text:
    THE PEOPLE OF THE STATE OF NEW YORK, Respondent, v. BRUNO W. GOTTSCHALK, Appellant.

      Crimes — the distinction between larceny and obtaining property by false pretenses — the intention to pass the title.

    Bruno W. Gottschalk was convicted of grand larceny in tlie second degree upon, an indictment which charged that he, with force and arms, feloniously did steal, take and carry away the money and property of Joseph Weiss.
    Upon the trial the evidence showed that Weiss, having advertised for the position of collector, Gottschalk called upon him, represented that he was engaged in a legitimate business, and employed Weiss as a collector; that thereupon Weiss deposited $200 with Gottschalk as security, and received a receipt and contract of employment by which Gottschalk agreed to return the money at the termination of the employment; that Weiss, having found out that the business was not legitimate, his employment was duly terminated, and Gottschalk promised to return the money, but did not, and went away to another State, that Gottschalk designed to steal the money of Weiss, and made the representations in question to induce Weiss to deposit his money with him.
    The defendant moved to strike out the testimony tending to establish these facts upon the ground that the indictment charged larceny by trespass, while the evidence indicated that the property had been obtained through false representations.
    Upon an appeal by the defendant from a judgment of conviction;

      Held, that the conviction was proper.
    That the proof established the crime of larceny by trick and device at common law, which constituted larceny within the Penal Code.
    That, as the offense had been committed, it was not affected by the fact that Weiss subsequently entered into negotiations with Gottschalk, under which the latter promised to return the money, but did not do so.
    That the distinction between the crime of larceny and that of obtaining property by false pretenses, turned upon the intention of the owner to part with the title to his property; that if he, although deceived, intended to part with the title, the defendant could not be found guilty of larceny, but if, as in the case of Weiss, the owner never intended to pai&with the title, and parted with the possession to one who took the property animo fwrandi. the crime of larceny at common law and within the Penal Code was made out.

      People v. Pumas' (106 N. Y. 502) distinguished.
    Appeal by tlie defendant Bruno "W. Gottschalk from a judgment, entered in the office of the clerk of the city and county of New York on the 18th day of April, 1892, sentencing the defendant to imprisonment for the term of four years and ten months, upon a conviction of the crime of grand larceny in the second degree, after a trial at the Court of tbe General Sessions of the Peace of the city and county of New York before the court and a jury;

      Edward Grosse, ..or une appellant.

      Senry B, B. Stapler, for the respondent.
   O’BbieN, J.:

This appeal is taken upon a pure question of law, as to whether the crime charged in the indictment was the crime proven upon the trial. The indictment charged that the defendant, “ with force and arms, feloniously did steal, take and carry away the money and property of Joseph "Weiss.” It is conceded that the following facts,, which are concisely stated in the bill of exceptions, were established by the people upon the trial: That one Joseph Weiss published, on. or about November 11, 1891, an advertisement in the city of New York, in which the said Joseph Weiss applied for a position as clerk or collector, and offered to give security for the faithful performance of his duty. That thereupon, in the city of New York, on or about the said 11th of November, 1891, the defendant called on said Joseph Weiss, and represented that he was engaged in a legitimate business in which he needed the services of a clerk or collector who could deposit security for his honesty. That thereupon the said Joseph Weiss paid over to said defendant, and deposited with said defendant the sum of $200, not intending to part with the title of said $200, but only to pledge the said money as security, retaining the title thereto, and received from the said defendant a certain receipt and contract of employment, by the terms of which the said defendant undertook to return the said sum of $200 on the termination of the contract of employment, and that said contract of employment would b^determined on a-liotice of thirty days by said Joseph Weiss to defendant. That said Joseph Weiss entered the said service of defendant, but found out that his business was not a legitimate one, and on or about the 9th day of December, 1891, gave defendant notice, in accordance with the requirements of the contract, that he would terminate the contract. That defendant promised and agreed to repay and return the sum of $200 as follows: One hundred dollars on February 1, 1892, and one lmndred dollars on Marcli 1, 1892, but that, on or about January 11, 1892, defendant left for Chicago and did not return any part of said $200, but that said defendant designed to steal the same and to appropriate the same at the time said Weiss made said deposit of $200 and entered the employment of said defendant, and at the time he made his said statements and representations to said Joseph "Weiss. That said statements and representations were made by-the defendant in order to induce the said "Weiss to make the said deposit with the defendant. The defendant’s attorney objected to the introduction of this evidence at the proper time on the ground that the facts were not stated in the indictment. The objection was overruled. Defendant excepted.

The defendant moved to strike out the testimony on the ground that the indictment charged that the larceny was committed by trespass, while the proof showed that the larceny, if any, was committed by obtaining the property through false and fraudulent representations, which fact was not pleaded in the indictment.

The court held that the facts stated tended to prove a larceny by trick and device, and the indictment was sufficient to admit proof of these facts. The defendant excepted to this ruling. Other witnesses were called by the prosecution to confirm the testimony of Joseph "Weiss, but the testimony did not vary the version of the facts as stated by Joseph "Weiss, and at the close of the testimony for the people the defendant’s counsel moved that the court direct the jury to acquit the defendant on the grounds: 1. That the crime alleged was not proven. 2. That the facts alleged in the indictment were not proven. 3. That the facts proven varied materially from the facts alleged in the indictment.

The court denied the defendant’s motion, and defendant excepted to it. The court then charged the jury, and the jury found a verdict of guilty of larceny in the second degree.

Between the indictment and proof it is insisted by the appellant that there was a fatal variance, in that the act alleged is a forcible taking of complainant’s money, which, it is claimed, was not proven; while what was proved was the fraudulently inducing of Weiss -to deliver the money to defendant, defendant’s duty to repay it on termination of the contract, and his neglect to comply with this duty, which,.it is claimed, were not alleged.

It will tlms be seen tliat tlie appellant seeks to bring this case within the principle of People v. Dumar (106 N. Y., 502). Ye think, however, that an examination of what was decided in that case will show the distinction which the appellant seemingly overlooks. That case is authority for the proposition that, under the provisions of the Code of Criminal Procedure prescribing the form of the indictment, it must charge both the crime and the act constituting it, and that the omission of either is fatal. That case, therefore, held, where an indictment for grand larceny charged the act constituting the crime thus, that defendant “ unlawfully and feloniously did steal, take and carry away ” the property described, that it could not be sustained by proof that the defendant obtained possession of the property from the owner upon a sale on credit induced by false and fraudulent representations. The distinction between these two crimes as they existed at common law is clearly pointed out, and, as therein said: “ In order to constitute larceny there must have been a taking of personal property against the will of the owner. The other offense (false pretenses) could not be confounded with it. In either case the property may have been obtained by artifice or fraud, but if in one the owner intended to part with his property absolutely and to convey it to the defendant, but in the other intended only to part with the temporary possession for a limited and specific purpose, retaining the ownership in himself,, the latter case would be larceny, but the former would not. It was, therefore, uniformly held that if a person, through the fraudulent representations of another, delivered to him a chattel, intending to pass the property in it, the latter could not be indicted for larceny, but only for obtaining the chattel under false pretenses.”

It is therein further shown that “ The Penal Code * * * swept away the theory by which the courts had felt constrained to distinguish them in principle. By it larceny is so treated (chap. 4) as to include, not only that offense as defined at common law and by the Bevised Statutes (2 B. S. 679, 690), but also embezzlement, obtaining property by false pretenses, and felonious breach of trust.”

* * * Therefore, under the Penal Code, there are at least four distinct and separate acts or ways by which a person may commit or be guilty of larceny. The first embraces larceny as described at common law and under the Bevised Statutes (supra); tbe second embraces the offense formerly known as obtaining property by false representations.

This case is, therefore, undoubted authority for the position that one who has been indicted for larceny for doing the first act cannot be convicted of larceny for doing the second.

No question, however, can here arise as to this being a good indictment for larceny at common law; and if the facts given in evidence were sufficient to sustain the crime of larceny at common law, then there is no variance between the indictment and the proof. At common law, when the owner of property, induced by false and fraudulent representations, intends to part with the title thereto, the crime of procuring property by false representations is committed, and not the crime of larceny. "Where, however, the intention not to part with the title to the property appeared, even though possession thereof may have been obtained by trick, device or fraudulent representations, it was larceny. This distinction, we think, is very well pointed out in the case of Smith v. People (53 N. Y., 111; 13 Am. Rep., 474), wherein it was held that, if by trick or artifice the owner of the property is induced to part with the custody or naked possession to one who receives the property animo furandi, the owner still meaning to retain the right of property, the taking will be larceny. In this case it is conceded that Weiss did not intend to part with the title to the $200, but only to pledge the said money as security, retaining the title thereto ; that the appellant afterwards appropriated the $200, and that his design at the time the complainant ¿nade the said deposit was to steal the same.

The intention of Weiss to retain the title while parting with the possession of his money, and the intention of the prisoner to steal the same at the time of obtaining possession, are not affected by the subsequent negotiations to obtain, on the part of Weiss, a return of his property. It is absurd for appellant to claim, after having, without the consent of Weiss, stolen his $200, that this act which constituted the crime of larceny was in any way changed or affected by the subsequent negotiations between the parties relative to Weiss’ obtaining a return of the same, and that, because the appellant agreed to make such return at a period subsequent to the indictment, the crime could not be committed until this period had expired by his then refusing to return the money.

The distinction which we have sought to point out between the crime of larceny and false pretenses we think is clearly supported by the cases of People v. Morse (99 N. Y., 662), and Soltau v. Gerdau (119 id., 380). In the former the indictment was for common-law larceny, and there, as here, the appellant contended that the crime established was the crime of obtaining money by false pretenses, and the test applied, as to whether it was one or the other, was the intention to part or not to part with the title of the property at the time possession thereof was taken from the true owner. "We think, therefore, that where it is conceded, as in this case, that the complainant did not intend to part with the title to the $200, and that the defendant received the same with the intention of stealing it, and did steal it, the crime committed was common-law larceny, and not larceny.by false pretenses. And where, as here, the proof tended to support and was directed to establish the crime of larceny at common law and as defined in the Penal Code — and as the crime charged in the indictment was the crime of larceny as it existed at common law and under the Code — there was no material variance between the facts proven and those alleged. The vice in appellant’s argument is due to his assuming, throughout, that the proof tended only to support the crime of statutory larceny by false pretenses, whereas, as we have shown, the facts did establish larceny at common law.

We are of opinion, therefore, that the conviction should be affirmed.

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


source: Caselaw Access Project

author: Yan Brunt, P. J.:

license: Public Domain

text:
    ELIZABETH E. HUTCHINS, as Executrix of WALDO HUTCHINS, Respondent, v. ABRAHAM VAN VECHTEN, Appellant.

      Trust created by a writing not under seal —what is a sufficient declaration of trust — presumption as to the time when the trust was created.

    In 1870 Reuben E. Fenton and wife conveyed to Abrabam Yan Yecbten certain land by a deed absolute in form, and it did not appear that any declaration of trust, or instrument of that nature, upon the part of Yan Vechten, was executed at that time.

      In 1873 Van Vecliten executed to John H. Platt, who was then the law partner of. Waldo Hutchins, a power of attorney authorizing Platt to convey the premises, and on the same day wrote to Platt a letter, which he signed, in which, after referring to the power of attorney, he stated'. “Whatever is realized you will understand that it belongs to Waldo Hutchins and myself, jointly and equally, and any further instruction Mr, Hutchins may give you, you may comply with.” In 1887 Van Vechten wrote a letter to a tenant on the premises, in which he said: “ Although the title of the whole premises is in me there is another party who has an interest.” 1-Ie also wrote letters, in 1885 and 1886, to Hutchins and to bis-son relative to the property, and to taxes thereon.
    In an action brought by Elizabeth E. Hutchins, as executrix of Waldo Hutchins, deceased, to establish a trust in favor of the estate, judgment was rendered in .her favor against Van Vechten.
    Upon an appeal from this judgment by Van Vechten:

      Held, that, since the passage of chapter 322 of the Laws of 1860, it has not been necessary to produce a deed or declaration of trust, under seal, in order to estab- . lish a trust, but that it may be proved “ by any writing subscribed by the party declaring the same.”
    'That the papers and documents in question sufficiently established a trust in favor of Waldo Hutchins, and that its subject-matter was pointed out with sufficient' certainty.
    That as ihe evidence justified the finding that a valid trust had been created in favor of Hutchins, the court would presume that it was created at the time of the delivery of the deed by Fenton to Van Vechten,
    Appeal by tlie defendant Abraham Yan Vechten from an interlocutory judgment of the Supreme Court, entered in the office of the clerk of the city and county of New York on the 13th day of June, 1892, in favor of the plaintiff, establishing a trust in favor of the estate of her testator in certain lands held by the defendant and directing an accounting, after a trial by the court at the New York Special Term.

      Matthew Hale, for the appellant.

      C. H. Morgan, for the respondent.
   Yan Brunt, P. J.:

This action was commenced to have it adjudged and declared, that the defendant held certain real property and the proceeds thereof,, together with the rents, issues and profits arising out of the use and possession of the same, in trust for the joint and equal benefit of himself and the plaintiff’s testator.

The evidence in the case showed that on or about the 23d day of December, 1870, the defendant received from Reuben E. Fen-ton and wife, a deed dated that day, conveying to him the premises mentioned and described in the complaint for the consideration expressed in such deed of fifteen thousand dollars.- Such deed was absolute in its terms, and it does not appear that at the time of its delivery to the defendant any declarations of trust or other instrument, evidencing that he took the conveyance of the premises in trust for the plaintiff’s testator, was executed by him.

And the question involved was whether tho evidence which is hereinafter referred to established a trust in favor of the plaintiff’s testator. The testimony established that subsequently to the execution and delivery of such deed, and on or about the 5th day of June, 1873, the defendant executed to one John H. Platt, then the law partner of the said "Waldo Hutchins, a power of attorney, dated that day,-empowering and authorizing the said John H. Platt to sell and convey the premises in question upon the terms in such power of attorney stated and expressed.

It also appears that at the time of the execution and delivery of said power of attorney, the defendant wrote a letter to the said John H. Platt, dated the same day, to wit, the 5 th day of June, 1873, and signed by him, in which, after referring- to the above-mentioned power of attorney, he states: “ Whatever is realized you will understand that it belongs to Waldo Hutchins and myself jointly and equally, and any further instruction Mr. Hutchins may give you, you may comply with.”

With the two papers above mentioned, there was found, after the decease of Waldo Hutchins, another paper, wholly in the handwriting of the defendant, but without date or signature, containing a description of the premises in question, to which is appended, also in the handwriting of the defendant, this note: “ The above is the description of the property as contained in deed to me, nothing about our beimg entitled to six hundred inches.”

It further appears from the testimony that subsequently to the execution and delivery of the power of attorney and letter to John H. Platt, above mentioned, the defendant wrote various letters, one to Waldo Hutchins, Jr., in reference to the property in question, dated August 5,1885; another to Waldo Hutchins, Sr., in reference to taxes on the property in question, dated May 7, 1886 ; a third to Waldo Hutchins, Sr., referring to the property and to the taxes thereon, dated April 20, 1886, and a fourth, dated February 14,1887, to one Fenton, of Jamestown, N° Y., who was then a tenant of a portion of the property in question, in which the defendant says:

“ Although the title of the whole property is in me, there is another party who has an interest. I expect to go to New York some time next week, when I will see him and let you know what it is decided to do.”

Upon these facts the court held the trust to have been established, and from the judgment thereupon entered this appeal is taken.

The Revised Statutes declare that no estate or interest in lands * * * nor any trust or power over or concerning lands, or in any matter relating thereto, shall hereafter be created * * * or declared, unless by act or operation of law, or by a deed or conveyance in writing subscribed by the party creating, granting, assigning, surrendering or declaring the same.” (2 R. S., 134, § 6.)

By chapter 322 of the Laws of 1860, the section of the Revised Statutes following the one quoted was amended to read as follows: “ The preceding section shall not be construed to affect in any manner the power of a testator in the disposition of his real estate by a last will and testament; nor to prevent any trust from arising or being extinguished by implication or operation of law; nor to prevent any declaration of trust from being proved, by any writing subscribed by the party declaring the same,” etc.; thus assimilating our statutes to the law as it existed prior to the adoption of the Revised Statutes and making it substantially the same as the English statute, upon the same subject by which it was enacted that all declarations or creations of trust or confidence of any land, tenements or hereditaments shall ,be manifested or proved by some writing signed by the party who was by law enabled to declare such trust. Therefore, in order to prove a trust it is not necessary to produce a deed or declaration of trust under seal, but such declaration of trust may be proved by any writing subscribed by the party entitled to declare the same.

The question thus presented in this case is whether the writings to which attention has been called establish such a declaration. Our attention has been called to the case of Young v. Young (80 N. Y., 422), as a strong case in support of the contention of the defendant. We are unable, however, to see that it has any application to the case at bar. The question in that case was a question as to whether a gift had been made of certain bonds which belonged to and were in the possession of the donor at the time of his death. But there is no proposition in this case involving a gift; there is nothing to show that the defendant was speaking of a gift when he was speaking of the interest of Mr. Hutchins in the property in question. It was of a legal right, because he says in one place that somebody else has an interest in the property, and in another he speaks of it as being “ our property,” and in another that in case of sale one-half belongs to Mr. Hutchins — not a mere authorization to pay but a statement of a tact. He says: “Whatever is realized you will understand that it belongs to Waldo Hutchins and myself, jointly and equally, and any further instructions Mr. Hutchins may give you, you may comply with.”

It is urged that the alleged declaration is not sufficiently clear and explict, and does not point out with certainty the subject-matter and the extent of the beneficial interest. It is difficult to see how this criticism can apply. The subject-matter was distinctly specified in the power of attorney to Platt, and in the letter which contains the declaration of interest this power of attorney was referred to, thus pointing out with certainty the subject-matter; and when he says that all proceeds belong to Hutchins and himself jointly and equally, the extent of the beneficial interest is no longer uncertain.

It is further claimed that the interest mentioned in the letter to ■ Platt may have been compensation for services in effecting a sale, or something in connection with the property. But this is inconsistent with the letters in reference to the taxes, and also with the statement, in his own handwriting, that another party has an interest in the property.

The case of Cook v. Barr (4A N. Y., 156) certainly does not sustain the contention of the defendant. In that ease it was sought to establish a trust by certain allegations in an answer, and it was held that all such allegations were perfectly consistent with absolute ownership in the land, and no trust in the land was properly or necessarily inferable from them. But in the case at bar there is no such ambiguity. The declaration is explicit that another party has an interest in the land ; and that whatever is realized from the land belongs to Hutchins and the defendant jointly and equally. From this language, it is impossible to draw any other inference than that the defendant and Hutchins were jointly interested in the enterprise in respect to this land. It is not necessary to notice the various theories, advances by the learned counsel for the appellant, because it seems to us that they torture the plain language used in the documents offered in evidence from their manifest and natural meaning; and suppositions are indulged in which have no foundation except in the imagination, it being suggested that the defendant proposed to make a gift of the half of the proceeds of this property in case of a sale. But no words were used to indicate any such intention. A man does not give to another what belongs to that other.

It is also claimed that there is no evidence in the case tending, in the slightest degree, to show that a trust was created at the time of the delivery of the deed from Fenton to the defendant. The evidence was sufficient, as already seen, to justify the court in finding that a valid trust existed in favor of the deceased Hutchins, and the presumption would necessarily arise that such trust was created at a time which would make it effective, rather than a presumption which would enable the defendant to shield himself under the statute of frauds.

The various other exceptions in the case have been examined, and none of them seem to us to be of any materiality. "We are, therefore, of the opinion that the judgment appealed from should be affirmed, with costs.

O’Brien and Lawrence, JJ., concurred.

Judgment affirmed, with costs.


text:
    WILLIAM H. BEERS, Plaintiff, v. THE NEW YORK LIFE INSURANCE COMPANY, Defendant.

      Corporations — compensation of an officer of, for past services — ultra vires contract — 'a president presiding but not voting at a meeting at which he was voted an unearned future salary for life.

    The New York Life Insurance Company, a corporation having no capital stock (its assets being held in trust for the benefit of the policyholders, who, by statute, were made the members of the corporation), exercised its corporate powers hy a hoard of twenty trustees, the term of office of five of whom expired annually. The charter provided that the president and vice-president should he elected annually, which the by-laws reaffirmed and added that the president should have general supervision and direction of the company, and that the actuary should also he elected annually; that the supervisory and agency committee should have power to appoint and remove all agents, and to fix their compensation, and that the president and vice-president should have such power over all other persons employed; that no alteration of the same could be made unless it had been proposed at a stated meeting, and was adopted by a majority of the trustees at a subsequent meeting.
    In 1891 the superintendent of the insurance department of the State of New York investigated the affairs of the company and reported that large losses had arisen from neglect and incompetency in the management, but he did not find that Beers, the president, who had been connected with the company for many years, or the trustees, had been guilty, personally, of corrupt acts.
    At a meeting of the trustees, held February 8, 1892, Beers presided, but presented his resignation, to take effect February 10, 1892, which was then accepted. At the same time the trustees, hy resolution, authorized the corporation to enter into a contract, hy which Beers was to be paid during life $37,500, in recognition of past services and of his future usefulness to the company, Such a contract was subsequently entered into between Beers and the company, hy which Beers agreed, during his life, “so far as strength and health permitted,” to serve the company in an advisory capacity, to use his best efforts for its success, and not to enter any other company or any business which might compete with that of the New York Life Insurance Company.
    This contract recited his past services and his resignation, and a resolution which had been passed relative to the subject on January 25, 1892, spoke of making a proper recognition of services rendered. After this contract was made Beers was not asked to, nor did he, render any services to the company, which refused to make the first payment falling due under the contract.
    Upon a submission of the question as to Beers’ right to enforce this contract:

      Held, that Beers was not entitled to recover.
    That it was evident that the contract was based upon past services, and was, therefore, void.

      That the charter and by-laws showed that it was not intended that the trustees of the corporation should have power to make contracts which might extend far beyond their term of office, and that they could not make this contract with Beers ' for his life.
    That it was intended, by the short terms of office of the officers, and the manner prescribed of employing agents, that the corporation should maintain a present control over its servants.
    That, under the by-laws, which had not been amended as required at a stated meeting, the trustees had no power to appoint any person to office under the corporation.
    That Beers, who had been president of the corporation for years, must be presumed to have known of the limitations in this regard fixed by its by-laws. That the contract was void, as against public policy, because Beers presided over the meeting which legislated in his favor, although he did not vote upon the resolution granting him the salary.
    That while the tendency of late decisions is to allow a trustee or director to contract with his corporation, provided that, while acting in his own interest, he does not also act as trustee or director, yet this rule does not apply where one actually presides over a body and superintends a balloting, by the result of which he profits individually.
    Submission of a controversy between William H. Beers, as plaintiff, and the New York Life Insurance Company, as defendant, without action upon an agreed statement of facts, under sections 1279-1281 of the Code of Civil Procedure.

      JEselc Oowen and Frederic R. Couder% for the plaintiff.

      A. Hamilton, for the defendant.
   Yan Brunt, P. J.:

The question in difference is stated in the agreed case to be:

“ Is the said Beers entitled to be paid and to recover from and have judgment against the said the New York Life Insurance Company, in the sum of $9,375, being the first quarterly payment upon and under an agreement hereinafter set forth executed by the said William II. Beers on his own behalf, and by A. H. Welsh, second vice-president, and II. W. Weeks, actuary of the said The New York Life Insurance Company, on behalf and under the seal of and by authority of the board of trustees of said company on February 8th, 1892?”-

The power of the court to decide this question arises from sections 1279 to 1281 of the Code of Civil Procedure, which provides that parties to a question in difference, which may be the subject of action, may agree upon a case containing a statement of facts upon which the controversy depends, which case must be accompanied by the affidavit of one of the parties to the effect that the controversy is real.

If the position attempted to be taken by the learned counsel for the plaintiff is correct, then there is no controversy whatever to be submitted to the court; because it is claimed by him that the board of trustees of the defendant have not repudiated the contract; and that their act agreeing to the submission expressly states that their resolutions authorizing the president to obtain a submission from a court of competent jurisdiction as to the validity of the contract are not to be understood as an affirmance or disaffirmance of said contract. Now, unless there has been a denial, and is a denial, upon the part of this defendant corporation, of any liability upon this contract, then there is no controversy. This court is not the advisory counsel of this corporation. It does not occupy any such position and it does not propose to act in any such capacity; and if it is the purpose of the trustees of this corporation to use this court for that purpose, the court must decline the office.

But, as we understand the position of the corporation, it is a denial of liability upon the contract; and a denial of liability upon the contract is necessarily a repudiation of the same. The fiscal officers of the corporation have refused to pay, and the trustees have not dissented from that refusal. The refusal to pay is based upon the claim that the corporation is not bound by this contract, and the trustees have not dissented from this position. ■ Hence the controversy. And understanding that this corporation, hotli by its fiscal officers and its trustees, has denied its liability upon this contract, and, therefore, repudiate the same, this court proposes to discuss the controversy which has thus arisen.

The facts bearing upon the submission are substantially as follows r

By a curious metamorphosis, the Nautilus Insurance Company, incorporated in 1841, for the purpose of exereising the power of an insurance company for marine inland navigation, was, by various statutes passed in and prior to 1849, changed into a purely mutual life insurance company called the New York Life Insurance Com- ’ pany. It has neither stock nor stockholders. Its assets belong to, and are held in trust for the exclusive benefit of policyholders, who, under one of the statutes authorizing the transformation, constitute the members of this corporation. All the corporate powers of the company were to be exercised by a board of trustees, and such officers and agents as they might appoint, the board of trustees consisting of twenty persons who should elect a president and vice-president annually, who should, on their election, be ex-officio members' cf said board of trustees, and hold office until others were elected in their stead. The term of office of a trustee was four years; and but five of their terms expired annually, which would require at least three years to elapse before the policyholders could choose a majority of new trustees after any given period or event. By the by-laws, it is provided that the president shall have the general supervision and direction of the business of the company. The plaintiff, up to and for a number of years prior to the 10th of February, 1892, had been a member of the board of trustees and the president of the company, and had the general control and management of its affairs. In 1891 the management of the company was severely assailed as injudicious and extravagant, which led to an official examination of its affairs by the superintendent of the insurance department of this State, and which resulted in. an official report, showing large losses in the management of the affairs of this company, arising from gross neglect and incompetency in its management; but which fortunately had not, as yet, resulted in insolvency.

There was no finding in the report of the department of any personal dishonesty upon the part of Beérs, and nothing which showed any corrupt or dishonest use of the profits of the company for the private gain of any of the officei's of the corporation. It is stated in the agreed case that the plaintiff denied the charges of mismanagement, wrote an elaborate defense thereof, and expressed to the board of trustees not only his willingness, but strong desire to have the matter of the propriety of his dealings with agents, and in making investments, made the subject of a judicial determination, and that he was sustained in his position by a large majority of the trustees of the company.

What this last clause in the submission means we have not been able precisely to determine. If it was his position of willingness and strong desire to be further -investigated, this large majority of the trustees seem to have limited themselves to approving the desire, •without taking any action to give such desire effect.

Upon this report of the insurance department, on the 25th of January, 1892, at a meeting of the board of trustees, over which the plaintiff presided (eighteen members being present, and there being one vacancy), a committee of the board of trustees was appointed and directed to take into consideration such report and consider what action should be taken in view thereof; the submission stating that Beers did not vote. As the resolution was seemingly carried without any difficulty without his vote, of course, there was no necessity of his putting himself upon record in favor thereof. This committee reported to the full board at an adjourned meeting on February 8, 1892 (nineteen members being present), over which meeting Mr. Beers presided throughout, which he seems to have done whenever his personal interests were at stake. In their report the committee stated that they had given the matter most careful consideration in order to determine what course was best for the interests of the company, and what changes in the organization or methods of the company were desirable; and they recommended the division of duties of executive officers by the appointment of an auditor who should report direct to the trustees,, the amendment of certain parts of the by-laws, and that a contract which had already been submitted to the committee to pay the plaintiff $25,000 per annum for life in recognition of past services and his future usefulness to the company be entered into. At the same time there was tendei’ed at the meeting, by Mr. Beers, his resignation of his office as president, to take effect on Wednesday, February 10, 1892 ; but he did not resign his office of trustee, which continued until April, 1892. At this meeting the board accepted the resignation of Beers, and, after passing a eulogy upon his administration of the affairs of this corporation, notwithstanding the fact that large losses had arisen from gross neglect and incompetency in its management, authorized an agreement to be made with him to secure his services during the remainder of his life in an advisory capacity upon half pay, viz., an annual salary of $37,500, thus raising the recommendation of the committee by fifty per cent, and authorizing the second vice-president and the actuary to execute the contract submitted under the seal of tbe company Thereupon, upon the same day, an agreement was entered into between the plaintiff and the defendant, whereby the plaintiff agreed, so far as strength and health permitted, to serve the company in an advisory capacity, and give its officers all the aid and assistance that might lie within his power in said advisory capacity to maintain and extend its business prosperity, and at all times to use his best efforts for the success and benefit of the company ; that he would not become an officer, or enter the employment of any other life insurance company or association or become connected in any form with any other company, or enter into any business directly or indirectly which should affect or be in competition with the defendant during the remainder of his life. The defendant thereupon agreed, on the true and faithful performance of the covenants and agreements therein contained on behalf of the plaintiff to be kept and performed, to pay the plaintiff during the remainder of his life the annual salary of $37,500 payable quarterly, to commence on the 10th of February, 1892. The plaintiff continued to act as president up to and including the 10th of February, 1892, and presiding over the meeting on that day, and, as already stated, he continued to hold his office, as trustee, until April, 1892. On the 12th of February, 1892, the vacancy in the office of president was filled, and since that time plaintiff has ceased to act as president, and he has not rendered any services or given any assistance or advice to the company, and has not been called upon to do so. The first payment under the agreement having become due the plaintiff demanded the same, which the president and fiscal officers of the company refused to make, claiming that the company was not bound by the agreement, and, therefore, the trustees authorized the president to execute the submission of the controversy between the parties to this court, and the question is whether, upon this state of facts, the plaintiff is entitled to recover the sum of $37,500 a year during the continuance of his life from the defendant, being one-half of the enormous salary which he received for managing or mismanaging the affairs of this corporation.

It seems to us that there can be but one answer to this proposition. It is urged upon the part of the plaintiff that the contract in question is not ultra vires, but clearly within the chartered powers of the corporation ; that the plaintiff had resigned when the contract was executed, and there is nothing in the case to show that his resignation was any part of the consideration of the contract; and that, although this* contract has been assailed as a pension to the plaintiff for past services, there is no such consideration stated in the contract, nor is there anything in the submission which justifies any such conclusion.

It seems to us that a very brief examination of the facts admitted in the submission justifies the criticisms which have been suggested. The committee appointed at the meeting of the 25th of January, 1892,, recommended that, “in view of the long and devoted services rendered by Tvlr. William H. Beers to this company, his untiring energy and ability shown in building up a company which is second to none, we feel that a proper recognition of such services and his future usefulness to the company, warrant us in suggesting to this board that a salary of 825,000 per annum be given him to continue for life in accordance with a contract already submitted to this committee.” This language clearly shows that, in the opinion of this committee, the $15,000 salary which the president had been receiving did not sufficiently compensate him for the faithful services which he had rendered, and they, therefore, recommended this additional compensation, by way of a pension, of $25,000 per annum to continue during his life. And this idea permeates the recitals of the contract itself. It says: “ Whereas, the party of the second part has been connected with this company since 1858 (about 34 years), and has occupied successfully the positions of accountant, cashier, actuary, vice-president and president, and has been largely instrumental in building up this company to its present high position and financial strength. And, whereas, he has resigned the office of president of this company to take effect the 10th day of February, 1892. And, whereas, it is deemed desirable, in the interests of this company, that the company should retain the benefit of his knowledge, skill and experience. Now, it is hereby mutually covenanted and agreed as follows: ” _ That is, that, in consideration of the premises — of the fact of his building up the company to its present high position and financial strength — the fact that he had lost his salary as president by his resignation, and the other fact that it was deemed desirable, in the interests of the company, that the company should retain the benefit of his knowledge, skill and experience. And he obligated. himself to serve the company in an advisory capacity so far as strength and health permitted, and not to enter the employment of another life insurance company. This report was acted upon favorably when presented to the board of trustees at their meeting, so far as it related to the contract with Mr. Beers, except that they were of the opinion that a pension of $25,000 was not sufficient for Mr. Beers’ future compensation, and its amount was raised to $37,500, one-half of his salary as president. As to this increase the members of the special committee were recorded as voting in the negative.

It seems to us apparent from this state of facts that the true consideration for the payment of this large annuity was that this board of trustees desired to give the plaintiff some recognition out of the pockets of the policyholders of the past services which they seemed to think had been so valuable to the company and inadequately compensated. The idea of past services is the one which permeates the resolutions and the agreement. It is studiously referred to, apparently to fortify the action of the trustees, because they seemed to realize that the payment of such an enormous salary in order that a man should sit with his arms folded and render no services whatever to the company could not otherwise be justified. That services to the company were not contemplated is apparent from the very nature of the agreement, because it is for life, and is not even dependent upon the ability to render any service to the company, because the obligation to serve is only “ so far as strength and health might permit.” And as it seems to be conceded that the corporation would have no right to make any such agreement founded upon past services, the claim of the plaintiff would necessarily fall because of that infirmity in his contract.

There is another ground which seems to be fatal to the obligatory force of the contract in question, and that is that this board of trustees has no power to make a perpetual contract. If they can employ a man to do nothing in a so-called -advisory capacity as long as he shall live, there is no reason why they could not employ every clerk, accountant, messenger boy or other employee for the same length of time, and thus take the management of the business of the corporation out of the hands of the owners of its assets, viz., the policyholders, with whom the policy of the law supposes the ultimate authority lies. Tlie policy of the law under which this corporation is organized is, that every four years its board of trustees may be wholly changed; that five of its members may be compelled to retire at the end of any one year at the wish of the policyholders ; and that by this means the policyholders shall have the ultimate control of the manner in which the business of the company shall be conducted, and determine who shall be the agents, employees and servants of the corporation. Of this right the board of trustees cannot deprive the policyholders by making contracts which will extend for long periods of years beyond their terms of office. This principle was recognized in reference to the relations between railroad •corporations when it became necessary for the legislature to expressly authorize the leasing for a long term of years of one corporation to another. And even notwithstanding this legislation it was until very recently the settled policy of this State that such power could not be authorized by the board of directors of a railroad company without the assent of the stockholders.

But our court of last resort has recently established the doctrine that the board of directors of a railroad company, elected by the stockholders, to manage its affairs for a year, may, without the consent of the stockholders, lease all the property confided to their management for a year, for an unlimited period and thus forever deprive the stockholders of any further control over their property.

The right to exercise this extraordinary power was held to exist in this corporation, solely because of the legislation which permitted •one railroad corporation to lease its property to another.

The principle of continued control over the officers and employees of this corporation is recognized in its charter and by-laws. By this charter it is provided that a president and vice-president shall be elected annually, and by the by-laws it is provided that a president, vice-president and actuary shall be elected at the next regular monthly meeting of the board after the annual election for trustees. Its resident physicians were to be appointed by the board, to hold their office during the pleasure of the board. The supervisory and agency committee had the appointment and removal of agents and the fixing of their compensation; and the president and vice-president had the power to appoint, remove and fix the compensation of each and every person, except agents, employed by the company, and were required every three months to make a written report to the supervisory committee in respect to all changes made relating thereto.

Under this condition of affairs it is evidently not within the powers which were committed to the board of trustees by the policyholders, that they should be able to fasten upon such corporation a subordinate so long as he might live.

From this construction of the charter and by-laws, in connection with the provision contained in such by-laws that no alteration of the same might be made without first being proposed at a stated meeting, and that such alterations could be considered only at a subsequent stated meeting, and adopted only by the concurrence of a majority of the whole board, it would seem that by their own act, the board of trustees were precluded from making any such contract. The by-laws are explicit as to by whom all agents and servants shall be employed. The supervisory and agency committee, as already stated, had the power to ajopoint and remove agents and fix their compensaion. And the president and vice-president had the power to appoint every other employee, but were required every three months to make a written report to the supervisory committee in relation to all changes made relating thereto.

It may be said that the board of trustees who adopted these by-laws might change the same. But they have expressly provided how these by-laws shall be changed, viz.: That any change should be first pi’oposed at a stated meeting, considered at a subsequent stated meeting, and adopted only by concurrence of a majority of the whole board. If this provision means anything; if these by-laws mean anything; if they have any force and effect for any purposes whatever, the board of trustees could not make any alteration in these by-laws except in the manner therein provided.

We do not think that it will be seriously contended in our day, that the regulations of business, as embodied in by-laws, are only binding so long as a majority of the board of trustees may see fit, notwithstanding the provisions as to the manner in which alterations therein shall be made. Therefore, this action upon the part of the board of trustees in attempting to employ this plaintiff in any capacity was wholly without authority, and absolutely nugatory.

Tlie plaintiff, as president, must be presumed to have known of these restrictions. He had been so long connected with the corporation, and had so long exercised the duties of president, that he cannot be held to have been ignorant of this important function pertaining to his office.

It is further urged against the validity of this contract that the plaintiff, being the president of the defendant and a member of its board of trustees, could not enter into h contract of this description for his own benefit, by virtue of resolutions passed at a time when he was present in the meeting of the board, and presiding over its deliberations. Until a comparatively recent period in the history of jurisprudence in this State, it was considered the law that no director or trustee of a corporation could contract with the corporation without raising the presumption that such contract was fraudulent.

It may be true that Mr. Morawetz, in his Work on Corporations (§ 521), after stating that it had been held in some cases that a directoi? cannot enter into a valid contract with the corporation of which he is an agent, although the corporation is represented in the transaction by a majority of the board of trustees, says : But the weight of authority and of reason appears to indicate that such a contract would be valid.”

It is unfortunately true that, at the present time, the weight of authority is that such a contract may be valid ; but the weight of reason is absolutely the other way. And a very brief consideration of the relation of a director or trustee of a corporation to it, seems to show that public policy ought to be so shaped .that such opportunities for flagrant frauds should not be allowed. The director or trustee is appointed by the owners of the property of the corporation for the purpose of the management of the business of the corporation ; and their term is always restricted ordinarily to one year, but in some cases, in order that there may not be an abrupt change in the whole policy of the corporation, only certain portions of the board are elected at each annual election. These directors or trustees are appointed by the owners of the property, because of their confidence in their ability, integrity and business capacity, and because they believe that they will devote this ability, integrity and business capacity to the furtherance of the interests of the corporation. The director or trustee, wlien he takes upon himself the duties of 'the office to which he has been elected by the owners of the property of the corporation, is by them understood to obligate himself to exercise, in the management of the-business of the corporation, all the ability, integrity and business capacity of which he is possessed; and that upon each and every occasion he shall protect the rights and interests of his constituents. Now, it is apparent that the owners of the property of the corporation, having conferred upon a person the office of director or trustee for the purposes above mentioned, and the director cr trustee having undertaken the obligations of such office, it is a flagrant dereliction of duty for him to deprive the corporation of the benefit of those counsels which he has promised to give the corporation in every contingency by proposing to enter into a contract for his own benefit, If one director can enter into a contract for his own benefit,, then every director can, and instead of the interests of the corporation being studied by the board of trustees, the individual or private interests of each trustee or director would become the main objects of their efforts and enterprise.

The director has no right to deprive the corporation of the benefit of his counsels by his own act, because Ins advice upon any question of administration, if conscientiously given, although he may originally have stood alone, may change the minds of all his brother directors. And, therefore, it ought to be no answer to the objection to a director entering into a contract with the corporation, that his vote was not necessary to the carrying out of the contract, and that he took no part in the meeting of his associates which authorized the same.

But, unfortunately, the rule in this State has been relaxed and in the cases of Van Cott v. Van Brunt (82 N. Y., 535) and Gamble v. Queens County Water Company (123 id., 91) it is held that a director is at liberty to make a contract with his corporation so long as he does not, while acting in his own interest on the one side, also-act on the other in the capacity of trustee, so that his interest and his duty might conflict. It is difficult to see how his interest- and duty do not conflict when, because of his interest, he does not perform his duty as director or trustee. But we have to take the law in this respect as we find it. And how does that apply to the case at bar % The plaintiff, at the time these very resolutions were passed, at the time this contract was authorized, did not feel sufficiently confident as to the action of his board of trustees to allow some other officer to preside over their deliberations at these meetings, wherein his interests were so deeply involved ; but he felt it necessary, in order that this scheme should be carried out, that he should control the course of deliberation; that lie should put the question as to the execution of this contract with himself ; that he should superintend the vote upon such resolution, and that he should announce the result. lie, therefore, took this part at least in the conduct of these meetings and saw to it, that his own interests were duly advanced at the expense of the corporation whose welfare he was supposed to represent.

This question might have been a different one had he deemed himself sufficiently strong to have absented himself from these meetings. But instead of that he seems to have thought it necessary to keep his board of trustees under his own eye,, in order that they should do his behests in respect to this contract, and at each meeting he presides throughout, conducts the deliberations as to this pension of $37,500 given to him, and now claims that such a contract is a valid contract because he did not vote. If a contract of this kind is to be recognized and upheld m a court of justice, then the courts may as well take the remaining step, and say that unless a board of trustees can be proven to have acted from a corrupt and fraudulent motive in the malting of a contract with one of its own number, such contract shall be upheld even though the contracting trustee takes part in the deliberations of the board, which results in the authorization of the contract, and as a trustee urges and votes for its adoption.

It is further urged, as an objection to this contract, that the plaintiff agreed that he would not become an officer of or enter into the employment of any other life insurance company or association, or become connected in any form with any other company, or enter into or become engaged in any business, directly or indirectly, which should affect or be. in competition with the defendant for the remainder of his life, and that this is in restraint of trade and void as against public policy, unless it is shown to be reasonable and necessary, and the ease failing to show that’the plaintiff cannot recover.

Ia the disposition of this case it has not been considered necessary to discuss this proposition. It has seemed to us advisable to place •our decision upon the other points which are so strongly presented by the facts admitted in the case at bar, and they seeming to indicate that no recovery upon the part of the plaintiff can be liad upon the contract in question, judgment should be ordered for the defendant, with costs.

O’Brien and Lawrence, JJ., concurred.

Judgment ordered for the defendant, with costs.


author: Patterson, J.: O’BbieN, J\:

text:
    THE PEOPLE OF THE STATE OF NEW YORK ex rel. JOHN W. GOODWIN, Relator, v JOHN R. VOORHIS and Others, Commissioners, Composing the Board of Police of the Police Department of the City of New York, Respondents.

      Police department of New York city — reinstatement of a roundsman — right to a trial —a resignation obtained by force and fraud —minutes of a former trial in a court — their effect — statute of limitations.

    In 1889 Jolm R. Goodwin, a roundsman, resigned from the police force of the city of New York, and his resignation was accepted by the police commissioners. Subsequently he applied for a mandamus to compel his reinstatement upon the ground that his resignation was procured by coercion and fraud of his sergeant and captain, and, further, that his resignation had been fraudulently altered by them. A trial of the issue presented by these proceedings, to which the commissioners were parties, took place in the Supreme Court, and the issue as to coercion and fraud was found in favor of Goodwin, who then applied to the police commissioners for reinstatement upon the ground that the court had decided that a resignation procured in such a manner, oi one which had been altered, was a nullity.
    Upon his application Goodwin set forth the facts by affidavit and annexed thereto a copy of the testimony and findings of the jury on the trial of the issues as to fraud, coercion and alteration. Goodwin’s application having been denied peremptorily, without an opportunity having been afforded him to be heard and to give further evidence, he sued out a writ of certiorari to review the action of the commissioners.
    Held, that the action of the commissioners was improper, and that Goodwin was entitled to a rehearing of the case by the commissioners.

      That the commissioners, however, were not hound to accept the testimony and findings of the jury as final, and that they might demand the production of witnesses.
    That the statute of limitations, providing that a proceeding to restore an officer to the police force must be brought within two years, and that any writ to review such a determination must be granted and served within four calendar months after the determination, were not a bar to this proceeding. (Per O’Brien, J.) That the original action of the police commissioners, in 1889, had been taken in ignorance of the facts and was based upon a mere nullity, and that the proceeding by certiorari, taken in February, 1892, to review their subsequent determination, made in January, 1892, was in time. (Per O’Brien, J.)
    Certiorari to review the proceedings and decision of John R. Yoorhis, John. McOlave, James J. Martin and Charles F. McLean, commissioners, composing the board of police of the police department of the city of New York, denying the application of John W. Goodwin that they rescind a resolution theretofore made accepting his alleged resignation of his office of roundsman in said ■department.

      Louis J. Grant, for the relator.

      E. H. Hawke, Jr., and W. H. Glarke, for the respondents.
   Patterson, J.:

The subject-matter of this application has been several times presented for the consideration of this court, and we have had occasion to state that the facts being as claimed by the relator, he has suffered a wrong calling loudly for redress. Unfortunate mistakes in practice have prevented the enforcement of his rights up to the present time, but we are satisfied they may be secured by following the ■course now directed to be pursued. A brief statement of proceedings anterior to this, and of what has been determined or held in them, will not be out of place. On the 13th day of August, 1889, the relator was a member of the police force of the city of New York. On that day he signed a paper purporting to be a resignation of his position, and which, on being presented to the board of police commissioners, was accepted by that body. The paper was regular in form, recited that it was the voluntary act of the relator, and was signed of his own free will and accord, and that it was not caused by any threat of punishment or act of coercion from his superior officers, or any other person connected with the police department. It further appears in the record that, subsequent to the acceptance of the resignation, the relator refused to give up his shield or badge of office, and demanded reinstatement as a member of the force, alleging that the resignation had been procured by coercion and fraud practiced upon him by the sergeant and captain of the precinct to which he was attached. The commissioners declined to restore him to his position, whereupon a writ of certiorari was obtained from this court, upon the hearing on the return of which it was held that the remedy invoked was inapjilieable, because the commissioners had merely acted within their authority and jurisdiction to accept a resignation regular on its face, one appearing to be the voluntary and valid act of the relator; and as no proceeding or judgment of any kind had been taken or pronounced against him, there was nothing to be reviewed by certiorari. But in the opinion of the General Term (by Beady, J.), it is said that ■ “ if the charge can be made against any member of the force, whoever it may be, whether captain or sergeant, that the relator was forced to resign, that would doubtless furnish a good and sufficient reason why he should be reinstated on a proper application to the respondents for that purpose, and which, if denied, might be the subject of review in a proper proceeding,” etc. After the dismissal of the writ referred to, an alternative mandamios to reinstate the relator was applied for, and it was then further claimed that the resignation had been fraudulently altered at the police station by the sergeant or captain. Issues of fact were framed and tried by a jury, and it was found by the verdict that the resignation was obtained by force, fraud and coercion of the sergeant and captain, but without any participation therein of the commissioners. On the findings of the jury a peremptory order was issued at Special Term for the reinstatement of the relator ; but, on appeal, it was reversed on the specific ground that the rescisión of the resolution accepting the resignation was a prerequisite to restoration of the relator .to the force, and that it did not appear that the respondents had refused to entertain the relator’s application, and hence they could not be compelled to rescind their prior action without the presentation to them of facts to justify it, or to require it be done. The question was not properly presented, and it was not for the court to compel a reinstatement arbitrarily. Bat, again, the court indicated what, in its judgment, was the proper course to be pursued by the relator in the premises. Mr. Justice Ingraham, in the opinion of the court, says : “ When the respondent had determined to disaffirm the resignation he could have presented the ease to the boai’d with a statement of the circumstances which induced him to sign the resignation and a request that they would reconsider their official act in accepting his resignation. It would then have been their duty to ascertain whether the respondent had truly stated the facts, and to determine whether for not their action should be reconsidered and the respondent reinstated.” And in the opinion of the presiding justice on the same appeal, it is said: “ If the. so-called resignation was altered and added to, as is claimed by the relator, it was no resignation at all, as such alterations were fraudulent and did alter the character of that jiaper, and, in fact, destroyed whatever validity it might have possessed.”

We thus have an authoritative expression of opinion on two subjects connected with this matter; first, that if the facts as claimed by the relator are established, the resignation is not valid, and may be avoided if it is not altogether void; and, secondly, that the proper method of obtaining redress was to apply to the board of police commissioners to reconsider its action and to reinstate the petitioner. That course has now been pursued. On the 1st day of December, 1891, the relator presented a written request and demand to the respondents that they reconsider the acceptance of the resignation. The general grounds of the request are stated in that writing and the details are set forth in an affidavit served therewith, to which was annexed a copy of the stenograp'lier’s minutes of testimony and findings of the jury on the trial of the issues in the mandamus proceedings.

On the 29th day of January, 1892, tne police commissioners acted upon the request and demand of the relator of December 1, 1891, and refused to comply with it. That application was made under the express declaration of this court that it was the proper course to pursue, and upon its denial a writ of certiorari was granted to review the decision of the commissioners, and thus the whole subject is brought again before us.

The return of the commissioners as first made was defective and insufficient. As finally made, it consists of a sworn statement of their action, and of the reasons governing it, and of documents, including the stenographer’s minutes of the trial of the mandamus issues, which had been furnished them by the relator. Those minutes were intended to be evidence upon which the commissioners .should act. They were sent originally to the respondents, to substantiate, in detail, what was generally set forth in the affidavit of the relator, and showed not only the findings of the jury in the mandamus proceeding, but also all the testimony taken by both parties on. the trial of thetissues therein. The commissioners were parties to that proceeding, made a return to the writ, were represented by counsel and contested it. But that does not make such minutes absolute evidence if the commissioners required further, or, as it is •called, common-law proof. If we could hold that these minutes, and the evidence thus furnished to the commissioners was such as they were obliged to receive, we might be able to dispose of the case, at once, on the merits. But we do not feel justified in holding that these documents thus placed before the commissioners constituted such technical legal evidence as required them to reinstate the relator upon that evidence alone. We think the respondents were not bound to accept the affidavits of the relator, nor the evidence of the witnesses taken in the mandamus proceedings, as absolute and conclusive proof of the facts upon which the relator demanded reinstatement ; but, at the same time, the respondents could not arbitrarily reject the relator’s application, made as stated, in pursuance of a direct decision of this court upon that point, and without allowing him that opportunity to be heard, which was the very ground and essence of the decision made in the former proceeding. It is not a sufficient excuse for the respondents to say that they never refused to hear the relator. He did all that he possibly could have done, or that, in reason, could have been required of him. He demanded the right to be heard, and submitted papers which might have been sufficient in this matter to satisfy the commissioners morally, and he insisted upon an opportunity of presenting his whole case for that re-examination or re-liearing, to which this court held he was entitled. The respondents never afforded him that opportunity to which he was so entitled. If, upon such opportunity being afforded, the respondents had demanded the production of his witnesses, we think they would have had a right to inquire into the whole matter, de novo ; but without such an opportunity (as stated before), they could not make such a summary disposition of this matter as that to-which we have adverted, and which was palpably wrong. The conclusion we reach is that the proceeding of the respondents should be reversed and the matter sent back to them for further action, with instructions to notify the relator of the time and place at which his application will be heard, and an opportunity offered him to present his testimony. No costs of this application to either party. „

VaN Bbuot, P. J., concurred.

O’BbieN, J\:

I concur. The only serious question is that raised as to the statute of limitations. Section 272 of the New York city consolidation act provides that an action or proceeding at law or in equity “ to restore or reinstate to the police force ox department any member or officer thereof * * * shall be commenced within two years after the cause of action shall have accrued.”

Section 2125 of the Code of Civil Procedure requires that a writ to review a determination must be granted and served within four-calendar months after the determination.

In People ex rel. McNeary v. Police Commissioners (64 Hun, 205) it was held, construing section 2125 of the Code, that where it appeared on the face of the petition that the statutory time had expired, the court needed no other proof, and the board of police was not required to make a return and set up the failure to bring the proceedings within the time limited, but the court should dismiss such application, having no jurisdiction to issue the writ.

As the original action of the commissioners was taken in August, 18S9, upon accepting what appeared to be a resignation of the relator, if the period of limitation began to run from August, 1889, then it is clear, under either and both of the sections referred to, that this proceeding taken in February, 1892, was too late.

It must be remembered, however, -that the proceeding taken in February, 1892, was to review the determination of the board of police commissioners made in January, 1892. The original action of the commissioners in 1889 was taken in ignorance of the facts, and was based upon what, in view of the subsequent lighf thrown about the circumstances relating to the resignation, must be held to liave been a nullity In the former proceedings before this court the denial of relief to relator was, in effect, based on the fact that there had been no final determination by the board.

Although such facts were before them the commissioners did not act until January, 1892, and, then, having finally determined to deny relator’s application the statute of limitations commenced to run, and this proceeding in February was within the statutory period. I do not, therefore, regard the point as well taken, that by reason of the statute of limitations having run, this court is without jurisdiction to afford relator such relief as he is entitled to on the merits.

Proceedings of commissioners reversed and the, matter sent back to them for further action, with instructions to notify the relator of the time and place at which his application will be heard, and an opportunity offered him to present his testimony.


author: O’BeibN, J.:

text:
    LOUIS ETTLINGER, Appellant, v. PERSIAN RUG AND CARPET COMPANY, PAUL M. KRAUSE and THEODORE SCHUMACHER, Respondents.

      Jurisdiction — an insane trustee for bondholders — right of a "bondholder to foreclose the mortgage — receiver — notice — a/ppea/rance — interlocutory judgment — reopening a.case.

    A domestic corporation, tlie Persian Rug and Carpet Company, executed a chattel mortgage upon its property to Paul M. Krause, as trustee for Louis Ettlinger and Theodore Schumacher, the holders of certain bonds. The interest upon the bonds being unpaid Louis Ettlinger began an action to foreclose the mortgage, the complaint in which alleged that Paul M. Krause was confined in an insane asylum in Germany, that the corporation was insolvent, and that the mortgaged chattels were likely, at great expense, to be removed from demised premises by the landlord because of the non-payment of rent by the company, and demanded thqyippointment of a receiver.

      Held, that the question whether the court had jurisdiction of an action, brought under such circumstances by a bondholder instead of by the trustee, was one of law to be determined upon the complaint alone.
    That as it appeared that present loss of property was apprehended, and as a demand upon the trustee to begin an action to foreclose would, because of his mental incompetency, have been futile, an action could be maintained by Ettlinger as a bondholder.

      Upon an application for the appointment of a receiver notice was given to the corporation and to the attorney-general, but none was given to the trustee Krause.

      Held, that as the court had acquired jurisdiction of the corporation by service upon it, and as it had appeared by attorney, the appointment was regular.
    That section 714 of the Code of Civil Procedure did not apply to a case where a corporation had appeared.
    It appeared that the receiver had sold the property of the corporation under an order of the court, much of it to Ettlinger ata very small price; that a judgment-creditor had levied upon the property sold before this sale, and the court had by order preserved his lien upon the proceeds. It further appeared that the court below deemed the action for the foreclosure of the mortgage collusive, and an attempt by Ettlinger to gain possession of all the assets to the exclusion of Theodore Schumacher.
    Upon the trial the complaint was dismissed.

      Held, that such dismissal was improper.
    That, conceding that the action was collusive, the proper course would have been to direct an interlocutory reference to ascertain the value of the property of which Ettlinger had by the sale obtained possession; and when that was ascertained to direct that property be placed in the receiver’s hand equal to the amount which Ettlinger had appropriated,
    That while the status quo could not be restored, the rights of all parties could in this manner be best adjusted.
    That a refusal to reopen a case to admit further testimony rests in the discretion of the court, to which the application is made, and the appellate court will not interfere unless the refusal is unjustifiable.
    Appeal by tbe plaintiff Louis Ettlinger from a judgment of tbe Supreme Court, entered in tbe office of the clerk of tbe city and county of New York on tbe 20th day of April, 1892, dismissing tbe complaint upon the merits after a trial at tbe New York Circuit before tbe court; and also from an order of said court, dated tbe 15th day of March, 1892, and entered in said clerk’s office, denying a motion by tbe plaintiff to introduce further evidence.
    Tbe action was brought for tbe foreclosure of a chattel mortgage by one of tbe holders of bonds secured thereby. By tbe ‘decision of the court before which the action was tried it appeared that a receiver of tbe mortgaged chattels appointed in tbe action bad sold them; and that tbe plaintiff Ettlinger bad purchased certain of tbe property at tbe receiver’s sale, including certain machinery, at what was claimed to be an insufficient price.

      Thomas P. ~Wick.es, for tbe appellant.

      Francis JB. (Jhedsey, for tbe respondents.
   O’BeibN, J.:

This action was brought by the plaintiff to foreclose a chattel mortgage executed by the Persian Rug and Carpet Company, a domestic corporation, to defendant Krause, as trustee for the holders of a series of twenty-five $1,000 bonds, of which there were issued twenty-one, fourteen of which were held by the plaintiff and seven by the defendant Schumacher. There is no dispute but that at the time of the commencement of the action the interest upon the bonds was due and unpaid, and a cause of action for the foreclosure of the mortgage existed.

The questions most seriously litigated upon the trial, and determined by the judgment appealed from, were that the plaintiff had no status to maintain the action; that the court was without jurisdiction to appoint a receiver or direct the salo of the property; that the sale under the order was improper, as being one step in a collusive action by plaintiff to obtain possession of the corporate property.

If the view taken by the learned trial judge that the court was without jurisdiction to entertain the action by reason of the plaintiff not having a legal status to bring such suit be correct, then we agree with him that the orders made upon the assumption of such jurisdiction would be void. It must be conceded that the complaint alleges every allegation essential to a complete cause of action to foreclose a mortgage, and the legal status of the plaintiff to maintain the action is alone involved in determining the question of the court’s jurisdiction. The complaint, in addition to the cause of action in favor of some one, alleges the insolvency of the defendant company, the necessity for immediate proceedings to foreclose, by reason of the character of the assets, consisting principally of heavy machinery which could not be removed without great expense, and the imminent danger of its being removed from the premises by summary proceedings because of inability to pay rent, and the damage and injury that would result to the bondholders if the machinery and other property were removed from the premises before a sale thereof could be had. The complaint also alleges that the trustee, Krause, did, while in Germany, become violently and incurably insane, and that he is now confined in a lunatic asylum at Frankfort, in the Empire of Germany, and cannot act under said mortgage as trustee to preserve and sell said property for the benefit of said bondholders.

The question thus presented at the outset is as to whether the court had jurisdiction to entertain this action. And in thus considering it we are to take, not the proof given upon the trial — upon which it was proper, according to the weight given thereto, to either grant or refuse the relief — but the complaint itself. In other words, we think that this question should be disposed of as a question of law, just as though it was raised upon a demurrer to the complaint.

We recognize the well-settled doctrine that a trustee for bondholders, holding the legal title for the benefit of all concerned, should sue; and in cases where it is to appear that he is cornpetent and willing to institute an action, this right cannot be assumed by a cestui que trust or beneficiary or other person. And it is only where it is made to appear that the trustee is-unwilling, or by reason of his relations to the grievance of cestui que trust or beneficiary he should not be permitted to maintain the action, that it can be maintained by such eestui que trust or beneficiary. It will not be seriously disputed that, upon a proper case showing unwillingness on the part of a trustee to bring a proper action, such may be maintained by a beneficiary or cestui que trust. Most of the cases to which we have been referred by the respondent, wherein a bill or complaint by a beneficiary has been dismissed, will show that it is because of failure to prove a proper ease, and not by reason of lack of jurisdiction that the bill or complaint has been dismissed; that, whether the beneficiary asserts his right in his own name or through the trustee, is more a matter of form than of substantial right 5 and that the beneficiary will be allowed to sue whenever the wrongs complained of must otherwise go without redress. The position of a trustee under a mortgage given to secure bondholders is similar in principle to that of a corporation with respect to rights inuring to stockholders, and for the redress of which an action would lie in favor of the corporation. With regard to these cases we have the rule clearly laid down that, although an action to recover such losses should, in general, be brought in the name of the corporation; where it refuses, or where the wrongs complained of would otherwise go without redress, the stockholders, who are the real parties in interest, will be permitted to sue in their own names, making the corporation a defendant. (Brincherhoff v. Bostwick, 88 N. Y., 52; Hawes v. Oakland, 104 U. S., 450.)

¥e think that here the facts alleged in the complaint show that it would have been futile, if not physically impossible, to have made a demand upon the trustee in time to prevent what was feared, namely, injury to the property of the corporation by its removal; that such allegations srqpplied a reason for the failure of the trustee to begin the suit, and satisfied the requirement that before the right of the trustee to maintain the action in the first instance is taken away, some statement must be furnished upon which the court can see that the injury sought to be remedied, or the complaint made, would otherwise go unredressed. In this action we do not think that any distinction can be made between an unwilling and an incompetent trustee, because, as illustrated in this very case, while it is true that the trustee’s misfortune, and not his misconduct, is the reason why he could not respond to bring the action, this would not alter the fact that, by reason of his not doing so, plaintiff’s substantial rights were in jeopardy; and it might well be that delay might result, in a given case, in a substantial denying of justice to all persons interested in the fund.

It will not do, in considering this question, to take account here, that upon the proof the learned trial judge reached the conclusion that the action itself was collusive. We must take the complaint as it stood at the commencement of this action, and its allegations, for the purpose of determining whether a cause of action in favor of a beneficiary was stated, which, in the absence of a demand on the trustee, the failure of which was explained, could be maintained. The court could not assume on the complaint, nor could it see, that the action was collusive. And if we indulge in an opposite assumption to that found by proof upon the trial, viz., that the. suit itself was, in good faith, intended to protect the interests of the plaintiff and the defendant, and all other persons interested in the company, we can better reach a conclusion as to whether the court was wanting in jurisdiction to entertain the action dr not. "Many cases could be referred to wherein, either by the refusal of the trustee to begin the action, or for reasons stated showing the impropriety of Ms bringing tlie action, it lias been maintained in tlie name of a beneficiary or cestui que trust; and we have been referred to no case wliicli goes to tlie length of holding that where proper reasons are assigned, showing that, in consequence of removal from the jurisdiction or incompency through mental trouble of the trustee, the beneficiary or cestui que trust could not maintain the action where such action was necessary to protect the rights of the cestui que trust and others interested in the trust property.

The conclusion we have reached on this point leads us to the view that the court had jurisdiction of the action, and upon a proper showing could have granted the relief prayed for at the suit of the plaintiff. ¥e think, also, in an action wherein the court has jurisdiction, that upon notice to the corporation and attorney-general, under circumstances here appearing, the court was not without jurisdiction to appoint a receiver.

Upon such application it was shown that the corporation was insolvent and unable to pay its current expenses; that the landlord had recovered a judgment against it for rent due August first, and levied execution upon the property of the company, and that the company was unable to pay the rent which would fall due on the first of the month following, and anticipated being evicted from the premises in which it was carrying on business. This situation of affairs would certainly justify the appointment of a receiver in a proper action; and the objection that notice thereof was not served upon the defendant trustee, where the difficulty or impossibility of giving such notice was fully shown, cannot affect the validity of the order appointing the receiver.

It is insisted that the authority of the court to appoint a receiver without giving such notice is limited by section Ilf of the Code, which, in effect, provides that a temporary receiver shall only be appointed without notice in a ease where an order of publication for the purpose of acquiring jurisdiction over the defendant has been published. We think, however, that this section has no application to this ease, for the reason that the court, by virtue of service upon and appearance by the corporation through its attorneys, acquired jurisdiction over the defendant corporation, and upon a proper showing, in appointing a receiver it but exercised the power which has been regarded as inherent in the Supreme Court.

Though not entirely in point, the case of the Attorney-General v. Guardian Mutual Life Insurance Company (77 N. Y., 272) is instructive as to the power of the court in respect to the appointment of receivers. There the order to show cause why a receiver should not be appointed was served neither on the president nor other officer of the company, but on the return, the company appeared by attorneys, who admitted service of the order to show cause. The learned judge writing the opinion in that case says: “ The Supreme Court acquired jurisdiction of the proceeding for the appointment of a receiver of the Guardian Life Insurance Company by the presentation of the petition of the attorney-general, setting forth that the superintendent of the insurance department had communicated to him that he had made an examination of the affairs of the company, and that it appeared to the superintendent from such examination that the assets of the company were insufficient to reinsure its outstanding risks. The court, having acquired jurisdiction of the subject-matter by the presentation of the petition, acquired jurisdiction of the corporation by its voluntary appearance by its attorneys on the return of the order to show cause, service of which had previously been admitted by them. This service, followed by the appearance of the attorneys on the return of the order, bound the corporation and dispensed with the necessity of actual service of the order on 'the president or other officers of the company. There is no proof that the appearance by the attorney was unauthorized, and the presumption is that they appeared by authority of the corporation. A corporation, like a natural person, may appear voluntarily by attorney, and such appearance gives jurisdiction to the same extent as if there was actual service of process. * * * The court, therefore, had jurisdiction to make the decree dissolving the corporation and appointing a receiver. If the decree was improvidently granted, or if for any reason it should be set aside or modified, relief can be had upon application, by any party interested, to the court by which it was made, but the regularity of the appointment of the receiver cannot be questioned by any other tribunal.”

The receiver here, upon his appointment, showed in his application to the court, thereafter immediately made for leave to sell the property, that the situation described in the motion papers leading up to bis appointment was correct, and tbat there was reason to believe that it would be for the best interests of all parties that the property should be sold.

"With regard to the power of the court to appoint a receiver and direct a sale of the property by the, receiver pendente lite, the recent cases in this court, and in the Court of Appeals, growing out of the failure of Levy Bros., so fully discuss these questions that a reference thereto alone is sufficient. And, amongst the others, see National Park Bank v. Goddard (62 Hun, 31).

The receiver, under the order to sell, disposed of the property, some to third parties and the bulk thereof to the plaintiff, and the parties who purchased on such sale having taken possession of the property so purchased by them, which has been removed, and some ■of which may no longer be in existence, it would be impossible to have it restored to the corporation in its original condition.

This order of sale was subsequently modified, upon the application of one John Morgan, a judgment-creditor, who had obtained a judgment and made a levy, by directing that the property should be sold “subject to any lien upon the proceeds of such sale that may be established by the said Morgan.” As the result of such sale a fund has been obtained by the receiver, of which, in view of the judgment appealed from, it is difficult to see what disposition is to "be made.

W e have thus, at some length, referred to the situation for the xeason that, while we are not disposed to interfere with the conclusion reached by the learned trial judge in refusing relief to the plaintiff, we think that the court, having the power to determine -the rights of the parties, should have proceeded in such a way as to do complete justice.

"While, therefore, our opinion is, in this case, that the court had jurisdiction of the action, we think the learned trial judge was right in refusing to give any relief to the plaintiff upon his conclusion that the suit was, upon ail the facts adduced at the trial, in a legal sense, collusive, and * * * subversive, as conducted, of Mr. Schumacher’s rights,” and “ that the plaintiff and all concerned ■should be required to relinquish what they have obtained through these proceedings, and in some form to restore the status quo.”

To accomplish this, however, we think the complaint should not liave been dismissed, but tbat, to protect tbe rights of all parties,, namely, the rights of persons who, other than the plaintiff, purchased upon the sale, and the judgment-creditor Morgan, who released his levy upon the property on condition that he should be allowed to have his lien attach to the proceeds of the sale, and, above all, to give to the defendant Schumacher relief to which, in view of the conclusions reached by the learned trial judge, we think lie was entitled, it would have been the proper course to have directed an interlocutory reference, to the end, first, that,an account might be taken of the value of the property which the plaintiff had thus succeeded in getting into his possession; and, that ascertained, that the property be placed in the receiver’s hands for the purpose of securing a fund equal to the value of the assets thus appropriated by the plaintiff for distribution among those entitled thereto.

Unless some such interlocutory reference be had in the action, we fail to see how the court is to restore the status quo or to protect its-own receiver, whose appointment was not a void one, and against whose disinterestedness and good faith throughout no suggestion is-made. As the case now stands, he has a fund in his hands resulting from a sale of the property, which has not been, nor do we see, with the judgment standing in its present form, how it can be, distributed and disposed of. We think that the result of the interlocutory judgment ordering a reference such as suggested will be to have the questions as to the value of the property determined, and that, upon the coming in of such referee’s report, the question of the amount, which should be paid by the plaintiff to the receiver can be ascertained, and thus the rights of all the parties can be fixed and determined in this action. Should the judgment stand, the questions which could be thus settled will be the unquestioned source of numerous suits and motions which, by following the suggestion indicated, can be settled and adjusted in this one action.

"We are of opinion, therefore, that the judgment should be modified in the manner pointed out, by an interlocutory judgment directing a reference for the disjiosition of the questions indicated, with costs to abide the event.

In regard to the appeal taken from the order of the learned trial judge, refusing to reopen the case for further testimony, but little need be said. The granting or refusing of such a motion was one resting in the discretion of the court, and we do not find that there was an unjustifiable refusal to exercise it in plaintiff’s favor.

The order appealed from should, therefore, be affirmed, with costs and disbursements.

YaN BbuNt, P. J., and LaweeNoe, J., concurred.

Judgment modified as directed in opinion, and, as modified, affirmed, with costs to abide event; order affirmed, with costs and disbursements.