author: Macombek, J.:

text:
    THEODORE KIRSCH, by MICHAEL J. KIRSCH, his Guardian Ad Litem, and Another, Respondents, v. ORANGE L. TOZIER and Another, Appellants, Impleaded with Others, Defendants.

      Mortgage — held in trust by a general guardian — power to satisfy it prematurely — remedy in equity — constructive notice — what recitals put a subsequent mortgagee upon inquiry — additional allowance.

    Orange L. Tozier, who, in 1873, was appointed general guardian of the three infant children of John Kirsch, in 1875 took from Lester H. Tozier, who had acquired title to certain real estate of John Kirsch, a mortgage in trust for the infants; payable, one-third of the principal sum secured thereby, at each of three dates, each being the date of arrival at majority of one of the infants; interest, by the terms of the mortgage, was payable annually.
    In 1883 Lester II. Tozier conveyed the premises to Orange L. Tozier, who, in 1886, before any of the principal sums secured thereby became payable, discharged the mortgage of record, and subsequently borrowed money from a bank and secured the payment thereof by a mortgage upon the same premises. The abstract of title, upon the faith of which the bank made this loan, described the mortgage of 1875 as being given by Lester H. Tozier and wife to O. L. Tozier, in trust for the minor children of John M. Kirsch, deceased. “Discharged March 9, 1886. E. M. Jennings, Olerk.” Then followed a brief statement of its terms and date of record. The bank lent the money in good faith and without any notice of the existence of the L. H. Tozier mortgage, except such notice as the record afforded.
    In an action brought in the interest of the infants to reinstate the mortgage:

      Meld, that the trust or trust power created in favor of the infants was valid, and that it imposed upon the trustee a duty which equity would enforce.
    That he had neither the right nor the power to satisfy the mortgage of record.
    That the recitals in the mortgage were constructive notice to the bank of the irregularity of the discharge, and that it was thereby put upon inquiry.
    That inquiry would have shown the fact that the minors would arrive at majority upon the dates when the several portions of the principal became payable, and that, consequently, the satisfaction thereof was an act in contravention of the purpose of the trust.
    That where an extra allowance is excessive, because calculated on a sum greater than the value of the subject-matter, the objection should be taken at Special Term. If presented for the first time upon appeal the court will do no more than correct the error in computation.
    Appeal by tbe defendant Orange L. Tozier from a judgment of tbe Supreme Court, entered in the office of tbe clerk of tbe county of 'Wyoming on the 30th day of September, 1891, among other tilings, adjudging a mortgage executed by Lester H. Tozier and wife to Orange L. Tozier, in trust for tlie infant children of John Kirsch, to be a lien upon the premises described in it prior to a mortgage given by Orange L. Tozier to the Buffalo Savings Bank, and directing a sale under it, with notice of an intention to bring up for review upon the appeal an order entered in said clerk’s office September 30, 1891, granting an extra allowance of costs, after a trial before a referee. .
    Also an appeal by the defendant, the Buffalo Savings Bank, from the same judgment.
    The statement of the abstract of title relative to the mortgage was as follows:
    Lester LI. Tozier and Nellie, his wife, to O. L. Tozier, in trust for Michael Kirsch and Theodore Kirsch and Peter Kirsch, minor children of John M. Kirsch, deceased.
    Discharged March 9, 1886. E. M. JENNINGS,

      Cleric.

    Mortgage dated October 15, 1875, recorded October 23, 1875, in Liber 45 of Mortgages, page 201. Given for $1,000 and interest. Conveys the premises described in abstracts Nos. 4, 6 and 8.
    The condition of the mortgage was, so far as material, as follows :
    “ This grant is intended as a security for the payment of the sum of one thousand dollars to be paid as'follows: The sum of three hundred and thirty-three dollars and thirty-three cents on November 13th, 1887; the sum of three hundred and thirty-three dollars and thirty-three cents on March 18th, 1891, and the sum of three hundred and thirty-three dollars and thirty-three cents, October 6th, 1892. The. interest on the above to be paid annually from the 1st day of April, 1876, according to the condition of a bond this day executed and delivered by the said party of the first part to the said party of the second part; and this conveyance shall be void if such payment be made as herein specified.”

      I. Sam Johnson, for the appellant, Orange L. Tozier.

      Spencer Clinton, for the appellant, the Buffalo Savings Bank.

      F. C. Peck, for the respondents.
   Macombek, J.:

This action was brought to reinstate a mortgage executed by the defendant Lester H. Tozier and his wife to the defendant Orange L. Tozier, which was made in trust for the plaintiffs, Michael Kirsch and Theodore Kirsch, and for Peter Kirsch now deceased, minor children of John Kirsch, to set aside a discharge of such mortgage executed by Orange L. Tozier, and for foreclosure of the mortgage and sale of the mortgaged premises for the benefit of the persons named as cestui que t/rust.

The lands in question consist of 102 acres situate in the town of Sheldon, Wyoming county, New York, of which John Kirsch died seized in the year 1872. On the 8th day of January, 1813, the defendant'Orange L. Tozier was appointed general guardian of the infant children, Michael Jt, Theodore and Peter Kirsch. At the time of his death John Kirsch owed debts which, with the incumbrances upon his real estate, exceeded the value of both his personal and real property. Orange L. Tozier and Elizabeth Kirsch, the latter the widow of the deceased, were appointed administrators of the estate of John Kirsch. Subsequently to this it was agreed between them and Lester H. Tozier, a. son of Orange L. Tozier, that they should purchase the mortgages then existing on the farm, foreclose them, and procure a title to the land, and convey the same to Elizabeth Kirsch, who should, in turn, by mortgage thereon, secure to Lester H. Tozier the amount paid by him, and give a mortgage upon the farm of $1,000 to these three children. This arrangement was carried out, except that upon a sale of the lands, either by direct purchase at the sale or by deed coming immediately from the purchaser, Lester H. Tozier, became the owner for the consideration, in all, of $1,131.56. Thereupon it was further arranged between Orange L. Tozier and the widow, Elizabeth Kirsch, that the widow should convey to the then holder of the title, Lester H. Tozier, all her interest in the lands to which she was entitled as widow, and that a mortgage should be executed by Lester II. Tozier to Orange L. Tozier, in trust for the three children, in the sum of $1,000, one-third thereof payable to each of the three children when he should arrive at age, with interest in the meantime. Having received the deed from Mrs. Elizabeth Kirsch, Lester II. Tozier and! his wife executed to Orange L. Tozier, in trust for Michael Kirsch, Peter Kirsch and Theodore Kirsch, the mortgage in question, dated the 15th day of October, 1875, expressing^ a consideration of $1,000, payable as follows: The sum of $333.33 November 13, 1887; the sum of $333.33 March 18,1891, and the sum of $333.33 October 6, 1892, with interest payable annually from the 1st day of April, 1876. This instrument was delivered to Orange L. Tozier, who caused the same to be recorded in the proper clerk’s office on the 23d day of October, 1875. The mortgagee and trustee paid the interest upon this mortgage to Elizabeth Kirsch, the mother of the children, in pursuance of a previous arrangement, until the spring of 1886, since which time no part of the principal or interest has been paid thereon by the trustee for the benefit of either of the children.

On the 3d day of September, 1883, Lester IT. Tozier and his wife executed and delivered a deed of the farm to Orange L. Tozier, at a'consideration, as expressed in the deed, of $1,000, and the record title of such farm has since been in Orange L. Tozier. After acquiring this title, and on the 19th day of February, 1886, Orange L. Tozier executed and acknowledged a discharge of the mortgage, and caused the same to be recorded in the proper clerk’s office on the 9th day of March, 1886. On the 27th day of January, 1886, before the execution of such discharge, Orange L. Tozier applied to the defendant, the Buffalo Savings Bank, for a loan of $2,000 upon this farm, which application was granted on the 1st day of February, 1886, and on an examination of the title of such farm, submitted to the officers of the bank, there was an abstract certified by the proper clerk of Wyoming county to the effect that Orange L. Tozier appeared to be the owner of the farm. On such abstract a memorandum of the mortgage, sought by this action to be reinstated, described the mortgage simply as being given for $1,000 and interest, having written across the face of the memorandum as follows: “ Discharged March 9, 1886, E. M. Jennings, Clerk.” The defendant, the Buffalo Savings Bank, at the time of taking its mortgage and advancing the money thereon, had not, either through any of its officers or attorneys, any knowledge or notice of the existence of f.bi's mortgage now sought to be reinstated in this action, except the memorandum on the abstract of title of its discharge, and the constructive notice given by the record of such mortgage.

Under these facts, we think the learned referee was correct in granting to the plaintiffs the relief sought by this action. By the terms of this trust mortgage there was disclosed by the record thereof in the county clerk’s office a notice to all persons that it had been executed for the benefit of the three minor children of John M. Eirsch, deceased. That this trust or this trust power (1 R. S., 729, § 58) was valid admits of no doubt, for the beneficiaries were minors. Its execution or non-execution did not depend on the will of the mortgagee; on the contrary, his obligation was imperative and imposed a duty on him the performance of which may be enforced in equity for the benefit of the parties interested. (1 R. S., 781, § 96.) It was not competent for Orange L. Tozier to repudiate the trust; on the contrary, he was bound to carry out the same faithfully. After the mortgage had once taken effect it became irrevocable and its operation could not be affected by any subsequent act of the mortgagee, by way of repudiation, in discharging the lands from the lien of the mortgage, or in any other way impairing the rights of his wards. (Wallace v. Berdell, 97 N. Y., 25.) The question, therefore, as against the appellant, Orange L. Tozier, is not difficult of solution upon the merits of the transaction.

A point, however, is made by his learned counsel that the remedy adopted in this case was not the correct one; that the plaintiff should have made a demand upon the trustee that he foreclose the mortgage, or, failing in that, that he should be called to an account and should be required to pay only the difference between the sum that he had- apparently deprived the cestui que trust of and the actual moneys expended by him in their behalf. But we cannot follow their lead in the direction of this argument. It would be an expression of a fatuous confidence to expect that this trustee, after having discharged of record the mortgage which he held in trust for infants, thus violating to the full extent of his ability the trust imposed in him, should himself be intrusted by the court with the duty of restoring the mortgage to its proper record and of vindicating the integrity of the trust which he had so wantonly violated. The case must, therefore, be treated in respect to the remedy on the theory that the trustee has no disposition, and, under the circumstances, no power, to repair the injury to his wards, which he has deliberately wrought, and the case must be permitted to proceed against him in invitum.

In respect to the appeal taken by the Buffalo Savings Bank a different question is presented. The provision for the payment of the principal of the trust mortgage was sufficient, in our judgment, to put any person examining the records upon inquiry, and on such inquiry the fact would have been easily ascertained, even though imperfectly disclosed in the mortgage itself, that the minors would arrive at their majority, respectively, at the very dates when these several sums of principal were made payable. The learned referee has charged this appellant with such constructive notice of the terms of this trust mortgage and with constructive notice of the irregularity of its discharge, placing his decision mainly upon the case of McPherson v. Rollins (107 N. Y., 316). In that case a person, for the purpose of making a provision for his daughter and two grandchildren, conveyed to his daughter certain lands and received from her a mortgage back thereon, which stated that it was given as security, among other things, for the payment to him or to the general guardian of the plaintiff in that action, one of the grand-daughters, of the sum of fifty dollars annually for the benefit of that plaintiff until she should arrive at the age of fifteen years, and thereafter the sum of one hundred dollars until she should arrive at the age of twenty-one years. Both instruments were recorded. The mortgagee thereafter, and without consideration, executed a certificate of satisfaction of the mortgage, which was recorded, and a memorandum was made in the margin of the record of the mortgage to the effect that it was dischaiged of record. Subsequently the lands were conveyed for a full and valuable consideration to a grantee who had no actual notice of the execution of the trust mortgage. In an . action to foreclose that mortgage, which had actually been discharged, it was held that a valid and irrevocable trust was created by it, and as the same had in no way been renounced by the cestui qtie trust, the discharge was in contravention of the trust, and consequently void. It was there further held that the grantee was chargeable with notice that the plaintiff had a beneficiary interest under the mortgage, and the satisfaction thereof was an act not in the execution of the trust, but beyond the power of the trustee to perform. Danforth, J , in delivering the opinion of the court, said: “ The important inquiry before the referee was, whether the defendants had any notice, actual or constructive, of the plaintiff’s rights, or of the character in which Deming held the mortgage. His finding that they had no actual notice reduces our inquiry to the effect of the recording act. As intending purchasers, they must be presumed to investigate the title and to examine every deed or instrument forming a part of it, especially if recorded. They must, therefore, be deemed to have known every fact disclosed (Acer v. Westcott, 46 N. Y., 384), and every other fact which an inquiry suggested by those records would have led up to. Thus they are plainly chargeable with notice of the mortgage, and of all the facts of which the mortgage could inform them.”

That cause was tried before the venerable jurist, the late Addison Gardiner, and was the last important case decided by him; and of his opinion then delivered, which has been furnished to ns, and upon which his decision in that case was affirmed by this court, it is not too much to say that, in grasp of facts and of law, and in its vigorous judicial style, it shows no .diminution of those rare judicial powers exhibited by him in his first opinion delivered thirty-five years before, contained in the first appeal in the first volume of the Court of Appeals reports. Inasmuch as that opinion has never found its way into the reports, and as it expresses accurately our views of the case now before us, a quotation from it may not be deemed out of place. Judge Gardiner said: “ The next important question presented is whether these defendants had, at the time of their purchase, constructive notice, or, what is the same in effect, notice to put them on inquiry as to the trust in question. The leading purpose of the recording acts, it is supposed, was to enable purchasers of real estate, and those having liens upon it, to protect themselves and the public against the frauds of previous owners and the claims of subsequent purchasers and incumbrancers, by spreading upon the records of the appropriate county a statement of their respective claims or their discharge, which should constitute a notice to all persons obtaining or seeking to obtain an interest in the lands designated of the matters contained in such statement. These .acts, as construed by our courts, require due vigilance upon the part of those giving this notice, and of those affected by it. The one must record his claim and the other search for it with all reasonable expedition and thoroughness. (Heilbrun v. Hammond, 13 Hun, 419; Viele v. Judson, 82 N. Y., 32, and cases ; Ely v. Scofield, 35 Barb., 330.) In the case last cited the mortgage had been assigned, but the assignment was not recorded; then the mortgage was discharged by the only person apparently authorized to secure payment, and the discharge duly recorded; due search disclosing no defect in the title, a purchaser in good faith relying upon the discharge was protected against the claim of the assignee and the lien of the mortgage. In Viele v. Judson (supra) the assignment was first recorded and the mortgagee subsequently executed a discharge, which was also' recorded; the purchasers relied upon the discharge without search for the assignment; held, that the record which showed the discharge showed also its invalidity. The same doctrine for like reasons is affirmed in 13 Hun. In view of these decisions, what is the situation of these parties? The mortgage of the 14th of July was duly recorded with the deed to which it referred, and through which the Rollins derived title to these premises. The mortgage declared the trust, the power of the trustee, the age of the cestui que trust, and consequently the inability of the trustee to discharge the investment in their favor and that of the infants to sanction such change, even if desirable” (citing authorities). “Having given public notice of the claim of their children on the records in the clerk’s office,, those who acted in their behalf had done all in their power to protect their interest and secure the public against the fraud of former owners- and mortgagees. The Rollins, on the other hand, had concluded their purchase without a personal examination to be made. They undoubtedly believed they had secured a good title, a belief induced mainly by their confidence in those with whom they dealt, and partially confirmed by a defective search, procured by Mr. Janes and shown to them, in which the Gray and Stevens mortgages of the fourteenth of July were omitted as though never executed or recorded. Such an omission from a paper purporting to give a history of matters-affecting the title to lands gathered from the records was erroneous, and misleading. It seems in this case to have been exceptional, also, since a subsequent mortgage to one Allen, although discharged, is-noted and the facts stated as they should be. The notion that a discharge expunges the mortgage and leaves the record tabula rasa is absurd. The record always remains, but whether as evidence of an existing lien or not will depend upon the character of the certificate and the authority of the person assuming to execute it. In this case the whole record, if diligently examined, would disclose the trust, the age of the beneficiaries, and that Deming, as their trustee, could not discharge the lien of the mortgage to the prejudice of minor children, while he possessed full power in that respect as to his own annuity. As in Viele v. Judson (supra), the record which showed the discharge, if followed out, would prove its invalidity. The records invited investigation; the discharge pointed directly to the record of the mortgage, book and page, and that record in turn by the memorandum upon it referred back to the certificate. The inquirers had only to read and learn all that was necessary for their protection. The defendants failed to do this; and between these parties, both innocent, which shall suffer ? The daughters, who used every measure permitted by law with more than ordinary diligence to apprise these purchasers of the trust in their favor, or the defendants, who neglected all the usual precautions, and risked their investment upon such outside information as could be obtained without'expense or trouble.”

We think, therefore, that the referee did well to follow the decision of McPherson v. Rollins, and that such authority, under the facts disclosed, leads to an affirmance of the judgment entered upon his report.

In respect to the appeal by the defendant Orange L. Tozier from the order granting an additional allowance of costs, under section 3253 of the Code of Civil Procedure, on the ground that the case was difficult and extraordinary; it appears from the referee’s report that the valne of the subject-matter involved in this action was $1,323, being the amount due on the mortgage, and that, consequently, the amount of one hundred dollars was slightly excessive of the limitation of five per cent imposed by the statute. It was the duty, we think, of the appellant’s counsel to raise .this question at the Special Term, which he failed to do. It appears, by the order entered, that the only objection made to the application for an additional allowance of costs was that the plaintiffs were not entitled to any additional allowance. • A rigid application of the rule would lead us to an affirmance of this order upon the ground that the act of the appellant, at the Special Term, probably led the court into the error of allowing too much under this section of the Code. But our modification of the order ought not, under the circurnstances, to affect the question of costs of this appeal. Thi$ order is modified by allowing, instead of one hundred dollars, the sum of sixty-six dollars and fifteen cents, and as so modified affirmed.

Dwight, P. J., and Lewis, J., concurred.

Judgment and order appealed from affirmed, with costs, except that the additional allowance of costs is reduced from! one hundred dollars to sixty-six dollars and fifteen cents.


source: Caselaw Access Project

author: Lewis, J.:

license: Public Domain

text:
    STILLMAN F. PRATT, as Administrator of GEORGE W. SMITH, Deceased, Respondent, v. THE LAKE SHORE AND MICHIGAN SOUTHERN RAILWAY COMPANY, Appellant.

      Negligence — defective machinery — special agreement of a brakeman — measure of his duty — his negligence a question for the jury.

    A brakeman, who was killed while attempting to set a defective brake, four out of six of the spokes of which, as the evidence tended to show, were broken at the time of the accident, had, upon being employed, signed an agreement, in which, among other things, he agreed that before using a car he would examine it to ascertain its condition and soundness; that he was to be allowed sufficient time to do this, and might refuse to obey an order which would expose him to danger.
    It appeared that the railroad corporation which employed him had experts to make such examinations. It did not appear, however, that the deceased knew anything about machinery; and there was evidence tending to show that the defect was not easily discoverable.
    In an action brought by the administrator of the deceased to recover the damages occasioned by his death:

      Meld, that the agreement was not a defense to the corporation.
    That the measure of the brakeman’s duty under it was to be vigilant to discover defects in the machinery, and to refrain from using such as he knew was defective. That the question of his negligence was one which was properly submitted to the jury.
    Appeal by the defendant, tlie Lake Shore and Michigan Southern Railway Company, from an order, entered in the office of the clerk of the county of Erie on the 24th day of October, 1891, denying a motion for a new trial upon a case and exceptions; and also from a judgment, entered in said clerk’s office on the 29th day of October, 1891, upon a verdict for the plaintiff for $3,000 after a trial at the Erie Circuit before the court and a jury.

      James F. GPaok, for the appellant.

      Tracey O. Beaker, for the respondent.
   Lewis, J.:

The deceased was employed by the defendant as a brakeman, and on the 10th day of June, 1890, it became necessary for him, in discharging his duties as a brakeman, to set a brake upon one of the cars of the •defendant, and in so doing it broke, he was precipitated from the car to the ground and was killed by the train of cars passing over him.

It was found upon examination that the brake was defective, in that four of the six spokes which connected the hub and rim of the wheel of the brake were broken off where their ends had joined the rim. The ends thus broken were rusty, showing that they had been broken for a long time. Of the two sound spokes broken off when the deceased attempted to set the brake, the broken ends were bright, showing that they were freshly broken. The defective condition of the brake caused the accident.

There was abundant evidence tending to establish that the defendant was guilty of negligence in failing to ascertain, by a proper inspection, the defective condition of the brake. The defendant’s negligence became a question of fact for the jury. The defendant introduced in evidence an agreement signed by the deceased on the 18th day of December, 1884, which provided that having been employed by the defendant he acknowledged the receipt of printed rules and regulations of the company.

The agreement further stated: I do hereby agree with it in consideration that it will pay me the wages stipulated, that I will, so long as I remain in its service, faithfully respect and obey all said orders, rules and regulations, and all others which may be adopted and of which I may have notice; and I do further agree that I will for myself, in all cases before exposing myself in working or in being on the tracks or grounds of the company, or in working with or being in any manner on or with its cars, engines, machinery or tools,-examine for my own safety the condition of all machinery, tools, tracks, cars, engines, or whatever I may undertake to work upon or with, before I make use of or expose myself on or with the same, so as to ascertain, so far as I reasonably can, their condition and soundness. * * *

“The object of this agreement being first to protect me from suffering personal injury from any cause; second, that while the company will be responsible to me for the discharge of all its duties and obligations to me and for any fault or neglect of its own or of its board of directors or general officers, which are the proximate cause of injury, yet it will not be responsible to me for the consequences of my own fault or neglect. * * *

“ It being expressly agreed on the part of the company that it is my right and duty, under all circumstances, to take sufficient time, before exposing myself, to make such examinations as I have here agreed to; and to refuse to obey any order which would expose me to danger.”

It is the contention of the defendant that the deceased was guilty of negligence himself in not having discovered the defective condition of the brake before using it. There was evidence showing that the defendant employed experts whose special duty it was to examine the machinery, tools, etc., used by the defendant. The deceased was a brakeman simply. There was no evidence in the case that he was an expert in the examination of machinery.

It is quite clear that it would not have been practicable for the deceased to have performed the duty of an expert examiner before using the machinery of the cars he was required to use in the discharge of his duties. The cars composing the trains he was required to work on were frequently changed in making up trains. The exigencies of the business prevented that deliberation which would obviously be necessary to a proper examination of the machinery. He was required to be attentive and vigilant in the discharge of his duties to discover defects in the machinery, and to refrain from using machinery if he learned it was in a defective condition; and that, we think, was the extent of the requirements of the agreement.

The evidence tended to show that it required an expert to have discovered the defects in his brake.

The question of the deceased’s negligence was properly submitted to the jury.

We fail to find any reason for the reversal of the judgment.

Dwight, P. J., and IVIacombbr, J., concurred.

Judgment and order appealed from affirmed.


text:
    In the Matter of the Petition of CHARLES E. MORRIS, as Executor and Trustee of GEORGE H. THOMPSON, to Sell or Mortgage Real Estate.

      Trustees — when they will be authorized to mortgage or sell trust real estate to pay extraordinary assessments.

    In 1884, George H. Thompson died and left a will, by which he gave his wife the use for life of all his real and personal estate “ after deducting therefrom the sum necessary to keep such real estate in proper repair, and to pay the taxes, assessments and liens thereon. ” Part of his estate was land near Rochester, at the time of his death of little value, which subsequently rose in value very rapidly, though not built upon, and heavy assessments were imposed upon it for street improvements to such an extent that if the widow were to live in the style in which her husband had, the payment of such expenses and of the assessments would have consumed much more than the income of the entire estate,
    Upon an application made by a trustee, who was given power to care for the real estate and pay over the net income, for leave to sell or mortgage the real estate to pay the extraordinary assessments:
    Held, that as the court inferred from the will that the testator intended his widow i to live as she had before his death, the language of the will would be taken to mean that there should be deducted from the gross income only such taxes and assessments as the testator had been accustomed to pay thereon in his lifetime, and that it was a proper case in which to authorize the trustee to mortgage the property or to sell a part thereof. (R. S., pt. 2, chap 1, tit. 2, art. 2, § 65, as amended by chapter 257 of the Laws of 1886.)
    Appeals by Herbert Morris, Ralph Morris and Edward Morris, infants, by Henry ~W. Conklin, their guardian ad litem, and by Jeanette M. Morris and David Z. Morris, all being parties to the proceeding, from an order, entered in the office of the clerk of the county of Monroe on the 9th day of November, 1891, granting leave to Charles E. Morris, as trustee of George H. Thompson, deceased, to mortgage or sell certain lands of the deceased to pay certain assessments thereon, except so much of said order as directed the trustee to pay out of any funds in his hands to the guardians ad litem of the infants the sum of fifty dollars each.
    The gross income of the real estate was $9,300. The net income of the widow was $4,000. The lands were unproductive and there were no buildings upon them.
    The testator, by his will, provided, among other things, as follows:
    Section 1. I give to my wife, Carrie L. Thompson, the use, during the term of her natural life, of all of my real and personal estate after deducting therefrom the sums necessary to keep such real estate in proper repair, and to pay the taxes, assessments and liens thereon.
    Section 2. I give and devise to my adopted son, George Mathew Thompson, the use, during his natural life, of the real estate next hereinafter described, but he is, in no event, to take the same before he reaches the age of twenty-four years. In case my said wife should die before the said George Mathew Thompson reaches the age of twenty-four years the said real estate, the use of which is hereby devised to him, shall remain in the hands of my executor, whom I hereby constitute a trustee, to hold the same and take charge of it, who shall pay such portion of the net use or rents of such real estate over to said George Mathew Thompson as shall be necessary for his support and education, and invest the residue of such use, if there be any, in bonds and mortgages on unincumbered real estate. And I direct my executor and trustee to pay to said George Mathew Thompson all the net rents and profits of the real estate described in this subdivision of my will when he shall arrive at the age of twenty-four years, but not in any event until after the death of my said wife, Carrie L. Thompson; such payment to be made annually, semi-annually or quarterly as shall be most convenient. * * *

      Lastly. I make, constitute and appoint Charles E. Morris to be executor of this, my last will and testament. And I hereby constitute the said Charles E. Morris a trustee, for the purpose of carrying the provisions of this instrument into effect and give him full power to take possession after my death of all my property, real and personal, to convert the personal property except household furniture into money and to take possession and charge of all my real estate during the life of my said wife, and to pay over to her the net rents and the profits thereof, and after her death to distribute the net use of the same as herein directed. I give and grant unto my said executor as trustee, full power to do all things necessary for the full and complete discharge of the trust herein created.

      Hewry W. Gonldm, guardian, etc., for the appellants.

      George F. Dcmforth, for the respondent.
   Lewis, J.:

George H. Thompson, of Rochester, died on the 26th day of June, 1884, possessed of various parcels of real estate in the city of Rochester, some of which were improved and productive. There were three lots owned by Mr. Thompson and known as lots 31, 45 and 55, which are represented upon a map attached to the case as outlying farms or pasture lands. These lots were located in the outskirts of the city of Rochester. They were vacant, unimproved and were yielding no revenue. The annual taxes and assessments upon these lots down to the time of the death of Mr. Thompson were comparatively small, not exceeding in the aggregate twenty dollars and fifty cents.

Mr. Thompson left a will, section one of which is as follows: “ I give to my wife Carrie L. Thompson, the use during the term of her natural life of all of my real and personal estate, after deducting therefrom the sum necessary to keep such real estate in proper repair and to pay the taxes, assessments and liens thereon.”

The will then makes a provision for an adopted son and an adopted daughter and makes the appellants residuary legatees. He left no natural children. He appointed Charles E. Morris executor of his will and a trustee for the purpose of carrying its provisions into effect, giving him power to take charge of the real estate during the life of the testator’s wife, and directed that the net rents and profits therefrom should be paid by the trustee to his widow. He was residing at the time of his death with his family, consisting of his wife and adopted son in a dwelling-house located upon large grounds on one of the most valuable residence streets in the city of Rochester. He had been accustomed to live in a liberal manner, maintaining a somewhat expensive establishment, keeping a coachman and horses. It is apparent from his will. that he desired and expected his widow to continue to occupy the homestead, which was owned by her, and live substantially in the same style and manner they had been living. By a codicil to his will he bequeathed to her a span of horses, single and double carriage, with the necessary harness, robes, blankets, etc.

Since the death of Mr. Thompson the residence district of the city of Rochester has extended rapidly out towards the three vacant lots mentioned. A large number of dwelling-houses have been erected in the immediate vicinity of these vacant lots, and the lots are obviously increasing in value.

The city recently authorized and directed extensive improvements, consisting of the opening and improvement of streets through and adjacent to these lots, the building of sewers and sidewalks, and assessments have been made upon the lots to pay for these improvements, amounting in the aggregate, including interest and expenses, to the sum of eight or nine thousand dollars. The trustee, Mr. Morris, not having funds with which to pay these assessments, presented a petition to the court asking for an order authorizing him to mortgage these lots, or authorizing him to sell such parts thereof as might be necessary for the purpose of raising the necessary funds to pay these assessments, and the order appealed from was made, authorizing the trustee to execute a separate mortgage on each of the lots for a sum sufficient to pay and discharge the assessments upon the lots respectively, together with the interest, fees and expenses, or if he should be unable to obtain the money by mortgaging the lots, the order authorized him to sell, at public or private sale, enough of each of the lots to raise a sum sufficient to make such payments. The appellants opposed the granting of the order.

It was made to appear to the Special Term justice that the income from the estate was barely sufficient to provide for the support of the widow and adopted son in the manner they had been accustomed to live prior to the death of Mr. Thompson, after deducting therefrom the ordinary taxes and assessments thereon, and the necessary repairs and expenses.

If a sufficient amount should be reserved from the income of the estate to pay these extraordinary expenses, there would not be sufficient left to maintain Mrs. Thompson and her adopted son in the occupation of the premises the testator desired her to occupy, unless a very radical change should be made in her style of living.

It appealed, upon the hearing of the motion, that the lots had already been sold by the city for the non-payment of some of these assessments, and unless the assessments are paid the lots will be lost to the estate. In providing in his will for the payment of taxes and assessments upon his estate out of the income therefrom, we think the testator had in mind the ordinary assessments to which his property had been theretofore subjected, and .not to such extraordinary assessments as have been made by the improvement of these lots. Had these assessments been imposed during the life of Mr. Thompson, he obviously would have raised the money by mortgaging or selling some part of his property.

It is not at all probable that he would have changed his style of living and so reduced his expenses as to have saved a sufficient amount out of his rents and income to pay these assessments; and we are at liberty to give such a construction to his will as to carry out what we believe to have been his intention. It is apparent that these lots are rapidly increasing in value. These improvements, we must assume, have added to their value a sum equal to the amount assessed upon them.

The improvements are of a character proper and necessary to prepare the lots to be used for residence purposes. The improvements enure to the benefit of the appellants and add nothing to the present income of the estate. An emérgency has arisen not contemplated nor provided for by the testator in his will. Funds are required to preserve the estate. It was made to appear to the court that it was necessary and for the benefit of the estate to raise by mortgage thereon or by a sale thereof funds for the purpose of preserving or improving such estate as provided for by the act of 1886.

¥e think the facts presented justified the granting of the order, and it should be affirmed, with costs to the respondent and to the guardian ad litem of the infants, payable by the trustee out of the moneys raised by the mortgaging or sale of the land, and with costs to Henry W. Conklin as guardian ad litem for the infant defendants, Ralph Morris and others, to be paid by the trustee out of the moneys raised as aforesaid.

Dwight, P. J., concurred; Macomber, J., dissents.

Order appealed from affirmed, with costs of this appeal to the respondents and to the guardian ad litem of the infants, payable by the trustee out of the moneys raised by the mortgaging or sale of the land.


author: Andrews, J.:

text:
    THE TORONTO GENERAL TRUSTS COMPANY, as Trustee, Appellant and Respondent, v. THE CHICAGO, BURLINGTON AND QUINCY RAILROAD COMPANY, Respondent, and THE NATIONAL BANK OF COMMERCE, in New York, Appellant and Respondent.

      Trustee — receiving fluctuating secu/rities — effect of a power to sell on the death of the life tenant — not a limitation on the power to sell stocks before the death — liability of a transfer agent.

    George H. Dunscomb died leaving a will and codicil by which he gave to his widow for life the income of all his property, which he left upon her death to his child or children. The codicil then provided that the real and personal estate should be realized upon by the trustee, either at public or private sale, whichever might, in the discretion of the trustee, be deemed best for the interest of the estate, at the death of his wife, and be divided among his issue.
    A. trustee was then appointed, who was empowered to receive and pay over the income of the trust estate to the widow, who was appointed an executrix, and at her death to dispose of it as directed. There was no devise or bequest to the trustee of the estate, a part of which consisted of railway shares which fluctuated greatly in value.
    With the consent of the widow the trustee sold these shares, and they were trans. ferred by a bank, the transfer agent of the railway company, to the purchaser. The trustee thereafter died.
    In an action brought by a substituted trustee against the bank and the railway company to require a transfer to the trustee of the stock so sold or for the recovery of its value:

      Held, that the express power of sale given to the trustee could not be exercised until the death of the widow.
    That as there were no directions what should be done .with the stock, nor any provision forbidding its sale, the trustee had a right, acting in good faith, to sell the same in order to reinvest the proceeds in the securities authorized by law in such cases.

      Qucere, whether it was his absolute duty to sell fluctuating securities received by him as trustee.
    That as the trustee was authorized to sell, the bank, though chargeable with notice that he held the stock as trustee, was justified in permitting it to be transferred upon the books of the railroad, and was not bound to see that the proceeds were thereafter properly invested.
    That the provision directing the trustee to realize upon the real and personal estate at the death of the wife was not a restriction upon the sale of the stock, but was a provision inserted in aid of a distribution of the estate.
    Appeal by tbe defendant, the National Bank of Commerce, in New York, from a judgment of the Supreme Court, entered, after a trial at tbe New York Special Term, in tbe office of tbe clerk of tbe city and county of New York on tbe 27th day of June, 1891, in favor of tbe plaintiff, directing that tbe said bank purchase and turn over to the plaintiff, or a receiver to be appointed herein, .two hundred and eigbty-two (282) shares of stock of the Chicago, Burlington and Quincy Railroad Company, or pay to said plaintiff or to a receiver thereby appointed, money sufficient to purchase said stock in the open market; that tbe net dividends or income from said stock or from said money be paid to tbe defendant bank during tbe lifetime of Harriette C. Hunt, and that on her death the said stock or principal shall belong to and be paid over to the plaintiff herein. That the Union Trust Company of New York be and it thereby was appointed receiver herein for such purpose.
    That the plaintiff recover from the defendant bank the sum of $l,496Tj]-g- costs and disbursements of this action as taxed, and that the plaintiff have execution therefor.
    Also an appeal by the plaintiff, the Toronto General Trusts Company, from so much of said judgment as dismissed the complaint as to the defendant, the Chicago, Burlington and Quincy Railroad Company, and from that part of said judgment which directed that the net dividends or income from the stock or money therein mentioned, be paid to the defendant bank during the lifetime of Harriette C. Hunt, and from said judgment, or so much, or that part, of said judgment which failed or refused to direct the delivery of said shares of stock, or payment of a sum of money sufficient to purchase the same to the plaintiff herein; or which failed or refused to award to the plaintiff or prevented recovery by the plaintiff of the dividends on said stock since the illegal transfer thereof, and interest thereon, less the amount actually paid Harriette C. Hunt by trustee Muirheid, mentioned in the complaint, and from said judgment, and each and every part thereof, which failed, refused or neglected to award to said plaintiff the relief prayed for in the complaint herein, and each and every part thereof, or requested in the requests submitted on1 behalf of plaintiff.

      Parrish & Pendleton, for the plaintiff, appellant and respondent.

      Penjamin D. /Silliman, Jasper W. Gilbert and Frederick A. Ward, for defendant, the National Bank of Commerce, in New York, appellant.

      Root & Clark, for the defendant railroad company, respondent.
   Andrews, J.:

George H. Dunscomb, of Coburg, in Canada, died in Florida on March 25, 1871. He left a will, executed on December 14, 1870, whereby he specifically bequeathed to his wife certain stock and bonds, and gave certain pecuniary legacies to his relatives. His wife was named as executrix, and his brother John as executor. On the same day he executed a codicil, which, except as to the appointment of said executrix and executor, superseded the will, and was as follows:

In the event of my having issue by my wife, Harriette Catherine Dunscomb, I give, devise and bequeath to my said wife for the term of her natural life the income from all the real and personal estate that I may die possessed of, and on her death to the child or children of our marriage now living, or who may be living at the time of my death, or. born after my death, to be divided equally among them, share and share alike.

The, real and personal estate to be realized by my trustee, either at public or private sale, whichever may, in the discretion of the said trustee, be deemed best for the interest of my estate, at the death of my wife, and divided among the issue of my marriage as above directed.

“And I do appoint Charles H. Muirhead, of the city of Philadelphia, in the State of Pennsylvania, in the United States of America, as trustee under this my will, to collect and receive and pay over the income of the trust estate therein comprised to my wife, if she survives me, during her life, and at her death to dispose of the said real and personal estate as above directed.

“And I bequeath to the said Charles II. Muirhead for his services as trustee the usual commission.”

Mr. Dunscomb left a widow, who, at the date of the will, was twenty-six years of age, and a posthumous son, both of whom are still living. The widow qualified as sole executrix, and on January 23, 1872, as such executrix, transferred to Muirhead 261 shares of the stock in controversy, describing him in such transfer as “ Trustee for Harriette C. Dunscomb under the will of George H. Dunscomb,” and on January 31, 1875, a certificate for a stock dividend of twenty-one shares was issued by direction of the defendant railroad, by the defendant bank to Muirhead, as “ Trustee for Harriette C. Dunscomb, under the will.” At the time when the transfer was made by the executrix to the trustee, in January, 1872, she lodged with the bank, with the certificate of her qualification, a copy of said will. On July 3, 1877, Muirhead, as trustee, sold all of such stock and transferred the same upon the books of the defendant railroad, kept by the defendant bank, to Ward, Campbell & Company. This sale and transfer were made with the full knowledge and apjxroval of the widow, who, as above stated, was executrix, and under said codicil was entitled to the income received therefrom during her life. Such stock had fluctuated, since the death of the testator and the transfer to the trustee, about forty cents on the dollar in its market-price, and had declined below its par. The money derived from this sale was loaned by Muirhead upon mortgages on real estate, in the city of Philadelphia, but said mortgages turned out to be worthless, although the interest upon the same was paid to Mrs. Dunscomb until December, 1882. Muir-head died at Philadelphia, May 7, 1883, and was, at the time of his death, insolvent. Upon July 6, 1883, this action was commenced by the plaintiff, an institution alleged to be incorporated under the laws of the Province of Ontario, and which appears to have been appointed a collector of Dunscomb’s estate by the High Court of Justice in Canada. Upon tlie trial the Special Term decided that Muirhead liad no right to sell the stock, and that the defendant bank had notice of such want of authority, and judgment was thereupon entered in favor of the plaintiff against the bank, as prayed for in the complaint, but the complaint was dismissed as against the defendant railroad, and from such judgment appeals were taken by the plaintiff and the bank.

It was held by the Special Term that the trustee Muirhead had no right to sell the stock in question, because such codicil not only did not expressly authorize the trustee to sell the same, but also because the authority given to him to sell the stock, at the death of the widow, inferentially excluded the power to sell it before that time. We think that the grounds upon which the decision was placed •are untenable, and that the judgment in favor of the plaintiff must, therefore, be reversed, and that the judgment in favor of the defendant railroad must, for the same reason, be affirmed.

As the testator left a posthumous child, the will was practically superseded by the codicil, which is inartificially drawn, and does not, in terms, give the stock in question, or any other property, to the trustee. The first sentence of such codicil gives the income of all the testator’s real and personal estate to his wife, during her life, and then, according to its grammatical construction, gives the income to his child or children; although the draughtsman of the will, and the testator, may have supposed that the division of the whole estate was provided for in the last clause of the same sentence.

The next sentence provides, in effect, for a sale of both the real and personal estate at the death of his wife. The third sentence' appoints Muirhead trustee, and empowers him to collect and receive and pay over the income to. the wife, during her life, and at her death, “ to dispose of said real and personal estate as above directed.”

This is substantially all there is of the codicil, and it is apparent, therefore, that it does not contain, in terms, any devise- or bequest whatever to the trustee. It is not necessary, however, to consider whether, in view of the duties devolved upon the trustee, it is to be -implied that the legal title to the personal estate was vested in him by the codicil, because, as above stated, the executrix herself ■formally transferred the stock in question to him, and the legal title ■to such stock was certainly vested in him, in one way, or the other.

It is claimed by counsel for tbe defendant Bank that tbe codicil, when properly punctuated, can and should be construed as conferring-on the trustee a power of sale, which could be lawfully exercised at any time after the death of the testator and the probate of the will.. We are unable, however, to adopt this view, and are of the opinion that the express power of sale given by the codicil could not have been exercised until after the death of the wife. Nor can we adopt the view taken by the Special Term, that the sale by the trustee was. unlawful, because it was not authorized in express terms by the-codicil. The stock in question had fluctuated greatly in value during the time it was held by the trustee, and continued to fluctuate after-wards. It had declined about forty cents on the dollar, while in the hands of the trustee, at the time when the sale was made. The evidence shows such fluctuations prior to the time of the sale to have been as follows: In January, 1873, price was 13&J; in November, 1873, the price was 78 ; in 1871, the lowest price was. 97 and the highest 109. In 1875, the highest price was 119 and the lowest 103J. In 1876, the highest price was 121-J- and the lowest 103£. In 1877, the highest price was 118$- and the lowest. 96. In the month of July, 1877, it ranged from 97, the lowest price, to 100, the highest. On the 3d of July, 1877, the price was 98|- and 99. After the sale, and up to the time of the trial, it. fluctuated from 183£ to 78, and on the day of the trial it was. selling at 79.

If the trustee had received from the executrix money, which, under the codicil, it would have been his duty to invest, and had purchased the stock in question, he certainly would have been personally liable had there ultimately been a loss upon the transaction (Ackerman v. Emott, 4 Barb., 626); and unless the codicil is to be construed as, in effect, forbidding a sale before the death of the wife, a court of equity would have directed a sale at the instance of the trustee or the cestui que trust. For aught that appears in the evidence, the trustee acted in good faith in making the sale. It appears that, before the sale was made, he submitted to the executrix and her second husband the question whether the stock should be sold, and that on June 13, 1877, the husband wrote to the trustee a letter which contained the following: “In reply to yours dated the twenty-fifth ult., and received yesterday, both my wife and self think it would be most advisable to sell the railway stock you mention and to invest it as you may think advisable, and where there will not be the slightest doubt as to its security, and if you will see to this as soon as possible -we shall be very much obliged to you. "We shall be anxious to hear that you have sold out as it -would be better to receive less interest and have it quite safe.” No one but the executrix was interested in the matter, except her son, who was then an infant of tender years. There was apparently some ground for apprehending that the stock might further depreciate in value, if it did not become entirely worthless, and it doubtless appeared to the trustee, the executrix and her second husband, to be a wise and prudent thing to do, to sell the stock and invest the proceeds in some other manner; and it doubtless would have so appeared to any person who was accustomed to exercise reasonable care and prudence in managing his own pecuniary affairs, and especially so to a trustee, who honestly desired to protect the interests of his cestui que trust, and to avoid personal liability on his own part.

It is urged, on behalf of the plaintiff, that in determining the question whether the trustee had the right to sell such stock the intention of the testator should- be sought, and that the codicil should be construed in such manner as to carry out that intention. This contention is undoubtedly well founded, but the difficulty is that, as we read the codicil, the testator did not therein declare what his intention was as to the question whether the stock should, or should not, be sold before the death of his wife; and if this be so, then the fair and necessary inference is that the testator intended that the trustee should be governed by whatever rules the law prescribes in such a case.

It is also said that trustees have those powers only which are expressly conferred upon them by the wills, deed, or other instrument, which creates the trust; and that to imply a power of sale, because securities are of an uncertain and fluctuating value, is to vary the terms of the trust. It frequently occurs, however, that courts, in the administration of justice, are obliged not only to enlarge or vary the terms of a trust by implication, but even to imply an intention to create a trust, when a trust has not been directly or expressly declared in terms.

It is also urged that to imply a power of sale, not expressly given by the instrument creating the trust, is to invest the trustee with a discretion, the exercise of which may, as in the case at bar, result disastrously for the cestui que trust. The answer to this argument is that, in the absence of a statute governing the case, courts should adopt a rule which, it is reasonably certain, will produce the best results in the greatest number of cases. The rule in England and in this State, which forbids a trustee to invest trust funds in the securities of railroads and other corporations is a most salutary one; and we think the rule is, or ought to be, that a trustee who receives trust property, invested in such securities, should, if he is not requited to sell the same, at any rate, have the right to make such sale, and invest the proceeds in the same manner that he would be required to do if the trust property received by him consisted of money. In some cases this course may result in loss of income, but if the trustee is honest, and reasonably careful, the principal at least will be safe. On the other hand, the doctrine contended for by the plaintiffs counsel would, in many cases, lead to the result that when, as frequently happens, the instrument creating the trust contains no power of sale, the trustee has no duty to watch the securities in his charge, to see whether they are appreciating or depreciating in value; and even if he sees that they are depreciating in value, and may eventually become worthless, he is wholly powerless, and must stand idly by until the trust fund has entirely disappeared. A doctrine, which leads to this result, cannot be a sound one, and while we concede that the general rule is, as claimed by plaintiffs counsel, viz., “ that trustees may not sell or vary specific securities given in trust, nor securities left by a testator, in which he has himself invested the funds,” we think that this rule does not prevent trustees from converting wasting securities into those of a permanent character, and converting investments, that are not authorized by law, into such as are allowed by law. We are also of the opinion that the general rule applicable to this class of cases is correctly stated in section 465 of Perry on Trusts, and is as follows: “There is said to be a distinction between an original investment improperly made by trustees and an investment made by the testator himself and simply continued by a trustee; but it is a distinction that cannot be safely acted upon. If a testator gives any directions in his will to continue his investments already made, trustees must, of course, follow such directions ; and if they follow them in good faith, they will not be liable for any losses unless they are negligent in failing to change an investment when it ought to be changed to save it; for it cannot be supposed that the direction of a testator to continue a certain investment relieves the trustee from the ordinary duty of watching such investment, and of calling it in when there is imminent danger of its loss by change of circumstances. If no directions are given in the will as to the conversion and investment of the trust property, trustees, to be safe, should take care to invest the property in the securities pointed out by the law. It is true that a testator, during his life, may deal with his property according to his pleasure, and investments made by him are some evidence that he had confidence in that class of investments; but in the absence of directions in the will, it is more reasonable to suppose that a testator intended that his trustees should act according to law. •Consequently, in States where the investments which trustees may make are pointed out by law, the fact that the testator has invested his property in certain stocks, or loaned it on personal security, will not authorize trustees to continue such investments beyond a reasonable time for conversion and investment in regular securities. * * * Taking all the cases together, it would appear to be a settled principle that trustees are not justified, in the absence of express or implied directions in the will, in continuing an investment permanently made by the testator, which they would not be justified themselves in making. The principle probably has this qualification that if a trustee ■continue such investment in good faith, and a loss happens, he would be held to replace the original sum only, without interest.”

We are referred to quite a number of cases by the counsel for the respective parties. Some of these tend to support the views above expressed, and some do not. Some of them arose in the case of executors, and it is claimed by plaintiff’s counsel that they are, therefore, inapplicable. Most of the- cases cited arose in the English courts, and are not controlling here, except so far as the decisions appear to be based upon sound principles of natural justice. We do not see that it would subserve any useful purpose if we should make an elaborate examination of these cases, and point out wherein they support, or antagonize, the views entertained by us. In the absence of any controlling decision by the courts of this State to the eontrary, we feel at liberty to adopt the rule which is founded, as we think, in reason .and justice, and which is, that where a trustee receives such personal securities as the stock in question, and the instrument creating the trust neither empowers, nor forbids, a sale, he has the right to sell the same, for the purpose of reinvesting the proceeds in such securities as he is authorized by law to invest in. Whether it is the absolute duty of the trustee in such case to sell the securities, and whether in case he does not sell them, and loss ensues, he can be held liable for such loss, it is not now necessary to decide. If Muirhead had the right to sell the stock in question, the defendant bank, though chargeable with notice that he held the stock as trustee, was justified in permitting the transfer of the stock upon the books of the defendant railroad, which were in its custody, and was not bound to see to it that the proceeds were thereafter properly reinvested, and cannot be held liable for the subsequent loss of the trust fund.

The plaintiffs counsel, however, contends that the codicil contains a provision, which, by necessary implication, forbade the sale before the death of the Avife, and this view was also taken by the Special Term. The provision in question is the one which declares that the- real and personal estate is to be realized by the trustee, at public or private sale, at the death of the wife.

We are unable to accept this construction of the codicil. Said provision must be construed with reference to the rule, above laid down, as to the right of the trustee to sell, when he is not, in terms, forbidden to do so. There was no specific bequest of the stock to the trustee, for, as above stated, the codicil does not, in terms, give anything to the trustee. Such stock, if needed to pay the testator’s debts, might have beei/sold by the executrix, and never have come into the trustee’s hands. The testator saw fit to provide for the distribution of his estate, at the death of his wife, among his children, in cash, and the provision for the sale appears to have been inserted solely for the purpose of enabling the trustee to make such distribution. It does not, in any way, refer to said stock, or any particular property, but, as we construe the codicil, it is merely a general direction that whatever real and personal property should be held by the trustee, at the time of his wife’s death, should then be sold, and the proceeds divided among his children. We cannot think that this provision should be regarded as forbidding the trustee to sell the stock before the death of his wife.

Upon the whole case, we are of the opinion that the judgment in favor of the plaintiff against the defendant bank should be reversed and new trial ordered, with costs to appellant to abide the event, and that the judgment in favor of the defendant railroad should be affirmed, with costs.

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

Judgment of the plaintiff against the defendant bank reversed, and new trial ordered, with costs to the appellant to abide event, and judgment in favor of the defendant railroad affirmed, with costs.


author: O’Brien, J.:

text:
    CHARLES C. WEBB, Respondent, v. THEODORE A. MEYERS, Appellant.

      Gratuity fund of the New Toi'k Stock Exchange — gift by will — a mistake in payment — implied promise — money had and received.

    It was provided by tbe constitution of the New York Stock Exchange that upon the death of a member leaving neither widow nor children, his next of kin should receive a sum of money as a gratuity from the surviving members; that a certified copy of the proceedings before a surrogate should be proof of the right of claimants, and should protect the exchange in payment, and that the provision for benefit should not be construed as constituting an estate, but merely an agreement by the members to make a gift to the family of the deceased associate.
    Alfred G. Meyers, by his will, bequeathed this fund to his two sisters and his brother. The petition of his executor for the proof of his will stated them to be the only next of kin of the testator, when, in fact, there were living children of his half-brother.
    In pursuance of the statements contained in the proceedings for the proof of the will the Exchange paid the fund to the persons mentioned therein.
    In an action brought by the assignee of one of the children of the half-brother against the brother, as for moneys had and received for his use and benefit, a demurrer was interposed to the complaint.
    Held, that the action could be maintained.
    That the deceased had no such property right in the fund as enabled him to alter the disposition of the fund by his will.
    That while the Exchange was protected in the payment, the money had been paid by mistake to the brother.

      That as the payment had been thus made, and as the brother had not asserted any hostile claim to the whole amount paid him, and as the share of the half, ' brother’s child came to the brother wrongfully, the child of the former was equitably entitled to recover.
    That an implied promise arose from the duty of the person in possession to account for and pay over the fund to the person beneficially entitled thereto.
    Appeal by tbe defendant Theodore A. Meyers 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 31st day of December, 1891, overruling a demurrer to the plaintiff’s complaint after a trial at the New York Special Term.

      A. Bhiland, Jr., for the appellant.

      Samiilton H. Bquier, for the respondent.
   O’Brien, J.:

The complaint, in substance, alleges: That one Alfred Gr. Meyers died March 4, 1887, a member of the New York Stock Exchange in good standing; that, as a part of the benefits accruing from membership in said Exchange, it is provided in the constitution of said Exchange that upon the death of any member in good standing, leaving neither widow or children, there shall be given to his next of kin, within the limit of representation prescribed by the statutes of the State of New York, the sum of $10,000 as a gratuity from the surviving members of the said Exchange, which said constitution further provides as follows:

“ The faith of the New York Stock Exchange is hereby pledged to pay, within one year after proof of death of any member, out of the money so collected, the sum of ten thousand dollars, or so much thereof as may have been collected, to the persons named in the next section as therein provided, which money shall be paid as a gratuity from the surviving members of the Exchange, free from all debts, charges or demands whatever. * * *

“ In all cases a certified copy of the proceedings before a surrogate or judge of probate shall be accepted as proof of the rights of the claimants, be deemed ample authority to the Stock Exchange to pay over the money; shall protect the Exchange in so doing, and •shall release the Exchange forever from all further claim or liability whatsoever. * * *

“ Nothing herein contained shall be construed as constituting any estate in esse which can be mortgaged or pledged for the payment of any debts; but it shall be construed, as the solemn agreement of every member of the Stock Exchange, to .make a voluntary gift to the family of each deceased member, and of the Exchange to collect and pay over to such family the said voluntary gift; it being understood and hereby expressly declared that the provisions of this article, XYIII, of these rules shall only be in force in, and apply to cases of death which shall take place after its adoption.”

That said Alfred G-. Meyers left him surviving, as his next of kin, his two sisters Matilda and Louisa Meyers, one brother (the defendant), Theodore A. Meyers, and four children of a deceased half-brother, viz.: Ada Frank, Sarah Meyers, Maria Moss and Frederick S. Meyers; that said Alfred G. Meyers left a last will and testament, and in and by said will he bequeathed said gratuity fund of $10,000 to his two sisters and his said brother (this defendant), share and share alike; that thereafter one John A. Rutherford, one of the executors of said will, presented a petition to the surrogate of the county of New York for the probate of said will, and said will was thereupon duly admitted to probate; that in said petition said Rutherford alleged that the only next of kin of said Alfred Gr. Meyers, deceased, were the defendant Theodore A. Meyers and his said two sisters; that said petition was erroneous and untrue, in that the petition should have recited that the said Sarah Meyers, Maria Moss, Ada Frank and Frederick S. Meyers were also of the next of kin of the said Alfred G. Meyers, deceased; that if said petition had stated the relationship of the said Sarah Meyers, Maria Moss, Ada Frank and Frederick S. Meyers to said deceased, the trustees of the gratuity fund of the New York Stock Exchange would have divided said fund into four parts and given one-fourth of a fourth, or one-sixteenth, to each of said alleged children of the deceased half-brother of said Alfred G. Meyers; that the trustees of said gratuity fund, in good faith and in ignorance of the relationship of said Sarah Meyers, Maria Moss, Ada Frank and Frederick S. Meyers to said Alfred G. Meyers, deceased, and misled by said probate proceedings, paid said gratuity fund to the said two sisters and this defendant, one-third thereof to each; that before the commencement of this action a demand was made on the defendant, in behalf of said Sarah Meyers, Maria Moss, Ada Frank and. Frederick S. Meyers, that he pay over to each of them the sum of $208.33 of the money so received by him from the trustees of the gratuity fund of the New York Stock Exchange; that he refused to make any payment and claimed that he was entitled to the full amount he had received from said trustees of the gratuity fund under the said will of Alfred Gr. Meyers, deceased; that before the commencement of this action Sarah Meyers sold and transferred to plaintiff her right, title and interest in and to the claim and demand which she had against said defendant for her share of the moneys received by said defendant from the trustees of the gratuity fund.

The defendant demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. The court, at Special Term, overruled this demurrer, and from the judgment thereupon entered this appeal is taken.

We think that the Stock Exchange having created the gratuity fund for the next of kin of a deceased member, and having provided that it should not be construed as constituting any estate in esse to which a member had title, that the deceased had no such property right therein as would have enabled him to. change the beneficiary while living or dispose of the fund by will after death. The by laws of the Exchange designated to whom the money should go after a member’s decease, and the title or right of such persons designated to share in the fund was immediately created and vested upon a member’s death. While it is called a gratuity, it was beyond the power of the Exchange itself to withhold it after collection against those beneficially interested, though when paid to persons not justly entitled thereto, pursuant to an. order or other proceeding before a surrogate, such payment discharges the Exchange from any liability to again pay it over, even to the rightful owners thereof. Such protection, however, thrown about the Exchange in making payment does not affect the right or title of those legally entitled to the fund. Moneys, therefore, which should have been received by plaintiff’s assignor having been through mistake paid to defendant, the question presented is, can a recovery be had ?

The action is one for moneys had and received, and plaintiff’s theory - is that, having been wrongfully deprived of the money through the mistake or misrepresentation of the true facts to the Exchange, which resulted in payment to defendant, that the latter has received money which ex ceguo et bono, belongs to plaintiff, and which after demand and refusal he is entitled to recover.

On the other hand, defendant insists that the action cannot be maintained; that the complaint does -not allege any fraud, deceit or misrepresentation on the part of the defendant, nor does it allege that the defendant was the agent, expressly or impliedly, of the plaintiff or his assignor in any way, or that there was paid to him, or that he received any sum whatever as the agent or representative of the plaintiff or his assignor, or for his or her account, or in trust for him or her, or that he concealed any fact from the New York Stock Exchange or from the trustees of the gratuity fund thereof; or that he had any knowledge of the contents of said petition for probate, or made any claim based thereon, or that he had any knowledge of the existence of the plaintiff’s assignor or of any of the alleged children of the alleged half-brother, or that any proceedings have been had to probate their heirship or amend the petition for probate referred to in the complaint, but the complaint does show that the money paid to the defendant was a voluntary gift ’ and £ gratuity ’ from the Stock Exchange to him; that the Exchange was directed to make such gift to him by the will of the deceased member on whose account it was to be paid; that it was claimed by defendant for himself only, and that it was paid to and received by him as his own and for his exclusive use and benefit.”

Having disposed of the question of the effect of the will, and reached the conclusion that the plaintiff’s assignor was entitled to a portion of the fund as one of the next of kin, it remains to consider the authorities upon which the appellant’s contention is claimed to be supported. (Patrick v. Metcalf, 37 N. Y., 332; Butterworth v. Gould, 41 id., 450; Rowe v. Bank of Auburn, 51 id., 674; Hathaway v. Town of Homer, 54 id., 655; Decker v. Saltzman, 59 id., 275; Peckham v. Van Wagenen, 83 id., 40.)

We had occasion to examine these cases recently in the case of Fox, Receiver, v. McComb, decided herewith, and it is not necessary for us to do more than state, in the language of Woodruff, J., in the •case of Butterworth v. Gould, the principles underlying these cases. He says, at page 463 : “ The principle of the decision is in accordance with the case in this court, viz., where a defendant has received moneys due to the plaintiff, bnt claiming it as his own under circumstances in which he has no authority from the plaintiff, and does not act under pretense of such authority, and the payment to him is made in proposed recognition of his title thereto as his own, and 'does not operate to discharge the payor from his liability to the plaintiff, then and in such case there is no trust and no implied promise to pay the money to the plaintiff.” The decision referred to in the foregoing quotation was that of Sargent v. Striker decided in the Supreme Court of New Jersey, and which was to the same effect as Patrick v. Metcalf (supra).

As shown, however, in Butterworth v. Gould, there is a class of cases, namely, where fees are collected by an officer de facto, he may be proceeded against by the officer de jure as for so much money had and received to his use. Why'? Because he has received them by a color of authority, and those who paid had a right to pay them, and are protected in making such payments.

The principle underlying this latter class of cases seems to us to be analogous to the one at bar.

We have, however, as shown by the learned judge in his opinion below, another class of cases, also relied upon here by the appellant, where payment has been made upon conflicting claims known to the person who made the payment. In some of these the payment resulted in discharging the principal debtor, and in others, again, the debt was not discharged. But it was still held that no recovery could be had in favor of one rightfully entitled to the money against one to whom the paynient was made where it appeared that such moneys were received under an adverse claim and in hostility to the person really entitled thereto.

The quotation from Mr. Justice Blaokstone by the learned judge below is apt, viz., that “ indebitatus assumpsit lies when one has received money belonging to another without any valuable consideration given on the receiver’s part, for the law construes this to be money had and received for the use of the owner only, and implies that the person so receiving promised and undertook to account for it to the true proprietor.”

The principle thus enunciated is in entire harmony with the view expressed by Mr. Justice Andrews in the case of Roberts v. Ely (113 N. Y., 131).

“ The case falls within the familiar doctrine that money in the hands of -one person, to which another is equitably entitled, may be recovered in a common-law action by the equitable owner upon an implied promise arising from the duty of the person in possession to account for and pay over the same to the person beneficially entitled. The action for money had and received to the use of another is the form in which courts of common law enforce the equitable obligation. The scope of this remedy has been gradually extended to embrace many cases which were originally cognizable only in courts of equity. Whenever one person has in his possession money which he cannot conscientiously retain from another, the latter may recover it in this form of action subject to the restriction that the mode of trial and the relief which can be given in a legal action are adapted to the exigencies of the particular case, and that the transaction is capable of adjustment by that procedure without prejudice to the interests of third persons. No privity of contract between the parties is required, except that which results from the circumstances. (Mason v. Waite, 17 Mass., 560.) The right on the one side and the correlative duty on the other create the necessary privity and justify the implication of a promise by defendant to do that which j ustice and equity require. It is immaterial, also, whether the original possession of the money by the defendant was rightful or wrongful. It is sufficient that the duty exists on his part, created by the circumstances, to account for and pay it over to the plaintiff.”

The facts presented, namely, that the Stoclc Exchange, by payment to the defendant, became discharged from all liability to pay over the amount again to the plaintiff; that the payment was made by mistake and was received by the defendant, not asserting any hostile claim thereto, but merely accepting the same as paid to him, and no question existing but that the title of the plaintiff to so much thereof as was payable to him was valid, and that the same came wrongfully into the possession of the defendant, we think, distinguish this case from those relied upon by the appellant, and bring it within the principle stated in Roberts v. Ely (supra) and Carver v. Creque (48 N. Y., 385), that money in the hands of one person to which another is equitably entitled may be recovered.

It is true that the case of Roberts v Eby was decided upon the ground that the statute of limitations had run, and no recovery could be had. But, as an argument and an expression supported by authority as to what principle should be applied in cases of this kind, it is of great value and weight, expressing, to say the least, the views of a learned and able judge of our highest appellate court.

We are, therefore, of opinion that the complaint does state facts sufficient to constitute a cause of action, and that the demurrer was properly overruled.

The judgment should be affirmed, with costs and with leave to answer over on payment of costs in this court and court below.

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

Judgment' affirmed, with costs and with leave to answer over on payment of costs in this court and court below.


author: Ingraham, J.: Tan Brunt, P. J., and O’Brien, J. :•

text:
    In the Matter of a Controversy Existing Between WILLIAM DUNN and GEORGE HUETHER.

      Inchoate dower right — a chose in action — it cannot be extinguished by the committee of a lunatic— Code of Civil Procedure, secs. 2320-2340, 2348; B. 8., pt. 2, chap. 1, tit. 3, sec. 16.
    An inchoate right of dower is a chose in action, not transferable, and can be extinguished only by the act of the wife in joining with her husband in a deed of the land.
    The Code of Civil Procedure gives no express authority to the committee of a lunatic wife to execute any instrument which would extinguish this inchoate right of dower, and no such authority will be implied.
    A controversy between William Dunn and George Huether (submitted upon an agreed statement of facts without action.
    The facts, as stated on the submission, were that on the 17th day of October, 1891, William Dunn entered into a written contract with George Huether, by which Dunn agreed to convey, and Huether agreed to purchase, a lot of land known as No. 276 Henry street, New York city, for the sum of $12,500, free and clear of all incumbrances. Said conveyance to be made by deed containing a general warranty and the usual full covenants. Upon the execution of such contract, Huether paid to Dunn on account the sum of $500.
    William Dunn is the owner in fee of said real estate. He is a married man, his wife, Catharine Dunn, living as an inmate in the Insane Retreat at Amityville, Long Island.
    In proceedings regularly instituted in the Court of Common Pleas for the city and county of New York, said Catharine Dunn was duly adjudged a lunatic, incapable of managing her affairs, and her son, John J. Dunn, was, by an order of said court, duly and regularly obtained, appointed the committee of the person and estate of said lunatic. Said committee duly qualified and gave the bond required by law.
    The committee of the lunatic wife instituted proceedings in the Court of Common Pleas for the city and county of New York, for leave to join with the husband of the lunatic in the sale of said property to Huether under said contract, and to convey the interest of the said lunatic wife, and release and extinguish the dower right of said lunatic wife in said real estate.
    In that proceeding an order was made granting leave, and the committee duly executed the deed.
    The purchaser, George Huether, refused to- take the title offered by William Dunn, on the ground that the inchoate right of dower of the lunatic Catharine Dunn could not, through the means of proceedings under the Code to sell or convey the interest of lunatics in land, be conveyed, released or extinguished, and that the Court of Common Pleas could not authorize the committee of the lunatic, either in the name of the lunatic or otherwise, to convey or release such inchoate right of dower.

      B. J. Bouras, for Wiliam Dunn.

      Goldfogle <& Gohn, for George H. Huether.
   Ingraham, J.:

By title 6 of article 4 of chapter 17 of the Code, sections 2320 to 2340, inclusive, this court is given the custody of the person and the care of the property of a person incompetent to manage himself or his affairs in consequence of lunacy, idiocy or habitual drunkenness, and in this city the Court of Common Pleas has concurrent jurisdiction with this court, as to the custody of the person and the care of the property of such persons.

The power of the court, however, is limited by the provisions of this title, and there is no express authority given for the court or the committee appointed by the court to dispose of the property of the lunatic.

Section 2339 provides that the committee, either of the person or the property, is subject to the direction and control of the court by which he was appointed, with respect to the execution of his duties; but this direction and control cannot be construed to authorize the court to direct an extinguishment by the committee of the inchoate right of dower of the lunatic.

There is no express provision as to the powers of the committee when appointed, but by section 2321 the court must preserve the lunatic property from waste and destruction, and out of the proceeds must provide for the payment of his debts and for the safekeeping and maintenance and the education, when required, of an incompetent person and his family, and section 2339 provides that the committee of the property cannot alien, mortgage or otherwise dispose of real property, except to lease it for a term not exceeding five years, without the special direction of the court obtained upon proceedings taken for that purpose, as prescribed in title 1 of the chapter.

I do not think that the court is, by this title, given any power to divest a lunatic of - her inchoate right of dower in her husband’s property; none, certainly, is expressly given, and I do not think it is given by implication.

Section 2318 provides for the application to sell the real property of the lunatic, and authority is there given to the court to order the sale, conveyance, mortgage or lease of the real property or a term estate or other interest in real property belonging to the incompetent person.

It has been held in the case of Witthaus v. Schack (105 N. Y., 336), that an inchoate right of dower is not an interest in land at all, but is .a contingent claim arising not out of contracts, but as an institution of law constituting a. mere chose in action, incapable of transfer by grant or conveyance, but susceptible only during its inchoate state of extinguishment, and such extinguishment can only be effected by tbe act of tbe wife in joining with her husband in the execution of a deed of land by force of the statute.

By section 16, chapter 1, title 3, part 2 of the Revised Statutes, it is provided that “no act, deed or conveyance executed or performed by the husband -without the assent of his wife, evidenced by her acknowledgment thereof in the manner required by law to pass the estates of married women, * * * shall prejudice the right of his wife to her dower or jointure, or preclude her from the recovery thereof if otherwise entitled thereto.”

I think, therefore, that as this court, or the committee appointed by the court, is not directly authorized by statute to execute an instrument by which this inchoate right of dower shall be extinguished, and as the provision of the Code authorizing the sale of the lunatic’s property does not include an inchoate right of dower, and as the provisions of the Revised Statutes before cited provide that no deed of the husband without the assent of the wife shall prejudice the right of the wife to her dower, or preclude her from the •enforcement thereof, that the act of the committee in joining with the husband in executing a deed of the property in which the wife has such an inchoate right of dower, would not extinguish such right, .and that in consequence thereof the deed tendered by the vendor would not pass a title in the grantee free from the wife’s dower.

Huether is, therefore, entitled to judgment for the recovery of :$500, with interest from October 17, 1891, together with the sum ■of $130, the amount agreed upon as the expenses for examining the title, and judgment should be ordered accordingly.

Tan Brunt, P. J., and O’Brien, J. :•

The papers submitted do not conform to the provision of the statute in that no statement of facts is agreed to, and the submission is not in the form of an action, but as the questions have been examined, and we concur in the foregoing opinion, we have con-eluded so to decide the question.

Judgment directed for Huether for $500, with interest from October 17, 1891, together with $130, the amount agreed upon as the expenses for examining the title.


author: Van Brunt, P. J.:

text:
    THE AMERICAN NATIONAL BANK OF PROVIDENCE, Respondent, v. WILLIAM R. GRACE, Appellant.

      Misjoinder — of causes of action for fraud and for money.had and received — when-transactions we not connected with the same subject of action— Code of Civil Procedure, sec. 484, sub. 9.
    A complaint stated, two causes of action:
    The first was for fraud and deceit in inducing the plaintiff, a bank, to purchase the notes of an insolvent firm upon false representations that it was prosperous.
    The second was for money had and received, alleging that such insolvent firm had given to the defendant money with which to pay the firm notes, which were held by the plaintiff, and that the defendant had not done so, but had converted the money to his own use.
    A demurrer, setting up a misjoinder of causes of action, was interposed to the complaint.

      Meld, that the causes of action were improperly joined, the first being in tort and the second on contract.
    That the allegation, in the second cause of action, of a conversion was untenable.
    That the transactions forming the subject-matter of the two causes of action were not connected with the same subject of action, and could not be joined in the same complaint.
    Appeal by the defendant William R. Grace 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 8th day of September, 1891, overruling a demurrer to the complaint after a trial at the New York Special Term.

      F. JR. Goudert, for the appellant.

      II. W. Bean, for the respondent.
   Van Brunt, P. J.:

Two causes of action are alleged in the complaint. The first is to recover damages for fraud and deceit, such fraud and deceit consisting of the inducing, by false and fraudulent representations and concealment, the plaintiff: to purchase of the defendant two promissory notes of the firm of Grant & Ward, and to pay him therefor the sum of $19,600; the false and fraudulent representation and concealment being the representation that Grant & Ward were a prosperous and solvent firm, whereas the defendant well knew that they were wholly insolvent and unable to pay their debts.

It is true that many other facts are alleged in the complaint in respect to the first cause of action, but this seems to be its true statement.

The second cause of action is for money had and received to the plaintiff’s use; the evidence alleged being that Grant & Ward paid to the defendant the amount of the two notes sold by the defendant to the plaintiff under an agreement that the defendant should apply the money so received by him to the payment of said notes, but that the defendant has failed to apply the said sum, or any part thereof, to the payment of the same, and has converted the same to his own use. The allegation of conversion seems to be entirely surplusage, because it is apparent that he has not converted any property of the plaintiffs to his own use, as he never had any of their property in his possession, except the money which he is alleged to have received upon the purchase of the notes.

The defendant demurred to this complaint upon the ground that it sets forth two causes of action, which are improperly joined. This demurrer was overruled by the court below upon the ground, first, that each cause of action set out in the complaint was in tort, one for fraud and deceit and one for conversion, and that the two causes of action related to transactions connected with the same subject of action, viz., the alleged wrongful conduct of the defendant in respect to the notes in question.

It seems to us clear that the learned judge below fell into error in his conclusion that the second cause of action sounded in tort. The sole ground of recovery alleged in that cause of action is that the defendant has money in his hands which has been paid by Grant & Ward to the use of the plaintiff, and which it is entitled in equity to receive from the defendant. The allegation in respect to conversion cannot apply, because it is not claimed that any specific sum was converted; but that Grant & Ward placed the defendant in funds to take care of the notes belonging to the plaintiff with others, and that the defendant has not taken care of the two notes held by the plaintiff. The most that can be made out of this is that Grant & Ward have paid to the defendant money to the-use of the plaintiff. Therefore it is an action on contract, and in no respect sounds in tort any more than any case for money had and received.

The question, then, is presented whether the transactions forming the subject-matter of the two causes of action are connected with the same subject of action, and that is substantially what seems to have been claimed by the learned counsel upon the argument of this appeal.

We think that a very brief examination of the causes of action will show that they are entirely independent and not connected ■with each other. The first cause of action, as already stated, is for fraud and deceit in inducing the plaintiff to purchase these notes by false and fraudulent representations. In connection with these alleged causes of action are allegations of the circumstances under which the defendant became possessed of the notes in question, and of the agreement between Grant & Ward and the defendant in respect thereto, whereby Grant & Ward agreed to pay a certain bonus for the procuring of a loan upon these notes and others, and also agreed to take up the notes two months prior to their falling due.

These allegations, of course, have no connection with or relevancy to the cause of action set out in the first subdivision of the complaint, viz., for fraud and deceit. As far as that cause of action was concerned, it was entirely immaterial what the agreements between Grant & Ward and the defendant were. If he induced the plaintiff to take these notes on false and fraudulent representations and damages are demanded therefor, the relations between Grant & Ward and the defendant (except so far as they may tend to establish the defendant’s knowledge of their insolvency) are entirelyimmaterial, and allegations in respect thereto are allegations of evidence and not of facts necessary to the proper averment of the cause of action.

We next come to the cause of action for money had and received. In this cause of action is re-alleged each and all of the allegations contained in the first cause of action. Now, this cause of action is founded upon the claim that Grant & Ward had paid to the defendant these notes, and that he was in duty bound to pay the money over to the plaintiff. This evidently has no connection with the original transaction between the defendant and the plaintiffs.

In order to unite causes of action between two parties, the claims must arise out of the same transaction between those parties or transactions connected with the same subject of action. Now, in the first cause of action, whatever the relations, as already said, existing between Grant & Ward and the defendant, the plaintiff has no interest therein except so far as they may tend to prove scienter on the part of the defendant. The subject-matter of that cause of action is the fraud and deceit in getting the plaintiff to purchase the notes of a firm which defendant knew to be insolvent. The second cause of action cannot possibly have its inception or be connected with anything prior to the time of the payment of the money by Grant ■& Ward to the defendant. It is the money paid to the defendant by Grant & Ward which is the subject of that action, and it is that .transaction which forms its basis. Therefore, what the connection is between the cause of action arising out of the payment of money by- Grant & Ward to the defendant and the cause of action based upon the fraud and deceit of the defendant we cannot perceive.

The very statement of the inconsistencies between those two causes of action shows that they cannot arise out of the same transaction or transactions connected with the same subject of action, as they both arise at different times and periods. The one is founded upon the allegation of the insolvency of Grant & Ward and their inability to pay the notes in suit; and the other is founded upon the claim that they have paid the notes in suit to the defendant — claims ■clearly inconsistent with each other.

It seems, therefore, that the one cause of action being for fraud and deceit, and the other for money had and received, the subject-matter of the causes of action are entirely distinct and arise out of •different transactions.

We think, therefore, that the demurrer should have been sustained and that the judgment should, therefore, be reversed, with costs to appellant, the plaintiff to be allowed to amend on payment of cost's •of appeal and costs of demurrer in the court below.

O’Brien and Ingraham, JJ., concurred.

Demurrer sustained and judgment reversed, with costs to appellant, the plaintiff to be allowed to, amend on payment of costs of appeal.