text:
    In the Matter of Acquiring Title, etc., to Prospect Avenue in the Twenty-third Ward of the City of New York. Celina Dodin, Appellant; Edmond Huerstel and Another, Respondents.

      Substitution of attorneys— the attorney’s compensation secured to him, except in case of his misconduct.

    Upon an application by a party to an action, for the substitution of another attorney in placo of his attorney of record, ordinarily the court will see that the original attorney is protected as to his fees; but where the attorney’s conduct has been improper and neglectful, the court will deny its protection and direct an unconditional substitution, leaving the attorney to his action for his fees. Apart from the question of misconduct or bad faith, a client, subject only to the payment of the attorney’s fees in a proper case or the securing of them, if they cannot then be fixed and determined, has the right, without assigning any cause, at any point in a suit or proceeding, to change his attorney.
    Appeal by Celina Dodin from an order of tbe Supreme Court, made at tbe New York Special Term and entered in tbe office of tbe clerk of tbe county of New York on tbe 29tb day of January, 1895, denying tbe motion of said Celina Dodin for a substitution of attorneys.
    One Celina Dodin, applied for a substitution of attorneys in the above-entitled proceeding. She is a widow upwards of fifty years of age, owning some property on Prospect avenue in this city, for tbe widening whereof proceedings were instituted by tbe city of New York; it appeared that for the purpose of. procuring proper awards for her property which it was intended to take, she retained an attorney, with whom she bad been acquainted for several years, and who bad acted for ber as legal adviser in many matters during that period; tbat for some reason unknown to ber tbe attorney directed his clerk to appear as attorney in such proceedings and be did so appear; that she now desmes to sever the relation between them and to have another attorney appear for ber, for tbe reason tbat the person selected and now acting for her induced her to make him a loan of $3,000 upon a promissory note and upon tbe representation that it would be paid at maturity. That as the result of ber confidence in him and ber relationship to him she did loan the money, that the note was not paid at maturity and she. was obliged to bring an action, wherein the clerk, who, as stated, had appeared for her in the proceedings, acted for her attorney; that she obtained judgment and issued execution, but the latter was returned unsatisfied, and up to the present time she has been unable to realize anything upon her judgment. That she believes her present relationship to her attorney is such that it is improper for him to represent her as attorney or otherwise, either in his own name or in that of his clerk, and she asks that other attorneys be substituted in their place and stead.
    In answer, the attorney, without denying the client’s statements, claims that by virtue of a written power of attorney, which is set forth in full, she constituted him her attorney in fact, and agreed for the services to be rendered to pay him certain compensation which was contingent upon his success; that is to say, he was to receive twenty-five per cent of the amount of any decrease of assessments or increase of awards, or both, from the amount of assessments and awards established in the first instance by the commissioners appointed in the proceeding, and in the event of the proceeding being discontinued after any assessment should be fixed by the commissioners, he was to receive ten per cent of such assessment, and in the event of no increase of awards or the setting aside of the proceedings, he was to receive no compensation whatever.

      Earley c& Prendergast, for the appellant.

      Edmond Iluerstel and William J. Gilroy, for the respondents.
   O’Brien, J. :

In denying the motion for a substitution the learned judge below stated that he did not think that the moving party is entitled to substitution as a matter of right in this case. Some misconduct should be shown upon the part of the attorney.”

If what had been here sought was an unconditional substitution the conclusion thus arrived at would have been right. The application, however, was not for an unconditional substitution, but for a substitution, and this the court had the right to grant upon such terms as were just. The question presented is, then, was the client, upon the showing made, entitled to any relief ?

As held by this court in the case of Pierce v. Waters (10 Wkly. Dig. 432, head note), upon an application by a party for' substitution of another attorney in place of his attorney of record, ordinarily the court will see that the attorney is protected as to his fees; yet where the attorney’s conduct has been improper and neglectful the court will deny this protection and direct an unconditional substitution, leaving the attorney to his action for his fees.” This clearly points out what we think is the distinction to be observed upon motions of this character. If an unconditional substitution is asked for this will not be granted unless such misconduct on the part of the attorney is shown as would deny him the protection which the court would otherwise afford him for his fees or for any other lien that he might have.

Upon this application, even though we do not go to the extent of holding that the act of the attorney in borrowing from his client, a widow, without security and without-having, as shown by the results, the ability to pay, the sum of $3,000, necessitating on her part a resort to remedies to collect the judgment, was so wrongful as to amount to misconduct and bad faith, yet we think it clear that the delicate and confidential character of the relations which should exist between attorney and client were by such act necessarily destroyed, and that the client, under the circumstances, was entitled to some relief. We think, apart from the question of misconduct or bad faith, that a client, subject only to the payment of the attorney’s fees in a proper case, or securing them if they cannot then be fixed and determined, has the right, without assigning cause, at any point in a suit or proceeding, to change his or her attorney. And this view, we think, finds support in the cases of Ogden v. Devlin (45 N. Y. Super. Ct. 631); Prentiss v. Livingston (60 How. Pr. 380); In re Paschal (10 Wall. 483). In Ogden v. Devlin it was held that a client has the right, of his own volition, to change his attorney of record, and this though no complaint is made against the attorney, and though the'object for which the benefit of his services was required has been accomplished; but that the condition of granting substitution in such a case is the payment or securing in full for his services as such attorney and counsel. And, as said in In re Paschal (;supra):The relations between counsel and client are of a very delicate and confidential character, and unless the utmost confidence prevails between them the client’s interests must necessai’ily suffer.”

While, therefore, the client has a right to a substitution at any time upon payment or the securing of the attorney’s fees — which is but another way of saying that such right is conditional — there is the other right, arising from the misconduct of the attorney, which, when shown- to the satisfaction of the court, is unconditional. In one case a substitution is granted as a matter of course upon terms; and in the latter, for misconduct the substitution is unconditional.

There is no force in the suggestion of the respondent Huerstel, that the written power constituted him an attorney in fact with an interest, and that, therefore, the client could not upon any terms substitute another in his place. There is nothing in -the power itself which states or indicates that he was to be the attorney in fact; and the fair construction of the instrument is that he was retained and given all the power that an attorney ordinarily has in such a proceeding, the purpose of it being definitely to fix the amount of his compensation, which could have been provided for just as well by parol, but which the parties for greater certainty reduced to writing. In other words, the right to receive the compensation mentioned in the retainer is nothing more than the ordinary right which an attorney at law has by way of a lien upon the case and papers and money received for his costs and compensation. The fact that such attorney directed his clerk to appear for him in the proceeding does not prevent the client obtaining any relief, because there was no authority given him to delegate to another the right to appear for Mrs. Dodin in the proceeding, and upon his authority ceasing, that of the clerk would fall with it, there being no obligation upon the part of Mrs. Dodin to pay the clerk.

We think, therefore, that, without assigning any reasons, Mrs. Dodin was entitled to a substitution. We do not decide that by reason of the misconduct of the attorney in borrowing from her she is entitled to an unconditional substitution, but that, subject to proper provision to be made in the order for the compensation to which he may be entitled, the order should be reversed and the application for a substitution granted. We cannot, however, overlook the fact, which is not denied, that the attorney has $3,000 of her money, which is represented by the judgment she obtained against him, and to that extent he is secured. "We think that the provision in the order should be that either party should have leave to apply for a reference, now or hereafter, to determine the amount of the attorney’s lien, as against which she should have the right to offset the $3,000 borrowed from her, she only being required to pay him any additional amount that may be found to be due him, and, if the amount due him for compensation is less than the amount of the judgment, that he should be credited with that sum upon the judgment.

Order reversed accordingly and the application for substitution granted, with ten dollars costs and disbursements.

Eollett, J., concurred.

Order reversed and application granted, with ten dollars costs and disbursements.


source: Caselaw Access Project

author: Eollett, J.:

license: Public Domain

text:
    Sabina R. Struthers, as Trustee, etc., of Robert Struthers, and Others, Respondents, v. William E. Smith, Appellant.

      Bischar-ge of a doubtful claim — a good, consideration for a promise of a third person.

    The discharge by a person of a doubtful claim against another is a good consideration for the promise by a third person to pay a sum of money to secure such discharge.
    Appeal by the defendant, William E. Smith, from a judgment of ¡■■the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 26th day of November, 1894, upon the verdict of a jury rendered by direction of the court after a trial at the New York Circuit, and also from an order entered in said clerk’s office on the 26th day of November, 1894, denying the defendant’s motion for a new trial made upon the minutes.

      Injmcm E. Warren, for the appellant.

      Delos McGurdy and John Yard, for the respondents.
   Eollett, J.:

This action was brought on a contract dated November 6, 1893, by which the defendant promised to pay to the plaintiffs’ assignors $17,500 three years after date, with interest semi-annually at the rate of six per cent. The contract contains a provision that in case any installment of interest remains unpaid for thirty days, the entire principal sum shall then become immediately due and payable. The defendant failed to pay the interest, arid this action was brought to recover the principal and interest. The sole defense interjiosed was that there was no consideration for the agreement.

In 1892 the American Lactose Company, a corporation, was organized under the laws of New Jersey, with an authorized capital of $250,000, divided into shares of $100 each. The defendant was the promoter of this corporation, arid after its organization became a director and the president thereof, transferring to it several factories owned by him, for which he received $50,000 of the capital stock. Stephen R. Struthers was a trustee for certain persons for whose benefit he held trust funds, $18,000 of which he, without authority, invested in the shares of the corporation. The money was received by the defendant, who caused the certificates for shares to be issued to Stephen R. Struthers as trustee. Subsequently the beneficiaries under the trust discovered the misappropriation of their funds and threatened to bring an action against the corporation .to recover the sums so invested, and after considerable negotiation the- defendant, acting under the advice of counsel, for the purpose of avoiding an action, executed and delivered the contract on which this action was brought.

It is well settled that the discharge by A of a doubtful claim against B is a good consideration for the promise by O to pay a sum of money to secure such discharge. (White v. Hoyt, 73 N. Y. 505; Wahl v. Barnum, 116 id. 87; Traders Nat. Bank v. Parker, 130 id. 415.)

The judgment and order should be affirmed, with costs.

Yan Brunt, P. J., concurred.

Judgment and order affirmed, with costs.


author: Eollbtt, J.:

text:
    Margaret B. Edson, as Executrix, etc., of Marmont B. Edson, Deceased, Appellant, v. John E. Parsons and Others, Individually and as Executors, etc., of Mary A. Edson, Deceased, Respondents, Impleaded with Others.

      Mutual wills — rewaability of — contract as to the contents of wills, enforcible — f right of the proposed beneficiary to compel performance.

    It is not the law of the State of New York, although it is the rule in some jurisdictions, that in case two persons execute wills at the same time, each having knowledge of the provisions of the other, each giving all of his estate or some definite sum to the other, that neither testator can revoke his will in the lifetime of both without giving notice of his intentions to the other.
    In case two persons execute their wills in like manner, each giving his residuary estate or a definite amount to a third person, either testator may, without notice, revoke his will in the lifetime of both or after the death of the other.
    No legal obligation not to revoke is created by the mere execution of such wills, but in case two persons enter into a contract by which they agree that each will give, by will, to the other, a definite sum or a particular estate, and each executes a will, pursuant to the contract, if either revokes his will without notice, the other may compel a specific performance of the contract, or, in case a specific performance is impossible, may recover damages for the breach of the contract, but the fact that the contract was made must be established by the most clear and satisfactory evidence either by recitals in the wills or by extrinsic proof.

      Quaere, in case two persons agree that each will give by will his residuary estate or a definite sum to a third person, and they concurrently execute their wills, pursuant to the contract, each having full knowledge of the contents of the other’s will, but the beneficiary having no knowledge of either and there being no consideration moving from him to either, whether such beneficiary can compel the performance of the contract or recover damages from the estate in case the provision for his benefit is revoked.
    Appeal by tbe plaintiff, Margaret B. Edson, as executrix, ete., of Marmont B. Edson, deceased, from a judgment of tbe Supreme Court in favor of the defendants, entered in the office of tbe clerk of the county of New York on tbe 18th day of April, 18bJ, upon tbe decision of tbe court rendered after a trial at tbe New York Special Term adjudging that certain papers were not mutual wills, and dismissing tbe plaintiff’s complaint upon tbe merits.

      Joseph E. Choate and Treadwell Cleveland, for tbe appellant.

      Edwa/rd M. Shepa/rd and Devoid D. Ogden, for the respondents.
   Eollbtt, J.:

In some jurisdictions the rule is that in case A and B execute wills at the same time, each having knowledge of the provisions of the other’s, each giving all of his estate, or a definite sum, to the other, neither testator can revoke in the lifetime of both without giving notice of his intentions to the other. But this is not the law of England or of this State. (Hobson v. Blackburn, 1 Addams Eccles. 274; Ex parte Day, 1 Bradf. 476; Jarman on Wills [6th Am. ed.], 29; 1 Williams on Ex. [7th Am. ed.] 9,174.) In the case first cited it was said:

“I have no hesitation whatever in rejecting the allegation, propounding the mutual, or conjoint, will, as that of the party deceased in this cause, on the principle that an instrument of this nature is unknown to the testamentary law of this country; or, in other words, that it is unknown, as a will, to the law of this country at all. It may, for aught that I know, be valid as a compact — it may be operative in equity to the extent of making the devisees of the will trustees for performing the deceased’s part of the compact.”

In Ex parte Day the learned surrogate of the city and county of New York referred to the judgment above quoted as follows: “ So far as this judgment proceeded upon the r&oocabilitry of a will by a subsequent testamentary paper duly executed, notwithstanding any contract to the contrary, the decision is beyond criticism.” We find no case in England or in this State holding that mutual wills are not revocable.

In case A and B execute their wills in like manner, each giving his residuary estate, or a definite amount, to C, either testator may, without notice, revoke his will in the lifetime of both, or after the death of the other. No legal obligation not to revoke is created by the mere execution of such wills. But in case A and B enter into a contract by which they agree that each will give, by will to the other, a definite sum or a particular estate, and each executes a will, pursuant to the contract, if either revokes, without notice, the other may compel a specific performance of the contract, or, in case a specific performance is impossible, may recover damages for the breach of the contract. In case A and B agree that each will give by will his residuary estate or a definite sum to C, and they concurrently execute their wills, pursuant to the contract, ea«h having full knowledge of the contents of the other’s will, but 0 having no knowledge of either and no consideration moving from him .to either, whether 0 can compel the performance of the contract or recover damages from the estate, in case the provision is revoked, need not be determined in this action because we are of the opinion that no such contract is established by the evidence in the case at bar.

The fact that the wills were made, pursuant to such a contract, must be established by the most clear and satisfactory evidence. If it is recited in the wills that they were so made, or if in any way it appears on their face that they were executed pursuant to a contract, it is quite sufficient. The existence of a contract may also be established outside of the wills, by the same evidence by which the existence of other contracts may be proved. In this case the evidence by which the plaintiff: seeks to establish the existence of a contract outside of the wills utterly fails to convince this court that the wills were executed pursuant to an agreement that portions of the respective estates of the sisters should be given to hfarmont B. Edson. The plaintiff to éstablish her case introduced in evidence the diaries kept by the sisters. In the' diary of Susan are memoranda of their consultations with their counsel about the preparation of the wills, and in each of them we find entries relating to the most trivial occurrences in their daily lives, but nowhere is there any suggestion that their wills were made pursuant to an agreement, which seems to us to be at least as good evidence of the non-existence of such a contract as the entries referred to are of its existence.

On turning to the wills of the sisters we find no evidence in either that they were executed, pursuant to an agreement, that the amounts bequeathed by each to Marmont should not be subject to revocation by either testatrix.

The judgment should be affirmed, with costs.

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

Judgment affirmed, with costs.


author: Van Brunt, P. J.:

text:
    Martin L. Rickerson, Respondent, v. The German-American Insurance Company of New York, Appellant, Impleaded with Another.

      Mre insv/ramce policy — property covered thereby — when a question for the eou/rt.

    In an action brought to recover upon a fire insurance policy, where there is no application or allegation looking toward the reformation of the policy, the question as to the property covered thereby can only be determined by a construction of the language of the policy, and if there is no ambiguity in the terms of the policy there is no question for the jury to pass upon on the trial of such action.
    Where a fire insurance policy was issued upon a brick building and additions occupied for stores and dwellings, such language cannot be construed to cover an independent building occupied almost exclusively as a factory, erected directly in the rear of the brick building occupied for stores and dwellings, where the only mode of communication between the two buildings was by crawling through a temporary frame structure from the windows of one into the windows of the other, and where the factory was a larger building than the stores and dwellings.
    Appeal by the defendant, The German-American Insurance Company of New York, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 5th day of July, 1894, upon the verdict of a jury rendered after a trial at the New York Circuit, and also from an order entered in said clerk’s office on the 22d day of June, 1894, denying the defendant’s motion for a new trial made upon the minutes.

      W. D. Murra/y, for the appellant.

      George Richards, for the respondent.
   Van Brunt, P. J.:

This action was brought to recover upon a policy of insurance issued by the defendant to P. Samuel and J. Alexander, of which policy the plaintiff became the owner subject to the interest of a mortgagee. The dispute which has arisen between the parties to this action is as to the property insured by the said policy. There is no demand made by either party for a reformation of the policy, „and the question depends, therefore, upon the construction to be given to the terms of the policy. The question as to what the parties intended by the policy was submitted to the jury, and they having found a verdict in favor of the plaintiff, from the judgment thereupon entered and from the order denying the motion for a new trial this appeal is taken.

It does not seem to us, however, that there is any question for the jury to pass upon, as there does not seem to be any ambiguity in the terms of the policy. By the policy in question the defendants insured against loss or damage by fire “ the brick building and additions, including gas, steam and water pipes, yard fixtures, railings, stoops and sidewalk in front of and all fixtures contained in or attached thereto, or under sidewalk thereof, situate No. 160 Mott street, city of New York, occupied for stores and dwelling.” The lot to which the number 160 attached was about twenty-five feet wide and one hundred and seven or one hundred and eight feet deep. The front of the lot was occupied by a three-story brick building twenty-five feet by about forty-six feet deep; the first floor being occupied as a liquor store and the other floors as dwellings. On the east side was a two-story extension of about sixteen feet in depth. Upon the rear of the lot was a five-story brick factory building, having independent walls on all its four sides, being about twenty-four feet wide by thirty-seven feet deep. There was a space between the rear wall of the extension on the front building and the front wall of the rear building of about seven feet. This space was filled in by a small frame structure, three sides of which were formed by the walls of the rear building, the extension of the front building and the wall of the building on the next lot, boards being nailed up to form the front and boards being nailed down to form the roof. There was a window, in the extension which looked into this small structure and a like window in the factory. The usual way of entering the rear building was through an alleyway under the front building by a wooden stoop to the first floor of the rear building and down some steps to the basement. Passage from one building to the other could only be effected by crawling through the windows which have been spoken of. The ordinary entrance to this frame building was from the yard, and it was used by the tenant of the rear building.

The- question presented is whether the policy in question covered the rear building as well as the front. It is to be observed that there is only one building insured with the additions to such building, which it is represented in the policy were occupied as stores and dwellings. It is difficult to conceive how the rear building is to be considered as an addition to the front building, there being no connection between the two; because this small frame structure cannot be considered a connection. It certainly was not intended to connect the rear building with the front building, nor was it used for any such purpose. The fact of the existence of windows in the front and rear buildings, making it possible to crawl into this frame structure, temporary in its nature, in no manner made the large brick factory an addition to the smaller building on the front.

And, furthermore, by the terms of the policy the building insured is represented as being occupied for stores and dwellings, and it is only the front building that answers this description. The rear building was used almost entirely as a factory, with a very small portion of it occupied as a store for the sale of the goods manufactured therein.

Under these circumstances it is difficult to see how, under the terms of the j)olicy as it reads, it is possible to include this rear factory building. As has already been observed, the buildings -were absolutely independent of each other and intended for different uses, and the mere fact that this frame structure adjoined each building could in no way make the rear building an addition to the front building any more than it could make the front building an addition to the rear. The ordinary signification of tho word addition ” seems to be something added to. But these buildings are entirely disconnected and do not seem to have been intended to have any connection with each other as buildings, and the addition moreover would seem to be of greater magnitude than that to which it is added.

It is undoubtedly true that the large amount of insurance which was obtained would seem to indicate an intention upon the part of the owner to have insured all the buildings that were situated upon this lot, and if there was any mutual mistake between the parties in that respect it would have been necessary to reform the policy in order that it might cover all these structures. But there being no application or allegation looking towards such reformation, we can only construe tlie language of the policy as we find it. Applying the ordinary significance of language to the terms contained in. this policy which was issued upon a brick building and additions occupied for stores and dwellings, we cannot make such language cover another and independent building occupied almost exclusively for the purpose of a factory.

Under all the circumstances of the case it seems to us that there was no question for the jury to pass upon, but that under the interpretation of the language of the policy the rear building was excluded.

The judgment appealed from must, therefore, be reversed and a new trial ordered, with costs to the appellant to abide the event.

Follett and Parker, JJ., concurred.

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


author: Yan Brunt, P. J.:

text:
    The New York Insulated Wire Company, Appellant, v. Westinghouse Electric and Manufacturing Company, Respondent.

      Amended pleading — supersedes the m'iginal — offer to allow judgment — how available.

    Where an amended pleading is served, it takes the place of the original pleading, and the action will proceed as if the original pleading had never been served. Such original pleading, under such circumstances, forms no part of the record and does not set forth the issues which are involved therein, and recourse cannot be had to the original pleading for the purpose of explaining the allegations contained in the amended pleading.
    The only way in which the plaintiff in an action can avail himself of an offer of judgment is in the manner provided by the Code of Civil Procedure, and he will not be permitted to make use of such offer on a motion made by him to sever the action and for judgment for a portion of the amount demanded by the complaint and claimed to bo admitted to be due by the answer, where the court cannot determine from an inspection of such answer the amount which is admitted to be due.
    Appeal by the plaintiff, The New York Insulated Wire Company, from an order of tie Supreme Court, made at the New York Special Term and entered in tlie office of the clerk of the county of New York on the 23d day of January, 1895, denying the plaintiff’s motion for a severance of the action and entry of judgment in favor of the plaintiff for a portion of the amount demanded by the complaint.

      W. B. Putney and Hem'y B. Twonibty, for the appellant.

      Paul B. Gravath, for the respondent.
   Yan Brunt, P. J.:

The summons and complaint in this action were served on the 16th of August, 1894, and on the twelfth of November the defendant served an answer. On the twenty-fourth of November a notice of motion for a severance of the action and for a judgment of $17,079.24, claimed to be admitted to be due in said answer, was served, said notice being returnable on the third of December, the last day for the defendants to serve an amended answer. The defendant asked that the motion stand over until the following day in order that it might serve its amended answer. This application was granted, and the next day the defendant, pursuant to such leave, served and submitted to the court such amended answer and at the same time served upon the plaintiff an offer of judgment for $24,000. The original answer and the offer to allow judgment are contained in the papers handed up upon this appeal.

It is undoubtedly true- that the jfiaintiff was entitled to the relief demanded by this motion under the original answer. But the amended answer contains no such specific admissions as were embraced within the original answer; and the court cannot determine, upon an inspection of the amended answer, the amount which is admitted to be due.

It is urged, however, upon the part of the appellant, that recourse may be had to the original answer for the purpose of explaining the allegations contained in the amended answer. But we think that this cannot be done as it is a well-settled rule of pleading that where an amended pleading is served it takes the place of the original pleading and the action proceeds as though the original pleading had never been served. Such original pleading, under such circumstances, forms no part of the record and does not set forth the issues which are involved. It is difficult, therefore, to see what bearing or relevancy the original answer can have upon a motion of this description; and upon reading the order in this case it would seem not to have been considered by the court below. ..The summons and complaint and the amended answer are referred to in definite terms; but although the words, “ and upon all the papers and proceedings herein,” are inserted in the order it is manifest that the court did not consider the original answer in determining the application, and if it did it would have been error.

Neither can the plaintiff’s application receive any support because of the offer of judgment which is contained in these papers. The only way in which the plaintiff can avail ’ himself of an offer of judgment is set forth in the Code. It is not upon such a motion as the one now under review that any use is permitted of such an offer. If the amended answer in question was served in bad faith simply for the purposes of delay the Code points out the remedy which a party aggrieved is entitled to pursue. He may have it stricken out upon motion and then the action proceeds upon the original pleading. No such course was taken in the case at bar, and we see no means of aiding the. plaintiff in procuring the judgment which he was entitled to under the original answer, and to prevent the recovery of which the amended pleading seems to have been served.

The order appealed from must be affirmed, with ten dollars costs and disbursements. .

O’Brien, J., concurred.

Order affirmed, with ten dollars costs and disbursements.


text:
    John L. McCullough, Respondent, v. Harvey L. Pence, Appellant.

      Answer, after the overruling of a demurrer — objections to the maintenance of the p, action — jurisdiction of an accounting by equity courts. |
    Where a defendant’s demurrer to the complaint is overruled, and thereafter, by permission of the court, the defendant answers, by answering the demurrer is withdrawn and it no longer properly forms any part of the record, and the defendant may raise any objections to the maintenance of the action which he did not waive by answering.
    It is not of every action, in which it is necessary to take an account, that equity has jurisdiction. There must be something more than the mere right to an accounting. It would seem that there must exist some trust or fiduciary relation in order to justify a resort to courts of equity or a decree for an accounting, and the existence of a bare agency is not sufficient.
    Appeal by the defendant, Harvey L. Pence, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 20th day of April, 1894, upon the decision of the court rendered at the New York Special Term adjudging that the plaintiff is entitled to an accounting and referring the matter to a referee to take an account, and also from the final judgment in favor of the plaintiff, entered in said clerk’s office on the 28th day of November, 1894, upon the coming in of said referee’s report.

      John H. Parsons, for the appellant.

      William O. Reddy, for the respondent.
   Yan Brunt, P. J.:

The complaint in this action alleged that the plaintiff was the owner of a one-sixth interest or share in certain letters patent, and that defendant had the right of sale under said letters patent upon payment of certain royalties, one-sixth of which belonged to plaintiff, and that defendant had made large sales of patented articles and had made a payment to plaintiff on account of his interest; that the amount of sales was unknown to plaintiff, but that the plaintiff had been informed and believed that they had been very extensive; that an account had been requested, but the defendant had refused to so account, and had not made any account since a date in said complaint mentioned.

Judgment is prayed for an accounting and for judgment for the amount found due. The defendant demurred to this complaint upon the ground of defect of parties, improper union of causes of action, and that the complaint did not state facts sufficient to constitute a cause of action. That demurrer was overruled and defendant given leave to amend. -

The defendant availed himself of leave to amend and answered, denying knowledge of assignment, and averring willingness to pay ten dollars, which amount the royalties did not exceed.

The issues thus raised came up for trial at a Special Term, The defendant claimed trial by jury, which, being denied, the defendant moved to dismiss the complaint upon the ground that it did not state any cause of action of equitable cognizance, which motion was renewed at the close of the case. These motions being denied and exceptions duly taken the trial proceeded and resulted in an interlocutory judgment referring it to a referee to take and state the account. The referee reported seven dollars and twenty-three cents due at the time of the commencement of the action and sixteen dollars and twenty-nine cents due at the time of trial. Judgment was entered upon the referee’s report for said sum of sixteen dollars and twenty-nine cents and one hundred and forty dollars and thirty cents costs. Prom this judgment and the interlocutory judgment this appeal is taken.

It is urged by the appellant that the motion to dismiss the complaint should have been- granted, because the facts proved- did not constitute a cause of action in equity for an accounting. In reply the respondent claims that the plaintiff’s right to bring this action for an accounting was determined and became res adgudioata on the decision of the demurrer. Several cases are cited to support this proposition, but an examination of them seems to show that the contrary is the rule. By answering the defendant has withdrawn his demurrer, and it no longer properly forms any part of the record. This was distinctly held in the case of Brown v. Saratoga R. R. Co. (18 N. Y. 495). The defendant, therefore, could raise any objections to the maintenance of the action which he did not waive by answering, the general ground against maintaining the action being one.

It is not of every action in which it is necessary to take an account that equity has jurisdiction. There must be something more than-the mere right to an account. It would seem that there must be some trust or fiduciary relation between the parties in order to justify a resort to a court of equity or a decree for an accounting. Even the existence of a bare agency is not sufficient. (Marvin v. Brooks, 94 N. Y. 71.) In the case at bar there was not the semblance of any trust. The action is brought to enforce a mere contract obligation to pay royalties, and the only final judgment would be a money judgment.

The defendant, in an action at law, could have a reference to take the accounts, if necessary, and, if a discovery was needed, an examination before trial was open.

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

Parker and O’Brien, JJ., concurred.

Judgments reversed, new trial ordered, costs to appellant to abide event.


author: Yan Brunt,' P. J.:

text:
    Franz O. Matthiessen, Respondent, v. G. N. Bartlett, Appellant, Impleaded with Others.

      Misjoinder of canises of action.

    In an action setting forth several separate contracts of guaranty, all secured by one collateral, in which the several guarantors have an interest in proportion to the amounts for which they are bound under their respective guaranties, in which action all the guarantors are made parties defendant, a complaint which demands that the plaintiff '(who has paid the principal loan.for which he was liable to the creditor) be subrogated to the rights of the creditor, is not demurrable on the ground that several causes of action are therein improperly united.
    Appeal by the defendant G. N. Bartlett from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 2d day of January, 1895, upon the decision of the court rendered at the New York Special Term overruling the demurrer of the defendant G. N. Bartlett to" the complaint.

      J. Q. Decme and Archibald A. McGlashcm, for the appellant.

      M. W. Devme, for the respondent.
   Yan Brunt,' P. J.:

The complaint in this action alleged that, on the 22d of March, 1894, the defendants Goodwin and Swift procured a loan from the Western National Bank of the city of New York of $44,000, and as •security for the payment thereof deposited forty-four first mortgage bonds of tlie Colonial City Electric Railway Company of Kingston, N. Y., each for the sum of $1,000; that the plaintiff guaranteed the payment to said bank of said loan at maturity; that, in order to induce the plaintiff to guarantee said loan, the defendants Bartlett, Swift, Orne, Abbott, Robinson and Smith duly executed to the plaintiff their agreement in writing, wherein and whereby they agreed with the plaintiff, in the amounts and proportions set opposite their respective names, to severally guarantee the payment of said loan to the extent of said amounts respectively, in case the plaintiff was required to pay said loan, and further agreed to pay to plaintiff the amounts so set opposite their respective names on demand and presentation of the proportionate' amount of said collateral bonds; that the agreement further provided that each of said guarantors contracted for himself and not for any other, and only for the-amount-set opposite his name; that opposite the name of the defendant Bartlett was the amount-of $5,000, and various other sums opposite the name of the other guarantors; and that the loan of $44,000 to- Goodwin and Swift becoming due, the plaintiff paid the same to the said Western National Bank, and received the collateral security.

The complaint further alleges that the plaintiff tendered to the defendant Bartlett bonds aggregating $5,000, the proportionate amount required to be tendered to him, and demanded from him the payment of said sum of $5,000, which was refused. The same allegation is made in regard to the other persons executing the contract of guaranty. Judgment was thereupon demanded that the plaintiff be subrogated to all the rights and liens of said Western National Bank in and to said bonds, and that it be adjudged that there is due from the defendant Bartlett to the plaintiff, on account of his guaranty, the sum of $5,000, with interest, and a similar demand is made as against the other defendants; and that the collateral security be sold at public auction, and the proceeds of five of said mortgage bonds be applied to ■ the payment of said sum of $5,000, and that the plaintiff have judgment against said defendant Bartlett for any deficiency. And similar allegations are made as against the other defendants.

The defendant Bartlett demurred upon the ground that causes of action are improperly united, and that the complaint did not state facts sufficient to constitute a cause of action. The first ground only is urged upon this appeal.

There would seem to be no doubt that the demurrer would have been well taken if there were any means of segregating the particular bonds in which the defendant Bartlett had an interest. But it appears that the bonds were treated as a body, and it cannot be said that the defendant Bartlett or the other defendants were entitled to receive any particular ones of these bonds ; and, as a consequence, although the contract of guaranty may be a separate contract, yet the collateral security which formed that guaranty formed one security in which these parties have an interest in proportion to the amounts for which they were bound under their guaranty, in the sale of the bonds for the purpose of paying this loan. How would it be possible, if these various bonds brought different prices, to adjust the equities of the parties in this collateral security, without the presence of all ? It cannot be said that Bartlett is entitled to have the proceeds of the bonds first sold, or of those last sold, applied to the payment of his indebtedness, and the same is true as to the other defendants. Consequently it is necessary that there should be a marshaling of the proceeds of these bonds and that they should be proportionately divided amongst these various guarantors. There seems, therefore, to be no possible method in which the plaintiff could proceed except by bringing in all the jiarties who are interested in these securities, selling the same for and on their account, and have the court marshal the proceeds, determine the equities between the parties and the amount with which they are to be credited, and give judgment for a deficiency, if the plaintiff should be so entitled, as to each separately.

Under these circumstances we think the court below was right in overruling the demurrer, and the judgment should be affirmed, with costs, with leave, however, for the defendant to answer upon payment of the costs in the court below and of this appeal.

Parker and O’Brien, JJ., concurred.

Judgment affirmed, with costs, but with leave to defendant to answer on payment of costs in court below and of this appeal.


author: Yan Brunt, P. J.: Follett, J.

text:
    The People of the State of New York v. The St. Nicholas Bank of New York. In the Matter of the Application of Horace H. Chittenden, Assignee, etc., of A. S. Hatch & Co., Appellant, to Compel Hugh J. Grant, Temporary Receiver of The St. Nicholas Bank of New York, Respondent, to Pay Certain Dividends, etc.
    , Assignee for the benefit of creditors — his right to the assigned estate until he is removed.

    An assignee for the benefit of creditors is not an officer of the court, and, until he is removed from Ms office of assignee in the manner prescribed by statute, he is entitled to the possession of the assigned estate, and although he may have made propositions to a bank in which the funds of the assigned estate were on deposit, inconsistent with his duties as assignee, such fact does not enable the receiver of such hank to successfully resist his application for the payment of the amount standing on deposit to his credit as assignee.
    Follett, J., dissenting.
    Appeal by the petitioner, Horace H. Chittenden, assignee, etc., of A. S. Hatch & Go., from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 17th day of December, 1894, denying the petitioner’s motion to compel Hugh J. Grant, temporary receiver of The St. Nicholas Bank of New York, to pay certain dividends to the petitioner.

      Thomas P. Wickes, for the petitioner, appellant.

      John M. Bowers and L. G-. Heed, for the temporary receiver, respondent.
   Yan Brunt, P. J.:

I cannot concur in the conclusion of Mr. Justice Follett in the case at bar. The applicant is the assignee and the owner of the fund deposited. He is not an officer of the court, and until he is removed from his office of assignee in the manner prescribed by statute he is entitled to the possession of the assigned estate; and although he may, as far as this semi-defunct bank is concerned, have made propositions which were inconsistent with his duties as assignee, such fact certainly does not authorize a holder of the funds of the assigned estate to resist the payment of the amount due to the assignee. If the assignee has misbehaved he should be removed. But to say that the receiver of this bank shall be entitled to hold the funds simply because the assignee and owner of the same ddfes not say that he intended to distribute it amongst the creditors, would seem to be appointing the receiver of this semi-defunct bank the substituted assignee of the estate, without going through any of the forms of law necessary to such substitution. Certainly, if this bank did not happen to be in the hands of a receiver, and a suit had been brought by the assignee to recover the amount on deposit, no defense would have been disclosed; and the fact that the bank is in the hands of such receiver and a suit cannot be brought, does not seem to be any reason for denying relief to which the petitioner is legally entitled. The order should be reversed and the motion granted, without costs.

O’Brien, J., concurred.

Follett, J.

(dissenting):

It is not contended that the receiver of the bank can set off the funds standing to the credit of the assignee against his individual indebtedness to the bank. The assignee is not personally the owner of five per cent of this sum (his commission) or of any part or jiortion of it, and the receiver has no right to hold any part or portion of the fund for the purpose of applying it in payment of the individual debt of the assignee to the bank. The fund must ultimately be distributed pursuant to a final decree' of the court making the order for distribution of the funds in the hands of the assignee. The learned judge at Special Term held nothing to the contrary of the propositions above stated, but refused to take the funds from the hands of one officer of the court and place them in the hands of a trustee subject to the control of the court under the circumstances disclosed, and in this we think he wisely exercised his discretion.

The assignee did not state in his application that he desired to distribute the fund among the creditors of the assigned estate or to make any use of it as assignee, or that he proposed to deposit it as a trust fund. In a letter written by the assignee to the cashier of the bank, June 11, 1891, he said : Referring to my matters with your bank, I have to say that the reason I did not fulfill my engagement to settle the interest and overdraft was that I was obliged t® postpone for two weeks a sale of some of the property of A. S. Hatch & Co., which I had every reason to suppose would be consummated before June 1. This sale will come off about June 15, and will, by the lowest estimate, put me largely in funds, and I hope you will consider this in view of what follows.”

Again, on June 27, 1893, the assignee wrote the cashier as follows : “ With reference to my note given for interest on jnevious notes, due at your bank within a few days, I ask you to give me a three months’ renewal with the added interest. When I asked you to take this note instead of cash, I represented to you that I expected to realize on property in my hands as assignee of A. S. Hatch & Co. a sufficient sum to enable me to pay the whole of my indebtedness to your bank, and I told you that I was about to make a sale of such property. In accordance with the intention I thus expressed to you, I advertised for sale certain of the property of the estate, the sale to take place on the 25th of May last. I enclose you a copy of the advertisement (marked 1).”

In these letters the assignee stated that as soon as a portion of the assets of the assigned estate was converted into money he would pay his individual debt to the bank therefrom. Under such circumstances we think the Special Term wisely refused to order the funds of this assigned estate into the personal custody of the assignee.

The order should be affirmed, with ten dollars costs and disbursements payable by Horace H. Chittenden personally.

Order reversed and motion granted, without costs.


author: Yan Brunt, P. J'.:

text:
    Jacob Ringle and Another, Respondents, v. The Wallis Iron Works, Appellant, Impleaded with Another.

      Mechanic’s lien for future services under chapter 342 of 1885 — practice on its foreclosure —false statements in the notice — entry on a calendar', not am order — motion for a new trial.

    Chapter 342 of the Laws of 1885 expressly authorizes a mechanic’s lien to he filed in anticipation of work to he done or materials to he furnished. The intent of such statute is to assimilate the practice on the foreclosure of a mechanic’s lien to that on the foreclosure of a mortgage.

      A mechanic does not lose his lien because he is obliged to commence his action before the whole amount of the contract has become due; and, as in the case of a mortgage, a lienor upon the foreclosure of his mechanic’s lien, if anything is due at the time of the commencement of the action, may recover all that has become due up to the time of the trial.
    The objection in an action brought to foreclose a mechanic’s lien, that the notice of lien contained false statements which rendered it invalid, will not be entertained upon appeal when it has not been raised upon the trial of- the action. The more entry on the clerk’s day calendar of the Special Term of the Supreme Court, opposite to the title of a case, of the word “ discontinued,” cannot be construed into an order of the court discontinuing the action. Such calendar is not in any respect a record of the court, but a mere memorandum arranging the business to be transacted therein.
    Although the denial of a motion made for a new trial may appear upon the minutes of the court, yet an order is necessary in order that it may he reviewed on appeal.
    Appeal by the defendant, The Wallis Iron Works, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 15th day of October, 1894, upon the decision of the court rendered after a trial at the New York Special Term adjudging the amount due on the plaintiffs’ mechanic’s lien and directing the payment thereof.

      W. 0-. Wilson, for the appellant.

      T. C. Ennemr and E. L. Collier, for the respondents.
   Yan Brunt, P. J'.:

This action was brought to foreclose a mechanic’s lien filed by the plaintiffs, as sub-contractors, against certain property belonging to the defendant, The Terminal Warehouse Company, known as pier No. 57, North river, to secure a sum of money claimed to be due and owing from the defendant and appellant, The Wallis Iron "'^’orks, to them. Notice of plaintiffs’ lien was filed on the 16th of February, 1892, and this action was begun as to the appellant, The Wallis Iron Works, on the 5th of May, 1892, by summons dated April 26, 1892. On the 1st of April, 1892, upoa the Wallis Iron Works giving a bond, an order was made discharging and canceling the lien of record. It is claimed that on the 6th of March, 1892, this action was discontinued as to the Terminal Warehouse Company because of an entry upon the clerk’s day calendar of the Special Term, opposite the title of the cause, of the word discontinued.” It is difficult to see liow this action could have been discontinued on the 6th of March, 1892, when the summons was not issued until April, 1892.

The defendant, The Wallis Iron Works, answered on the 20th of May, 1892, and the issues presented by the complaint and answer of the Wallis Iron Works were tried at the Special Term and a judgment rendered in favor of the plaintiffs; and from the judgment thus entered this appeal is taken.

The grounds which are alleged for a reversal of the judgment on this appeal are, first, that no foundation was laid for awarding a lien for any specific sum; that the plaintiffs in the action could recover nothing except the amount actually due under this contract at the time of the commencement of the action. This point is embraced in the second objection raised, to the effect that the court erred in holding that the lien could be enforced for what was not due at the time of filing the notice of lien or at the time of bringing the action. The court held that as there was something due on this contract at the time the action was begun, and .that as it was for the foreclosure of a mechanic’s lien, assimilating in practice to the foreclosure of a mortgage, judgment would go for the entire amount due at the time of the trial.

The first error into which the learned counsel for the appellant seems to have fallen is, in not recognizing the fact that a mechanic’s lien can be filed under a contract for work to be done or materials to be furnished. Upon an examination of the Mechanics’ Lien Law (Chap. 342, Laws 1885) it will be seen that the statute expressly authorized a lien to be filed in anticipation of work to be done or materials to be furnished. It further expressly provides that an action must be commenced to foreclose the lien within a certain period after the lien has been filed, and if a party has been unable to complete his contract within that time he might lose the benefit of his lien if he could not commence an action and recover for that which was subsequently to become due.

It is urged that the learned court was mistaken in attempting to assimilate the practice in lien cases and the practice in foreclosure cases, to the extent of giving in an action to foreclose a mechanic’s lien all the remedies which are given in the foreclosure of a mortgage. It is said that the foreclosure of a mortgage is an equitable proceeding where the equitable rights of the parties are to be considered, and their equities control the decree; while the foreclosure of a mechanic’s lien, on the contrary, has been held to be and is a strictly statutory proceeding where the only things to be considered are the strict legal rights of the parties to the controversy. And it is further urged that in foreclosure suits the commencement of the action is not at all necessary to the continuance of the lien ; the lien rests upon the mortgage, which continues to be valid whether an action is commenced thereon or not.

Upon a consideration of the rights of parties in mechanic’s liens and liens obtained by mortgage, it will be seen that in almost a2L respects they are the same. In the case of the mechanic’s lien an action must be commenced or the lien extended within a short period. In the case of a mortgage the action must be commenced in a longer period; but if it is not commenced within the period allowed by law, the lien of the mortgage, precisely the same as the mechanic’s lien, ceases to exist by lapse of time. There was an evident intention in the statute to assimilate the practice in the foreclosure of a mechanic’s lien to that of a foreclosure of a mortgage. It was not in the contemplation of the Legislature that a mechanic should lose his lien because he was obliged to commence his action before the whole amount of the contract had become due. As in the case of a mortgage, he might commence his action and recover all that wás due at the time of the decree.

It would seem, therefore, under these circumstances, that the learned court was entirely right in holding that the plaintiffs in this action were entitled to foreclosure therein if anything was due at the time of the commencement of the action, and recover all that had become due up to the time of trial.

It is further urged that the notice of lien contained false statements which rendered it invalid. The notice of lien stated that at the time thereof there was justly due and owing to the claimants the full contract price. This point, however does not seem to have been raised upon the trial, although it is suggested in the appellant’s answer. In the brief of the appellant our attention is not called to any part of the case in which any such question was presented upon the trial, and we have been unable "to find any exception or motion which raises the same.

It is further urged, that no judgment can be rendered for a lien after the discontinuance of the suit as against the Terminal Warehouse Company. There does not seem to have been any evidence in the case that the action had been discontinued as to the Terminal Warehouse Company. If we were to overlook the discrepancy in dates, still it does not appear that any order has been made or any direction of the court given for such discontinuance. A mere entry on the Special Term clerk’s day calendar ■— which is not in any respect a record of the court, but a mere memorandum arranging the business to'be transacted in the court — cannot be construed into a record of the court. A direction of this kind, even when entered upon the clerk’s minutes, has been repeatedly held not to be equivalent to an order of the court. In the case of a motion for a new trial, .although the denial of the motion may appear upon the minutes of the court, yet an order is necessary to bring the same up on appeal. But in this case there does not se.ern to have been even any entry upon the clerk’s minutes, or any record whatever made, because the day calendars do not form any part of the records of the court.

Judgment should be affirmed, with costs.

Parker and O’Brien, JJ., concurred.

Judgment affirmed, with costs.


author: Per Curiam:

text:
    Elias C. Benedict and Others, as Executors, etc., of Edwin Booth, Deceased, Respondents, v. George T. Arnoux and Others, Defendants; Joseph Campbell and Others, as Executors, etc., of William Campbell, Deceased, Appellants.

      Opening a defendant’s default■ — merits of the proposed defense not considered.

    Where it appears that the default of a defendant, in failing to answer in an action, occurred through mistake, if there be no laches the defendant will be permitted upon such terms as are just to serve an answer ; under such circumstances, upon a motion to open the default and permit the service of an' answer, it is not proper to pass upon the validity of any defense proposed to be interposed unless it is clearly frivolous.
    All defenses which are defenses are entitled to the same consideration by the court.

      Appeal by the defendants, Joseph Campbell and others, as executors, etc., of "William Campbell, deceased, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 23d day of April, 1894, denying said defendants’ motion to open the default in the service of the answer of said defendants and for leave to serve an answer in the action.

      W. W. Wiles, for the appellants.

      C. W. Bovee, Jr., for the respondents.
   Per Curiam:

Without passing upon the question as to the validity of any defense set up in the answer propqsed to be served, we think that it is apparent that the default occurred through mistake, and that by reason of such mistake the appellants should not be deprived of the opportunity of raising the question in a manner in which it can be reviewed, as to whether the answer sets up á defense or not. Where it is apparent that the default has been suffered through mistake, and there is no laches, it does not seem to be proper to pass upon the validity of any defense proposed to be interposed, unless it is clearly frivolous.

It is claimed, however, upon the part of the plaintiffs, that the proposed defense is an unconscionable one, whatever that may mean. The Court of Appeals has held that all defenses which are defenses are entitled to the same consideration by the court, and that a defense is a defense whatever may be our private feelings in respect to it.

We think, therefore, that the defendants should have been allowed to put in their answer upon payment of the costs of the motion and all costs which have been incurred in the action.

The order should be reversed, with ten dollars costs and disbursements, and the defendants allowed to answer upon paying the costs of the motion and the costs which had accrued in the action at the time of the making of the motion.

Present — Yan Brunt, P. J., and Follett, J.

So ordered.


author: Parker, J.:

text:
    John C. Wilmerding and Others, Respondents, v. Sender Jarmulowsky, Appellant, Impleaded with Others.

      Valuable consideration — the granteds title sustained by an inadequate consideration— a bona fide purchaser of real estate — actual notice to a purchaser for value of real estate.

    A valuable consideration does not necessarily mean an adequate consideration, and if the consideration for the sale of real estate is valuable and substantial, although inadequate as to amount, it will be sufficient to sustain the grantee’s title to the premises conveyed unless he is chargeable with notice of a fraudulent intent on the part of his grantor.
    The payment of the full value of real estate by a purchaser thereof is evidence bearing upon the question of bonafides, but it is nót conclusive upon that question. It constitutes merely one circumstance to be weighed in connection with others that may be proved. So also inadequacy of consideration-is a circumstance to be weighed in connection with others, but it is not conclusive, nor is it sufficient standing alone.
    The severest rule which is ever invoiced against a purchaser paying a valuable consideration for real estate arises in cases where there is an outstanding title, lien or equitable interest affected by the conveyance; in such a case the purchaser’s title cannot be affected unless it be proved that prior to the consummation of the sale he had knowledge of facts sufficient to put him on inquiry as to the existence of the title, lien or equitable interest in conflict with that which he was about to purchase. If such knowledge be established, then in a case where a reasonable investigation would have disclosed the real situation, the grantee is presumed either to have made the inquiry and ascertained the extent of such prior right or to have been guilty of a degree of negligence equally fatal to his claim to be considered a bona fide purchaser.
    A purchaser watching for an opportunity to buy real estate from which he can secure an advance will not be deprived of his purchase solely because it appears that he believed he was getting the property for less than he could sell it for. There must be other circumstances having a tendency to make a would-be buyer suspect that the offer to sell at a low price is induced, not by the pressing necessities of the grantor, but because of a desire to defraud others.
    Where the conveyance to a purchaser of real estate for a valuable consideration' is sought to be set aside on the ground that it was made with intent to defraud creditors at large having no special lien or equity in the premises in question, it must be shown that actual notice was given the grantee of the fraudulent intent, or knowledge by him must he proved of circumstances which were equivalent to such notice; circumstances sufficient to put the purchaser on inquiry, where full value has been j>aid for the land conveyed, are not sufficient.
    Appeal by the defendant, Sender Jarmulowsky, from a judgment of the Supreme Court in favor of the plaintiffs, bearing date “'the 26th day of April, 1894, and entered in the office of the clerk of the county of New York, upon the decision of the court rendered after a trial at the New York Special Term adjudging that a certain assignment was made with intent to hinder, delay and defraud creditors and setting aside a certain conveyance of real property.

      Morris Olarh and David MoOT/ure, for the appellant.

      JEmanuel Blvmensteil, for the respondents.
   Parker, J.:

. In so far as this judgment affects the title to the real estate conveyed by Philip Bernstein and wife to Sender Jarmulowsky it must be reversed. There is ample evidence to sustain the finding of fraud against Bernstein, and if the conveyance of the property in question had been to his assignee, or to this defendant Jarmulowsky, without a valuable consideration, the proof would have been suffi-' cient to have supported the judgment rendered. But Jarmulow: sky paid a valuable consideration, and he followed it up by not only taking possession of the property, but erecting on one of the lots a building costing upwards of $14,000. Where a valuable consideration is paid, a still further step has to be taken by the party attacking the conveyance in order to affect the purchaser. And a valuable consideration does not necessarily mean an adequate consideration. If valuable and substantial, although inadequate as to amount, it will be sufficient to sustain the grantee’s title, unless he is chargeable with notice of the fraudulent intent of his grantor. (Truesdell v. Borles, 104 N. Y. 164.)

The severest rule which is ever invoked against a purchaser paying a valuable consideration arises in cases where there is an outstanding title, lien or equitable interest affected by the conveyance, which, of course, does not include a case like this where only general creditors are affected. In such a ease the purchaser’s title cannot be affected unless it be proved that, prior to the consummation of the sale, he had knowledge of facts sufficient to put him on inquiry as to the existence of a right, title, lien or equitable interest in conflict with that which he was about to purchase. If that be established, then the law is, in a case where a reasonable investigation would have disclosed the real situation, that the grantee is presumed either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered a bona fide purchaser. (Williamson v. Brown, 15 N. Y. 354; Baker v. Bliss, 39 id. 70; Acer v. Westcott, 46 id. 384; Reed v. Gannon, 50 id. 345; Bennett v. Buchan, 76 id. 386; Kirsch v. Tozier, 143 id. 390.)

Even under this rule the plaintiffs failed to establish a case. "What facts tending in that direction have they proved this grantee had knowledge of prior to the conveyance? Nothing of moment, except inadequacy of consideration, towards which their evidence strongly points, so strongly that it is perfectly safe to say that the purchase price of the property was considerably less than its real value. The payment of full value by a purchaser is evidence bearing upon the question of bona fides, because an ordinarily prudent man will not pay full value under circumstances that may provoke a lawsuit and possibly a loss of the amount invested. Rut it is not conclusive upon that question. It constitutes merely one circumstance to be weighed in connection with such others as may be proved. So inadequacy of consideration is a circumstance to be weighed in connection with others, but it is not conclusive. Nor is it sufficient standing alone, for it is the general rule that dealers in real estate, and other property as well, are constantly on the lookout for what they term bargains. They buy only because they are convinced that they can sell again for a better price. And the purchaser, watching for an opportunity to buy real estate from which he can secure an advance, will not be deprived of his purchase solely because it appears that he believed he was getting the property for less than he could sell it for. There must be other circumstances having a tendency to make a would-be buyer suspect that the offer to sell at a low price is induced, not by the pressing necessities of the grantor, but because of a desire to defraud others.

Jarmulowsky, prior to the conveyance, had loaned Bernstein $3,000, and taken as security a mortgage upon the property, which was already incumbered by mortgages aggregating $31,750. A few months after the making of the loan, Bernstein applied to him for a further loan upon the property, which Jarmulowsky refused to grant. He was a large owner of real estate in that section of the city, having at that time title to property aggregating in valuation about $350,000, and lie said to Bernstein he would buy the property if he wished to sell it, upon a basis to be fixed by an appraiser whom he should select to value the property. Subsequently he sent an appraiser, who reported that $36,000 would be a fair valuation, and on Bernstfein’s coming again he informed him that he would pay that amount for it. Bernstein asked $38,000, but Jarmulowsky refused to pay any more, and a written agreement was entered into between them on June sixteenth for a sale of the property to him for $36,000. About ten days later the deed was executed and delivered, and Jarmulowsky, after deducting from the consideration agreed upon the amount of the mortgage and interest due thereon, paid to him the balance by check, amounting to $916.19. Two or three days later Bernstein made a general assignment for the benefit of his creditors, but there is no evidence, whatever, that Jarmulowsky knew of his intention in that respect, or that any facts or circumstances came to his attention which should have prompted an ordinarily prudent man to inquire whether the grantor had in his mind a scheme to cheat and defraud his creditors. And Jarmulowsky’s conduct in erecting a building on one of the lots and paying for the same with his own money, tends, in some measure at least, to support the Iona fides of the transaction so far as his part in it is concerned.

So far we have considered this matter as if it were governed by the rule established in Williamson v. Brown, and other cases cited supra, and have reached the conclusion that, even under that rule, a case was not made out which would support a judgment so far as it affects the conveyance to Jarmulowsky. But a different and less-stringent rule seems to have been adopted in Stearns v. Gage (79 N. Y. 102) as to a purchaser of land who pays a valuable consideration in a case where the conveyance is sought to be set aside on the ground that it was made with intent to defraud creditors at large' having no special Hen or equity. This distinction seems to have been made because of the language of the statute relating to fraudulent convéyances. But, however that may be, the fact remains that, the court asserted in that action, which was one to set aside a deed on the ground that it was fraudulent and void as against creditors, after quoting the statute, that “ this plainly means that actual notice shall be given of the fraudulent intent or knowledge of eircumstances which are equivalent to sucb notice. Circumstances to .put the purchaser on inquiry wliere full value lias been paid are not sufficient.” Tlie effect of this decision was 'to create an exception to the general rule asserted by Williamson v. Brown.

As tliis case is of tlie same character as Stearns v. Gage, if of course comes within that decision, and calls for other and different proof of notice than that required by Williamson v. Broion, tbe requirements of wliicli were not even met by tbe plaintiffs, as we have already observed.

Tlie judgment should be reversed as to tlie 'defendant Jarmulowsky and a new trial granted, with costs to tbe appellant to abide the event.

Van Brunt, P. <L, and O’Brien, J., concurred.

Judgment reversed as to defendant Jarmulowsky and new trial granted, with costs .to appellant to abide event.


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    Berthold Levy and Others, Respondents, v. Walter Carr and Others, Appellants.

      Vendor and vendee — right to rescind a contract because of frcmd as against an assignee of the vendee, and as against a pledgee.

    A vendor lias the same right to rescind a sale because of ■ the fraud of the vendee whether the property sold is in the hands of the vendee or of his assignee for the benefit of creditors, and in either case to reclaim the goods sold. The only additional step which the vendor must take to recover the possession thereof from such assignee is to demand them from him before the commencement of the action.
    Where the sale of property is induced by the fraud of the vendee, the title to the property sold vests m him notwithstanding the fraud, subject, however, to the right of the vendor to rescind the contract if he should so elect. If, however, before the contract be rescinded and the property reclaimed, the property sold passes, for a valuable consideration, in the usual course of business, into the possession of a third person, in pledge, without any notice to him of the wrongdoing on the part of the vendee, the rescission of the contract by the vendor does not operate to take away from such third person the right which he acquires to resort to the collateral .pledged for the payment of the obligation which it was intended to secure.

      Appeal by the defendants, Walter Carr and others, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 24th day of May, 1893, upon the verdict of a jury rendered after a trial at the New York Circuit, and also from three several orders, the first two of which were entered in said clerk’s office on the 12th day of May, 1893, and the third of such orders on the 15th day of May, 1893, denying the defendants’ motions for a new trial made upon the minutes.

      H. Arlington, for the appellants.

      Wm. JSf. Oohen and Henry L. Soheuermcm, for the respondents.
   Parker, J.:

The plaintiffs, on August 25, 1891, contracted to sell to Walter Carr & Co. a quantity of beans, for which a thirty days’ note was to be given.

The day following the beans were delivered and the note requested, but the giving of the note was deferred upon a statement being made that the member of the firm authorized to sign notes was out of town. Within an hour after the beans were delivered to Walter Carr & Co. one of that firm consulted with counsel upon the subject of a general assignment by the firm for the benefit of creditors, and the day following, August twenty-seventh, the firm did execute a general assignment to Robert J. Dean as assignee. Plaintiffs elected to rescind the sale, on the ground that it had been procured by the fraud of Walter Carr & Co., and demanded possession of the beans from the assignee. Their demand being refused, this action was broúght to recover possession. If the possession of the beans had been in the assignee undoubtedly this judgment could stand. For the evidence was of such a character as authorized the jury to find as they did, that the sale of the beans was induced by .the fraud of Walter Carr & Co. Had the beans passed from the possession of Walter Carr & Co. to their assignee, Robert J. Dean, in pursuance of the assignment, they would have been subject to the same right of reclamation in the plaintiffs, upon their rescinding the fraudulent contract, as existed against the assignors. In such cases the only additional step which a vendor must take to recover possession of the chattels in the hands of the assignee is to demand them from him before commencing the action. This is so, because the assignee having lawfully acquired the title and possession of the goods, a demand and refusal becomes necessary in order to change the character of his possession. (Goodwin v. Wertheimer, 99 N. Y. 149.)

We have thus briefly called attention to the view upon which the ease appears to have been tried on the part of the plaintiffs, and as it is presented on their behalf on this appeal. But such view wholly ignores the fact established by the uncontradicted evidence, that neither the possession nor the right of possession of these beans was ever in the general assignee of Walter Carr & Co. Upon this subject the undisputed evidence is, that on August 19,1891, Walter Carr & Co. stored with Robert J. Dean & Co. certain merchandise, and received a negotiable warehouse receipt therefor. This receipt was indorsed by Walter Carr & Co., and together with a note for $6,000, also signed by them, and made payable at the Irving National Bank, was delivered to Robert J. Dean & Co. to be negotiated for the benefit of Walter Carr & Co., the warehouse receipt to be used as collateral for the note. Upon the back of the note payment thereof was guaranteed in writing by Robert J. Dean & Co. who were by a writing, also indorsed thereon by Walter Carr & Co., authorized to negotiate the note and collateral, and to thereafter take up the note, in which event it was provided that Robert J. Dean & Co. should be relegated to all the rights and remedies which by the terms of the note were given to the Irving National Bank. Robert J. Dean & Co. procured said note and negotiable warehouse receipt to be discounted by the Irving National Bank, Walter Carr & Co. receiving the proceeds. Eor fifteen years Walter Carr & Co. had been accustomed to store merchandise in the warehouse of Robert J. Dean & Co., taking negotiable warehouse receipts therefor, specifying the kinds and qualities of the merchandise stored, which they either negotiated on their own account or procured assistance from Robert J. Dean & Co. to that end. They were accustomed when Walter Carr & Co. should have procured a purchaser of some portion of the merchandise included in the warehouse receipts, to substitute other merchandise in its place. On August 25, 1891, the day on which it will be remembered the plaintiffs agreed to sell the beans in question to Walter Carr & Co., they addressed to Robert J. Dean & Co. the following letter:

“New York, Aug. 25th, 1891.
“ Messrs. R. J. Dean & Co.:
“Dear Sirs.— We have about 100 bags beans going into jour store to-day or to-morrow wbicli we desire you to substitute for 200 bags peas sold on the dock for which you hold B. L.
“Yours, truly,
“WALTER CARR & CO.”

Robert J. Dean & Co. assented to the proposed substitution, and the 200 bags of peas were released, and the beans, purchased by Walter Carr & Co., substituted in their place, which was in part consummated by their delivery to the warehouse of Robert J. Dean & Co. on August twenty-sixth, the day of their delivery to Walter Carr & Co. by these plaintiffs, the general assignment, as we have said, being made the day following. Thus it appears that, before the general assignment was made, these beans were delivered into the possession of Robert J. Dean & Co. in pledge.

Robert J. Dean & Co., being compelled to pay the note, became entitled to the collateral.

Assuming that at the close of the testimony it was established that Walter Carr & Co. had obtained the beans from these plaintiffs through fraud, and that before the commencement of this action a demand was duly made for their possession of the assignee of Walter Carr & Co., then this situation is presented. Walter Carr & Co., upon the delivery of the beans to them, in pursuance of their contract with the plaintiffs, became vested with the title and possession, notwithstanding the fraud, subject, however, to the right of the vendors to rescind the contract if they should so elect. (Powers v. Benedict, 88 N. Y. 605; Goodwin v. Wertheimer, supra Wise v. Grant, 140 N. Y. 593.)

But before.the plaintiffs concluded to rescind the contract and reclaim the property, it passed in the usual course of business into the possession of Robert J. Dean & Co., in pledge, without any notice to them of wrongdoing on the part of the vendees, and in consideration of their releasing from the pledge, for the benefit of Walter Carr & Co., a quantity of merchandise of equal value. Rescission of the contract by the plaintiffs could not operate to take away from Robert J. Dean & Co. the right, which they had acquired, of resorting to this collateral for the payment of the obligation which it was intended, in part, to secure, for the title and possession had become vested in persons protected, as a rule of necessity, from the original vendors.

The judgment should be reversed as to the defendants comprising the firm of Robert J. Dean & Co., with costs to the appellants to abide the event.

Yan Brunt, P. J., concurred.

Judgment reversed as to defendants comprising firm of R. J. Dean & Co., and new trial ordered, with costs to appellants to abide event.