text:
    Frederick H. Levey, Respondent, v. Victor S. Allien, Appellant.

      Note given in renewal of an usurious note — when enforcible — direction of a judgment by the court, when jproper.

      A note given solely in renewal of another note, tainted with usury and void, is equally tainted and alike condemned because it operates merely as a renewal or continuance of the usurious contract, but if the usurious contract be mutually abandoned by the parties and the securities canceled or destroyed so that they may not become the foundation of an action, and the borrower then makes a contract to pay the amount actually received by him, the last contract will not be tainted by the original usury, and may be enforced.
    To sustain a direction of judgment by a court the facts must be susceptible of only one inference.
    Appeal by the defendant, Victor S. Allien, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the city and county of New York on the 10th day of April, 1893, upon a verdict for the plaintiff directed by the court after a trial at the New York Circuit, and also from an order of the Supreme Court, entered in said clerk’s office on the 12th day of April, 1893, denying the defendant’s motion for a new trial.

      Luke A. loehwoocL, for the apjiellant.

      Q-eorge W. Wingate, for the respondent.
   Parker, J.:

Action on a note. Defense usury.- The appellant discusses the case from the standpoint of a judgment entered on the verdict of a jury, pursuant to a direction by the court after trial.

Respondent assumes that his motion for judgment on the pleadings was granted, and presents an exhaustive argument, for the purpose of convincing the court that the granting of the motion was required by the pleadings. Which position is the correct one may properly be first determined.

Immediately after the impanelling of the jury, the counsel for the plaintiff made a motion for judgment on the pleadings, supporting it with an argument which seems to have met, in some measure, at least, with the approval of the court.

Instead of granting the motion, the court requested counsel to “ make a statement of the facts of the case, and put it in the record.” The record of the subsequent events of the trial are as follows : Counsel agreed upon the following facts :

“ That on'the 3d day of January, 1887, at the city of New York, the defendant made and delivered to the plaintiff his promissory note, in the words and figures following, to wit:

“ ‘ $5,000. New Yos3L,'Jwrma/ry 3, 1887.

“‘ On demand I promise to pay to the order of Frederick H. Levey, five thousand dollars with legal interest, payable quarterly. Value received.

“‘No. A. Due. VICTOR S. ALLIEN.’

“ Payable on demand for the sum of $5,000, with interest. That at the time of the making and delivery of the said note it was agreed by and between the plaintiff and the defendant, in consideration of the sum of $5,000, for which the said note was given, that the said defendant would pay, and that the said plaintiff should receive, in addition to the interest reserved by said note for the loan and forbearance of the said money, and in addition to six per cent per annum, ten per cent of the net profits of the business as commission merchants of the said defendant during the year 1887, and twenty per cent of the net profits of said defendant’s said business during the year 1888. That in pursuance of said agreement the said defendant did, on or about the 20th day of January, 1888, pay to the said plaintiff, and said plaintiff received, the sum of $201.13, being ten per cent of the profits of the business of said defendant for the year 1887, in addition to the interest on the amount of said note at the rate of six per cent per annum.

And that thereafter, and on the 9th day of December, 1891, the said defendant made and delivered to the said plaintiff the note now in suit, solely in renewal and in cancellation of the note first mentioned.

And upon no other consideration. And that no other payments were made by the defendant to the plaintiff than those above stated, except the interest on the original note was paid up to the 7th day of January, 1889. That the original note and the loan were made in pursuance of an oral bargain to the same effect, before the completion of the transaction.

“ Plaintiff’s Counsel. — I will make the admission; we will save time by it. I will admit that the note of 1887 and the agreement to pay the commission was made in pursuance of a previous oral agreement between the parties.

“ Defendant’s Counsel. — Only I don’t want in the statement of the case, to waive the agreement to pay the ten per cent and twenty per cent profits: The note first offered was given in pursuance of an

•oral bargain for a loan upon the terms thus specified and performed. I believe that presents the case. Of course, we have liberty to take in the original note itself in case it becomes necessary. The amount of the claim is $5,000 and $400 interest — $5,400.

Plaintiff’s Counsel. — I now make a motion to direct a verdict for the plaintiff.

Defendant’s Counsel. — I object to that, and ask to have the case submitted to the jury on the question whether or not the note in suit was usurious. [Motion denied. Defendant excepts.]

Defendant’s Counsel. — I also ask, before your honor passes upon the other motion, that your honor direct a verdict for the defendant. [Motion to direct a verdict for the defendant denied. Defendant excepts.]

“ The Court. — The motion to direct a verdict for the plaintiff is granted. [Defendant excepts. By direction of the court the jury found a verdict for the plaintiff for the suxn of $5,400.]

“ Defendant’s Counsel. — I suppose for greater certainty I had better make the usual motion for a new trial. [Motion denied. Exception by defendant.] ”

It appears, therefore, that the motion for judgment on the pleadings was not granted, the suggestion of the court to stipulate the facts being at once adopted and carried out by the respective counsel, after, and necessarily upon, which the court was moved by the plaintiff for the direction of a verdict, which was granted.

It is true that the judgment recites the granting of a motion for judgment on the pleadings, but the record of the proceedings, upon which this judgment was founded, and which it should have followed, demonstrates that such was not the case. Therefore, we shall not consider respondent’s position, that the answer does not well plead the defense of usury.

From the stipulated facts it appears that in January, 1887, the defendant made and delivered to the plaintiff his promissory note for $5,000, with interest.

That note, by reason of an agi’eement between the parties that the maker should pay, and the payee receive, for the use of the money a sum in excess of that which the statute permits, was usurious and void.

About three years and one month later defendant made and delivered to the plaintiff the note in suit, for the same amount. And it appears that it was given “ solely in renewal and in cancellation of the note first mentioned.”

It further appears that while a portion of the profits of defendant’s business for the year 1887 was paid to the payee, in addition to the legal rate of interest, the entire amount of money received by him from the date of the first note down to the date of the renewal note did not equal the legal rate of interest on the sum loaned.

The question is whether, under these facts, the court may hold as matter of law that the renewal note is free from the taint of usury. If not, then the direction of a verdict against defendant’s objection, and in defiance of his request to go to the jury, was error.

It is too well settled to call for the citation of authority, that where a note is given solely in renewal of another note, tainted with usury and void, that it is equally tainted and alike condemned by the statute, because it operates merely as a renewal or continuance of the usurious contract. So, were there no other facts in the record than the stipulation that this note was given in renewal and cancellation of the note first mentioned, the defendant would have been entitled to a direction in his favor.

Other facts stipulated, it is said, show that the original contract was abandoned, and the result of the making of the new contract thereafter was to do away with the usury originally agreed upon.

It is well settled that if á usurious contract be mutually abandoned by the parties, and the securities canceled or destroyed, so that they may not become the foundation of an action, and the borrower then makes a contract to pay the amount actually received by him, this last contract will not be tainted by the original usury, and may be enforced. (Sheldon v. Haxtun, 91 N. Y. 124.)

Just what is necessary to be done touching an old and usurious contract in order to place the parties to it in a position where they can feel assured that a contract is free from all usurious taint, which has for its support a promise founded on the consideration of the original corrupt agreement, has not been fully outlined by the courts. But in order to do away with the old agreement both parties must act, and in the absence of a specific declaration of their intention, the circumstances proven must be such as to warrant an inference of fact, that the parties’ intended to do away with the old contract, and to put each other in precisely the same position as if the illegal feature of it never existed. And in order that the court-may direct a verdict it is necessary that the facts -should be susceptible of only one inference.

Certainly it cannot be said that the facts stipulated in this case are of such a character as to require a finding that both parties intended the abandonment of the original contract for the purpose of creating a new one, which should be free from the fault which rendered the original contract void.

The evidence tending to show it consists in the giving of the new note without interest for an amount which, if added to the total payments subsequent to the giving of the first note, would aggregate considerably less than the loan with legal interest added.

Its force in the direction claimed for it, is somewhat impaired by the stipulation of the parties that the note was given solely in renewal of the original note. Considered together, they do not require a finding that both maker and payee intended to do away with the old contract, and create a new one, which should not be in contravention of» the usury statute.

As the conclusion reached necessarily calls for a reversal of the judgment, we refrain from considering whether a question was presented for the jury, as it may well be that the facts will be so changed on the retrial as to render such a discussion fruitless.

The judgment should be reversed and a new trial granted, with costs to appellant to abide the event.

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

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


source: Caselaw Access Project

author: Parker, J.:

license: Public Domain

text:
    Louis Bauer, Appellant, v. Thomas C. Platt, Respondent, Impleaded with Others.

      Equity will entertain am action against the directors of a corporation by a creditor on his own behalf and that of all others — proper pa/rties to such am, action.

    Tbe charter of the American Loan and Trust Company provided that every director thereof should be personally liable for the debts incurred by the corporation during his administration to an amount not to exceed $5,000.
    A creditor of the corporation brought an action in equity against the directors, for his own benefit and that of all other creditors, to the complaint in which two of the directors, the defendants, Platt and Thurston, demurred on the ground that it did not state facts sufficient to constitute a cause of action against them, claiming that a suit in equity would not lie, the charter giving to a creditor an action of debt against the directors, and also on the ground that the corporation was a necessary party defendant and the other creditors were necessary parties plaintiff.

      Held, that the action would lie in equity, as a multiplicity of suits would be thereby prevented, and the rights and liabilities of all the parties interested would be determined in one suit;

      That the corporation was not a necessary party defendant in this stage of the action, nor were the other creditors necessary parties plaintiff.
    Appeal by tlie plaintiff, Louis Bauer, from an interlocutory judgment of tlie Supreme Court in favor of tbe defendant, entered in tlie office of the clerk of tlie city and county of New York on tlie 18tli day of November, 1892, upon the decision of the court rendered after a trial at the New York Special Term, sustaining the demurrer of the defendants Platt and Thurston to the plaintiff’s complaint.

      James Dunne, for the appellant.
    Traey, Boardman dé Platt, for the respondent.
   Parker, J.:

The complaint alleges the organization as a domestic corporation of the American Loan and Trust Company; pleads the charter, which provides that every director shall be personally liable for debts incurred by the corporation during his administration to an amount not exceeding $5,000; ” avers that defendants, and none others, were the duly qualified directors for the year 1890 ; the contracting of the debt by the company to plaintiff during that year; the demand for, and the refusal of, payment; the commencement of actions against the company on such indebtedness; the recovery of five judgments thereon; the issuing of executions against the company and the return thereof wholly unsatisfied; pleads anew the five certificates, which evidence the indebtedness of the company; contains appropriate allegations of presentment and demand and non-payment; asserts that other creditors are about to commence actions similar to this ; that the actual indebtedness contracted by the company during the year 1890, for which defendants are liable, cannot be ascertained without an investigation of the accounts between the company and its directors, and the creditors of the company similarly situated as the plaintiff in this suit, whore all such directors are made parties, and where such other creditors similarly situated can come in and have their interests protected.

The complaint concludes with a pi*ayer for relief in his own behalf, and in behalf of all other creditors similarly situated, who shall come in and join him, appropriate to the facts alleged, and asking, among other things, whether said defendants as directors are liable to pay said debts, or any part thereof; if so, what directors are liable; for what amounts; in what proportions; that the liability of said directors so. ascertained and determined be enforced, and that each of the defendants be restrained from paying to any creditor of the American Loan and Trust Company any sum of money whatever, as a liability under section 11 of the charter of the company, until the determination of the suit.

One of the grounds of demurrer sustained by the trial court is, that the complaint does not state facts sufficient to constitute a cause of action against this defendant.

The point specially relied on to support such ground of demurrer is that a suit in. equity will not lie; that by the 11th section of the charter an action of debt is given to any individual creditor against one who was a director at the time his debt accrued. That such a creditor has a remedy at common law, but can obtain no redress in equity. The provision of the charter is as follows: “ Every director shall be personally liable for debts incurred by the corporation during his administration to an amount not exceeding $5,000.” The charter does not, nor does any other statute, provide a special remedy for the enforcement of the right which it gives the creditors of the corporation against its directors.

The purpose of the provision was not only to insure vigilance on the part of the directors, but to further assure to the creditors of the company payment of tlieir claims.

It has for its object the protection of all creditors, not a portion of them. That result might not be effectuated if each creditor should be compelled to resort to an action at law. The. liability of each director does not exceed $5,000. If, then, each director should suffer judgment to go against him by default, the creditors first suing might recover their entire claims, while others less prompt would not receive anything.

If the directors should find that the amount of their statutory liability would not equal the deficiency of the company to its creditors, some or all of them might arrange for a preference of creditors, by answering, or demurring in some cases, while suffering default in others. By such methods, which even the vigilant prosecutor could not overcome, some creditors might be paid in full, while others would receive little or nothing.

As the statute was intended for the benefit of all creditors, and all of them, as well as some of them, must be presumed to have trusted in part to the protection assured them by its provisions, it is no more than just that each creditor should share ratably in the fund which an enforcement of the liability of the directors will produce.

A favored class of suits in courts of equity are those where, by bringing in all the parties interested in the particular subject-matter, complete justice to all may be had in one suit, thus preventing excessive litigation. (Moak’s Van Santvoord’s Pleadings [3d ed.], 108.)

Where there are a number of parties, and a multiplicity of actual or threatened suits, a resort to a court of equity will sometimes be justified when the subject is not at all of an equitable character, and there is no other element of equity jurisdiction. (Board of Supervisors v. Deyoe, 77 N. Y. 219.)

Now, the complaint charges in substance that other parties are about to commence actions against these defendants for the purpose of recovering the amounts of their respective claims as creditors of the American Loan and Trust Company.

The allegation is sufficient to inform the court that a multiplicity of suits is threatened and may be prevented if an action in equity broad enough to secure the rights of all the parties be prosecuted. It is apparent that much useless and probably expensive litigation will result if equity do not take jurisdiction and determine and enforce the rights and interests of all the parties.

Here are twenty directors, each of them liable in the sum of $5,000 — this plaintiff’s claim is over $10,000 — so in order to recover at law it would be necessary for him to bring three separate actions, but a dozen other creditors perhaps might sue the same directors, with the result that some portion of them would suffer defeat, because the first judgment obtained would exhaust the amount of the directors’ liability.

In Weeks v. Dove (50 N. Y. 568), the question was presented, whether a creditor of a manufacturing corporation organized under the act of 1848 (Laws of 1848, chap. 40) could maintain an action against one of the stockholders to enforce the liability imposed upon a stockholder by the act, when there are other creditors similarly situated.

It was held, following Bank of Poughkeepsie v. Ibbotson (24 Wend. 473); Garrison v. Howe (17 N. Y. 458), that a single creditor of the corporation could maintain an action at law against one of several stockholders to recover a debt owing, but the court said “ the personal liability of stockholders under these acts may be enforced in an equitable action against all the stockholders,” and quoted with, approval an intimation in Garrison v. Howe (supra),that a stockholder who had been sued by a creditor, in case of a recovery against him would subject him to a greater liability for the debts of the corporation than his share, as between himself and the other stockholders, might commence an equitable action against all the creditors and stockholders for an account, and for contribution, with a view to distribute the burden of the debt among the stockholders, according to the amount of stock held by them respectively.”

The discussion in Pfohl v. Simpson (74 N. Y. 137) is directly applicable and controlling here. That action was authorized by a statutory provision making stockholders liable for the debts of the corporation in an amount equal to their respective stockholdings. It was conceded that an action would lie by a creditor of a corporation against a stockholder, and the question was, whether a suit in equity could be maintained, and the court, probably in answer to a suggestion made in that ease, similar to one made here — that the liability created by the statute was special, and not analogous Avitlx the cases in Avliich courts of equity have taken jurisdiction — said : It matters not whether the right of action to so many arises from general principles of law, or from particular provisions of Constitution or of statute. If the right exists, and is likely to be used so as to produce the mischief, the jurisdiction of equity arises and attaches.”

The opinion of Judge Folger in that case also answers another point which is made here, that the liability of defendants is a several and not a joint liability.

The provision in the charter of the corporation, that the stockholders shall be severally liable, does not have such reach as that it precludes the attaching and exercise of this jurisdiction of equity. That provision fills the full scope of the legislative intention, when a stockholder is held liable by any jurisdiction, in any form of action, whether sued alone or brought into court with some or many others-in like category, for as much as, and no more than, the facts of his own relation to the corporation and its creditors and co-stockholders, demand.

“ He may not in any action be made liable (under provisions like those of this charter) for more than an amount equal to the sum of the stock owned by him individually, in addition to his liability to¡ pay in full the stock subscribed for or bought by him.

“ Though he be sued with others, and at the suit of many, or in a suit for the benefit of many, if he is not cast in judgment for more than the amount above indicated, his several liability is preserved.”'

It is clear, therefore, that no harm can result to the directors from bringing them all into court on the equity side, for they cannot in any event be decreed to pay more individually than the liability named in the charter, and assumed by them when they 'became directors.

Indeed, it would seem that such a suit is peculiarly adapted for the protection of directors in such cases, from the possibility of vexatious litigation.

If the amount due creditors equals or exceeds the aggregate of the statutory liability of the directors, the judgment decreeing that each make payment of the sum for which he is liable will relieve him from the annoyance and expense of further litigation; on the other hand, if it should prove to be less, the judgment will provide for a ratable payment, and in addition to the other litigation which would otherwise be threatened, possibly an action for contribution may be avoided.

If it should later appear that the rights of all the parties in interest, can only be protected by bringing in other parties than those now befort the court it will order them brought in, and thus in the end the object which the statute had in view in attaching a liability to-the directors, to-wit, security of the creditors, will be effectuated as nearly as possible by the accumulation of a fund from the directors, and its proportionate distribution among the creditors of the corporation entitled thereto, and at a minimum of expense, because accomplished through one suit.

Having reached the conclusion that a suit in equity will lie, we come to the consideration of the other grounds of demurrer.

The first is, that there is a defect of parties defendant, in that the American Loan and Trust Company was not made a defendant in this action. It may be assumed that the corporation is a proper party to- the suit, but demurrer will not lie unless it is a necessary party.

In McMahon v. Allen (12 How. Pr. 39), the phrase “ a complete determination of the controversy,” was held to mean, when there are persons not parties whose rights must be ascertained and ■settled, before the rights of the parties to the suit can be determined.

. This definition was cited with approval in Chapman v. Forbes (123 N. Y. 532-538).

■ In Anderton v. Wolf (41 Hun, 572), it was held that “ in order-to sustain a demurrer for a defect of parties, it must appear that the party demurring has an interest in having the omitted parties joined, -or that he is prejudiced by the nonjoinder.”

Now, applying these rules, we find, first, that the corporation has no rights to be ascertained and settled before the rights of the parties to the suit can be determined.

The liability of the directors is not created for the benefit of the ■corporation, but rather for that of its creditors. It is not an asset of the corporation, and cannot be enforced by it, nor by a receiver of its assets, appointed in an action for a dissolution of the ■corporation. The liability is to the creditors, and they alone can compel its payment. (Cook on Stock & Stockholders, § 216 ; Farnsworth v. Wood, 91 N. Y. 308 ; Billings v. Robinson, 94 id. 415.)

These decisions, it is true, were in cases arising under the Manufacturing Act, but they are equally applicable here.

It is said that the demurrant has an interest in having the corporation made a defendant, for the purpose of showing how much its assets can pay on the claim of plaintiff and others similarly situated, who may come in and prosecute the suit, and thus equitably adjust the amount which he is called upon to pay, but that point is not well made, unless it appears upon the face of the complaint that the corporation had assets which can be applied in payment of its creditors, and it does not so appear, while the •allegation touching the issuing of executions, and their return wholly unsatisfied, sufficiently establishes the insolvency of the corporation.

It was held in Mickles v. Rochester City Bank (11 Paige 118-127), that if the corporate property is exhausted, and the bill is filed for the mere purpose of enforcing the liability of stockholders, the corporation need not be made a party.

It may well be that after the pleadings are all in, it will appear to be a necessity to make the corporation a party, then the court, in the exercise of its equitable jurisdiction, and in pursuance of the authority conferred by the Code of Civil Procedure, will bring in the corporation, and such other parties, if any there be, which it may deem needful in order to secure a final and equitable adjustment of the matters in controversy.

A further ground of demurrer is that there is a defect of parties plaintiff, in that the other creditors for whose benefit the suit is brought, are not joined either as parties plaintiff or parties defendant. The Code provides that, Where the question is One of a common or general interest of many parties * * one or more may sue or defend for the benefit of all.” (§ 448.)

It sufficiently appears from the complaint, we think, that the question is one of common interest to many persons.

If other creditors fail to come in in due course plaintiff will be1 entitled to a judgment for the enforcement of such rights as he may have.

The interlocutory judgment sustaining the demurrer should be reversed, with costs, and the demurrer overruled, with leave to. answer within twenty days on the payment of twenty dollars costs..

O’Bkien, J., concurred; Follett, J., not voting.

Interlocutory judgment sustaining the demurrer reversed, with costs, and the demurrer overruled, with leave to answer within, twenty days on the payment of twenty dollars costs.


author: Follett, J. :

text:
    Henry E. Walker, Appellant, v. The Anglo-American Mortgage and Trust Company, Albert C. Burnham, Lysander W. Tulleys and James N. Brown, Respondents.

      Organization of a corporation — liability of eaehpan'tner for the misrepresentation and concealment of his copartners.

    'Where the members of a firm, under their firm name, organize a corporation, each partner is liable for the misrepresentations and concealments of the others, committed while engaged in promoting the enterprise.
    Persons who undertake to form a corporation and induce others to subscribe to stock therein, by issuing statements and prospectuses, occupy a position of trust and confidence toward the persons so induced to subscribe for shares to be issued, and they are bound to exercise the utmost good faith in their transactions. If they make material misrepresentations, or conceal material facts in respect to the enterprise, to the injury of those who are induced to subscribe, they become liable for damages, and their liability is not limited to subscribers whom they personally induced to take shares, but it extends to all those who are induced by their agents to subscribe for shares. If they make material misrepresentations to or conceal material facts from their agents, who, relying- on their statements, induce persons to become subscribers, the promoters are liable for the damages.
    A purchaser of shares in an existing corporation from a stockholder has no interest in the application of the money which he pays therefor, but it is different with one who agrees to subscribe for shares in a corporation to be created.
    In an action brought to rescind a purchase of fifty shares of stock, issued by the defendant corporation, and to recover the amount paid therefor, the court found that the firm by which the corporation was organized wrote certain letters and issued certain circulars in regard to the same, and that the statements and the correspondence were designed to mislead the agents of such firm -and corporation, but refused to find that they were designed to mislead subscribers.

      Held, that such refusal was improper; that if the statements were put forth with the design to mislead and deceive the agents of the defendants appointed to procure subscriptions, it followed that they were put forth with the intention of deceiving those who might subscribe for shares, and the inference of fraud, from the facts proved, was as strong in the one case as it was in the other.
    Appeal by the plaintiff, Henry F. Walker, from a judgment of the Supreme Court in favor of the defendants, entered upon a decision of the court in the office of the clerk of the city and county of New York on the 20th day of January, 1892, dismissing the plaintiff’s complaint, and for costs.
    The action was brought to rescind a purchase of fifty shares of stock issued by the defendant corporation, and to recover from the defendants the amount paid therefor.

      The firm of Burnham, Tulleys & Co. was organized in 1875, and from October, 1884, until its dissolution, June 1, 1888, it was composed of the individual defendants in this action. The firm was engaged in securing and selling western farm mortgages, having its principal place of business at Council Bluffs, Iowa. Burnham loaned to the firm $100,000, the capital employed in this business, upon which he received seven per cent interest. Tulleys and Brown contributed their time, services and experience. This firm had done a large business in procuring and selling, in the eastern States and abroad, western farm mortgages, amounting in the aggregate to several million dollars.
    Alfred "Walker & Co. was a firm of bankers and brokers engaged in business in New Haven, Conn.
    The plaintiff is a physician residing in the city of New York, and is a cousin of Alfred Walker, senior member of the firm. From time to time he had made investments through the agency of this firm, and, among other securities, had purchased a western farm mortgage obtained by the New Haven firm from Burnham, Tulleys & Co. In 1888, the firm resolved to form a corporation under the laws of the State of Iowa for the purpose of transacting the business theretofore carried on by the partnership.
    By a contract executed February 24,1888, between the individual members of Burnham, Tulleys & Co., it was agreed that Burnham should receive all of his interest in the firm, $100,000, secured to be paid in a manner specified and should turn over all of his interest in the business to the corporation to be formed. It was agreed that the corporation should issue $100,000 of stock for the good will of the business of the firm, of which Burnham, Tulleys and Brown were to receive $30,000 each, and $10,000 was to be issued to J. Y. McDowell, who had an interest in a branch firm connected with Burnham, Tulleys & Co.
    January 1, 1888, Burnham, Tulleys & Co. wrote Alfred Walker as follows:
    “ Burnham, Tulleys & Co.,
    “ Investment Bankers,
    “ Council Bluffs, Iowa, 1-1-1888.
    “ Alfred Walker, Esq., New Haven, Conn.:
    “Dear Sir — Referring to the incorporation scheme, which has been written about several times, we would say that we have about completed arrangements between ourselves to cover tlie same. We find an unwillingness on our part to part with tlie valuable plant wbicli we have upon our books, the outstanding loans figuring up in the millions.
    “ Of a proposed capital of $500,000 we will take the larger part ourselves, and, therefore, have only a limited amount to dispose of. As we indicated to you that you might place $50,000, we will adhere to that, although it takes a large portion of what we have to sell. You are, therefore, authorized to take subscriptions up to $50,000, 50$ of which to be paid at the time the subscription is made. Herein we hand you form of subscription. When the subscriptions are made, kindly forward to us the checks, give a receipt therefor, and certificates of stock will follow between now and the first of June. The board of directors will call in tlie balance of 50$ between now and that time. Having only a limited amount to sell we ask your early advice on the subject, as we will be obliged to treat the subscriptions in the priority of their receipt.
    “We believe we have one of the most valuable plants which has been offered, as it embraces an experience of over 25 years, and we have a large amount of business on our books. With the increased facilities which the incorporated form will give us, we think the stock will be valuable, and expect it will be worth a handsome premium in regular course.
    “ Yours, truly,
    “BURNHAM, TULLEYS & CO.”
    March third, Burnham, Tulleys & Co. wrote Alfred Walker & Co. as follows:
    “ Burnham, Tulleys & Co.,
    “Investment Bankers,
    “ Council Bluffs, Iowa, 3-3-1888.
    “Messrs. Alfred Walker & Co., New Haven, Conn.:
    “Gentlemen — We have your favor of the 29th inst. Under cover of our late respects you will see that we have practically decided the question of incorporation, and authorize you to take subscriptions for stock to the amount of $50,000.00. As we get no commission ourselves, and believe the stock to be very valuable, we would hardly feel inclined to pay any commission, and offer none to anybody.

      “ The stock will be worth in our judgment, as soon as the organization is completed, a premium. Our charter is liberal, and allows us to issue debentures and guarantee loans, and we can give such commissions as we may decide upon. * * *
    “ Referring to the commission on sale- of stock would say, that were our company a new one with no valuable plant, it would be consistent to give commissions, but, as we have written you, we are loath to give up our birthright and would take the entire amount of stock if we thought it practicable.
    “ Yours truly,
    “BURNHAM, TULLEYS & 00.”
    March 10, 1888, Burnham, Tulleys & Co. wrote Alfred Walker & Co. the following letter:
    “ Burnham, Tulleys & Co.,
    “ Investment Bankers,
    ' “ Council Bluffs, Iowa, 3-10-1888.
    “Messrs. Alfred Walker & Co., New Haven, Conn.:
    “ Gentlemen— We have your valued favor of the 7th inst., and believe our respects of yesterday will cover the additional information you desire. We hardly think some of your friends appreciate altogether the advantage of securing stock in a company which secures the accretions and emoluments of a business of long standings and of such value as Burnham, Tulleys & Co. have upon their books. We have been, as before intimated, rather unwilling to incorporate. In order to cover the competition that is upon the market, we have decided upon this step at your suggestion and some of our other friends, but would not be willing to take it unless we ourselves were largely interested in the stock.
    “We believe that under our new incorporation that securities will be more favorably cared for, and that we will find it mutually profitable in your representing us in New Haven, as we will endeavor to cover all the wants of your customers. * * *
    “Yours truly,
    “ BURNHAM, TULLEYS & CO.”
    March 20, 1888, Burnham,-Tulleys & Co. wrote Alfred Walker & Co. as follows :

      “ Burnham, Turleys & Co.,
    “ Investment Bankers,
    “ Council Bluffs, Iowa, 3-20-1888.
    Messrs. Alfred "Walker & Co., New Haven, Conn.:
    “ Gentlemen — We are in receipt of your valued favor of tlie 17th inst., covering draft for $2,500, 50$ of subscription of 50 shares in the American Mortgage and Trust Co., account of your Mr. Walker. Money has been coming in quite freely, and we would hardly think it wise at this time to accept any more money on account of this subscription. It is possible we will incorporate sooner than we anticipated, and if so we will call in the other 50 per cent. We are pleased that you approve of the papers sent you, and believe from the present plans that the company will be one of the very best extant
    “ Lately we took off a statement of our business, and were astonished to find how well it appeared, and think that we can affirm, ■without boasting, that no plant has been offered to the public possessing such desirable elements for an incorporation as we have. We are not incorporating in order to get rid of objectionable features of our business, but only because we think it will put the trusts we have assumed in a more permanent form and give us a larger line of customers. We repeat, that we expect to be liberal takers of the stock, and would not dispose of any of it outside, if we did not think the last-named object would be attained.
    “We are gratified to have you connected with us, and believe with- united effort and the experience which we all have had, that in regular course the stock will command a handsome premium.
    “ As yet we have not considered just the plan of guaranty it will be most judicious to adopt, but it seems to us that a certain class of loans at we might guaranty, but we did not contemplate guaranteeing above 6$. We have adopted, within a reasonable length of time, the most rigid rules in the making of loans, and believe in the new plant that we will have as fine a line of investments as have ever been floated.
    “We trust that the valued customers to whom you refer will not hesitate to take advantage of this investment while there is opportunity, as it does not occur very often. If it suits your purpose better, we would prefer that a smaller amount be paid at the time of tlie subscription, say 15 or 20$, as we do not care to put the company to the payment of interest when money is so easy as it is with us at present. We shall aim most certainly to merit the high regard you have for us.
    “ Thanking you for your kind expressions, we are
    “ Yours truly,
    “ BURNHAM, TULLEYS & CO.”
    The subscription referred to in the foregoing letter was of Alfred Walker, a member of the firm, and is not the subscription of the plaintiff. April 2, 1888, Burnham, Tulleys & Co. issued and circulated a printed statement, of which the following is a copy:
    “A. C. Burnham. L. W. Tulleys. J. N. Brown;
    “ Office of Burnham, Tulleys & Co.,
    “ Council Bluffs, Iowa, Apl. 2, ’88.
    “Realizing the advantage of permanency and perpetuity in a business conducted under corporate form, the American Mortgage & Trust Company has been organized under the Laws of the State of Iowa, to succeed the old and well-known firm of Burnham, Tulleys & Co., which has been placing Western Farm Mortgage Loans for more than twenty-five years, and has now many millions upon its books. The proposed capital is $500,000, a large part of which has been taken by ourselves. If it were practicable we should take it all, as, from our past experience in the business, we feel sure it will prove a profitable investment. We offer a limited amount of stock to our friends at par. Under our Articles of Incorporation and the Laws of this State the stock is full paid and n on-assessable. The company will be under the management of the members of said firm and will adhere to the same conservative methods which have characterized their past record. It needs no argument to demonstrate the value of our plant or that the stock will pay handsome dividends. The new firm will increase our facilities both East and West for a more extended business, and with a larger business will come increased profits. As the amount we have to dispose of is limited we offer it to all our friends and customers, and subscriptions will be accepted in order of the priority of their receipt. Subscriptions should be accompanied by 25 per cent of the amount subscribed. The balance will be called in between now and June first, as the directors may elect. As soon as the amount to be sold is taken we reserve the right to reject subscriptions hi excess.
    “Yours faithfully,
    BURNHAM, TULLEYS & CO.”
    This circular was distributed to the correspondents of the firm, and, among others, copies were sent to Alfred Walker & Oo., who received subscriptions from various persons for shares of the par value of about $50,000 and transmitted the money to Burnham, Tulleys & Co. About April 7, 1888, the plaintiff subscribed through Alfred Walker & Oo. for fifty shares of the stock for which he paid $5,000, which was remitted to the defendants. Subsequently, the corporation was placed in the hands of a receiver, and, through some scheme of the reorganization not disclosed by the evidence, the stock of the consenting shareholders was reduced one-half and the shares issued for good will were surrendered to the corporation. On the trial of the action, the plaintiff offered to surrender his shares.

      August O. Brown, for the appellant.

      Paul Wilcox, for the respondents.
   Follett, J. :

The individual defendants, under their firm name, organized the Anglo-American Mortgage and Trust Company, and each partner is liable for the misrepresentations and concealments of the others, committed while engaged in promoting the enterprise. (Chester v. Dickerson, 54 N. Y. 1; Getty v. Devlin, Id. 403; Locke v. Stearns, 1 Met. 560; Rapp v. Latham, 2 B. & A. 795; 1 Lind. Part. [3d Eng. ed.] 54, 310, 329; Story Part. §§ 108, 131; Big. Law Fraud, 240, § 6.) Burnham is equally liable with his partners for their misrepresentations and concealments.

The individual defendants, under tlieir firm name, organized the corporation, fixed the amount of the capital stock and determined the time when and the terms upon which the corporation should be formed. They appointed agents to receive subscriptions for shares, fixed tlieir price and the compensation to be paid the agents. All this was done before the corporation was created; and more, they as a, firm, received the money of the plaintiff and of others for shares in advance of the formation of the company. How the defendants applied this money does not appear. The defendants were the promoters of this corporation, and persons who undertake to form a corporation and induce others to subscribe for stock therein by issuing statements and prospectuses occupy a position of trust and confidence towards the persons so induced to subscribe for shares to be issued, and they are bound to exercise the utmost good faith in their transactions. If they make material misrepresentations or conceal material facts in respect to the enterprise, to the injury of those who are induced to subscribe, they become liable for damages. (Brewster v. Hatch, 122 N. Y. 349 ; Getty v. Devlin, 54 id. 403; Erlanger v. The New Sombrero Phosphate Co., L. R. [3 App. Cas.] 1218; 1 Mor. Corp. [2d ed.] § 291.)

The liability of promoters is not limited to subscribers whom they personally induce to take shares, but it extends to all those who are induced by their agents to subscribe for shares, and if they make material misrepresentations to, or conceal material facts from, their agents, who, relying on the statements, induce persons to become subscribers, the promoters are liable for the damages. It is a familiar principle that what one does by his agent, he does by himself. The scheme which was organized by the defendants and carried out in part through their agents was the proximate cause of the plaintiff’s damages, and no intervening and responsible principal standing between the plaintiff and defendants, the latter are liable to the former to the same extent as if they had personally, by false representations and concealments, induced him to become a subscriber. (Getty v. Devlin, supra.)

A purchaser of shares in an existing corporation from a stockholder has no interest in the application of the money which he pays for the shares, but it is quite different Avith one Avho agrees to subscribe for shares in a corporation to be created. The difference is well stated by Chief Justice Coleridge in Twycross v. Grant (2 C. P. Div. 483). He said : “ The value of a share in a company, however, depends not only on those circumstances which regulate the value of all salable commodities, but also on the persons by Avhom and the mode in which the capital of the company is to be dealt with. It is utterly immaterial to an ordinary purchaser to know wliat the vendor will do with the purchase money when he gets it; the purchaser has no further interest in it. But an applicant for shares in a company is in a totally different position. His money becomes part of the capital of the company, and to him it is all important to know what sort of persons are to have the control of his money when he has paid it, and how that money is to be applied, whether upon the enterprise itself or in remunerating, perhaps with lavish extravagance, those who have brought the company into existence. Again, it is all important for him to know whether shares applied for by other people are applied for honestly, as by himself, or by persons whose only object is to create a factitious demand for the shares, and to get rid of them as soon as they have succeeded in deluding others to take them on the faith of their apparent value. Now, these are all matters which promoters may arrange for their own benefit, and keep entirely out of sight; and it is notorious that by taking advantage of their opportunities in this respect promoters have committed gigantic frauds.”

This brings us to the question whether the defendant did make material false statements to, and conceal material facts from, their agents, with the intent of inducing, and which actually did induce, such agents to recommend and advise the plaintiff to subscribe for shares.

The court found that Burnham, Tulleys & Co. wrote the letters and issued the circular which are set out in the statements of facts. In the letter of March 20, 1888, they wrote : “We repeat that we expect to be liberal takers of this stock, and would not dispose of any of it outside if we did not think the last-named object (a larger line of customers) would be attained.” The whole tenor of these letters is to the effect that Burnham, Tulleys & Co. were to take a large proportion of the shares to be issued, and that the corporation was to be managed by the members of the firm in the same manner that their business had been previously managed. There is no hint in the letters or circular that any of the shares were to be issued except for cash, or that any were to be issued to members of the firm for good will.

The court found: “ 10. The statement in said circular that the proposed capital is $500,000, ‘ a large part of which has been taken by ourselves,’ was untrue, and designed to mislead and deceive A. Walker & Co.

“ 11. Tlie statement tliat the company will be under the management of the members of said firm ’ was untrue, and designed to mislead and deceive A. Walker & Co.

“ 12. On and after the organization of the corporation defendant Albert C. Burnham held no office of any sort in said corporation.

“ 15.. Burnham, Tulleys & Co. never disclosed to A. Walker & Co. the fact of the execution of the agreement of February 24, 1888, respecting good will stock, nor the fact that $100,000 of good will stock was to bo issued to the members of the firm upon its incorporation.

16. From the correspondence and dealings of A. Walker & Go. and Burnham, Tulleys & Co., with respect to the incorporation, A. Walker & Co. believed and had reason to believe, that subscribers for stock, whether members of the firm or outsiders, stood on equal footing.”

The court also found that Alfred Walker & Go. had not seen the circular of April second when they effected the sale of the stock to the plaintiff and obtained his subscription, and it did not rely upon the statements contained therein in effecting the sale to the plaintiff and in taking his subscription.

But this finding does not relieve the defendants'from liability, for, under the letters which they put forth, they were bound to procure the corporation to be organized upon the basis of all subscribers paying par value in cash for the shares to be issued, which they did not do, but issued to themselves one-fifth of the entire capital for so-called good will. In addition to this, the corporation was not placed under the management of the members of the firm, nor did they become liberal takers of the • stock, as they represented they would be. Burnham took no shares except the $30,000 issued to him for good will, and never assumed the management of the affairs of the corporation.

The court was asked to find that the statements and the correspondence were designed to mislead, not only A. Walker & Co., but persons intending to become subscribers for the shares.

The court found, as above stated, that the statements and the correspondence were designed to mislead A. Walker & Co., but refused to find that they were designed to mislead subscribers, to which refusal the plaintiff excepted. This, we think, was error. If the statements were put forth with the design to mislead and deceive A. Walker & Co., the agents of the defendants for procuring subscriptions, it is difficult to see why it does not follow that they were put forth with the intention of deceiving those who might subscribe for shares. The inference of fraud from the facts proved is as strong in the one cause as it is in the other. Hpon a re-trial of this case, if one shall be had, it may be disclosed upon what terms other subscriptions were made, to whom the shares were first issued, and what disposition was made by the defendants of the funds received by them.

We think the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event.

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

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


author: Eollett, J.:

text:
    Winston Jones, as Assignee of The Bank of Mobile, Appellant, v. The Merchants’ National Bank of the City of New York, Respondent, and The Bank of Mobile, Appellant.

      Men of one hank on the securities of aiwther hank in its possession, and on its deposit in an open account — evidence sustaining the verdict of a jury.

    In an action of replevin brought by the assignee for the benefit of creditors of the Bank of Mobile, to recover thirty mortgage bonds issued by the Mobile and Ohio Railroad Company and held by the Merchants’ National Bank, and §6,181.48, standing to the credit of the Bank of Mobile in an open account between it and the Merchants’ National Bank, it was admitted that the bonds were held by, and that the sum of $6,181 48 was on deposit in, the Merchants’ National Bank, but it was alleged that on May 15, 1884, the firm of Robinson & McMillan made their promissory note, whereby they promised to pay to the order of Danner & Co., five months after date, §8,800 at the Bank of Mobile; that before the note fell due it was indorsed and transferred, for value received, by the Bank of Mobile to the Merchants’ National Bank, and that at the maturity thereof it was duly presented for payment, and payment demanded, which was refused, and due notice of presentment, demand and non-payment was given to the Bank of Mobile. It was also alleged that by the custom of banks and bankers, and by virtue of an agreement between the Merchants’ National Bank and the Bank of Mobile, the former had a lien on the sum so standing to the credit of the Bank of Mobile, and also on the bonds in its hands, as security for the indebtedness on said note. The plaintiff denied that the Merchants’ National Bank had, by custom or by contract, a lien on the bonds, or on the sum standing to the credit of the Bank of Mobile, but did not deny that his assignor was indebted to the defendant as alleged.
    After a review of the evidence the court hold that it was sufficient to raise a question of fact for the jury, and that it and the course of dealing between the two banks warranted the verdict rendered in favor of the Merchants’ National Bank.
    A judgment was entered on tlie verdict declaring the existence and the amount of the lien of the Merchants’ National Bank.

      Held, that when such judgment was paid the plaintiff would be entitled to receive the property in the hands of the Merchants’ National Bank, or if the balance due it on account and sufficient of the avails of tlie bonds should be applied in payment of the judgment, that the plaintiff would be entitled to the remainder.
    When it is too late for a defeated party to set up an irregularity.
    Appeal by tlie plaintiff, Winston Jones, as assignee of tlie Bank of Mobile, from a judgment of tlie Supremo Court, entered in tlie office of the clerk of tlie city and county of New York on tlie 1st day of December, 1891, upon tlie verdict of a jury rendered at tlie New York' Circuit; also from an order made at tlie New York Circuit on tlie 13tli day of November, 1891, granting tlie defendant, tlie Merchants’ National Bank of tlie city of New York, an additional allowance of five per cent upon tlie amount of the verdict; also from an order made at the New York Circuit on the 13th day of November, 1891, denying the motions of the plaintiff that the verdict be set aside and for a new trial upon tlie minutes; also from an order made at tlie New York Circuit on the 13th day of November, 1S91, denying tlie plaintiff’s motion that the verdict to be entered be settled by the court., and that such settlement be made in a certain form; also from an order made at tlie New York Circuit on tliel3tli day of November, 1891, denying the plaintiff’s motion for a certificate that the substantial cause of action was the same upon eacli issue; also from an order made at the New York Special Term on the 1st day of December, 1891, denying the plaintiff’s motions tliat tlie taxation of costs made by tlie clerk and his refusal to tax the costs as proposed by the plaintiff be reviewed by tlie court, and for a new taxation, and for a certificate tliat the substantial cause of action was tlie same upon eacli of tlie issues in tlie action; also from .an order made at tlie New York Special Term on tlie lltli day of December, 1891,, denying tlie plaintiffs motions that tlie judgment be opened, vacated and set aside, and that tlie judgment be settled and entered as tlie court should, by order, direct; and also from an order made at the New York Special Term on the 17th day of January, 1893, denying the motion of the plaintiff for a new trial upon the case, made and settled, containing exceptions.
    Appeal by the defendant, the Bank of Mobile, from a judgment of the Supreme Court, entered in the office of the clerk of the city and county of New York on the 1st day of December, 1891, upon the verdict of a jury rendered at the New York Circuit, and also from an order of the Supreme Court made at the New York Special Term on the 11th day of December, 1891, denying the defendant’s motions that the judgment be opened, vacated and set aside, and that the judgment be settled and entered as the court should, by order, direct.
    This action was brought by the assignee for the benefit of creditors of the Bank of Mobile, who sets out in his complaint two causes of action against tlid Merchants’ National Bank of the city of New York: (1) In replevin to recover thirty mortgage bonds issued by the Mobile and Ohio Railroad Company, twenty-five for -|1,J100 each, four for $100 each and one for $500; (2) to recover $6,181.48 standing to the credit of the Bank of Mobile in an open account between the banks.
    The Merchants’ National Bank admits that it holds the bonds, and that it has on deposit to the credit of the Mobile bank $6,181.48, but alleges that May 15, 1884, Robinson & McMillan made their promissory note, whereby, for value received, they promised to pay to the order of Danner & Co., five months after date, $8,800 at the Bank of Mobile. That before the note fell due it was, for value received, indorsed and transferred by the Bank of Mobile to the defendant, and that at the maturity thereof it ivas duly presented for payment and payment demanded, which was refused, and due notice of presentment, demand and non-payment was given to the Bank of Mobile. It also alleges that, by the custom of banks and bankers, and by virtue of an agreement between it and the Bank of Mobile, it has a lien on the sum so standing to the credit of the Bank of Mobile, and also on the bonds in its hands, as security for said indebtedness on said note.

      The plaintiff replied, denying that the Merchants’ National Bank had, by custom or by contract, a lien on the bonds or on the sum standing to the credit of his assignor, but did not deny that his-assignor was indebted to the Merchants’ National Bank as alleged in its answer. The Bank of Mobile appeared in the action, but-made default, neither answering nor demurring. It was proved on the trial, and it was not controverted, that the Bank of Mobile was. indebted to the Merchants’ National Bank, as alleged in its answer, and that the amount of the indebtedness, principal and interest,, when the verdict was rendered, November 13,1891, was $13744.93,, which was found by the jury to be due from the Bank of Mobile to. the Merchants’ National Bank.
    After the verdict was rendered, and on the same day, the plaintiff' moved for a new trial on the minutes, which was denied, and he also, moved that the verdict be settled by the court in a form proposed,, which was also denied. The Merchants’ National Bank then moved for an additional allowance of five per cent on the verdict, which was granted. Afterwards the plaintiff moved, under section 3234 of the Code of Civil Procedure, for a certificate “ that the substantial cause of action was the same upon each issue,” which was denied. Costs were taxed by the clerk in favor of the Merchants’ National Bank, and thereafter the plaintiff moved that the taxation be set aside and costs taxed in his favor, which was denied. December 1, 1891, a judgment was entered on the verdict adjudging that the Merchants’ National Bank recover of the plaintiff, as assignee, $1,218.36 costs, $68725 of which was the additional allowance granted by the court, and that said bank had a lien on the-bonds and money, and was entitled to retain both until itfe claim of $13744.93, with interest, should be paid. The plaintiff and the Bank of Mobile then moved to set aside the judgment as entered, and that one in a form proposed be entered, with costs in favor of the plaintiff, which was denied. Afterwards a case was made and settled and the plaintiff moved for a new trial thereon, which was denied.

      Burton N. Harrison, for the appellant.

      George ZabrisMe, for the respondent.
   Eollett, J.:

The question of fact litigated before the jury and on the determination of which the decision of this case turns is, was there an agreement between the banks by which the Bank of Mobile gave the Merchants’ National Bank a lien on such bonds, stocks, notes ■and bills as it might have in its possession belonging to the Bank of Mobile as security for all liabilities which the last-mentioned bank should incur to the Merchants’ National Bank? Neither party asked that the case should be withdrawn from the jury and be ■decided by the court, both thus conceding that there was a question of fact for the jury. But whether the verdict is contrary to the weight of evidence is raised for consideration by this court by the appeals from the orders denying motions for a new trial. Erom the close of the war of the rebellion to July 8, 1884, the Merchants’ National Bank had been the New York correspondent of the Mobile bank, during which time there was an open mutual account between those banks, bent according to the custom of corresponding banks. The Bank of Mobile was accustomed to draw sight drafts or bills on the Merchants’ National Bank and send it bills and notes payable in northern cities for collection and credit. Frequently the New York bank rediscounted notes and commercial paper for the Bank of Mobile, and it appears by the uncontradicted evidence that the universal practice was in case commercial paper, the avails of which had been credited, was not paid, to charge it back to the account of the Bank of Mobile. Occasionally, the account of the Bank of Mobile was-overdrawn for considerable sums. During the entire existence of this account, the New York bank had in its possession various bonds, securities and bills belonging to the Mobile bank, which were not kejit in a box under the control of the last-mentioned bank, but were under the control of the New York bank, the •officers of which had access to them at all times. In other words, the securities were not held by the Merchants’ National Bank merely for safe-keeping. In 1870, the New York bank had in its possession bonds issued by the State of Alabama, which belonged to the Bank of Mobile. Mr. Yermilye, the president of the Merchants’ National Bank, testified in respect to the terms under which those bonds were held, as follows :

“ Q. About the terms on which you held those Alabama bonds, or whatever bonds yon held at that time —• were they held upon any agreed terms between your bank and the Mobile bank, and, if so, what were those terms? A. The agreement and understanding between the Bank of Mobile and the Merchants’ Bank was: In case of any overdraft, or any credit which was made to them which turned out not to be paid, it was charged back to the account, so far as that went, and if we paid their drafts before they got credit on the bills which they sent on, or any security which we had in hand, we charged them interest -on that until the credit came in from the collection.”

March 29, 1879, "William II. Pratt, then president of the Mobile bank, wrote the president of the Merchants’ National Bank -in respect to an overdraft, and, among .other things, said: “ I have considered you fully and amply covered by the lien I gave you on our deposit of Alabama bonds with Williams, Deacon & Co., of London.” May 1, 1879, Mr. Pratt again wrote the president of the Merchants’ National Bank, referring to certain bonds, and, among other things, said: “We may, however,.wish to draw on your bank beyond our remittances, not, however, to exceed, say $30,000, or a value of forty cents on the bonds held by you.”

This evidence is not very important, except that it shows that the securities held by the Merchants’ National Bank were used by the Bank of Mobile as a means of credit.

The bonds involved in this suit were paid for by the Merchants’ National Bank about June 28, 1880, and delivered to it, the sum paid being charged to the account of the Mobile bank. The letter of the latter bank to the former, directing the payment for these bonds states, you will take “said bonds and hold them for our account.” The important question is whether the Merchants’ National Bank had the right to hold these bonds as security for any liability which the Mobile bank might incur? We will first consider the evidence offered in behalf of the plaintiff on this issue.

Albert C. Danner, the president of the Bank of Mobile in 1884, testified, in answer to the third interrogatory: “Early in June, 1884, I went on to New York and called at the Merchants’ National Bank and asked to see the bonds. Mr. Banta, the cashier, showed them to me and they corresponded with the memoranda I had. I left them there with the positive agreement that the Bank <of Mobile could overdraw its account or get discounts from the Merchants’ Bank against these bonds as collateral to the amount of $20,000 — I think that was the amount. My recollection is that Mr. Banta gave me or sent to the Bank of Mobile a receipt for these bonds.”

“ Eighth interrogatory. Please state in detail the circumstances under which a certain note of Robinson & McMillan for $8,800, more particularly described in the answer of the Merchants’ Bank herein, was sent to said Merchants’ Bank for discount. Please produce and annex to your deposition any letter or writing, or copies of the same, which may have been addressed to^ said Merchants’ Bank by the Bank of Mobile or its officers at the time said note was forwarded for discount?

“ A. I have stated in answer to the third interrogatory that I had arranged, as president of the Bank of Mobile, to procure money from the Merchants’ National Bank against certain bonds; in addition to this, I also arranged to rediscount paper that the Bank of Mobile might send on' for that purpose up to thirty-five or forty thousand dollars. It being understood between Mr. Banta, the cashier of the Merchants’ 'National Bank, and myself, that the Bank of Mobile could borrow from the Merchants’ Rational Bank, and check for same as required up to fifty-five or sixty thousand dollars. I will say right here that while I was in New York arranging this matter, perhaps for three days, I was in the Merchants’ National Bank every day. I was informed that Mr. Yermilye, the president, was sick, but before I left New York I met him at the bank and understood from him and Mr. Banta that he approved the arrangement made. * * * With the cashier of the Bank of Mobile I went over the bills receivable in the possession of the Bank of Mobile. The piece of Robinson & McMillan paper referred to I remember selecting. It was sent on because it was a good large amount and believed to be good, and, therefore, thought to be a suitable piece for ¡rediscount in New York. I have no copy of the letter, in which said paper was sent on, but I directed such a letter to be written by the cashier of the Bank of Mobile, and a press copy of said letter is attached to the deposition of Mr. Winston Jones in this case, and is here referred to as a part of this answer. It is Exhibit 19.”

“ Tenth interrogatory. Please state, if you know, whether after the said note of Robinson & McMillan had been discounted by the Merchants’ National Bank, said Merchants’ Bank agreed to advance to the Bank of Mobile any money on the faith of the Mobile and Ohio bonds, to recover which this suit is brought %

A. The Merchants’ National Bank had agreed to loan the Bank of Mobile money on the faith of these bonds, as I have stated before. This money had not been borrowed by the Bank of Mobile.”

Richard E. Manly, the cashier of the Bank of Mobile from January, 1875, to the date of its failure, testified in behalf of the plaintiff.

Sixth interrogatory. Did the Bank of Mobile, at any time while you were connected with it, expressly or in any maimer pledge the bonds described in Exhibit B, to the Merchants’ National Bank to secure any advances, or for any other purpose whatsoever ?

“ A. I recall no instance where the Bank of Mobile at any time while I-was connected with it, expressly or in any manner, pledged the bonds mentioned in said Exhibit }8 to the deposition of Winston Jones, to the Merchants’ National Bank to secure advances, or for any other purpose, except one instance, which is shown and contained in Exhibit 21 to the deposition of Winston Jones in this case, and except that it was generally understood between both banks that the bonds should operate as a security to the Merchants’ National Bank for any debt for which the Bank of Mobile should be primarily liable to it.”

“ Eighth interrogatory. Did there, at any time, exist any understanding or agreement whatsoever between the Bank of Mobile and the Merchants’ Bank, whereby either bank had any lien upon or interest in the property or moneys of the other in its possession, except in cases where such property or moneys were expressly pledged by the owner ?

A. There was never any formal agreement between the two banks whereby either bank had a lien upon or interest in the property or moneys of the other in its possession, except in cases where the money or property was expressly pledged by the owner, but we sometimes drew on the Merchants’ Bank when we did not have funds in its hands, knowing that it held convertible securities of ours, and they paid such drafts, and we supposed that they did this on the faith of having such securities.”

Tlie foregoing is the principal evidence given by the plaintiff in respect to the purposes for which the defendant held the bonds in question.

Jacob D. Yermilye, who liad been cashier or president of the Merchants’ National Bank since 1858, testified in behalf of the defendant as follows in respect to a conversation had with Mr. Pratt, the former president of the Bank of Mobile :

“ Q. Hid yon have conversations with him, either in the same or other interviews, about the securities or bonds or whatever else there was in the hands of the Merchants’ Bank belonging to the Mobile bank ? A. Allusion was made to that by him and by me.

“ Q. What was said in substance ? A. The substance of it was that, while the account did not seem .to me to be satisfactory, we always had something behind to cover what we might overpay on account, apparently overpay.

Q. Ho you rememoer what it was ? A. Sterling exchange drafts, and if we had bonds at- that time, which I think we had, of course it covered that.

Q. Was there anything said for what indebtedness of the Mobile bank you should look to these securities ? A. I cannot answer that question as you have put it. I can only say it was the general understanding. The security that we had was to cover any obligation that they might owe.”

Mr. Yermilye and Mr. Cornelius Y. Banta, the cashier of the Merchants’ National Bank since 1872, both testified that there was no understanding between the officers of the'bank limiting the lien of the Merchants’ National Bank upon the securities held by it to debts for which the Bank of Mobile was primarily liable.

These are the leading features of the evidence on both sides respecting the existence of the lien, and we think there was sufficient to raise a question of fact for the jury, and that it cannot be said that their determination is contrary to the weight of evidence. We have not overlooked the letters written by the president of the Bank of Mobile hi August, 1883, and June, 1884, and the telegram of July 8, 1884. By an examination of the evidence of the officers of the Bank of Mobile it will be seen that they conceded that a lien was given on those securities for such debts as their hank was primarily liable for to the Merchants’ National Bank. The evidence and tlie course of dealing between the two banks warranted the verdict which was rendered.

It is urged in this court, by the learned counsel for tlie appellant, that the evidence was insufficient to justify the jury in finding that there was a lien upon the balance of the account due from the respondent to the appellant. No such question was presented to the trial court. The court was not asked to instruct the jury to find whether a lien existed upon the bonds, and also whether one existed upon tlie account. The practice arising out of this controversy has been somewhat peculiar.

In May, 1885, the Merchants’ National Bank brought an action against Winston Jones, as assignee, to recover the amount of the note, in which an attachment was issued. May 15, 1885, a stipulation was entered into between the attorneys of the respective parties, by which it was agreed that Jones should forthwith commence an action against the Merchants’ National Bank and the Bank of Mobile for tlie purpose of determining the rights of the parties in the bonds and in the balance due on the account.

Pursuant to this stipulation, this action was begun June 9, 1885. Two causes of action are set out in the complaint; one in replevin, arising out of an alleged wrongful conversion of the thirty bonds, and the other, assumpsit, for the recovery of a money judgment for the amount due on the account. The causes of action require, under the Code, different and inconsistent judgments and executions; the first for a specific recovery of the chattels and for damages, in case they cannot be recovered, and the second for an ordinary money judgment and execution. No objection was raised by the defendant to this misjoinder, probably because of the stipulation entered into between them and on the theory that the sole question to be tried was whether there was a lien or not. The successful party on this issue was entitled to costs. The action, having been brought and tried upon the theory that whether there was a lien or not, was the issue, without objection by either party until after the verdict, it is too late for the defeated party now to raise the question of irregularity.

On this verdict a judgment has been entered declaring the existence and the amount of the defendant’s lien. When this judgment is paid tlie plaintiff will be entitled to receive the property in the hands of the respondent, or if the balance due it on account and sufficient of the avails of the bonds he applied in payment of the judgment, the plaintiff will he entitled to the remainder.

The plaintiff now insists that he was entitled to a judgment declaring him to be tlie general owner of the bonds and funds. Iiis general ownership has never been denied, hut has been admitted from the outset, and is now admitted, the defendant simply claiming a lien on the bonds and account, tlie amount of which is fixed by the judgment. It is too late for the plaintiff, after having initiated this irregular procedure, to seek to set aside the judgment because of tlie irregularity. Under' the complaint in this action it was impossible to enter a judgment in strict accordance with the Code, but the one which has been entered sufficiently declares and protects the rights of the litigants and carries out their stipulation.

None of the exceptions taken to the admission or exclusion of evidence, or to the instructions of the court to the jury, are challenged by the learned counsel for the appellant, and they have not been considered.

The judgment and orders should be affirmed, with costs.

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

Judgment and orders affirmed, with costs.