author: By the Court, Robertson, J. Bosworth, Ch. J.

text:
    The Merchants’ Bank of New Haven vs. Bliss.
    1. An action brought to charge the defendants as trustees of a corporation organized under Laws of 1848, oh. 40, authorizing the formation of corporations for manufacturing, mining, mechanical, or chemical purposes, with a debt of the company, on account of a failure of the company to file the annual report required by section 12 of that act to be filed within twenty days from January 1st in each year, is an action upon a statute for a penalty or forfeiture given to the party aggrieved, within the meaning of subdivision 2 of section 92 of the Code, and must be commenced within three years.
    2. Where, in an action to charge the defendants, trustees of a corporation organized under the general law authorizing the formation of corporations for manufacturing and other purposes, with personal liability for a debt of the company, the defendants answered that at the time the debt matured, and for a long time afterwards, the corporation was solvent, audits stockholders severally and individually liable for all its debts, by. reason of the non-payment of its capital stock; that the plaintiff neglected to institute suit for two years, and that by such neglect the plaintiff released and discharged the stockholders from personal liability; that no notice was ever given to the defendants of the plaintiff’s claim, nor had the defendants any opportunity of being subrogated to the rights and remedies of the plaintiff against the corporation while solvent, nor against the stockholders before they were released as above stated; on demurrer to the answer, liM that these facts constituted no defense to the action.
    3. To determine whether a liability to which a person is subjected, is by way Of penalty or forfeiture, it is not necessary that the statute in the language imposing it should denominate it a penalty or forfeiture. When the statute subjects an officer of a company, as such officer,- to a liability to pay money either for omitting to perform a duty enjoined, or for doing an act prohibited, and does this in a case where but for such omission of duty or wrongful act he would b.e under no liability, he is thereby subjected to a forfeiture of the sum which he is made liable to pay, and so far as he is concerned, the imposition of liability is ,by way of punishment.
    (Before Bosworth, Ch. J. Hoffman, Moncrief, Robertson and White, JJ.)
    Decided August, 1863.
    Appeal from an order sustaining a demurrer. This action was brought to charge the defendants, as trustees’ of the Empire Stone' Dressing Company, a corporation organized under the general manufacturing law of this state, with personal liability for an acceptance of such company, bearing date, April 4th, 1854, and payable sixty days from date; on the grounds :
    I. That the annual report required by the twelfth section of the general manufacturing act, was not filed by said company within twenty days from the first day of January, 1854, nor until after said draft was accepted.
    II. That the annual report of such company, filed on the twentieth day of January, 1853, was untrue, and contained material false .representations. ■
    III. That during the year 1853, the trustees of such company declared and paid, dividends tending to render the company insolvent.
    The defendants answered, denying most of the allegations in the complaint, and set up affirmative defenses in the following words : “ Ninth. And these defendants further answering, aver that this action is upon a statute for a penalty where the action is given to the party aggrieved, and that the same was not commenced within fhree, years after the cause of action alleged in the complaint accrued.

      Tenth. And for a further and separate defense to said action, these defendants say that at the time of the maturity of said bill of exchange, and for a. long time afterwards, the Empire Stone. Dressing Company was solvent and able to pay all its debts; that its stockholders were severally and individually liable, to an amount equal to the amount of stock held by them respectively, for all the debts of said company, by reason of the non-payment of the capital stock fixed and limited by said company in compliance with the provisions of the act under which it was incorporated. That many of said stockholders held stock in said company to an amount greater than the plaintiff’s claim, and were at the time of the maturity of said bill, and ever since have been, and still continue to be, entirely solvent and responsible That the said bill matured on or about the 6th day of June, 1854, but that the plaintiff neglected to institute suit thereon for the collection thereof!, against said company, until on or about the 19th day of March, 1857, more than two years after the said alleged indebtedness of said company to said plaintiff had become due, and that by such neglect the said plaintiffs released, exonerated, and forever discharged the stockholders of said company from all personal liability for the payment of said debt. That no claim or demand was ever made by the plaintiffs on these defendants, nor was any notice of any claim or demand, whether against said company or these defendants, ever given to these defendants ; nor had these defendants any opportunity of being subrogated to the rights and remedies of the plaintiff against said company while solvent, nor against said stockholders before they were, so as aforesaid, released and discharged from their said liability.”
    To these defenses the plaintiff demurred. Before Mr. Justice Moncbiee, at special term, the demurrer was sustained, and the defendants appealed to the general term.

      Charles F. Sandford, for the appellants.
    I. The case is within the purview of the three years statute of limitations, applicable to penal actions, and the statute is a bar to the plaintiff’s claim. (Code, § 92, 2.) 1. It is an action upon the statute. But for the express provisions of the statute no such action would lie. If any liability exist at common law, it arises from and is limited by the damages actually sustained, and is not a liability for “debts.” No damage is alleged in the complaint. The action is brought to recover a debt, for which the defendants are alleged to have become liable, by reason of their violation of the provisions of the statute. 2. It is an action upon the statute for a penalty. As regards the liability .consequent. upon the mere omission to file a report, it has been- said by the highest authority, that “ the provisions of the statute are highly penal.” (Garrison v. Howe, 17 N. Y. Rep. 458.) Principle and authority concur in pronouncing the provisions of the statute highly penal, and the courts construe them strictly as against the creditor, and with as much liberality towards the trustee as is consistent with the object of the provision, regardless of its literal import. (Garrison v. Howe, 17 N. Y. Rep. 458. Boughton v. Otis, 29 Barb. 196. S. C. 21 N. Y. Rep. 261.) But the legislature has seen fit to impose a penalty upon trustees of manufacturing corporations, in order to deter them from violating the statute, and has given the benefit of it, in case of such violation, to the party aggrieved thereby—to the creditor to whose benefit the violated provisions of the statute were designed to enure. 3. It may be claimed that the liability in question is that “ liability created by statute, other than a penalty of forfeiture,” to which reference is made in sections 91 and 92 of the Code, the statutory limitation whereof is the period of six years. If, however, the action be penal, it is expressly excluded from the operation of this provision. 4. The provisions of the statute of limitations, as regards penalties, &c. are by express enactment declared to be inapplicable to actions against directors of moneyed corporations and banks. (Code, § 109.) It is a fair inference from this express exception, that the legislature designed that they should be availed of by directors of ordinary manufacturing companies. 5. As- the claim and limitation are both statutory, and as at common law no liability exists, in case of ambiguity or doubt, that construction should be adopted which will best protect the rights of the defendants as they exist, independently of the statute, thus restricting the plaintiff to his common law remedy, if he have one.
    II. The other defense to which the demurrer applies may be thus stated : 1. The liability of the defendants, if it, exists at all, is the liability of a "surety or guarantor for the debt of another. As between the plaintiffs and defendants, the implied contract which the law creates is simply that of responsibility, by way of guaranty,, for the amount due the plaintiff from the company. The trustees, if charged, will have recourse against the company and its stockholders for their indemnity, that is to say, will be subrogated to all the remedies and securities which the creditor had, as against his principal debtors, and the release or discharge of the principal debtors, the extention of time of payment to them, or the surrender of adequate securities held as collateral to their debt, will operate in discharge of the surety. 2. It is not claimed that the mere omission to sue the company, in the case of an ordinary surety, would operate as a discharge, even though the insolvency of the company should subsequently occur, unless the surety should have requested such suit to be brought. The better authorities, however, agree that where the surety has sustained injury by the failure of the creditor to prosecute after request, he is exonerated pro tanto. (1 Pars. on Cont. 510, and cases cited. Herrick v. Borst, 4 Hill, 650.) 3. It is however contended, that in the case of a trustee made penally liable for the debts in general of a corporation, which may well be contracted without his knowledge or assent, a different rule would prevail, and that.demand should be made upon, and notice given to such trustee, in time to enable him to avail of his right of subrogation. (1 Pars. on Cont. 514, and cases cited.) 4. The omission to sue, in the present case, operates as an absolute exoneration and discharge of the stockholders, who are principal debtors. The statute expressly provides (§ 24,) that no stockholder shall be personally liable for the payment of any debt, contracted by any company formed under this act, unless a suit for the collection of such debt ■ shall be brought against such company, within one year after the debt shall become due. It is insisted that this is as much a voluntary release and discharge of the stockholders, from their liability to pay their debt, as if a release had been executed and delivered by the creditor in writing and under seal, and as such it operates equally in discharge of the liability of the surety, viz. the trustee. ■ 5. If the stockholders are not principal debtors, their liability is certainly a collateral security for payment of the debt. But the surrender of securities held as collateral will operate to discharge the surety equally with the release of the principal debtor, and the omission to sue the company within the year is tantamount to a voluntary surrender of such security. (Pitts v. Congdon, 2 Comst. 352.)

      William Bliss, for the respondent.
    I. This is not an action upon a penalty where the action is given to the party aggrieved, but ah “action upon a liability created by statute,” or “an obligation or liability,” not of record or under seal, and “ other than a penalty or forfeiture.” (Code, § 91, subd. 1, 2. 2 R. S. 296, § 18. Id. 298, § 31. Code, § 92. See commissioners’ note to the last section, subd. 2, where the subject is discussed. First report of commissioners of Code, 99, subd. 2 of § 91, originally 71.) 1. The construction of the section of the Revised Statutes, corresponding with the 2d subdivision of section 92 of the Code, has been settled, (Van Hook v. Whitlock, Ct. of Errors, 26 Wend. 105 ; Corning v. McCullough, 1 N. Y. Rep. 47, overruling Freeland v. McCullough, 1 Denio, 414 ; S. C. [Court of Appeals,] 4 How. Pr. 183; and judgment of Supreme Court there reversed,) in conformity with this distinction, and the Code may be considered as declaratory of the pre-existing law, except that by the substitution of the word “penalty” for “cause” it is clearly confined to penalties strictly so called. 2. By the third section of the 8 th article of the constitution it is provided : “ Dues from corporations shall be secured by such individual liability of the corporators, and other means, as may be prescribed by law.” In obedience to such 8th article, the manufacturing act (ch. 40 Laws of 1848,) was passed. So far as this action is founded upon a liability created by statute, it is founded upon such act of 1848, and upon provisions of it, by which the debts of the corporation are so secured. (Laws of 1848, ch. 40, §§ 12, 13. See act of March 22, 1811, ch. 67, revived January 26,1821, for the law in force when the act of 1848 was enacted.) 3. The suit is for the debt, for which, under certain circumstances defined by the statute, the trustees become “jointly and severally liable.” The action is primarily on the contract, against persons made quasi parties to it. (Peckham v. Smith, 9 How. Pr. 437, 438 ; affirmed at general term.) “Whatever was a debt of the company, is now by force of the statute a debt against them.” (Slee v. Bloom, 20 John. 684, per Spencer, J.) 4. It is not an action for a penalty. The liability is not so denominated in the statute, but a liability for debts, a joint and several liability. It is not in the form of a penalty. It is not a fixed pecuniary sum, mentioned in the statute, nor any fixed sum whatever. The debts are shifting, accumulating, diminishing, reduced by-payments and otherwise, enlarged by interest due or undue, and until due, incapable of being enforced either against the company, or its stockholders, or trustees. According to Thomas v. Weed, (14 John. 255,) interest is not recoverable in actions of debt for a penalty ; nor in England, according to Woodgate v. Knatchbull, (2 Term R. 155,) costs in a penal action. The object of the statute is security for the dues of the corporation ; the effect upon the trustees personally is incidental. The present action is not based merely upon the statute, and acts in contravention of it, like actions for penalties, but partly upon the statute only, as in case of suits against executors and administrators, or indorsers of promissory notes, or against makers and indorsers jointly. (See Van Hook v. Whitlock, 26 Wend. 105, Nelson, J.) ' 5. The plaintiff is not “ the party aggrieved” in the sense of the statute of limitations. The creditor is not so denominated in the statute or by any equivalent word. The joint and several liability of the trustees is irrespective of any injury to the plaintiffs or creditors, by the act or omission of the particular trustees so liable. (See 2 R. S. 480, § 1. Corning v. McCullough, 1 N. Y. Rep. 69.) 6. Penalties are imposed by law for offenses. (2 R. S. 481, § 4. Code, §§ 96,124. Id. 297, §§ 29, 30. Webster on word Penalty.) Actions for them are local, (2 R. S. 481, §§ 4, 8, 9 ; Code, § 124,) and of a quasi criminal nature. A trustee may, under the statute, be liable, and yet have been guilty of no offense. 7. In section 12 of the act of 1828, the duty of tnalcing the report is devolved upon the company. If the company fail to make the report, all the trustees are liable, whether they have signed the report, or are in default or not. Section 13 imposes a joint and several liability in a certain contingency. They are liabilities “voluntarily assumed” by stockholders, when they subscribe for or take stock, and by trustees, when they accept and retain office. (Matter of the Empire City Bank, 18 N. Y. Rep. 210. Corning v. McCullough, 1 Comst. 55, 59.) So far from suits against stockholders, on their liability created by statute, being actions for penalties, they may be brought in equity. (Ct. of Errors, Slee v. Bloom, 20 John. 669. S. C. 19. Id. 456. Briggs v. Penniman, 8 Cowen, 387. Laws of 1855, ch. 390, 736, in pari materia. 1849, ch. 26.) 8. In a loose general sense, it may be said that all these provisions are penal in their character ; that is, though the sole object of them is the security of the creditor, and to give him a remedy for his debt, the liability may operate upon the party made liable by the statute with severity. So exemplary damages are called vindictive, punitive ; and in an action for slander the court will not grant a new trial for excess of damages because the action is penal in its character, at least, except in special and rare cases. (Hurtin v. Hopkins, 9 John. 36. Ex parte Bailey, 2 Cowen, 483. Hunt v. Bennett, 19 N. Y. Rep. 175. Fry v. Bennett, 1 Abb. Pr. 289, and see 308, 309. Clayton v. Wardell, 4 N. Y. Rep. 240.) In Woodgate v. Knatchbull, (2 Term R. 154,) it was said by Ashubst, J. that it had been held in many instances, that where a statute gives accumulated damages to the party grieved, it is not a penal action. So that such mere general expressions, used with a different intent, render no aid in solving the present question. 9. The first article of title 6 of part 3d of the Revised Statutes, (still in force, Code, § 471,) entitled “ Of actions for penalties and forfeitures,” prescribing the proceedings in such actions, is entirely inapplicable to actions like the present. (See §§ 1,10) 11, 13, original Nos.
      Peckham v. Smith, 9 How. Pr. 437, an action against a trustee.) 10. In section ■ 109 of the Code of Procedure, suits against directors or stockholders of a moneyed corporation or banking association, u to enforce a liability created by law," are expressly recognized, and distinguished from actions to recover a penalty or forfeiture imposed. The present action is against the directors of a corporation, though not a moneyed one, to enforce a similar liability. In section 92, an action against a sheriff, coroner, or constable, upon a liability incurred by the doing of an act in his official capacity, and in virtue of his office, or by the omission of an official duty, including the non-payment of money on an execution, is carefully distinguished from an action upon the statute,' for a penalty or forfeiture. 11. The liability in this case is in truth and in terms a liability created by statute. It is for the defendant to take it out of the general rule, and show that it comes within the exception, and' the short bar of three years. The construction of the defendants -would make the exception the rule, and sweep within it almost every statutory liability, for a liability is in its very nature burdensome and painful. 12. The trustees are the managing shareholders of the corporation. If the company were unincorporated, they would be liable for its debts. The statute exempts them from that liability (except to the amount of their shares as mere shareholders) on certain terms and conditions, but if those conditions be unfulfilled, leaves them to their full liability. It is in that respect like the' case of a special partner under the statute as to limited partnerships. (2 R. S. 766, §§ 16,17,22, See Corning v. McCullough, 1 N. Y. Rep. 47 ; and Boughton v. Otis, 21 N Y. Rep. 261.)
    II. The last alleged defense rests upon the plainly untenable proposition, that it is a condition precedent to a suit against the trustees, that the creditor should have suéd the corporation within two years after the maturity of his debt, and that he should have made a demand on the .trustees, or given notice to them of his claim against them, or of his claim against the corporation, while the corporation was solvent, or during the two years. No such condition precedent is prescribed by statute or by law. . The statute says, that if the report be not filed, or if the improper dividend be' made, the trustees shall be liable. Assuming for the moment that the trustees are sureties both for the corporation and stockholders, the plea is fatally defective. There is no allegation that suit was not commenced against the corporation while it was solvent. Mere delay of the creditor to call on the principal debtor, will not discharge the surety. (King v. Baldwin, 2 John. Ch. 554, 558, and cases cited. Fulton v. Mathews, 15 John. 433. Hunt v. U. S. 1 Gallison, 32. Wright v. Simpson, 6 Ves. 734. Trent Navigation Co. v. Harley, 10 East, 34. Pain v. Packard, 13 John. 174.) No request to sue either the corporation or the stockholders is alleged. Eot any agreement with either, by the terms of which the contract has been varied. But the trustees are not sureties for the stockholders. Both, in certain events, are liable for the debts of the corporation. The trustees are not, it seems, even-sureties for the corporation. (Moss v. McCullough, 7 Barb. 279. Peckham v. Smith, 9 How. Pr. 438, affirmed at general term.) If the stockholders are not, a fortiori, the trustees are not. If the defendants were entitled to be subrogated to the plaintiff, they might have been so on payment. Subrogation is only on payment. (Chester v. Bank of Kingston, 16 N. Y. Rep. 340. King v. Baldwin, 2 John. Ch. 260.)
   By the Court, Robertson, J.

Either this action is founded upon a statute, and brought for a penalty or forfeiture by the aggrieved party, within the meaning of the second subdivision of section 92 of the Code, or the subject of it is a liability created' by statute other than a penalty or forfeiture, or a contract obligation or liability expressed or implied, under section 91 of the Code. ' If it be the first, it could only have been brought within three years after the cause of action accrued.

If the liability of the defendants were of common law origin, and only aided or modified, not created by statute, it would come within subdivision 1 of section 91 ; for the liability of stockholders of manufacturing corporations, which was of common law origin, was held to he governed by a corresponding provision in the Revised Statutes. (Corning v. McCullough, 1 Comst. 62.)

The liability of the defendants might also, if created by statute, be included in subdivision 2 of section 91 of the Code, unless it were a penalty or forfeiture ; for that section might be construed to embrace some intermediate kinds of liability between that at common law (modified or aided by statute,) and a penalty or forfeiture, upon the principle that it was intended to include classes of liabilities not embraced either in subdivision 1 of section 81, or subdivision 2 of section 92 ; but the object of subdivision 2 of section 91 was to legalize a distinction, supposed to be sustained by authority, between a liability in the nature of a contract created by statute, and a penalty or forfeiture; at least so the framers of the Code have informed us in a note to such subdivision in their first report (p. 99,) and they refer to the decisions of Freeland v. McCullough, (1 Denio, 414,) and Van Hook v. Whitlock, (3 Paige, 409,) as containing an exposition of such distinction; it would seem, however, also, that they had heard of the decision in Corning v. McCullough, in the Court of' Appeals, which overruled the cases to which they referred, and without waiting to ascertain the extent of that decision, they propose to regulate anew by statute the time for bringing suits upon liabilities, such as that of the stockholders of companies : although the commissioners refer to the views of Judge Nelson, in the case of Van Hook v. Whitlock, I apprehend they did not intend, nor are they to be understood as intending, to incorporate in a statute all the illustrating cases suggested by that eminent jurist; the utmost they strove to attain was to separate actions for a penalty for a prejudicial act, from those for compensation for a breach of contract. Subdivision 1 of section 91 is amply sufficient to include the latter, and, therefore, for such purpose, the new provision was superfluous, although such cases as the liability of an heir for the simple contract debts of his ancestor and the like, which are founded on contract, although not that of' the party liable, might be included in subdivision 2.

The language, however, of the provision last referred to, (subdivision 2, section 91,) might be considered broad enough to include the liability of the defendants in this case, were it not for the words “ other than a penalty or forfeiture.” By subdivision 2, section 92, the time is prescribed for bringing actions upon a penalty or forfeiture by the aggrieved party ; and the two were evidently intended to comprehend all cases of liability • created by statute; indeed, section 109 of the Code recognizes this, by restricting the actions against directors and stockholders of certain corporations, the time for bringing which is thereby limited, to those for penalties and forfeitures, or for liabilities created by statute ; subdivision 2, section 91, should be read, therefore,.as though the words “by the party aggrieved ” were added at the end, If, therefore, the liability of the defendants be such as is included in subdivision 2, section 92, it would not be in subdivision 2, section 91 ; and it must, therefore, be first determined what the former embraces.

The provision of the Revised Statutes for which subdivision 2, section 92, of the Code, is a substitute, (2 R. S. 29, § 31,) was in substance the same; the only change of language is merely substituting “ penalty for “ cause,” and “ action is given ” for “ benefit and suit is limited,” and striking out the time of “ committing the offense” as the beginning of the period within which the action is to be brought: these changes do not disturb the purport and object of the statute; the wor<j.“ cause” under the previous provision was held to embrace liabilities which, although not technically penalties, were yet substantially penal, and operated to affect the party exposed to them in the same or a similar manner, (Corning v. MaCullough, 1 Comst. 64, opinion of Jones, J.;) and there is no evidence, unless it be afforded by the introduction of subdivision 2, section 92, of any intention to change such enactment; and that introduction is for an entirely different class of cases from penal remedies. Under both the former and present statutory provision, the action is required to be both remedial and penal, for it is to "be brought only by the party aggrieved, in which case the legislature could not take away the right of action, as it could for penalties for offenses in which the public might be interested, for bringing which a shorter period of limitation is provided. (Code, § 93, subd. 2.) The omission of the words “ offense committed ” from the present provision, is not less significant; for, as the action is to be by a party aggrieved, and the sum to be recovered is intended as indemnity for his private loss by the act complained of, the term “ offense ” is not appropriate to it, although it might be in actions for penalties given to the state or any one who would sue for it. Upon the whole, therefore, the provision in its, new form is not to be considered as manifesting any intent to change the substance of the statute in a mere revision of it, such as this part of the Code is. (In re Brown, 21 Wend. 316. Theriat v. Hart, 2 Hill, 380.) The present, therefore, must be held to embrace the same kind of penal actions as the former enactment.

Without refenence, however, to the prior existence of the same enactment in a different form, the present, statute extends to all actions for a penalty or forfeiture by an aggrieved party; and the only question under it is, what is a penalty or forfeiture for which an aggrieved party can sue ? Of course the expression is elliptical, for the act or mode is not stated by which the party is to be aggrieved. With the ellipsis supplied, it would read, “penalty or forfeiture for an act, other ' than the non-fulfillment of a contract, by which any person may be aggrieved ■” for in Corning v. McCullough, (1 Comst. 69,) the term “party aggrievedis held to he inappropriate to those who sue on contracts or liabilities for debts or damages ;, penalty or forfeiture does not necessarily imply a fixed sum, but any thing imposed as a punishment, whether specific or measured by the value of the interest affected by the act complained of; Penalty is defined in Burrill’s Dictionary as “ a pecuniary punishment or sum of money imposed by stat- , ute to be paid as _ a punishment for the commission of a certain offense; and a similar definition of it is given in Bouvier : Forfeiture is defined by Blackstone (2 Comm. 420) to be a loss of goods as a compensation for an offense and injury to -the person to whom they are forfeited, as well as a punishment for a misdemeanor ; and penalties whose benefit is given to a party aggrieved, include equally with forfeitures the idea of both such compensation and punishment. The fact of such gift ,to the injured party does not make a penalty less one; nor would its extension to the whole value of the interest affected, instead of being limited to a fixed sum. On the other hand, it would cease to be a penalty if it were limited to the actual loss of the party. In fact, they are only created in cases where the proof of such loss is difficult, if not impossible, and where, by the probable excess of the penalty beyond the loss to the party injured, or gain to the offender, the latter may be deterred from the offense. It is merely because such penalties may. surpass indemnity for loss,- and are not measured by it, that they are so termed, because, as was laid down by this court in Fry v. Bennett, (1 Alb. Pr. 308,) every excess merely of even vindictive damages beyond indemnity is a penalty.

The liability of the defendants does not arise from any act connected with the creation of the debt to the plaintiff. That debt is the interest affected by the failure to file a proper report, or payment of improper dividends, complained of. The grievance of the plaintiff consists of the effect upon his efforts in the collection of such debt, and not of any fraud or other influence, in contracting it. The extent of that grievance could not easily be proved. It may not have equalled the whole amount of the debt, for the company may have been innocently insolvent before the time of filing the report required, or the dividends not sufficient to have paid the debts. The infliction upon the trustees of the payment of the whole debt is therefore a penalty, for which an action is given to an aggrieved party.

Moreover, the application of the term “penalty or forfeiture ” to such liability as that of the defendants has been fully recognized by the legislature. Actions for penalties and forfeitures against the directors and stockholders of moneyed corporations and banking associations are provided for in section 109 of the Code ; but it will be found, on an examination of the statutes in relation to such corporations and associations, that there is no instance of the infliction of a penalty of a fixed sum upon either directors or stockholders, eo nomine; all those which are imposed are to indemnify an injured party either fully or to the extent of the stock owned by the stockholders. (2 R. S. 5th ed. 591, § 10. Id. 592, §§ 15, 16, 17. Id. 602, § 3.) It is therefore plain that such liabilities as that of the defendants was intended to be embraced by section 92.

Besides these considerations, the period of limitations is made to run from the time the cause of action accrued, not from the time the debt was incurred; the defendants are made liable as trustees long after their liability as stockholders has ceased, and for the full amount of the debts, not merely to the extent of their stock or the injury to the creditor; and they have no right of contribution from the other stockholders. It is difficult to imagine a liability more wanting in all the features of a contract, or more fully possessing those of a penalty.

The demurrer, therefore, to the ninth paragraph of the answer must be overruled.

The tenth paragraph of the answer sets up as a defense, laches on the part of the plaintiffs in suing the company, and notifying the defendants, so as to enable them to proceed against the other stockholders, who are alleged to be solvent. This defense proceeds upon the principle that the other stockholders are involved in the liability of the defendants as trustees, either as joint contractors or sureties. If that were so, it would take away the character of the defendant’s liability as a penalty, which has been already disposed of. The demurrer to this part of the answer is well taken, and should be sustained.

The judgment in this case must therefore be,, that the order made at special term be reversed, as to the demurrer to the defense, contained in the ninth paragraph of the answer, and affirmed as to that to the defense in the tenth, without costs on the appeal; with liberty to both parties to withdraw or amend their defective pleadings in twenty days, on payment of costs.

Bosworth, Ch. J.

The demurer to the defense set up under the ninth head of the answer, presents the question whether the liability imposed by the twelfth and thirteenth sections of the Manufacturing Companies’ Act, upon the trustees of a company, is a penalty or forfeiture within the meaning of subdivision 2, section 92, of the Code ?

The trustees of a company, incorporated, under that act, are not, as trustees, liable for any debt of the company. Heither are its stockholders liable for any of its debts—except those owing to “their laborers, servants and apprentices, for services performed for such corporation,” (§ 18 ;) after the whole amount of capital fixed by such company has been paid in, and a certificate thereof made and recorded in compliance with section 10 of that act.

But although the trustees being stockholders, and liable under section 10, may have been charged as stockholders, and satisfied the whole liability imposed by that section, yet if the company subsequently omits to perform the duty enjoined by section 12, the trustees will become liable for all the debts of the company.

This liability is imposed upon them as a punishment, and if the duty enjoined by section 12 is not performed, they severally and jointly forfeit a sum to be measured- by the amount of the company’s then existing debts, and such as it may contract before that duty shall be performed.

To determine whether a liability to which a person is subjected is by way of penalty or forfeiture, it is not necessary that the statute, in the language imposing it, should denominate it a penalty or forfeiture ; when the statute subjects an officer of a company, as such officer, to a liability to pay money, either for omitting to perform_ a duty enjoined or' for doing an act prohibited, and does this in a case where, but for such omission of duty of wrongful'act, he would be under rno liability,- he is thereby subjected to a forfeiture of the sum which he is made liable to pay, and, so far as he is concerned, the imposition of liability is by way of punishment. Subjecting the trustee to such liability is none the less a punishment as to him, although the creditors may recover more than a full indemnity against the consequences of this misconduct by obtaining satisfaction of their debts.

Each creditor of the company is, under this act, the aggrieved party to whom the action is given, within the meaning of subdivision 2, section 92, of the Code.

Section 12 of the act makes it the duty of the company to file the report therein mentioned; and for the failure of the company to perform the duty, punishes its trustees, by whom alone that duty can be performed. It treats the creditors of the company as the parties aggrieved by this neglect of duty, and for this neglect of duty gives to each an action against the trustees jointly and severally for the whole amount of his debt against the company.

The trustees, on being compelled as such to pay to the extent of the liabilities thus imposed upon' them, have no claim against the company for reimbursement.

In nó case are the consequences prescribed by statute, for an omission or violation of duty, more emphatically penal than in the present.

So, too, the liability imposed by section 13 treats the creditors of the company as the parties aggrieved by the misconduct which that section prohibits, and gives them an action to enforce against the trustees the liability imposed upon them by that section for doing the act which it forbids.

The act prohibited by that section is treated as one by which each stockholder receives his true aliquot share of the sum divided, and the creditors, not the company, are regarded as the aggrieved parties.

In this view, the demurrer to the defense now under consideration is not well taken, and should have been overruled; and as to that, the order appealed from should be reversed, with liberty to the plaintiffs to withdraw their demurrer and reply to this part of the answer, on payment of the costs of the. demurrer.

. The demurrer to the defense, pleaded under head, tenth of the' answer, is well taken ; and as to that, the order appealed from should be affirmed. :

Judginent reversed in respect to the demurrers to the ninth paragraph of the answer, and- affirmed as to the residue.


source: Caselaw Access Project

author: By the Court, Moncrief, J. Robertson, J.

license: Public Domain

text:
    Clarke B. Wheeler, plaintiff and appellant, vs. Elisha Ruckman, (who was impleaded with William Lake,) defendant and respondent.
    1. The plaintiff in an action on a promissory note is hot estopped from asserting his title to the note, by -the record of a former unsuccessful suit which he, as the attorney for the payee, instituted in the name of the latter.
    2. Such record if admissible in evidence at all, is only so as tending to show-want of title "in the present plaintiff. Where the evidence on this point is con- ■ dieting,'-‘it is a question which must be submitted to the jury.
    3. There are no different rules of estoppel for officers of courts than other persons. They are not personally bound by what'they state not under oath, so as to be precluded from subsequently testifying otherwise, particularly as regards third parties, except where the latter, having a right to act on the faith of such statement, have done so, and have been prejudiced thereby. Per Robertson, J.
    4. " Claiming in one atitibn to be owner of a chose in action by virtue of a specified transfer where "he has derived no benefit from such claim, does not preclude the plaintiff from claiming, in a subsequent action for the same cause, that he became owner by a prior and different transfer. Per Robertson, J.
    (Before Moncrief, Robertson and Monell, JJ.)
    Heard October 6,1863;
    decided December 5, 1863.
    This was an. appeal by the plaintiff from a judgment against him on a verdict.
    The action was brought on a promissory note made by the defendants, and which the plaintiff in his" complaint alleged was.indorsed by one Russell the payee, and delivered to the plaintiff in February, 1854.
    The making and delivery of the note to Russell, the payee, was admitted by the answer of the defendant Ruckman. The amount of principal and interest due upon the note was proven' to be #531.87.
    Among other things, the defendant offered to prove that the plaintiff commenced a suit on the same note in the Marine Court, in the name of Robert P. Russell, the payee of the note, against Lake & Ruckman. To this evidence the plaintiff objected. The court overruled the objection and admitted the return from the Marine Court, upon an appeal to the court of common pleas, in the suit of Robert P. Russell against Lake & Ruckman- The counsel for the plaintiff excepted to such admission.
    It appeared from that return that the complaint in that action, which was made in February, 1854, and was signed by Wheeler, (the present plaintiff,) as attorney for Russell, (the plaintiff in that action,) set forth the note in suit, alleging it to be the property of Russell; that the defendant set up, among other things, that the sheriff, under an attachment issued at the suit of one Drury against the property of Russell, had attached the note, in Wheeler’s hands ; and that the justice of the Marine Court had dissmissed the action, on the ground that the sheriff was a necessary party.
    The return having been read, Wheeler offered to show that the reason why he brought such suit in the name of Russell, the payee, was, that he believed the note was not negotiable, and must, without a formal assignment other than the indorsement, be sued in the payee's name. This evidence the court excluded.
    It appeared also that in another former action, brought on this note," by Wheeler in his own name, in this court, and which had been dismissed, he had alleged in his complaint that Russell had assigned the note to him by an instrument under seal, dated in December, 1854.
    The testimony being closed, the court, without any summing up of the cause by the respective counsel, instructed the jury directly, and in express terms, to find a verdict for the defendant, which they did, according to the instruction, without leaving their seats. To these instructions, and to the ruling of the justice before whom this cause was, tried, the counsel for the plaintiff excepted. Judgment was entered upon the verdict, and from the judgment the plaintiff now appealed.

      Peter Y. Cutler, for the appellant.

      E. A. Doolittle, for the respondent,
    As to the conclusive effect of the proceedings in the Marine Court cited, 3 Abb. Dig. 185, Nos. 6, 11, 12; Birckhead v. Brown, (5 Sandf. 134;) Miller v. Manice, (6 Hill, 114;) 1 Vern. 310 ; 2 Edw. Ch. 461; Doty v. Brown, (4 N. Y. Rep. 71;) White v. Coatsworth, (6 id. 137;) Castle v. Noyes, (14 id. 329 ;) Ogsbury v. La Farge, (2 id. 113 ;) Perine v. Dunn, (4 John. Ch. 140;) Holmes v. Remsen, (7 id. 286 ;) 3 Abb. Dig. 192, Nos. 87, 88, 89, 121; 1 Esp. 43; 2 John. 24; 3 Abb. Dig. 185, Nos. 8, 10; 3 Comst. 511; 12 Barb. 168 ; Ehle v. Bingham, (7 id. 494.)
   By the Court, Moncrief, J.

It is not clear upon what theory the record of the proceedings and judgment in the Marine Court, in the case of Bussell v. Lake and Buckman, was presented or admitted as evidence upon the trial. If it is assumed to be upon the ground as argued by the learned counsel for the respondent, that such record was an estoppel upon the plaintiff in this action, then the ruling of the court is plainly erroneous. (Wilson v. Davol, 5 Bosw. 619.) It was not an action between the same parties, and the plaintiff was not shown connected with it otherwise than as the attorney for Mr. Russell; and that fact, surely, could not conclude him in an action like the present, wherein he claims as owner and adverse of course to Mr. Russell, his former client. The most that could be claimed is that evidence might have been introduced tending to show want of title to the note in suit in the plaintiff, by proving his assertion in writing or otherwise of such title and ownership in Mr. Russell or some other person ; but even then the evidence being conflicting it would have been the privilege of the plaintiff to have the jury pass upon the questions of fact under proper instructions from the court.

As a new trial is inevitable, and as many of the exceptions now argued may not again be taken, we forbear to notice them.

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

Robertson, J.

It may be a matter of considerable question in this action, whether a mere return made and signed by a justice of the Marine Court of this city to the court of common pleas of the city and county of New York, upon an appeal taken to the latter court from a" judgment in an action in the former, was evidence of every thing stated in it, particularly in another action where the parties are not the same. It is highly doubtful, if nothing more, whether the mere notes taken by the judge of a court, .on the trial of a cause, of testimony given, by a witness in it, were admissible as evidence of such testimony, except upon proof that such judge does not recollect the words of the witness without such notes, (Russell v. The Hudson River R. R. Co., 17 N. Y. Rep. 134,) and that such notes contain his words. (Wilbur v. Seeden, 5 Wis. R. 162, 165.)

If, however, such return and notes had been admitted without objection, it would have appeared by the former that the judgment of the Marine Court in the case of Russell against the defendant Ruckman, was rendered upon the ground that the sheriff alone had a right to maintain the action by virtue of the attachment in favor of Drury, and that no evidence was offered of any ownership by the present plaintiff. It also appears by the judgment of the court of common pleas that such judgment in the Marine Court was' reversed, and there is no evidence that any further proceedings were had in such action. Of course, there is no judgment determining any question of fact estopping the plaintiff from claiming the amount due on the contract sued upon in this action.

There is no evidence in the case that the present plaintiff was examined as a witness in the Marine Court action. It does not appear from the case on what ground this court, on the trial of the action, prevented the plaintiff from showing the 'cause of Ms filing a complaint in the former court, stating that the note there sued upon belonged to the plaintiff in that action (Russell) instead of himself. The cause as assigned in his offer was a reasonable one to be passed upon by the jury. If the ground was as suggested on the argument, that the plaintiff having been an officer of the Marine Court, when he stated in a complaint put in by him as such1 officer in that court, that the note then sued upon was at that time the property of the plaintiff in the action then brought, he can not now be allowed to prove, in this court, that it was his own; it is clearly 'untenable. There are no different rules of estoppel for officers of courts than other persons; their statements not , under oath are entitled to as much or as little weight, as evidence, as those of any other person under the same circumstance's, but they are not precluded from- testifying to a fact differently from a former statement. They are not personally bound by what they state in pleadings, particularly as regards third parties, unless the latter had a right to act on the faith of such statement, has so acted and been prejudiced thereby. The defendants in this action not only did no act on the faith of the truth of the allegation in such pleading that Russell was owner, since they even denied it in such action, but they were not prejudiced thereby, for the judgment proceeded on a different ground. They, therefore, can not avail themselves óf any such assertion. Their own denial of Russell’s ownership in such action would be as good a ground for estopping them from now setting it up. Possibly an assertion by the present plaintiff in such action, although as attorney for another, that the contract in question was the property of the latter, if "it was his own, may require explanation. He proposed to give a very natural one, but his offer of testimony was excluded by the court; which clearly was error.

Again, in the former action in this court between the present parties, commenced in March, 1855, it appeared by the complaint that the plaintiff claimed to have become owner of the note in question by a sealed instrument in writing, executed by Russell to him on the 29th of December, 1854. The fact of an attachment served in February previous, in the action of Drury against Bussell, was admitted on such trial. The only evidence of the plaintiff’s title offered, was an assignment under seal, dated in December, 1854. It appeared by the minutes of the court that the complaint in such action was dismissed, and by a stipulation that it was so by the court without any submission to a jury. The plaintiff’s counsel offered to prove on the trial that such dismissal was put, by the judge by whom it was made, distinctly on the ground that the complaint did not show a title early enough to escape the operation of the attachment, and that it should have claimed a title in February instead of December, 1854; but he was prevented by the court. The decision of one of the justices of this court, (Bosworth, Oh. J.) on a motion for a new trial in such action, holds that if the plaintiff could not maintain his action under the instrument of December, 1854, he must fail, and that the judgment on the trial must have been given on that hypothesis, and that a prior agreement in February, 1854, could not be noticed because not mentioned in the complaint. The decision of another judge, (Hormas, J.) on a motion to amend in that respect, which was denied, was put on the ground that a trial had been had and a motion for a new trial denied, and the plaintiff’s right to recover after the amendment was doubted. It is thus clear that the plaintiff has been prejudiced by being prevented from proving that the causes of action were not the same in the two actions, to wit, that in one it was for a cause of action assigned in February, and in another in December, 1854, his right of action depending exclusively on the time of assignment. He was also precluded in a measure from showing that the former action had failed for want of evidence, and that judgment was not given against him on the merits. This, of course, was error on the trial in this action.

Assuming the doctrine laid down in Dunlop v. Patterson, (5 Cowen, 243,) to be unquestionable, that a judge is bound to charge a jury that they must entirely disregard the evidence of a witness who admits that he has contradicted in such evidence what he swore to on a former trial, I can not perceive how the present was a case for its application. The former complaint only alleges that Russell executed to the plaintiff the assignment of December, 1854, and that the plaintiff was the owner and holder of such note.- That is not necessarily contradictory to the present one which alleges the acquisition of such ownership in the February previous. Such assignment would have passed the title, but for the attachment. The plaintiff did not testify on the former trial that he was not owner of the note in question in February, 1854, or did not become so until December, 1854. He testified, it is true, that he was owner of part and Bussell of part; but he produced the agreement on which he rested that claim, and which he now claims gave him the whole, That agreement may or may not transfer all Russell’s interest; it is not so clear as to charge even an attorney with perjury, who swears as a conclusion of law that it does. Russell agreed by it to receive two hundred and fifty dollars in full for the note if collected by the present plaintiff, and a less sum in proportion to the amount collected. If nothing was collected, he agreed to lose the note and all moneys due thereon, and the plaintiff was to lose his costs and expenses. It is not necessary now to decide upon the effect of that agreement, except to rescue the plaintiff from a charge of inevitable perjury, because he may swear it gives him the whole title, or has relied upon it solely in this statement in the complaint to that effect. Such statement under oath was probably based upon the suggestion in the opinion of the' learned judge, who refused to allow the amendment of the complaint in the former action, that “such agreement would raise ,a plausible case at least in favor of the plaintiff, if it were properly in the case.” The plaintiff was cut off in this case from every opportunity of proving how he became the owner of the note before the attachment; upon what grounds does not appear, unless they were those urged on the argument, which, are not tenahle. It was matter for the jury to determine, when the statements were not contradictory in themselves, or when evidence was given to explain such contradiction, whether to believe the witness or not; the court clearly had no right to pass upon the question of credibility. The decision in this case may yet turn on the proper construction of the agreement of February, 1854.

It is certainly a matter of very great doubt whether the portions of the case made in the former action between the present parties, as settled in the handwriting of the present plaintiff, could be read in evidence against him. He had no discretion but to copy it as it was settled ; he might undoubtedly leave another to copy it; but the fact of saving that expense or time will not make him chargeable with admitting the facts stated. But he certainly should have been allowed to prove the circumstances under which he made the writing. A case made for an appeal does not necessarily contain all the evidence, and can not be used even to discredit a witness, (Neilson v. Columbian Insurance Co., 1 John. 301.)

It is not necessary now to pass upon the questions raised as to the validity of the attachment; they may he reserved for a future trial. The judgment should be reversed for the errors before pointed out, and a new trial had, with costs to abide the event.

Ordered accordingly.


author: Robertson, J.

text:
    James A. Ruthven et al. executors, &c. plaintiffs and respondents, vs. Joseph H. Patten, administrator, et al. defendants and appellants.
    1. The surrogate has no power, without any account rendered and an inquiry into the assets and various debts of a deceased intestate, to decree absolute payment by his personal representative, of a debt not resting in judgment which is contested by him.
    2. He can not; upon a creditor’s application for payment, and without any such accounting, try the merits of a disputed claim and decree payment. And although such personal representative may have once made an admission of the validity of such demand, his litigation of it upon such application takes away the surrogate’s jurisdiction.
    3. In an action upon an administrator’s bond, by a creditor to whom it has been assigned by the surrogate, to enable him to bring such action to recover the amount of such surrogate’s decree for the payment, by the administrator, of the plaintiff’s demand, if it appear that the supreme court, on an appeal from the surrogate’s court, has made an order or judgment in terms merely reversing the decree in question, without specifying the grounds, this court will not inquire whether the appeal was such as to bring the decree up for review, or whether the reversal was not inadvertent^ Bedress against any error in the proceedings of the Supreme Court, in this respect, must be sought in that court.
    (Before Moncrief, Robertson and Monell, JJ.)
    Heard October 21, 1863;
    decided December 5, 1863
    This was an appeal by the defendants, Joseph H. Patten, James W. Wilson and Samuel W. Bridgham, who were the defendants in this action, from a judgment entered in favor of James A. Ruthven and John B. Jervis, who were the plaintiffs, suing as executors, &c. of James Ruthven, deceased.
    The claim out of which the judgment appealed from in this case arose, was originally against John G-. Bailey, deceased, of whom one of the defendants (Patten) was administrator, in favor of the testator of the plaintiffs (James Ruthven) for two quarters’ rent, ending respectively in May and August, 1847. Bailey died in Brooklyn in April, 1847, and Patten was appointed his administrator in June, 1847, by the surrogate of Kings county. In February, 1853, the testator of -the plaintiffs presented to the defendant Patten his claim in writing, stating its nature and amount, duly verified by his affidavit as to its justice and the non-existence of any payments or offsets. On such claim so verified, the defendant Patten then signed an indorsement in writing, admitting it to be due by the estate of Bailey, and that a dividend would be paid on it as soon as various clo,ims should be settled and discharged. The testator Ruthven died in November, 1855, leaving a will by and of which the plaintiffs were made executors thereof.
    In -September, 1857, the plaintiff Ruthven, as executor, made a written application to the surrogate of Kings county, for an order requiring the defendant Patten both to render his account as administrator or show cause why an attachment should not be issued against him, and that such other proceedings might be had as might be requisite to enforce the payment of the claim of the applicant. Such application was verified, and set forth the indebtedness of Bailey, the grant of letters of administration to the defendant Patten, the filing by him of an inventory and the non-payment of such claim ; and asked for the order sought, to the end that Patten might be compelled to pay such claim; but it did not set forth any admission of the claim by the defendant. An order was made by the surrogate on such application, requiring the defendant to appear before him at a certain day, in November following, and “ render an account of his proceedings as administrator, or show cause why an attachment should not issue against him, and also why he should not be decreed to pay the demand or claim of the applicant.”

    At the time fixed by the order, the defendant Patten appeared before the surrogate and filed á written answer to the application of the plaintiff Ruthven, duly verified by oath. In that answer he alleged that Ruthven had no legal claims against the estate of Bailey; that the testator Ruthven presented such claim immediately after his appointment as administrator, which he refused to pay; that he had not seen Ruthven for six or seven years past, and believed from what he said, he intended to give it up, and therefore the defendant had paid over what he had received from the estate to the next of kin. He also averred that more than six years had elapsed since an admission of the claim made by him in order to give the testator Ruthven a right to a dividend in the estate. His answer ended with a denial that the executors of the testator of Ruthven hád any legal claim upon the estate administered by the defendant, or had any right to require him to account.
    After filing his answer, the counsel for the claimant put in evidence the defendant’s written admission before mentioned, and the hearing of the matter was adjourned. At the adjourned day the hearing was again adjourned, and on the day of the second adjournment, in November, 1857, the defendant failed to appear. An affidavit by the plaintiffs, denying some part of the defendant’s affidavit, was filed, and the inventory of the estate was put in evidence. No account was taken or required, but the surrogate made a decree that the defendant pay the claim of the applicant, with interest and costs. In March, 1854, the defendant applied to the surrogate to amend his decree or order and minutes so as to conform to certain facts alleged in a petition and affidavit made by him, and to have the decree of November previous opened; which application was refused, and an order made to that effect by the surrogate.
    In May, 1858, the defendant Patten filed a petition of appeal to the Supreme Court, wherein, after stating the November decree and the March order, he prayed that the minutes of the surrogate might be corrected so as to conform to the facts stated therein, and that his default, if any, might be opened, and 11 said order” (without.specifying which) set aside and for other relief. In such petition he also set forth the granting of letters of administration to him, the citation issued to him to render an account on a certain day, the filing of his answer on'that day, averring that such claim was barred by the statute of limitations, and was illegal; the adjournment of the hearing of such matter, and a proposal by counsel on the adjourned day to appear for such defendant, which was refused by the surrogate. That the decree was made, and no entry of such offer to appear was made in the minutes. That such order transcended the jurisdiction of the surrogate. That he had applied to correct such minutes and order, and was refused by the March order. The answer of the plaintiffs to this petition of appeal controverted the fact of such appearance and offer to appear by counsel until after the decree had been made; but admitted the citation and decree, as alleged. It also alleged that their claim was just, and that the administrator having failed to show cause, was ordered to pay it. In April previous, the defendant had filed and served a notice of appeal from the order entered in March, 1858, in this matter, “denying the motion of the administrator to amend the minutes in said matter and the erder or decree entered therein,” in November, 1857, “ and to open the default (if any) therein, and from the whole and every part thereof.”
    In May, 1859, an entry was made in the minutes of the general term of the Supreme Court of the district, entitled In the appeal of the defendant from such proceedings, and declaring the “Decree of the surrogate of Kings county reversed without costs.” On the same day an order or judgment was entered at such general term, which recited the submis- • sion of such matter at a general term before certain justices in February previous, and “that it appeared to that court that the answer which the present defendant had put in, before the surrogate, substantially contained a plea of the statute of limitations and a denial of the validity of the claim of the present plaintiff, and that such surrogate made a decree directing the payment of such debt, and that the appeal which the administrator had taken was from that decree as well as from the order refusing to open his default.” Then followed in such order or judgment an apparent extract from the opinion of the court; reasoning against the right of surrogates to try the validity of claims where they are disputed by the executors or administrators, and citing various authorities. It then proceeded as follows: “ The decree of the surrogate in the present ease was, therefore beyond his powers, and must for that, reason be reversedand ended with the words, “ and inasmuch as we reverse for a want of jurisdiction in the court below, we do so without costs.”
    An order was obtained in July, .1859, to show cause why the appeal before mentioned should, not be reargued, and for such other relief as might be just, &c. on the ground' that the decree which such order of May, 1859, purports to reverse was not appealed from; and that the court made it under a mistake. On showing such cause, an order was made in September, 1859, containing no reasons, but ordering such cause to be reargued at a general term, and proceedings on the part■ of the appellant stayed. In February, 1862, an order was-made by the Supreme Court at a general term, on default of the defendant, decreeing that the order made by the surrogate ' of Kings county in March, 1858, (“ being the order from which this appeal was taken,”) should be, and was thereby affirmed, with $10 costs.
    In December, 1857, a certified statement of the decree of such- surrogate, of November, 1857, was filed in the office of the clerk of New York county, and an execution was issued in .March, 1858, thereon to the sheriff of that county, by whom it was duly returned wholly unsatisfied. And on the application of the plaintiffs and proof of such judgment, execution and return, the surrogate assigned the administrator’s bond of the defendant Patten on which his co-defendants are sureties, to be sued;.and the present.action was brought thereon. ■
    The complaint sets forth the grant of letters of administration on the- estate of Bailey, to the defendant Patten; the execution of his bond by himself and his co-defendánts, in the usual form required by statute, for the faithful perforananee of his duties; the existence of a valid claim by the testator of the plaintiffs against Bailey, the presentation of such claim by such testator to the defendant Patten, his written admission of such claim, the death of the testator of the plaintiffs, and his appointment of them as his executors, the application by the plaintiffs to the defendant for payment, their application to the surrogate of Kings county which was stated to be to show cause only why he should not pay the plaintiffs’ claim, the issuing of the citation, the subsequent decree of the surrogate, of November, 1857, against the defendant, the issuing by him of a certificate containing the substance of such decree and its filing and docket in the New York county clerk’s office, the issuing of execution thereon to the sheriff of New York county and its return by him unsatisfied, the failure of the defendant Patten to pay such decree, the application to the surrogate for such bond for prosecution, and his order to that effect, and a request to the sureties to pay the debt.
    The original answer of the defendants denied the proper filing of any certificate in the New York county clerk’s office, and the validity of any judgment or order and execution against the defendant Paiten. It alleged that Patten never made the default, on which the surrogate’s order purports to be founded, but that he appeared pursuant to the surrogate’s citation, denied the right of the plaintiffs to call him to account, alleged the insolvency of the estate and the existence of other creditors of equal rank, denied the validity of the plaintiffs’ claim, and the jurisdiction of the surrogate—leaving them to a suit at law in the proper court—that the surrogate made the order illegally, that the defendant Patten appealed from the order to the general term of the Supreme Court, who reversed the same, that Patten filed a copy of such reversing order with the surrogate, and that after-wards the plaintiffs put such cause on the calendar for re-argument, took the defendant Patten’s default which he has moved to open, and that such motion has been argued and not decided; such answer also alleged that there had been no accounting by Patten or allowance of his accounts by the surrogate. A supplemental answer was put in afterwards, in January, 1862, alleging that the defendant Patten’s default was opened on certain terms, which, upon appeal by him, was affirmed, and that he complied with such terms.
    The issues thus formed were tried by the court at special term, without a jury. The court found as facts, (1st.) The administration of the defendant, Patten, and the execution of the bonds1 sued on. (2d.) The death of the testator of the plaintiffs and their executorship. (3d.) .An application by the plaintiffs to the surrogate of Kings county for a citation to the defendant, Patten, to.show cause why he should not pay such demand. (4th.) The decree of the surrogate, ordering the defendant, as administrator, to pay such demand. (5th.) The filing of the certificate of such decree in the New York county clerk’s office, and the issuing of the execution and its return wholly unsatisfied. (6th.) The assignment of the bond to the plaintiffs, By the surrogate, on the return of such execution,- to be prosecuted. (7th.) The filing by Patten of an affidavit on the return of the citation in opposition to such claim of the plaintiffs. (8th.) The amount, of interest. The conclusions of law applied by the court, were that the surrogate had jurisdiction of the plaintiffs’ claim against Patten, and .to make the decree or order made by him for its payment.

      E. P. Cowles, for the defendants, appellants.

      J. A. Ruthven, for the plaintiffs, respondents.
   Robertson, J.

Beyond the personal responsibility of an administrator, the creditors, of an intestate, who has no real estate, have no other security for the faithful distribution of the assets of the deceased among them, than his bond given on issuing letters of administration, in double the value of the estate. ■ In case of the insolvency of the intestate, if one creditor could get judgment on such bond, for his own benefit alone, the whole' security might be exhausted by a few to the exclusion of the rest.

An administrator has a right, in an action at law against him, to show, that there are unsatisfied debts of a prior class, or unpaid debts of the same class, as that for which such suit is brought. (2 R. S. 88, § 31.) In such case, judgment can only be rendered for whatever assets may remain after satisfying debts of a prior class, and be a just proportion of debts of the same class. (Id.) An execution can only issue against an administrator after rendering and settling an account of his administration, or on the order of the surrogate who appointed him. (2 R. S. 88, § 32. Id. 116, § 21.) After such account rendered, execution can only issue for such sum as may have appeared on the settlement of the former to be a just proportion of the assets applicable to such judgment. (Id.) The judgment creditor may apply to the surrogate for an order to show cause why such execution should not issue. (2 R. S. 116, § 19.)

It is contended in this case, however, that another provision in the Revised Statutes gives a surrogate authority to decree the absolute payment of a debt, without a judgment, although contested, and without any account rendered or any inquiry into the condition of the estate, or amount of claims of a prior or the same class ; and that on the decree so made, the creditor in whose favor it was made has a right for his own exclusive benefit to recover the amount due upon the administrator’s bond. ,

That provision permits a surrogate, after six months from the time of granting letters of administration, to decree payment of a debt of the intestate, or a proportional part, and one year after such grant, the payment of a legacy or its just proportional part. (2 R. S. 116, § 18.)

The first question that arises is whether the surrogate can ' try, on such an application, the merits of a disputed claim, and decree its payment on simply determining it to be due. If he can, he has far superior powers to a court of law, in which an execution can not issue until after an accounting, and then only for a proportionate part of the assets. This question is fully and ably discussed, and decided in the case of Wilson v. Baptist Education Society, (10 Barb. 308, 316.) It had been previously analyzed by the vigorous mind of the late surrogate, Ogden, in the Matter of Kent, (Day. Surrogate, 1st ed.; App. p. 7, ed. 1855,p. 507.) The cases of Magee v. Vedder, (6 Barb. 352;) Matter of Jones, (5 N. Y. Leg. Obs. 124;) Disosway v. Bank of Washington, (24 Barb. 60;) Andrews v. Wallege, (8 Abb. Pr. 425 ; S. C. 29 Barb. 350 ;) Mills v. Thursby, (11 How. 126,) sustain the same principle; and lastly, the decision of the Supreme Court, at general term, in this very litigation, holds the same doctrinó. It is also held in these cases, that a dispute of the claim before the surrogate, a contestatio litis, takes away the jurisdiction. It would be a daring innovation to try to stem the current of such authorities; in fact it was not attempted on the argument. 1

It,is claimed, however, that the surrogate did not lose his jurisdiction : (1.) Because the claim had been passed upon, and admitted by the administrator, before the application. (2.) By the admission of assets by him sufficient to satisfy it, and the illegality of all others. (3.) By reason of contradictions in the administrator’s affidavit, and his failure to appear at the adjourned day. It is also contended that he had a right to compel an" account on the application .of a creditor whose claim had been' admitted.

It will be necessary in the first case to separate the jurisdiction of a surrogate to decree payment of debts,'or allow the issuing of an execution after an accounting, from .that which he exercises: in decreeing payment of an admitted debt' separate from all others.

The Revised Statutes, (vol. 2, p. 92, § 52,) provide that after eighteen months from the time of his appointment, an adrUinistrator" may be compelled to render an account. of’ his pro-' ceedings, by order of the proper surrogate, upon the application of any person having a demand against the estate of the deceased, and even without such application. The contest of the claim does not affect the jurisdiction, as the surrogate may order the account to be rendered, on his own motion. (Kidd v. Chapman, 2 Barb. Ch. 414.) But the power of the surrogate on such an application ends with compelling the rendition of the account of proceedings, (Westervelt v. Gregg, 1 Barb. Ch. 469 ; Smith v. Van Kuren, 2 id. 473,) unless the creditor has a judgment at law, when he may, under the provisions before cited (2 R. S. 88, § 32 ; Id. 116, § 21,) authorize an execution for a proper amount to be issued. Such an amount is not intended to accompany or assist the provision before referred to, by which a debt may be ordered to be paid in six months after the appointment, (2 R. S. 116, § 18 ;) because it cannot be required until eighteen months after that time.

Upon the application of an administrator who has been cited to account by a creditor, or without it, the former may procure a final settlement of his account, (2 R. S. 93, § 60 ; Id. 95, § 70,) for which purpose he is to notify all persons interested. Only upon that settlement can the surrogate decree distribution, and determine any question as to debts and the sums to be paid thereon. (2 R. S. 95, § 71.) There is no other statutory provision authorizing the surrogate to decree payment of specific debts, except the one previously referred to. (2 R. S. 116, § 18.)

The case of Hall v. Bruen, (1 Bradf. 435,) was upon an application by a creditor for an account, not for payment of a debt. In Kidd v. Chapman, (2 Barb. Ch. 414,) the claim was in judgment. In Flagg v. Ruden, (1 Bradf. 192,) the claim was not passed upon, but the exercise of jurisdiction refused. In the Matter of Phyfe, (5 N. Y. Leg. Obs. 331,) it was held that the surrogate had jurisdiction to inquire into an admission of a debt; but it was on an accounting, not a petition for its payment.

The effect on the surrogate’s jurisdiction of an admission by an administrator of a debt on its presentation, when made with a view of having it referred if disputed, is not fully settled by the authorities. In the Matter of Phyfe, (ubi supra,) it was held that the fact of admission as well as of judgment, could be tried, and for that purpose the surrogate had jurisdiction. In Johnson v. Corbett, (11 Paige, 265,) an admission of a debt is considered to have rendered its presentment for allowance unnecessary; but it was not determined whether such allowance did any thing more than affect the question of costs in an action for it, or the payment or dis•tribution of moneys for claims of inferior degree, or legacies or among next of kin. (2 R. S. 89, § 39.)

If there was either such an admission in this case, proved before the surrogate, as gave him jurisdiction to decree payment, or if it was not denied, the Supreme Court at general term disregarded it as having no effect where the claim was disputed. They held, however, that the defendants’ answer contained substantially a plea of the statute of limitations, and a denial of the validity of the claim. The decree of the surrogate after reciting that application for • a citation, its issue and service, the adjourment of the hearing and the failure of the administrator to appear and render an account, declares that it appeared to him, that the claim was justly due to the plaintiffs, and that there were assets sufficient in the defendants’ hands to pay all the just debts of the decedent; and orders the payment of the claim. The application to the surrogate was not founded upon any admission of the debt as a jurisdictional fact, but in what is called a sworn reply to the affidavit of the defendant, offered by way of answer in denial of the claim of the plaintiffs, a written admission was stated. This was offered in evidence on a previous day without such sworn reply being put in, and when the defendant was present; but such reply was put in afterwards, when he was absent. It does not, therefore, appear whether the Supreme Court considered such admission offered as mere evidence to sustain the claim, or as sustaining the jurisdiction. Even in regard to it, however, the defendant anticipating it, alleged it to have been given more than six years previous ; and that it was given for a particular purpose. There also does not appear to have been any evidence taken before the surrogate as to the amount of the assets or debts. The defendant’s answer in the surrogate’s court, shows he paid over most of the estate to the next of kin, long before he gave the admission, and that he refused the claim when it was first presented. It might, therefore, have been questionable whether a decree could have been made in the surrogate’s court, notwithstanding the admission, without disposing of numerous 'questions of law and fact affecting the liability of the defendant as administrator.

But a still more important question arises, whether there was any legal existence of a decree by the surrogate, for the payment of the debt in question. The notice of appeal to the Supreme Court from the surrogate declares that the defendant appealed from the order of March, 1858, denying his motion to amend the minutes in such matter, and the decree of November, 1857, and to open the default therein, and from the whole and every part thereof. A question might have arisen on that whether the words, the decree of November were joined by the previous copulative “and” with the order of March, 1858, or the minutes; the subsequent words, and to open, would seem to make it refer to the latter. The order to show cause was in the same form, and the petition of appeal attacks the validity of the order of November, 1857, but only specifies as the relief sought, the setting aside the order of March, 1858, ond other relief. The answer to it, however, denies the order of November, 1857, to be erroneous. But the judgment of the Supreme Court declares expressly that the November decree was appealed from as well as the March order, and reverses it without costs, because such reversal was founded on a want of jurisdiction in the surrogate. That judgment has never been recalled or modified, unless the order for a reargument, or that affirming the order of March, 1858, does so. The former, of course, left the judgment to stand, until the reargument was heard. The latter affirmed only the last order refusing to correct the minutes or decree. It is true, it declared, as did the judgment of reversal, that the March order was appealed from, but not that the November decree was not appealed from. This court can not correct or revise the solemn adjudications of the Supreme Court. That court on the first argument declared what was appealed from, consisting of an order and decree ; and reversed the decree without disposing of the order, and on a subsequent default pronounced an affirmance of it', without interfering with the former judgment. While that court is still open for redress, it would be indecorous for us to pass upon the propriety of its records, if we could do so. If their judgment or second order did not conform to the views of the judges of that court, the application should, have been made then. This court can not determine what was appealed from, when that tribunal has necessarily had jurisdiction to pass upon .that question,, and has done so.

No facts have been found by the learned judge before whom this cause was tried, as to such appeal, judgment and order of the Supreme Court; and there is no contradictory evidence to impugn the records of them, if any could be received; but he has found that the defendant appeared before the surrogate and filed his affidavit in opposition to the claim of the plaintiffs, and has applied, as a conclusion of law, that the surrogate had jurisdiction of the claim, and to make the decree made by him. I think this was intended to be in opposition to the principles laid down in the cases before cited.

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

Moecbi’ee, J. concurred.

New trial granted.


author: By the Court, Monell, J.

text:
    Nathaniel A. Cowdrey, plaintiff and respondent, vs. Jacob Carpenter, defendant and appellant.
    1. An agreement to pay a sum as liquidated damages in case a court in which an action was then pending should fail to make an order containing a specified provision affecting substantial interests, is void. If the contemplated order would be inequitable, or contrary to settled practice, such agreement would be against public policy; if the same as it may be usual to make in like cases, it is in the nature of a wager, and prohibited by the statute of betting and gaming.
    2. Thus where a party to an action for the foreclosure of a mortgage of real estate on assigning a junior mortgage of only a part of the premises, stipulated with his assignee that the order of sale in such action should direct the property not covered by the junior mortgage to be first sold for payment of the prior mortgage; hM that the stipulation being void, the assignee could not recover he liquidated damages specified in it, upon its breach by the making of an order without the designated provision, and the sale of the whole premises under it, without producing enough to pay the junior mortgage.
    (Before Bosworth, Ch. J. and White and Monell, JJ.)
    Heard November 7, 1863;
    decided December 5, 1863.
    This was an appeal from a judgment entered upon a verdict recovered by the plaintiff on a trial before Justice Moncrief and a jury, on the 12th of May, 1863.
    The action was brought by the plaintiff (Cowdrey) against the defendant (Carpenter) upon an agreement whereby the latter covenanted to pay the former the amount due on a certain mortgage of real estate, ($2000,) then assigned by the defendant to the plaintiff, as liquidated damages, in case an order of sale in an action then pending, in which the present defendant was a defendant, for the foreclosure of a prior mortgage, (for $5000,) on the same and other premises, should not require the prior sale of that part of such premises not covered by such assigned mortgage, and prior application of the proceeds of such sale in satisfaction of the mortgage then being foreclosed, before any sale of the residue.
    The order of sale made in such pending action did not contain any provision or direction for selling any part of such mortgaged premises before the other, and the whole premises were sold together. The plaintiff took out of court a surplus of the proceeds of such sale remaining after satisfying the first mortgage, ($783.25.)
    On the trial the judge charged the jury, that the plaintiff was entitled to recover the difference between the sum which the defendant had agreed to pay as liquidated damages, in case there was no such direction in such order of sale, and the surplus moneys withdrawn by him from court.
    The defendant excepted to such decision, and brought this appeal.

      A. R. Dyett, for the defendant, appellant.

      F. S. Bangs, for the plaintiff, respondent.
   By the Court, Monell, J.

If the contract is valid, the plaintiff is entitled to recover the $2000, as damages liquidated and agreed upon, by the parties. The damages relate to a single breach or default; they were entirely uncertain, and were the proper subject of liquidation by the parties; they were so liquidated, and hence are not a penalty. (Clement v. Cash, 21 N. Y. Rep. 253.)

If the defendant’s contract is to be deemed a promise that he would procure an order of sale containing the stipulated provision, it is a contract which he had not the power to perform, and this must have been known to both parties. If it is to be regarded as a contract to induce the court to make an order which was inequitable or contrary to its settled practice, it is illegal and void.

It is to be inferred, probably, that Mr. Binney, when he gave the $5000 mortgage to Eoe, owned all the lots covered by it. But it does not appear whether he first aliened the two lots mortgaged to Hawke, or the other lots. There is nothing to show affirmatively, that he ever conveyed any of them. It may be. inferred that Coit could not have mortgaged the two lots without having the title. If the two lots were first aliened, then the other lots might have been ordered to be first sold. (Rathbon v. Clark, 9 Paige, 648.)

We must presume the court made the order of sale, according to its established practice in such cases. There is nothing in the case from which we can arrive at a different conclusion ; and as the facts do not leave it open for the suggestion that the established practice of the court, was not followed, the defendant has presumptively contracted that the court would make an order contrary to its established practice ; or an inequitable order. Such a contract would be void.

A promise to pay $2000, or any other sum, as liquidated damages, in the event that in a suit then pending the court shall fail to make an order with a specified provision, affecting substantial interests, we think is contrary to public policy, and therefore void. If the order stipulated for be such as it has been usual to make in like cases, then the contract is a wager, that, in the case covered by the contract, the court will decide in a particular manner. Such contract is void.

Whether such a contract would have been void at the common law, is perhaps not clear; but under our statute (1 R. S. 666, § 8,) all wagers, bets or stakes made to depend upon any lot, chance, casualty, or unknown or contingent event whatever, is declared to be unlawful. Independently, therefore, of its being a contract opposed to public policy, I think it is also in the nature of a wager, and prohibited by statute. (Hall v. Bergen, 19 Barb. 122.)

We think the learned judge erred in his direction to the jury, and that he should have dismissed the complaint.

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


author: By the Court, Bosworth, Ch. J.

text:
    William Heffernan, plaintiff, vs. James Benkard et al. defendants.
    Any interference, assumption of control, or «directions given by the owner of buildings, being erected for him by contractors under a special agreement giving the latter the control of the work, renders him personally liable for injuries caused to third persons by the negligent conduct of such contractors, in work done in obedience to such directions.
    (Before Bosworth, Ch. J. and White and Monell, JJ.)
    Heard November 11, 1863;
    decided December 5, 1863.
    Exceptions taken on the trial of the cause, and directed by the court to he heard at the general term in the first instance. ■' This action was brought against the defendants, Benkard and Hutton, to recover damages sustained by the plaintiff, Heffernan, by injuries to himself, his wife and property, by the fall of a wall of a building, when in process of construction upon the premises'of.the defendants. The complaint alleged that the fall of the wall was by the carelessness and negligence of the defendants, their servants and workmen. The defendants, in their answer, admitted that they were owners of the building, but averred that the premises were, at the time of the accident, in the possession, of four other parties, as contractors for doing the marble, mason, carpenter and iron work, respectively, and that, during the process of such construction, the defendants had no control of the work, and no right to interfere therewith. They also alleged that all usual and proper cafe was taken in the construction of the wall, and that its fall was occasioned by an extraordinary tempest.
    The cause‘was tried on the 28th of May, 1863, before Mr. Justice Barbour and a jury.
    At the close of the evidence, the defendants’ counsel moved to dismiss the complaint, which was granted.
    The court directed the plaintiff’s exceptions to be heard in the first instance at general term.

      C. W. Sandford, for the plaintiff.
    1. The defendants were liable for the injury sustained by the plaintiff from the falling of the wall. 1. It was proved that it was oecásioned by the erection of the side walls without the front, by the direct orders of the defendant, Hutton, and the architect xvho was selected and employed by the defendants as their agent. (Blake v. Ferris, 1 Seld. 48, and cases there cited.)

    II. Although the defendants agreed to have different parts of the work done by different parties, yet by requiring the whole of them to work under the direction of their own agent, selected by themselves, and removable at their pleasure, they so retained the possession and control of the property as to be liable for the manner in which the work and materials of these contracts were brought together. (Mayor v. Bailey, 2 Denio, 434, 444. Matthews v. West London Water Works, 3 Camp. 403. Randleson v. Murray, 8 Ad. & El. 109.)
    III. The court erred in nonsuiting the plaintiff. The point upon which the nonsuit was granted, was a question of fact for the jury.
    IY. The only real issue in the cause was whether the defendants retained and exercised a control over the building during the progress of the work, and whether in consequence thereof the plaintiff was inj ured, which was a question solely for the j ury.

      B. D. Silliman, for the defendants.
    I. It being established by the evidence that the wall, as constructed, was such as the defendants had a right to construct, using the ordinary precautions under like circumstances, usual in reference to adjoining property, and that the fall of the wall occurred in consequence of a storm of unprecedented violence, the plaintiff did not establish any cause of action against the defendants, having failed to show any want of those usual and ordinary precautions in the erection of this wall.
    1. In the improvement of real property with lawful and proper structures, the owner, or person standing in his place, is bound to use ordinary care and diligence only, in reference to the adjoining lands, the structures thereon, and occupants thereof. The character of the structure and the precautionary measures for the preservation thereof,'usually adopted under like circumstances, are the only tests as to his liability for accidents. (Radcliff’s Executors v. the Mayor &c. of Brooklyn, 4 Comst. 195. Partridge v. Gilbert, 15 N. Y. Rep. 601. Lasala v. Holbrook, 4 Paige, 169. Brand v. The Troy and Schenectady Railroad Company, 8 Barb. 369.)
    2. Negligence will not be inferred merely from the occurrence of the accident. (Terry v. The N. Y. Central Railroad Company, 22 Barb. 574. Brand v. The Troy and Schenectady Railroad Company, 8 id. 369.)
    ■ II. The wall being in itself a proper structure, protected by proper bracing against all changes of weather, no directions by the architect and defendant, Hutton, could render the defendants liable for the consequences of negligence (if any) in the contractors properly to support and sustain the wall.
    1. There can be no pretense that the supposed direction changed the relations between the defendants and contractors. Such directions were not a new and distinct employment of the contractor; nor did they create any new or distinct responsibility, nor vary those existing. They were simply directions, or rather an urging to proceed with the walls, as part of the work embraced in the contract, and wholly and entirely under it. They, claimed and received obedience wholly in virtue of' and under the provisions of the contract.

      2. Even if it could be considered a distinct and independent employment creating new, or varying the existing responsibilities of the parties, the liability of the defendants could only arise from a defective plan, the erection of the walls according to such plan being without negligence on the part of the contractor in .erecting or bracing the same. The basis of these actions, however, is wholly and entirely negligence on the part of the contractor in the bracing of the wall.
    3. If it be held negligence not to have provided for the erec tion and support of the wall, against extraordinary occurrences, and changes of weather, it appears incontrovertibly upon the evidence, that the wall could have been braced both on the

      exterior or westerly side, and on the interior or easterly side, so that such bracing, on either side, would have rendered it perfectly safe, even as against all such changes of weather or occurrences; and it being evident upon the whole evidence that the wall was not so braced, the contractor, if any one, is the party liable, and not the defendants.
   By the Court, Bosworth, Ch. J.

I think it is free from reasonable doubt, that the wall, in the condition it was when it fell, was unsafe ; and that it was negligence to leave it in that condition.

The mason’s foreman, Mulshine, testified that the defendants’ architect (whose directions it may have been his duty to follow,) and one of the defendants, Hutton, directed him to carry up the west wall, so as to be in a condition to secure the roof, and that he did so, because these directions were given. That he informed them it was impracticable to do so, unless the front was also carried up ; and that if a storm should come, it would be blown down.

The mason, Woodruff, testified, that this wall “ was carried up so far above the front wall, ® * by the direction of the owner and his architect,” and that he so carried it up because Mr.Hutton directed it, and on no other ground.

If this interference would make the defendants liable, there should be a new trial. A new trial can not be denied, merely because this evidence was contradicted. The fact that it was contradicted, would make it necessary for the jury to ascertain and declare whether the defendants interfered or not; and whether the wall was built as it was in obedience to their orders.

If the defendant, Hutton, gave the directions testified to, and the wall was carried up as it was in obedience to his directions, and if this was dangerous, and was negligence, I think the defendants are liable. ' If he interfered, and controlled the action of the mason, it was his duty to see that such precautions were taken for the security of the wall, as reasonable prudence would require. If owners of buildings being erected for them by third persons, under a contract for the pupose, wish to be exempt from liability by reason of the negligent conduct of the latter, they must not assume to control or direct the contractors how they shall go on with the work, but leave them to that freedom from control for which the contract provides.

In Gilbert v. Beach, (16 N. Y. Rep. 608,) the court said: If it be assumed that the spout was placed in the condition in which it was found at the time of the coming on of the storm,, by the direction of the defendant, there could be no question in relation to his liability. The contrary clearly could not be assumed, for the witness, Young, testified that he ordered him to do it, and he did it.” (See S. C. 4 Duer, 423.)

The facts appearing on the second trial of that action, are stated in 5 Bosw. 445. The carpenters were to construct a gutter to receive the water falling on the roof, and a leader running down to the basement, where it was to be connected with a main pipe leading to the sewer. The leader was left, of a Saturday night, unfinished, reaching to within twelve or fifteen feet of the ground. There was a heavy rain at night, and the plaintiff’s cellar was flooded. There was evidence on the one hand, tending to show that the defendant was himself to furnish the main water pipe in the basement; and on the other, that one McKenzie, .the plumber, had contracted to furnish and introduce it, and that he had improperly delayed doing so. (Id. 447.) The judge ordered the jury to find for the defendants, which they accordingly did.

. The decision of the Court of Appeals, reversing the judgment of this court, was placed on the special ground stated in the opinion of Mr. Justice Clerks. (5 Bosw. 455, 456.) I understand the point decided is, that if an owner modifies in any respect his contract with those contracting to erect a building, so that in doing any particular act, they are obeying 'the directions of the owner, if that act is dangerous and negligent, and damage ensues, the owner is liable. In such a case it is- his duty to see that what is done under his special orders, is not negligently done ; and that if it is negligently done, and third persons are damaged in consequence thereof,"the owner is liable.

I think, therefore, that the propositions decided in Gilbert v. Beach, applied to this case, required the submission to the jury of the question whether the wall was carried up as it was in ■ consequence of, and in obedience to orders given by the defendant, and if the jury shall find that it was, and that this was a negligent act, and that in consequence thereof the plaintiff was injured, then the defendants are liable.

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