Middling, January Shipment, Cash on arrival at 10-| per lb.
“ Thanking you for the order,
“ Yours truly,
“(Signed) E. T. WILSON & CO.
“ Per Walker.”

That on the fifth of December the defendants wrote the plaintiff as follows:

“ Lewiston, Maine, Deo. Üth, ’90.
“E. T. Wilson & Co., New York :
“We find it will be impossible for us to take the 1,000 bales of cotton mentioned in yours of the 5th ult., as it is impossible to get the funds. Our payments for the next three months are all we can meet without taking any more burdens. The hope that the present stringency in the money market would cease soon, seems certain not to be realized.
“ Yours truly,
“F. W. PAEKEE,
TreasP

And that Hawley and the defendant’s officers had some conversation about arranging the matter amicably which resulted in nothing.

The plaintiffs also gave evidence tending to show damage because of failure of defendant to take the cotton. The defendant offered in evidence the Statute of Frauds of Maine as follows :

“ No contract for the sale of goods, wares or merchandise for $30- or more shall be valid unless the purchaser accepts and receives part of the goods, or gives something in earnest to bind the bargain or in part payment thereof, or some note or memorandum thereof is made and signed by the party to be charged thereby or by his agent.” (E. S. chap. Ill, § 4.)

Both sides offered in evidence certain authorities of Maine relating to the Statute of Frauds, whereupon the court directed a verdict for defendant, wliicli was duly excepted to, and from the judgment thereupon entered this appeal is taken.

The only question involved upon this appeal is whether there was a sufficient memorandum in writing to comply with the Statute of Frauds. It seems to us clear that notwithstanding the testimony of Hawley, that the defendant told him to transmit its bid to the plaintiffs, he did not imagine for one moment that in writing any part of the letter of November third, he was acting as the agent of the defendant. It will be seen that he is writing about a bid that, he has received as representing the plaintiffs, and not making an offer as the representative of the defendant. Hawley, in his letter, after telling his employers about the difficulty he had had to get any offer out of the defendant, says :

They did, however, * * * make me a bid,” etc., clearly showing that Hawley, in transmitting this bid, was acting for his employers and for no one else; and, therefore, Hawley’s letter of November third was not a sufficient memorandum or note to satisfy the Statute of Frauds.

It is, however, urged by the plaintiffs, that even if this letter of Hawley -was not a sufficient memorandum, the recognition of the contract by the letter of the defendant of December 5, 1890, together with the prior correspondence, did constitute such memorandum. In considering this question, it may perhaps be of some importance to determine whether the locus contractus was in Maine or New York. We think that the law of Maine must control, as the lex loci contractus almost invariably governs. The transaction in question took place in Maine; the bid was made to plaintiffs’ employee in Maine; and the cotton was to be delivered in Maine; and the fact that the acceptance of the plaintiffs was mailed in New York could not make the contract a New York contract.

It seems to be the law of Maine that, in order to satisfy the statute, the memorandum must contain within itself, or by reference to. other written evidence, the name of the vendor and vendee, and all the essential terms and conditions of the contract expressed with such reasonable certainty that all its terms may be gathered from the written evidence without any aid from parol testimony. (Williams v. Robinson, 73 Maine, 180.) If the telegram of November fifth, and the letter of November fifth, had contained the whole of the. terms and conditions of tlie contract, then the reference in defendant’s letter of -December fifth to the communication of the plaintiffs’ of fifth ult., would have so identified those papers as to have entitled them to be read with the letter of December fifth ; and thus the complete contract would have been shown by writing. But it is conceded that neither the telegram nor letter of November fifth contained the whole of defendant’s offer, and that they do not contain all the terms and conditions of the alleged contract. In order to ascertain these, we must refer to Hawley’s letters of November first and third, and these are in no way referred to in the only communication signed by the defendant, and, therefore, cannot be -appealed to, according to the rule laid down in the case cited, to establish the contract.

The case of Jenness v. The Mount Hope Iron Co. (53 Maine, 20) seems to establish that there was no sufficient memorandum to satisfy the statute.

■ The judgment appealed from should be affirmed, with costs.

Eollett and O’Brien, JJ., concurred.

Judgment affirmed, with costs.


author: Per Curiam :

text:
    The Nassau Bank, Appellant, v. Joseph Campbell, as Executor, and Others, Respondents.

      Btochnote — certificate of no defense thereto, when immaterial — erroneous rulings as to evidence.

    Where, upon the trial of an action, no question is made as to the validity of ■certain notes, and the question is whether the indorser was not discharged by •the action of the holder thereof in impairing the collateral security, the presence or absence of certificates to the effect .that the notes are Iona fide notes, and that there is no defense to the same, does not change the rule of law to bo applied.
    'The fact that, upon an appeal from a judgment dismissing- a complaint, it appears that some of the exceptions to the rulings upon questions of evidence were well taken, does not justify a reversal when there was sufficient competent evidence to present one point involved, which was controlling upon the trial judge, and justified his dismissal of the complaint.
    Appeal by tbe plaintiff, Tbe Nassau Bank, from a judgment of tbe Supreme Court in favor of tbe defendants, entered in tbe office of the cleric of tlie city and. county of New York on tlie lYtli day of June, 1893, upon a decision of the court dismissing the plaintiff’s complaint and for costs, rendered after a trial at the New York Circuit.

      Aaron P. Whitehead, for the appellant.

      William H. Arnoux, for the respondents.
   Per Curiam :

On the 12th of April, 1886, the firm of Pliyfe & Campbell made two promissory notes to the order of William Campbell, who indorsed the same. These notes on their face expressed that they were what are commonly termed “ stock notes,” having certain bonds deposited therewith as collateral security. After the notes were made and delivered, and without the consent of William Campbell, the bonds were stamped on their face as subordinate to a junior lien on the land, upon which there was a mortgage to secure such collateral bonds.

The law of this case was settled upon the former appeal, which is reported in 63 Ilun, 229. Upon the new trial counsel was asked to state wherein the proof differed from that appearing before this court upon the former appeal, and he thereupon stated that the certificates were not before the General Term, and that there may have been other testimony. These certificates were certificates that the notes themselves were bona, fide notes, and that there was no defense to the same. But these certificates did not change the rule of law to be applied, because no question was made as to the validity of the notes, the question being as to whether the indorser of the valid notes was not discharged by the action of the holder thereof in impairing the collateral security.

Upon this appeal, what other testimony there may be in the case has not been pointed out by the appellant, and upon examination we do not see that there is any testimony which would present any ■different question from that disposed of on the former appeal, and which would not make the decision then reached controlling.

Though some of the exceptions to rulings upon questions of evidence might be good, no advantage therefrom could be derived by tlie appellant, for the reason that there was sufficient competent evidence to raise one point involved, which was controlling upon the trial judge, and justified his dismissal of the complaint.

The judgment appealed from should, therefore, be affirmed, with costs.

Present — Yan Brunt, P. J., O’Brien and Parker, JJ.

Judgment affirmed, with costs.


author: O’Brien, J.:

text:
    In the Matter of the Judicial Settlement of the Accounts of David B. Johnston and Another, as Administrators, etc., of Archibald Johnston. William T. A. Hart, Administrator, Appellant; Hugh Langan and Another, Creditors, Respondents.

      When an administrator need not bring an notion — when he should withdrew) property offered for sale at republic auction.

    Although it may be the duty of an administra tor to bring an action, yet, if it can be shown that in such action he would not have prevailed, it would be extending the liability of an administrator beyond that fixed by law' to hold him responsible for' not having brought a suit which he could not have successfully maintained.
    When an interest in a lease of the value of $1,500 is offered for sale at public auction by the administrator of an estate, and the highest bid received therefor is 8110, it is the duty of the administrator to stop the sale, -withdraw the property, and make an effort to dispose of it at private sale, or to protect himself by applying- to the surrogate for instructions.
    Appeal by William T. A. Hart individually and as administrator of tlie estate of Archibald Jolmston, deceased, from portions of the decree of the surrogate of tlie county of New York, entered in tlie office of. tlie clerk of the New York County Surrogate’s Court on tlie 29tli day of July, 1893, judicially settling liis accounts as suc-li administrator, and also from portions of the intermediate decree made by said surrogate, and entered in the said clerk’s office on the 21st day of June, 1893, modifying, and confirming as modified, the report of a referee.
    Tlie opinion of the referee was as follows:
    “ It lias been seriously contended by tlie contesting creditors that Mr. Hart liad no beneficial interest in tbe Garjey lease, but that he was a mere surety for Johnston. I cannot yield to this view. I think it clear that Hart and Johnston took the lease in the ordinary way, and that the burdens and benefits were shared by them equally. This is shown by their dealings with each other, and with the lessor,, in the reconstruction of the buildings upon the leased property, and by the declarations of Johnston in his assignment to Enscoe, and in his assignment to Ezekiel Harris. Being convinced, from the whole case, that this view is correct, I cannot found an argument upon certain loose and unconsidered expressions in Hart’s testimony, to-deprive him of his one-half of the lease.
    “ In regard to the assignment of one-eighth of the lease by Johnston to Ezekiel Harris, and by Harris to Mrs. Johnston, I should, of course, be bound by the opinion of the General Term, were it not that new testimony presented on the trial before me shows that Hart was informed by Mrs. Johnston that she had paid two thousand dollars for the interest so assigned to her. A repetition of this statement of Mrs. Johnston’s by Hart to his counsel elicited the . opinion that under the circumstances it was not the administrator’s-duty to endeavor to set aside the Harris and Johnston assignments. There is besides some testimony to the effect that soon after the Garvey lease was executed and while the rebuilding by the lessees was going on, moneys belonging to Mrs. Johnston were loaned by her to her husband. Without, however, giving great weight to this-evidence, I am satisfied to rest my decision upon the ground above stated, viz., that the counsel for the administrator advised him to bring no action after Mrs. Johnston had declared that she paid value for the assignment.
    “ The sale by the administrator of the one-eighth interest in the-lease to James Kenney remains to be considered.
    “ This transaction occurred directly after the purchase by Mr. Ilart in his own right of a similar interest from Mrs. Johnston for $1,500. Presumably he paid no more than it was worth. We must, therefore, fix the value of one-eighth of the lease at $1,500. The-administrator advertised the sale to take place on the 20th February, 1888. The sale did not take place on that day, but for some reason that does not appear, was postponed until February 27. 'J'here is no evidence that the adjournment was advertised. On the-27th of February the one-eightli interest is sold to Kenney, in his ■absence, Mr. Hart being present directing the sale in person, and Mr. Merritt, Mr. Hart’s attorney, being also present, and bidding, for Kenney. The price at which it was sold was §110. Kenney, who was an acquaintance of Hart’s, holding continuous business relations with him, paid the administrator the consideration by an allowance in some unexplained way, of that amount in tlieir mutual dealings.
    “ On the day of the sale the two assignments, the one from Theodosia IT. Johnston to ITart, of her one-eightli interest in the lease, with the expressed consideration of $1,500, and the other from Hart, administrator, to Kenney, of a similar interest, with an ■expressed consideration of $110, were recorded. This transaction cannot stand. It was the clear duty of the administrator, when he found he could get no better bid than $110, to stop the sale, withdraw the property, and make an effort to dispose of it at private ■sale, or to protect himself by an application for instructions to the ■surrogate.

      “ lie cannot shield himself by a plea of ignorance, for he, better than any one else, knew what the thing -he sold was worth; he cannot shield himself by alleging that he was obliged to act without advice and hastily, for his counsel was present; and finally, he cannot shield himself under the advice of counsel, for if he had stated his dilemma to lfis counsel he would have been advised that such a bid was altogether inadequate, and consequently that the sale Avas improper.

      “ If he did consult his counsel, he Avas unquestionably so advised. The conclusion reached by me that the sale to Kenney was improper is strengthened by the subsequent transactions of Ilart in regard to the leasehold.
    “ Directly after the sale to Kenney, and on the 5th day of March, 1888, he brought an action against Neal and Kenney for a partition and sale of the leasehold. The action was carried to a decree and sale. At the sale the premises Avere bought by Neal, who subsequently assigned his bid to Hart. When the referee conveyed to Hart the leasehold premises, ITart produced and delivered Kenney’s receipt, and his, Hart’s, own cheque to the order of the referee for the amount of Kenney’s interest in the proceeds of the sale.

      “ The referee indorsed this cheque payable to the order of Kenney and returned it to ITart. Hart then procured Kenney’s indorsement and canceled the cheque.
    “ It is in evidence that the cheque was never deposited by Kenney or collected through the bank .or paid by the bank on which it was drawn. It was a mere memorandum cheque, and as it is clear that Kenney’s share of the proceeds of the sale did not pass from Hart to Kenney through the medium of the cheque, it was, I think, incumbent upon Hart to show how otherwise the money reached Kenney. This he has failed to do, and I am forced to the conclusion by the facts, as I have detailed them, that the purchase by Kenney through Merritt, at the sale of February 27, 1888, was made at the request of Hart and for his benefit.”

      George L. Terry, for the appellant.

      William C. Reddy, for the respondents.
   O’Brien, J.:

It appears that on February 24, 1886, Archibald Johnston, deceased, was the owner of a two-eighths interest in a leasehold, and that on that day he assigned to his wife, through one Harris as an intermediary, one-half of his interest, being one-eighth of the leasehold. He died August 31, 1881, and in February, 1888, the other one-eighth was sold by the administrators to one James Kenney, for the consideration of $110.

With respect to this sale to Kenney, the referee held that it was improvidently made, and in violation of their duty as administrators, and that the administrator Hart should be personally charged with the value thereof, with interest. With respect to the assignment by the intestate to Harris, and by Harris to Mrs. Johnston, the referee held that it was for a valuable consideration and valid. The surrogate confirmed so much of the report of the referee as held the administrator Hart chargeable with the value of the leasehold interest sold to Kenney, and also charged him with the costs, and refused to allow the administrators any commissions; and in the conclusion thus reached we concur, for the reasons which are clearly set forth in the opinion of the referee, and in the interlocutory and final decrees of the surrogate.

This leaves us to a consideration as to whether the view of the referee or that of the surrogate should prevail respecting the one-eighth interest assigned to Harris, and by Harris to Mrs. Johnston, and by the latter, for a valuable consideration, assigned to the administrator Hart individually.

Upon a former appeal it appeared that Johnston for years prior to his decease was insolvent, and that the administrators had knowledge of his insolvency. It further appeared that in 1886 he conveyed to one Harris one-eighth interest in the leasehold estate, which Harris upon the same day conveyed to the wife of said Johnston, and that the consideration expressed in such assignments was alike, viz., the nominal sum of one dollar. Upon these facts appearing, it was held that it was the duty of the administrators to take legal proceedings to recover the property upon the ground that it had been disposed of in fraud of the creditors of the intestate, and that they having refused to do so, it was error in the Surrogate’s Court to discharge them as administrators (Matter of Hart, 60 Hun, 516).

Upon this new proceeding before the referee additional evidence was offered tending to show that, although the nominal consideration of one dollar was expressed in the assignment, Mrs. Johnston paid her husband $2,000 out of moneys which she stated she had obtained upon a mortgage of $8,000 on property owned by her. That $2,000, by check of the person from whom the loan was obtained, she gave to her husband, subsequently receiving the assignment in question. In addition, the administrator Hart testified that Mrs. Johnston, .shortly after the death of her husband, had informed him that she had paid this consideration, and this testimony is supported by that given by Mrs. Johnston, who says that she did so tell the administrator Hart, and the latter states that thereupon he applied to counsel and was told' that it was not his duty to attempt to set aside the Harris and Johnston assignments.

The referee thought, as is apparent, that the former decision, if these facts were supported, would not be applicable, because they are entirely different from those appearing upon the former appeal. The referee was not inclined to give much weight to the statement of Mrs. Johnston that she had loaned the $2,000, placing his decision upon the ground that the administrator was not liable, for the reason ,a that the counsel for the administrator advised him to bring no action after Mrs. Jolmston liad declared tliat she paid value for the assignment.” The learned surrogate seemed to think that little weight should be given to this conclusion, otherwise the report would have been in this as in other respects confirmed.

We think, however, that the conclusion reached by the referee might have been piaced upon both grounds, and without referring again to the one upon which he placed his decision, which appears in his opinion, let u^for a moment consider the effect of the testimony now presentedhipon the question of whether it was the duty of the administrators to bring suit, or whether or not the creditors could successfully assail Mrs. Johnston’s statement that she was a purchaser for value.

Having regard to the price, viz., $1,500, at which she sold the interest to the administrator Hart, and the sale of the entire property .for $0,300, as made in the partition suit, it must be assumed that $2,000 was full value for one-eighth interest in this leasehold, which she testifies she loaned to her husband, subsequently receiving the assignment. Assuming, nevertheless, that it was the duty of the administrator to sue, we think that if it can be shown that in such an action he could not have prevailed,- in the light of all that now appears, it would he extending the liability of an administrator beyond that fixed by law to hold him responsible for not having brought a suit which he could not successfully maintain.

Had he brought such a suit he would have been met by testimony such as was produced before the referee in this case, of Mrs. Johnston asserting that she had loaned her husband $2,000, which was the consideration for the subsequent assignment to her of the leasehold interest. She testified to the sources from which she received this money and gave the date thereof. Her testimony is that she paid $2,000 in a check, which upon cross-examination she stated was obtained by mortgaging her house on Fourth or Park avenue to one Buchanan "Winthrop for $8,000, and that out of this $8,000 the $2,000 was paid. Hpon Mr. 'Wmthrop’s examination, it appeared that he had made a loan which was secured by the bond and mortgage of Mrs. Jolmston and her husband upon her house, but that in payment thereof he gave one check to Edward S. Dakin, which money was undoubtedly paid subsequently to Mrs. Johnston, but in what checks or in what way does not appear. It does appear, how- ' ever, from Mr. "Winthrop’s statement, that this payment was made on the 21st day of December, 1881. And by a book of Mrs. Johnston’s husband it would appear that upon the same day he deposited in the Bank of the Metropolis the sum of $1,889.52, or almost $2,000. The fact, therefore, that the husband and wife on that day raised a mortgage, and the further fact appearing that the husband was insolvent, renders this deposit of the intestate to some extent confirmatory of the inference that could be drawn that this $1,889.52 was given to him by his wife.

However, without regarding this as conclusive evidence, we think it clearly appears that had this testimony been elicited in an action brought by the administrator against Mrs. Johnston to set aside the assignment to her, standing as it does upon the record nncontradicted, it could not have supported the burden of proof which would have been upon the plaintiff of showing that the assignment to Mrs. Johnson was without consideration, and, therefore, void as against creditors of her insolvent husband.

Upon this new testimony elicited and for reasons given, in addition to those assigned by the referee, we think that the modification made in the report of the referee in respect to this interest should be reversed, and that the referee’s report as presented should be confirmed, and the interlocutory and final decrees of the surrogate in all other respects affirmed, without costs to either party upon this appeal.

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

Modification by surrogate in report of referee reversed and referee’s report confirmed, and the interlocutory and final decrees of the surrogate in all other respects affirmed, without costs to either party upon this appeal.