author: Monell, J. Spencer, J. Jones, J.

text:
    THE NATIONAL BANK OF THE COMMONWEALTH, Plaintiffs and Appellants, v. T. J. TEMPLE, Impleaded, etc., Defendant and Respondent.

      [Decided April 30, 1870.]
    In an action against copartners to recover a debt fraudulently contracted by one of the partners, all the partners are not liable to arrest. Only the partner who made the fraudulent representation can be arrested.
    Whether, if the action is to recover damages for the fraud, all the partners can be arrested: Quere, per Monell, J.
    Arrest and bail are not security for the debt, but are intended as a punishment for a wrong; and the granting of orders of arrest are in the discretion of the court. Being designed as a punishment, they should not be granted against innocent persons.
    The act abolishing imprisonment for debt was intended to prevent arrests for debt alone, but continuing the power to arrest for wrongs: thus indicating an intention to subject the wrong-doer to the consequences of his unlawful act.
    Before Monell, Jones, and Spencer, JJ.
    Appeal from an order made at Special Term, by Mr. Justice McCunn, vacating an order of arrest against defendant Temple.
    This action was brought against the defendants as copartners, to recover for money lent and advanced to them by the plaintiffs.
    Upon an affidavit that the money was obtained through false representations, made by the defendants, an order of arrest was granted.
    The defendant, Temple, applied to have the order vacated as to him, on the ground that the alleged false representations, if made, were made by his partner, Marsh, and not by himself (Temple), and proved, to the satisfaction of the court, that he was innocent.
    The court vacated the order as to Temple, and the plaintiffs appealed.

      Mr. James Emott for appellants.
    The fraudulent representations, which were the ground of the arrest, were fourfold:
    1. That fifty-nine shares of the stock of the Fourth National Bank were the property of Temple and Marsh, and would be transferred to secure the loan obtained of plaintiffs.
    2. That John L. Melcher owed Temple and Marsh $15,000, which would be paid to the plaintiffs.
    3. That James T. Leavitt owed Temple and Marsh, and that he was responsible, and would pay the plaintiffs.
    On these representations, and on the security of these three collaterals, the bank loaned the defendants $11,641 on the 18th of September, 1868.
    4. That Marsh was the owner of a house and lot on Seventh avenue, which he mortgaged to the bank, producing what purported to be a deed of it from his brother.
    On this representation and security, together with the other collaterals, the bank loaned the defendants $4,500 on the 22d September, and $1,340 on the 9th October, 1868.
    These representations were all of them confessedly false and fraudulent.
    They were the basis and inducement for the loans.
    The defendant, Marsh, usually conducted the business of the firm with the bank. He made the representations, as he negotiated the loans.
    The money obtained from the loans went into the business of the firm, and was used by both defendants, with knowledge on the part of both that it had been borrowed from the bank.
    All that Temple swears is that he did not know that these col-laterals were to be used, or that any such representations as Marsh made were to be presented to the bank, but he knew of the loans, and he shared in their avails.
    On this state of facts alone Temple is liable for the frauds of Marsh. He would be liable for property obtained or converted to the use of the firm by his fraud. He would be liable to damages for such conversion. Where money, and not property, is obtained, as in this case, by his partner’s fraud, and he has shared in the fruits of the fraud, he is liable to arrest, and to all remedies which the law gives against his associate who made the misrepresentations, even though himself ignorant and innocent of them.
    If he is liable to an action of tort for a conversion of property by his partner’s fraud, he is equally liable to an arrest in an action for money obtained for his firm by such fraud (Coman v. Reese, 21; How. Pr. Rep., 114; Townsend v. Bogart, 11 Abb., 355; Bull v. Mellin, 9 ib., 58; Hawkins v. Appleby, 2 Sand., S. C. R., 421; Chester v. Dickerson, 52 Barb., 349; Anonymous, 6 Abb., 319, note).
    One partner is not only liable on an implied contract in what was formerly an action of assumpsit for the value of property obtained by a fraud practised by his associate in their business, but in like manner and on the same principle he is liable for damages, or in an action of tort, for the fraud (Hawkins v. Appleby, q. s.; Chester v. Dickerson, q. s).
    H he is liable for damages in an action for tort, which involves his arrest, for the fraud of his copartner, he is certainly liable to arrest in such an action as the present, based on the same principle and similar facts to those on which an action of deceit will lie. Hor does such a rule impose any unjust or unreasonable hardship upon him. If he be entirely innocent, the plaintiffs are equally so, and the consequences must fall on the party to blame, who is the partner whose- association with the really guilty enabled the latter to perpetrate the fraud.

      Mr. R. J. Mitchell for respondent.
    Admitting that defendant Temple was privy to the alleged false representations made by his co-defendant, the order of arrest was properly vacated, for the reason that the plaintiff has united in the complaint distinct causes of action, on one of which (the second) defendants are neither of them liable to arrest.

      By suing, not upon the original indebtedness, but upon the promissory note given therefor, plaintiff waived his right to avail himself of any fraud on the part of the defendants in contracting said indebtedness (Woodruff v. Valentine, 19 Abbt. Pr., 93; Lambert v. Snow, 9 Abbt. Pr., 91; McGovern v. Payn, 32 Barb., 83).
    Upon all the evidence before the court, it must be held that the defendant Temple was not a party to the fraud practised upon the plaintiff.
    It appears from plaintiffs’ own affidavits, that all the alleged false statements and representations were made by defendant Marsh alone.
    The defendant Temple specifically and unequivocally denies that he was in any way privy to the making of them.
    The character and antecedents of said Temple, as testified to by many persons, corroborate his denial, and go far to render it morally certain that he is entirely guiltless.
    The defendant Temple cannot be held accountable for the fraud of his copartner.
    It is now well settled that in an action on contract, a partner, who is himself innocent, is not liable to arrest for the fraud of his copartner (Wetmore v. Earle, 9 Abbt. Pr., 58, note; The Hanover Company v. Shelden, 9 Abbt. Pr., 240. See also case in 36 Cal. R., cited in “The Albany Law Journal,” Vol. 1, No. l, p. 23).
   By the Court:

Monell, J.

Under statutes existing at the passage of the Hon-imprisonment Act of 1831, a defendant could be held to bail, of course, and without any special order for the purpose, in all actions of debt, and in actions upon contracts for the payment of money, the performance of service, or the delivery of property, and in actions for conversion of, or replevin, or trespass, for taking personal property, and for trespass upon lands. In all other eases a special order was required. The ao etiam clause m the writ denoted the true cause of action, and determined the question of bail (2 R. S., 348).

The act of 1831 (Laws, p. 396) abolished imprisonment on any civil process, in any suit or proceeding, for the recovery of money upon any contract, or due upon any contract, express or implied, or for the recovery of any damages for the non-performance of any contract.

The act, however, provided for the issuing of a warrant of arrest, upon satisfactory evidence establishing one or more of the following particulars: (1) A fraudulent removal of property; (2) a fraudulent concealment of property; (3) a fraudulent disposition of property, and (4) that the defendant fraudulently contracted the debt, or incurred the obligation, respecting which the suit is brought.”

The provisions of the Code are substantially like those of the Non-imprisonment Act, and are not, in any respect, inconsistent with the provisions of the [Revised Statutes concerning arrests in actions for torts. Arrests in such actions are allowed now, as formerly.

The effect, therefore, of the Act of 1831, and of the Code, was to take away, or abolish, the right to arrest a defendant for debt, leaving the remedy unimpaired in actions for wrongs, and sup plementing it, in cases of fraudulent removal, conceahnent, or disposition of property, or for fraudulently contracting the debt.

Nor have either of the acts referred to changed or affected the object and purpose of bail. Now, as formerly, it is an obligation to render the defendant amenable to final process in the action; and the obligation is fulfilled if the bail have the person of the defendant ready to be taken in execution. Bail is not, therefore, in any sense, a security for the debt, as the principal may be surrendered at any time, even after judgment in the action, in exoneration of their liability.

Imprisonment of the person of a defendant, which, in theory at least, is supposed to assist in compelling the performance of contracts or in redressing wrongs is, in its effects and results, a punishment. It is not a part of any contract, and may be abolished without impairing the obligation of any contract. Chief-Justice Marshall says, in Sturges v. Crowninshield (4 Wheat., 200) : “ Confinement of the debtor may be a punishment for not performing his contract, or may be allowed as a means of inducing him to perform it. But the State may refuse to inflict this punishment, or may withhold this means, and leave the contract in full force. Imprisonment is no part of the contract, and simply to release the prisoner does not impair its obligation.”

Chancellor Kent also says (2 Kent Com., 399): “ Imprisonment for debt is not usual, unless the debt was contracted, in the first instance, under deceitful assurances, or unless the debtor has applied his property unfairly, or refused to give to his creditor any reasonable or satisfactory explanation. And m all those cases he deserves punishment?

But the title of the act of 1831 very clearly indicates the legislative view of the meaning and purpose of arrests in civil actions. It is “An act to abolish imprisonment for debt, and to punish fraudulent debtors/” and the Code (§ 178) declares that none of its provisions shall affect such act, referring to it by its title, as an act to punish fraudulent debtors.

If anything further was required to establish that the purpose of an arrest is punishment, the very emphatic language .of Judge Woodruff, in the People v. Latorre (6 Abb., N. S., 63), will furnish it. In speaking of the act of 1831, he says : “ It would not be profitable to dwell upon the reasons moving the legislature to punish fraud, and to treat the fraudulent debtor as a criminal, or to inquire whether it is reasonable to punish a fraudulent debtor with more severity than any other wilful wrong-doer.” * * * Again, “ the general rule is, that no debtor shall be imprisoned, but the exception is affirmatively and explicitly made that to punish fraud the fraudulent debtor may be taken and committed as other criminals /” and that the legislature intended to punish the fraudulent debtor, and provided for the punishment, “ by a clear discrimination between him and the honest man.”

The liability of partners for the tortious acts of each other, is confined to such acts as are connected with the partnership affairs, and proceeds upon the principle of agency, the tort being looked upon as the joint and several tort of all the partners, so that they may be proceeded against in a body, or one may be sued alone, for the whole damage done. In law, the act of one, in respect to partnership affairs, is presumed to be with the assent of his copartners, and the liability arises from such presumption. As each acts as the agent of all, he is supposed to act with the consent of all. In all these cases the liability is several, as well as joint. Formerly, and until the enactment of the Code, a distinction existed between actions, and for a fraud a special action was required. For other torts the action Avas trover, or trespass, or replevin, and the liability of all the partners for the tortious act of one could be enforced only by one of such actions.

Those distinctions no longer exist, but an action may be maintained to recover damages for fraud, or deceit, or for a conversion of, or a trespass to property, without regard fo form.

To charge a whole partnership with the fraud of one partner, the action must be founded upon th % fraud. The fraud now, as formerly, can be waived, and a debt, although fraudulently contracted by one partner, may be recovered of all the partners, as a simple debt due from the firm. But when it is sought to enforce a liability of the remaining partners for the fraud, and to recover damages for a tortious act, the action must be founded upon the fraud.

An order of arrest has never been moré than a mere provisional remedy, designed to secure and retain the person of the defendant within the reach of the final process of the court, and is now allowed only in cases where some wrong has been done. The arrest becomes punishment when it is followed by actual imprisonment, which actual imprisonment must always follow where the defendant is unable to furnish bail. The arrest, therefore, is resorted to and used as a coercive remedy, to force payment, or to compel performance, as a means of obtaining a release from imprisonment, and it is useful to a creditor for no other purpose whatever. The actual imprisonment of a debtor on final process, although a technical satisfaction of the debt, is not in any sense a payment of it.

Beyond its coercive property and power, therefore, arrest and imprisonment is a punishment for a wrong, which the law holds the wrong-doer responsible for. But I thinfc the policy of the law is, as I believe it should be, to reach and subject to punishment such only as have committed the wrongs, or have done the acts which establish the right to arrest. Such policy was indicated in exempting from arrest heirs, executors, administrators, trustees, and assignees, unless they had incurred a personal obligation to pay the debt (2 R. S., 348, § 9); and since 1830 females and soldiers of the revolutionary war (Laws 1830, ch. 238); and now, under the Oode, a female is liable to arrest only for a wilful injury.

The liability of all the partners for the acts of each partner can, as before observed, arise only for acts relating to the business affairs of the copartnership ; and no such general liability attaches when the thing done is not within the general scope and business of the firm, unless the film has received the benefits of, or in some way, expressly or impliedly, ratified the act (Story on Part., § 166). Hence, all the partners are not liable for a conversion, by one partner, of property having no connection with the partnership affairs; nor for any other act, not committed in the course of the partnership business. But for torts which arise in the course of the business of the partnership, all the partners are liable, although the act may not have-been assented to by all the partners.. Hence, where one of the partners commits a fraud in the course of the partnership business, all the partners are liable, although they have not all concurred in the act.

Judge Story says (Story on Part., § 108), this liability of all the partners for the fraud of one, proceeds upon the intelligible ground, that where one of two innocent persons must suffer by the act of a third person, he shall suffer who has been the cause or the occasion of the confidence and credit reposed in such person.” But this ground does not gain any additional strength by denominating the act a tort, or determining it to be such.

Under the forms of actions as they existed before the Code, a special action on the case would have been the appropriate remedy to recover a debt which had been contracted by the fraudulent representation of one partner. In such an action the defendant could not have been arrested without a special order. "Whereas, if the tort had been waived, and an action of assumpsit, as it was called, had been brought, the defendant could have been held to bail, as of course, and without an order; which indicates that the fraud was not formerly considered as potent as the debt. And it may be, that if this action had been to recover for the fraud, that all the remedies to which a plaintiff would be entitled might have been taken against all of the partners. But in an action to recover the debt, where an order of arrest is no longer allowed, except as a mere incidental remedy, on the establishing of extrinsic facts constituting a fraud, the power of the court to grant such remedy must necessarily be dérived from such extrinsic facts; yet these facts are no part of the implied contract of indebtedness, nor of the cause of action. It would seem, therefore, to be just that the power should be exercised against, and confined to the partner who has done the wrong. If the innocent partners can be arrested and imprisoned, as a mere incidental remedy, in an action to recover the debt, I see no reason for withholding the order against all the partners, where one only has fraudulently concealed, removed, or disposed of the partnership property. But I have not found any case that would warrant any such conclusion. Yet each of these acts is a specific ground for arrest.

Courts have always exercised a discretion in granting orders of arrest, when such orders • were necessary, as in actions for personal injuries. As early as Clason v. Gould (2 Caines, 47), in an action for libel, the court held that a special cause must be shown. This was followed by Van Vechten v. Hopkins (2 J. R., 293), Horton v. Basneem (20 id., 337), and Zimmerman v. Cheisman (7 Hill, 153). The latter was an action for assault and battery. A similar discretion has been exercised under the Code (Davis v. Scott, 15 Abb. Pr. R., 127), and such is the practice of this court. Indeed, it may be said of all the cases in which an order of arrest is now allowed, that the order rests in the discretion of the court. The language of the Code (§ 179) is, that the defendant may be arrested, and the order may be made. This view is expressed by Judge Daly in Davis v. Scott, supra, and by Judge Harris in Laprous v. Hart (9 How. Pr. R., 541).

It may, however, be said that if the power is discretionary with the judge to grant or refuse the order, his action is final, and cannot be reviewed. That is probably so, and I, therefore, place the decision of this case upon the ground that the court has not the power to grant the order against an innocent partner; and that, therefore, to attain this provisional remedy, as a mere incident to the action, it must be shown that the partner, against whom the remedy is sought, has, himself, committed the fraud.

There is a substantial reason, as was stated by Judge Story (ubi sup.), for holding all the partners liable for a debt contracted by one, even when it was contracted in fraud, but in the name of the firm. But such reason is altogether insufficient when it is sought to inflict upon innocent persons other and criminal consequences, which do not affect, or impair, or increase the right to recover the debt. Where now, as formerly, the innocent as well as the offending person was liable for the tort in an action brought to recover for the tort, a distinction could not, perhaps, be made. All were liable, and the order probably would be general. But where the tort is waived, and an action for the recovery of the debt is instituted, the remedy of arrest can be granted only against the person who has committed the acts which authorize it.

The act abolishing imprisonment for debt was intended to prevent arrests for debt alone. But the legislature continued the power to arrest for certain wrongs committed in contracting the debt; thus clearly indicating, I think, an intention to subject the wrong-doer to the prescribed consequences of his unlawful act. And the Code has adopted the same provisions. It was not intended, it seems to me, to render every person, who by his mere relations to the wrong-doer is liable for a debt which has been contracted through the fraud of such wrong-doer alone, also liable to be arrested and imprisoned, unless the fraud is the foundation of the action.

I do not mean, however, to commit myself to any opinion, that even where the action is directly to recover damages for a fraud, all the partners can be arrested, either by order or on final process, for the tort of one partner only. It is enough that we should hold, that in action to recover the debt, an order of arrest, as a provisional remedy, cannot be granted against any person other than the one who has committed the fraud.

I am, therefore, of the opinion that the order of arrest in this case, as against the defendant Temple, was properly vacated and set aside.

The order appealed from should be affirmed, with costs.

Spencer, J.

(concurring). I am of the opinion that in an action to recover money for the breach of a simple contract brought against copartners, that an order of arrest should issue against those defendants only who appear (by the affidavits) to have been guilty of fraud and deceit, and therefore I concur with the judgment of my learned associate, that this order appealed from should be affirmed, with costs.

Jones, J.

(dissenting). The question presented on this appeal is, whether in an action in assumpsit brought against the members of a firm, to recover an indebtedness due from the firm, all the members thereof are liable to arrest by reason of a fraud committed by one of them in contracting the indebtedness without the knowledge, consent, connivance, privity, or participation of the others.

There is no direct authority in point on the question.

The case of Townsend v. Bogert (11 Abbt., 355) has frequently been cited as such an authority, but on a close analysis it will be found that it is not.

Five judges took part in the decision of that case, three of whom delivered opinions. One of them (Chief-Justice Bosworth) held—

First—That the affidavits on which the order of arrest was granted showed a cause of action which of itself gave a right to hold to bail.

Second—That the fraud of one member of a firm in obtaining goods which have gone to the firm’s use is, in judgment of law, the fraud of all in such sense that an action will lie against all of them for it, and that all are liable for the damages caused by it; and, as a result from this proposition, held that a partner who knew nothing of the fraud committed by his copartner, and neither authorized, participated in, or assented to it, was guilty of it himself within the meaning of that portion of sec. 179 which allows an arrest when the defendant has been guilty of a fraud in contracting the debt or incurring the obligation for which the action is brought; and

Third—That the affidavits showed that the partner who was' seeking to have the order of arrest vacated knew that the fraud had been committed and assented to it; and on these grounds he, the chief-justice, refused to vacate the order of arrest.

Justice Moncrief concurred in refusing to vacate the order on the first and third grounds mentioned in the opinion of the chief-justice.

Justice Hoffman gave no opinion.

Justice Woodruff dissented, holding—

First-SThat the action, as shown by the affidavit, was one to recover the price of the goods sold as a debt due by the defendants to the plaintiffs upon and for such sale.

Second—While admitting the proposition secondly laid down by the chief-justice, he denies the result claimed to arise therefrom, holding that it is only that defendant who has himself been guilty of fraud who is liable to an arrest in an action upon and to recover the debt which it is alleged has been fraudulently contracted; and he says if it were otherwise, then all joint makers of a note might be arrested, though some of them were in truth makers for accommodation, or sureties for the rest, if the latter by fraud procured it to be discounted.

Third—While admitting that if a partner with knowledge of the fraud assents to, adopts, or receives the benefit of the purchase, he is a fraudulent debtor within the meaning of the clause in question, yet that the affidavits did not bring the moving partner within any of those categories. He laid down the proposition, on which he insisted, “that in an action on the contract for the price of the goods, a partner who has not been guilty of the fraud as an actual participator therein, nor by assenting to or adopting the purchase with knowledge of the fraud, cannot be held to bail.”

Justice Robertson also dissented, without delivering any opinion.

Thus it will be seen that three of the five judges did not concur in the result derived by the chief-j ustice from his second proposition; a majority of the court not having concurred in that result, the case is not a binding decision on that point.

The other cases cited by the appellant, with the exception of Coman v. Reese (21 How. Pr. Rep., 114), go simply to establish the second proposition of Chief-Justice Bosworth, but do not contain any decision or intimation as to the result he derives therefrom.

The case of Coman v. Reese is founded solely on the case of Townsend v. Bogert; and is also treated by the court as an action upon the case, founded on the fraud. The question, then, is open for discussion and decision on principle.

It is well established that the law imputes the fraud committed by one partner, while transacting the partnership business, to all the other partners, so as to render them all, by reason of that fi-aud, liable for the damages sustained in consequence thereof; and the party defrauded has a remedy against all by an action based on such fraud, and in which all are liable to arrest as a part of that remedy.

It is claimed, however, that if the party defrauded elects not to base his action on the fraud, but to bring suit on the contract or debt which has been contracted or incurred by the fraud of one of the partners in the course of the partnership business, then the language of subdivision 4 of section 119 is not sufficiently broad to authorize the arrest of any one except the actual perpetrator of the fraud, and those who have made themselves participators therein by consent or adoption.

The provision in question is made, not by way of punishment for the commission of a fraud, but to provide a more ample remedy by means whereof one who has suffered damages by being beguiled out of his property may compel a satisfaction therefor.

There does not appear to be any substantial reason why he should be debarred of this remedy when he brings his action for the debt, while he would have it if he based his action on the fraud.

The law declares that for the purpose of civil remedies the fraud of one partner is the fraud of all. When, then, a statute gives to the injured party a civil remedy, by way of arrest for a fraud committed in the contraction of debt, it gives that remedy as against all whom the law declares to be parties to the fraud and to be civilly liable for the consequences arising therefrom, unless it contains a special exemption as to some of them.

The provision of the statute in question contains no special exemption; and there does not seem to be any ground or principle on which to exclude, by construction, any of those to whom the law imputes the fraud which was used in the contracting the debt for which the action is brought.

I am aware that some eminent judges and writers have occasionally used expressions which would seem to indicate that, in their opinion, an imprisonment under civil process was intended as a punishment.

The most prominent is the expression of Chief-Justice Marshall in Sturgis v. Crowninshield (4 Wheat., 200), where he says: “ Confinement of the debtor may he a punishment for not performing his contract, or may he allowed as a oneans of induei/ng him to perform it. But the State may refuse to inflict this punishment, or may withhold this means.”

This language was used arguendo while considering the question whether the right to imprison was a part of the contract, in which event a State law could not interfere with it as to existing contracts, or whether it was merely a remedy for the enforcement or consequent upon the breach of a contract, in which event a State legislature had full control over it.

The language of the learned judge imports that it was apparent to his mind that there were, so to speak, two species of confinement ; the one inflicted as a punishment without reference to the enforcement of the contract, and the other allowed simply as a means to enforce the contract without reference to a punishment for its breach; and that while confinement is, in a general sense, punishment in all cases, yet it is not punishment in a legal sense when it is applied as a remedy to enforce a contract. He was considering the power of a State legislature to abolish all confinement; and he used language to express his opinion that such power existed, as well where the confinement was for purposes of punishment as where it was used as a civil remedy for the enforcement of a contract.

The case of The People ex rel. Latorre v. O’Brien (Abbt. Pr. Rep., N. S., vol. 6, p. 63) arose under the non-imprisonment act. That act is entitled “An act to abolish imprisonment for debt, and to punish fraudulent debtors,” and its provisions are strict and severe. The learned judge, in the course of his opinion in the last cited case, reasoning from the title of the act and its strict provisions, expresses his view to be that the act to abolish imprisonment for debt, etc., had for its primary object the punishment of those whom it allowed to be imprisoned, the payment of the debt or appropriation of the debtor’s property to such payment, so far as it would go, being but secondary. It was not necessary thus to decide for the proper determination of that case; therefore the remarks of the judge on this subject are mere obiter. Although entitled to great respect as being the exposition of the views of a learned and able jurist, yet they have not the force of a decision. I am not at present prepared to deny the correctness of his views respecting the statute he was considering, nor is it essential for the purpose of this decision that I should do so.

The arguments in support of the doctrine that the imprisonment under the non-imprisonment act was intended by the legislature as a punishment afford, a strong argument in support of the proposition that imprisonment under the Code was not intended as a punishment.

The legislature, while providing for an arrest under the Code, expressly retained the arrest under the non-imprisonment act.

The title of that portion of the Code under which arrest is provided for is, Of the provisional remedies in civil actions,” and the provisions of the title are radically different from those of the non-imprisonment act. Not a word is used, or an intimation given, indicating that it was the design of the legislature that the arrest here provided for was intended to be or was a punishment. On the contrary, the title shows that it was given simply as a remedy in civil actions. A remedy to whom % Clearly to the plaintiff in such an action. A remedy for what ? The loss, damage, or injury for which a civil action may be brought.

Thus, then, assuming the exposition of the non-imprisonment act, as given in the case of The People ex rel. Latorre v. O’Brien, to be correct, we have two acts, by the one of which arrest and imprisonment under its provisions are given as a punishment, and by the other arrest and imprisonment under its provisions simply as a remedy, in contradistinction to the punishment provided for by the former.

There is, then, nothing in either Sturgis v. Crowninshield or The People ex rel. Latorre v. O’Brien which impugns the doctrine above laid down that, in an action against copartners upon a debt due by the firm, all the partners are liable to arrest under the Code, by reason of the fraud of one of them committed in incurring the debt, and this though the others neither actually participated in the fraud nor subsequently made themselves participators by consent or adoption.

I therefore concur in the views of Chief-Justice Bosworth, as expressed in the result drawn by him from his second proposition, and am of opinion that the order below should be reversed, with costs.


source: Caselaw Access Project

author: Jones, J. Monell, J., Spencer, J.

license: Public Domain

text:
    ENOS RICHARDSON, Plaintiff and Respondent, v. GEORGE CARPENTER, Defendant and Appellant.

      [Decided April 30, 1870.]
    An acceptor of an order drawn on him for the payment of a sum of money (said order not being a draft nor any species of negotiable mercantile paper) cannot be held liable upon his acceptance unless there was a consideration for it. The acceptance does not of itself import a consideration. A consideration must therefore be proved aliunde to exist by the plaintiff.
    Where a question of fact is presented which is essential to warrant a referee’s conclusion of law, and there is a conflict of evidence on that question, the report must contain a finding thereon, either expressly or by necessary implication, otherwise a judgment entered on the report will be reversed on appeal. Thus, if in an action against the acceptor of such an instrument he by his answer raises an issue of fact as to whether there was any consideration for the acceptance or not, and there is a conflict of evidence on that issue, a report of a referee in favor of the plaintiff which does not contain a finding of fact finding that issue in plaintiff’s favor cannot be sustained; and a judgment entered in plaintiff’s favor on such a report will be reversed on appeal
    Before Monell, Jones, and Spencer, JJ.
    This action was brought on an instrument of which the following is a copy:
    “ New York, February 14,1868.
    “ Mr. G. Carpenter, 13 Chambers street.
    “ Please pay E. Richardson, Esq., or order, five hundred dollars for value received, besides the amount stipulated to pay Mr. R. out of the proceeds of the claim against the Peabody estate, now in your hands to collect, when the same shall have been collected by you.

      “ Respectfully yours,
    “H. B. Melville.
    [Written across the face:]
    “Accepted February 24, 1868.
    “ Geo. Carpenter.”

      • The complaint sets out the substance of the above instrument according to its tenor and effect, and avers that it was made and delivered for a good and valuable consideration; that it was accepted by the defendant for a good and valuable consideration by his written acceptance thereon; that the plaintiff loaned and advanced the sum mentioned in the instrument on the faith of the acceptance, and is now the owner and holder thereof; that defendant had collected the sums mentioned in said instrument but had not paid the same or any part thereof to the plaintiff.
    The answer denied that the instrument was made or accepted for a good and valuable consideration or for any consideration whatever; also denied that plaintiff loaned or advanced the sum mentioned in the instrument, on the faith of the acceptance, or any sum whatever.
    It then sets up as an affirmative defense that plaintiff held a judgment against Melville & Co., of which firm H. B. Melville was a partner; that said H. B. Melville, acting as the agent of plaintiff, represented to him (the defendant) that the amount of said judgment, with the interest, was between $3,000 and $4,000, and that it could be collected out of the proceeds of a claim wliich Melville & Co. had against the estate of Mr. Peabody in Texas, which proceeds amounted to about $3,800, and was in the hands of parties in Texas, and proposed to the defendant to give to him, if he would proceed in the matter and collect the judgment without any charges or expenses being chargeable against the plaintiff in case of failure, one half of the amount to be collected, to which proposition defendant consented; that, in pursuance of the proposition thus consented "to, the plaintiff assigned said judgment to the defendant on an agreement that defendant should pay to him one half the amount collected thereon; that while-proceedings were pending to collect said judgment, and before defendant knew what amount was collected from the Peabody estate, said Melville again represented to defendant that the amount to be recovered therefrom was at least $3,800, and. requested defendant to accept a draft drawn by him in favor of the plaintiff, payable out of said proceeds; and defendant, relying on such statement made by Melville, and believing the amount collectable from the Peabody estate was as stated by him, accepted said draft, being the instrument sued on; that said representations, as to the amount which could be collected from said Peabody estate, were false and untrue, and were by said Melville falsely and fraudulently made, with full knowledge of their falsity, and for the purpose of cheating and defrauding defendant into accepting said draft; that the amount collected from said Peabody estate was $1,072, $22 deducted for disbursements, and $525 paid to plaintiff under the agreement between him and defendant.
    There were other allegations in the answer on which there is no evidence.
    The issues formed by this complaint and answer were sent to a referee for trial.
    On the trial the plaintiff read in evidence the instrument sued on (a copy of which is given above) and rested.
    The defendant moved for a dismissal of the complaint on various grounds, one of which was “ That there was no evidence of consideration for the draft, but on the contrary it appears there was no consideration.”
    The motion was denied and an exception taken.
    The defendant then introduced evidence tending to sustain the above allegations in the answer; also tending to prove that neither the plaintiff nor Melville had any interest whatever in the balance in his hands of the collection from the Peabody estate; that he accepted the draft as a mere gift to Melville which he was willing to make out of the sum of $2,000, which, from the representations made by Melville, he anticipated to receive for his own use, and that he did not receive any money from the Peabody estate until long after the acceptance.
    On the other hand, plaintiff introduced evidence tending to show that Carpenter was acting for the benefit of Melville, and took the assignment in trust as to one half of the proceeds of collection for Melville, and proceeded to collect the judgment for joint benefit of the plaintiff and Melville upon an agreement made between, him and Melville that he should take out of the collection a reasonable fee for the work he did 3 that this arrangement was made because Melville could not himself appear in the transaction as being interested in the claim, and therefore it was necessary that some person should nominally represent him.
    The referee found as follows :
    First.—That on the 14th day of February, 1868, H. B. Melville drew an order on the defendant, whereby he requested the said defendant to pay the plaintiff herein the sum of five hundred dollars, as soon as and when funds should come into the possession of such defendant, from the proceeds of the Peabody estate in Texas, sufficient to pay said order or draft; that on the 24th day of February, 1868, the said defendant accepted the said draft or order, and that the plaintiff herein thereafter became bona fide purchaser of the same, for a good and valuable consideration, and is now the lawful owner and possessor thereof.
    Second.—That afterwards the defendant came into the possession of funds from the Peabody estate in Texas, sufficient to pay the said draft, and that the date when he first became possessor of such funds was on or about the 19th day of September, 1868.
    Thvrd.—That the defendant has never paid the said draft so accepted as aforesaid.
    And I do further report, as conclusion of law, upon the facts found:
    That the defendant is indebted to the said plaintiff on the said, draft, and that the plaintiff is entitled to recover against the said defendant the sum of five hundred dollars, with interest thereon from the 19th day of September, 1868, and amounting to the sum of five hundred and thirty-six dollars and ninety-four cents.
    Upon these findings judgment was entered for plaintiff against defendant. From which judgment the present appeal is taken.

      Mr. D. T. Walden for appellant.
    The draft being payable out of a particular fund, was not a bill of exchange, nor equivalent to a bill of exchange (Atkinson
      v. Manks, 1 Cow. R., 692, 707; Cook v. Satterlee, 6 ib., 108; Worden v. Dodge, 4 Denio R., 159; Lowery v. Stevens, 3 Bosw., 505).
    The acceptance of the draft was a simple contract to pay Richardson so much money from such a fund when received; to make it obligatory, there must have been a consideration for the promise, and that consideration must be as to the defendant. His obligation cannot be sustained by a consideration between Melville and Richardson (Atkinson v. Manks, 1 Cow., 692, 706).
    To sustain an action on this agreement, and to charge the defendant, it is necessary to show that the defendant has received money belonging to the drawer—money from the Peabody estate belonging to Melville—for until that was done, neither was a consideration proved, or a breach of the contract (per Sutherland J., ib., 707).
    When the plaintiff rested, there was nothing to sustain his case; ■the plaintiff had mistaken his legal position, supposing the action to be upon a bill of exchange, and the motion to dismiss should have been granted.
    The referee’s findings of fact do not sustain his conclusion of law; the facts found do not show any indebtedness by the defendant to the plaintiff, or that the plaintiff is entitled to recover.
    The referee has not found that there was any consideration for the defendant’s promise, or that Melville had any interest in the fund; these were necessary facts, and attempted to be proved, and the referee’s failure to find them shows that they were not established to his satisfaction; if they or either had been, he would have so found (Nelson v. Ingersoll, 27 How., 1).
    This report is like the special findings of facts by a jury—if inconsistent with the general verdict, the former shall control, and the court shall give judgment accordingly (Code, § 262).

      Mr. George W. Parsons for respondent.
    The defendant has no equities as against the plaintiff. He gave his acceptance with a full knowledge of all the facts, or at least with the best possible means of obtaining such knowledge. If he had paid his acceptance he would still have received $72.75 or $75.75 for a trifling disbursement and service. On the other hand, the plaintiff parted with five hundred dollars, on the faith of the defendant’s promise to pay that amount.
    The strongest position that the defendant can possibly take is, that he accepted without any valuable consideration, and for the accommodation of Melville, and that, as the instrument is not technically a draft, the payee was put upon his inquiry as to any defenses. But this position would not be a defense to the action.
    The acceptance of the instrument was in law an equitable appropriation of the fundón which it was drawn (Edwards on Bills, 144; Vreeland v. Blunt, 6 Barb., 182).
    The instrument purports, on its face, to be for value received. The acceptor is the party primarily liable, and is estopped to set up want of consideration as against the plaintiff, who has parted with value on the faith of the instrument accepted (Edwards on Bills, 420; Kemble v. Lull, 3 McLean, 272).
    The instrument was used for the purpose intended by the parties. The defendant accepted it for the very purpose of giving Melville credit, and enabling him to raise money. "Under such circumstances the defendant is bound, though he was a mere accommodation acceptor (Edwards on Bills, p. 323, and cases there cited; Parsons on Notes and Bills, vol. 2, p. 27).
    The defendant’s exceptions are bad in law.
    The plaintiff and Melville both testify that the former paid the full amount of five hundred dollars for the draft. This evidence is wholly uncontradicted.
    The facts found are sufficient to support the conclusion of law.
    Possession of the draft is prima faoie proof of ownership. The defendant admitted in his answer that there were funds in his hands, applicable to the payment of the draft. It is not necessary (though sufficiently evident) that the funds should belong to Melville. The instrument was not drawn upon a fund specified as belongi/ng to the drawer, and the case thus differs from that of Atkinson v. Manks (1 Cowen, 691). It was not necessary to prove consideration. The instrument shows it on its face. The defendant was bound by his acceptance, and had no right to set up want of consideration (Edwards on Bills, pp. 420, 421; Jerome v. Whiting, 7 Johns., 321; Walrad v. Petrie, 4 Wend., 575; Lilly v. Hays, 5 Ad. & El., 548; Kemble v. Lull, 3 McLean, 272).
    The defendant was not an accommodation acceptor.
   By the Court:

Jones, J.

It is perfectly clear that the instrument in question is not a draft, nor any description of negotiable mercantile paper.

It was, therefore, necessary to prove a consideration for the acceptance before the defendant could be held liable.

Ho such proof had been offered at the time the plaintiff rested" his case. The motion to dismiss the complaint should, therefore, have been granted.

If, however, it was perfectly clear from conceded facts subsequently appearing that there was a consideration for the acceptance, the judgment might be sustained.

So, also, if the referee had found as matter of fact upon conflict of testimony that there was consideration for the acceptance, the judgment would be sustained.

The difficulty is that there was conflict of evidence on the subj ect of consideration for the acceptance, upon which the referee might well have found either that there was a consideration or that there was not; but he has not found either way on this disputed question of fact.

It is evident, from his denial of the motion to dismiss and his findings, that his judgment is based on the ground that the instrument imported a consideration, and it was unnecessary for the plaintiff to prove one aliunde. This is an incorrect view; and it results that his findings of fact do not support his conclusion of law.

It is not the office of the General Term to determine, in the first instance, disputed questions of facts. Those must be determined in the court below. We cannot here, for the first time, pass on the conflict of testimony and decide this important question of fact. Our sole authority over questions of fact is to set aside a finding of fact when the evidence is such that the tribunal below should, as matter of law, have held there was not evidence to warrant it.

There is a marked difference between a general verdict and the findings of a referee. A general verdict finds all disputed questions of fact in favor of the party for whom the verdict is given, except such as the judge at the trial may have expressly withdrawn from the jury. The findings of a referee, on the contrary, determine only those disputed questions on which he expressly finds, or which are, by necessary implication, included in some one of his findings of fact.

It being then necessary, to support this judgment, that the plaintiff should aver and establish a consideration for its acceptance, and the question whether there was a consideration or not being a disputed question of fact on which there was a conflict of testimony which would sustain a finding either way, and the referee not having found, either expressly or by necessary implication, on this disputed question of fact, it follows that an essential element in the plaintiff’s cause of action is wanting.

Judgment reversed, with costs to the appellant to abide the event, order of reference vacated, and new trial ordered.

Monell, J.,

concurred in reversing the judgment, on the ground that there was no finding by the referee of any consideration for the acceptance; that the order or request to pay was not a bill of exchange, and did not, therefore, import a consideration ; and it was necessary for the plaintiff to aver and prove, and the referee to find, that there was a sufficient consideration for the acceptance. The evidence as to a consideration being conflicting, the referee should have found' specifically upon it, one way or the other.

Spencer, J.

(dissenting). I do not deem it necessary to discuss the character of the instrument which is the basis of this action, as I hold that, whether the same shall be deemed a draft or commercial paper, or only a simple order, the evidence sustains the findings of the referee and the judgment. I also hold that, if the referee erred in denying the motion to dismiss the complaint, the evidence subsequent thereto fully supported his final conclusion. I hold this instrument to be an order or draft for money, made by one party upon and accepted by another (the defendant), the payment of which was contingent upon the latter (the acceptor) receiving funds from a claim which he (the acceptor) had in his hands for collection in behalf of and for the maker of said order. It appears to me that the language of the instrument itself, when read by the light of the evidence, clearly supports this view of the case, and that the report of the referee is based upon these conclusions. ■ The following is a copy of the order and its acceptance :

“ New York, February 14, 1868.
Mr. G. Carpenter, 13 Chambers street:
“ Please pay E. Richardson, Esq., or order, five hundred dollars, for value received, besides the amount stipulated to pay Mr. R., out of the proceeds of the claim against the Peabody estate now in yowr hands to collect, when the same shall have been collected by you.
Respectfully yours,
“ H. B. Melville.
[Indorsed on face:]
“ Accepted February 24, 1868.
Geo. Oabpenteb.”

The making, acceptance, and non-payment of the order are conceded facts from the pleadings, leaving the questions of consideration and of plaintiff being a bona fide purchaser contested and depending on the evidence; and as to the latter of these questions, I consider it fully established by the uncontradicted evidence of the plaintiff.

“I gave $500 for that paper. On the 14th of February, the date of the draft, I loaned Mr. Melville $150; some time after-wards he brought me this draft, and I gave him the balance, $350, in money; I think this was in March; it was a few days after the acceptance of the draft.

“ Q. What was the consideration of the first advance of $150 ?

“A. The consideration was that Melville would bring me Carpenter’s acceptance for $500. Ho part of this draft has been paid to me.”

Upon the question of consideration for the acceptance, the following facts are uncontested: That on the 21st day of June, 1854, the plaintiff and John B. Palmer and John B. Wilson recovered judgment against Henry B. Melville, the maker of the draft or order, and David Melville (his brother), forming the firm of Melville & Co., in the Supreme Court of Hew York, for the sum of $2,809.68, which on the 24th day of August, 1866, they assigned to the defendant, in consideration of one dollar; and the agreement of defendant in regard to the collection of the same, which was in substance that he would pay to Palmer, Richardson & Co. one half of the net proceeds collected on said judgment, and in case of non-collection he was to reassign the judgment. That H. B. Melville first informed defendant of this judgment a short time previous to the assignment, and requested him to take the assignment and collect the same from the Peabody claim in Texas, as he (Melville) directed. The negotiation in relation to the assignment of the judgment between plaintiff and defendant, prior to actual assignment, was conducted by said Melville. Defendant, by the direction and information given him by Melville, sent this judgment to Texas, and took proceedings to attach the money due Melville & Co. from the Peabody estate. That in September, 1868, defendant collected and received on this judgment, from the proceeds of the claim against the Peabody estate in Texas, the net sum of $1,072.75.

The gross sum collected in Texas was $1,912.07, but the costs and expenses of the Texas lawyers had reduced the same to $1,070.75. After receiving that amount, the defendant deducted $22.75 as disbursements claimed by him to have been made in the matter, leaving as the net proceeds of the claim against the Peabody estate in defendant’s hands (as ascertained and declared by him) the sum of $1,050, one half of which defendant paid to the plaintiff, on account of Palmer, Richardson & Co., in accordance with the agreement made by him with them when the judgment was assigned, leaving in his hands $517.75, or $525 after deducting the disbursements aforesaid of $22.75.

On the same day, September 19,1868, after this balance of over $500 from the collections made by the defendant from the Peabody estate had been thus ascertained and declared by him, this order or draft was presented by the plaintiff to the defendant and payment thereof demanded and refused. The order which he had accepted, directed him to pay the plaintiff or order, $500 “for value received, besides the amount stipulated to pay Mr. R. out of the proceeds of the claim against the Peabody estate now in your hands to collect, when the same shall heme been collected by you.”

Although-1 do not think that the question of a good consideration for the acceptance of this draft necessarily depends upon the evidence relating to or affecting the real ownership of this balance of the money so collected by defendant from the Peabody estate, nor that the plaintiff’s right of recovery should be affected by the condition of things or the existence of equities between Melville and defendant, yet I shall consider the evidence upon those points, holding that the conclusion of the referee can be fully supported by the same.

First.—It appears to me that the words of this acceptance, in their ordinary sense, together with the testimony of Melville and the defendant so far as they agree, establishes most conclusively that at the time of the making and acceptance of this order or draft both the defendant and Melville understood this matter alike,, and both recognized the fact that defendant was acting for Melville, in his interest, according to his directions, and as his attorney, in obtaining the assignment of the Richardson judgment„and in collecting a portion of the same from the claim against the Peabody estate in Texas.

They substantially agree in their respective statements as to these facts: “That Melville gave defendant all his information in the premises in respect to the judgment; that he requested the defendant to take the assignment of the same, and he, Melville, negotiated the matter between defendant and Eichardson, and after the assignment he directed the defendant in the matter of the collection.”

The matter being thus under full headway, with prospects of success, and Melville wishing to realize therefrom, this order is made, accepted, and negotiated, and by the acceptance thereof I hold that defendant substantially declared therein to the plaintiff or any bona fide purchaser thereof that he accepted for value, and that the Peabody claim was in his hands for collection for Melville, and he should be held responsible for his written declaration at the time and upon which the plaintiff advanced his money.

Second.—In reviewing the conflicting statements of Melville and defendant in relation to the interest of Melville in this judgment and the amount to be collected thereon from the Peabody estate, and in relation to the same being in defendant’s hands for collection as the attorney of Melville, the testimony of the latter clearly sustains and is sustained by the language of the order. The following is a copy of his testimony:

“ H. B. Melville, called as a witness for plaintiff, being duly sworn, testified as follows: Have had dealings with defendant with reference to judgment of Palmer, Eichardson & Co. against Melville & Co.; I know that an assignment of that judgment was made to Carpenter by plaintiff in that suit; I requested Carpenter to collect that judgment; I was wholly instrumental in procuring the assignment of that judgment; Carpenter was acting for me, for my benefit, because I could not act myself; I had conversations with Mr. Carpenter on this subject, about the time of this assignment; I went to Mr. Carpenter.
“ Q. What were the conversations?
“ [Objected to. Objection overruled; defendant excepts.]
“ A. I called on defendant and told him that there was money collected by my brother in Texas belonging to the firm of Melville & Co., and as I never had received one dollar out of my fortune that I put in with him, I had a means of collecting that money myself; that I could get a judgment of Melville & Co., on halves, that was the best I could, and if he would go and get the judgment from the records, send out to Texas, I would pay all expenses; he should collect the judgment, then take out his fees, or a reasonable fee for the work he did, hand over half to Palmer, Richardson & Co., and one half to me; as I could not act myself, he acted for me. He took the assignment of the judgment under tins arrangement; he agreed to that proposition. The assignment was not taken by me, because I was a party in interest in the affairs of Melville & Co.; I paid Mr. Carpenter money for disbursements, $25, which was $3 more than he said it was. This was a few days after the conversation about sending out the papers; this was before the assignment was made by Palmer, Richardson & Co.; it was about that time; it was all done in a day or two. I gave Mr. Carpenter the whole particulars of the amount which could be collected on paper, and have a copy of it; I got the information from Mr. Cummings, from Texas; I represented that it was $1,800 and some odd dollars, less expenses of his lawyers, etc.
Oross-examined. This conversation was in Mr. Carpenter’s office; no third person present; he told tiae the expenses would be about $22 for searching, obtaining judgment record, express and other expenses; I gave him the money in his office; no one present; took no receipt; Mr. Carpenter was at that time doing business for me, and had been for some time previously; I considered him at that time deeply in my debt; I had paid him fifty times for business he had done for me; I took Mr. Carpenter to Mr. Richardson’s office; I was not present when the judgment was assigned; I don’t know when it was assigned.
“ Q. Were you present when the agreement made by Carpenter to pay Richardson half the amount collected was executed %
“A. No, sir. It was executed nearly two years ago. The claim I have reference to was the money coming from the Peabody estate. Hr. Cummings was the lawyer in Texas. Saw Hr. Carpenter twice about this before assignment was made; both times in his office; no one was present but myself and Hr. Carpenter. I don’t know Henry Stanford by name; there was a young man sitting at a desk in one corner of the defendant’s office, but I never knew his name.
“Re-direct. Never took a receipt from Hr. Carpenter for money paid him.”

The defendant had previously testified and given his version of the relations existing between him and Helville in regard to this claim, but was recalled and examined particularly in reference to the foregoing testimony of Helville. The following is a copy of his examination.

George Carpenter, defendant, recalled for defendant.
“ Q. Did Hr. Helville at any time say he would pay all expenses ; that you could collect the judgment, and take out your fee, or a reasonable fee, for the work you did?
A. No, sir.
Q. Did he say you could hand over one half to Palmer, Richardson & Co., and one half to him, or Enos Richardson ?
“A. No; nothing of the kind was ever said by him, or any one on his behalf.
“ Q. Did you ever agree to anything of the kind ?
A. I never did.
“ Q. Did Hi\ Helville ever give you $25 for disbursements in that matter ?
A. He never did.
“ Q. Did you ever tell him that the disbursements would be $22?
A. I never did.
Q. At this time was Hi’. Helville in your debt ?
A. He was, and always has been ever since I have known him.
“ Cross-examination:. Hr. Helville did not tell me that he wanted me to take the assignment of this judgment, because he could not take it himself.
“ Q. What did he say %
“ A. He told me that Hr. Cummings had told him that he, Cummings, had collected a bill in favor of Melville & Co. against the Peabody estate in Texas, and that the money was then in the Probate Court, and he could probably attach it, if he did so before it was paid over by him, Cummings; Mr. Melville told me this, and told me he would see if he could get a judgment, and I might send down there and collect it; that I might as well have it as anybody else. He said nothing about his expecting to have anything out of it; he said nothing but what I have stated; said nothing about taking the assignment in his own name; never paid me any money in connection with this matter, except $10 for getting the judgment roll against Melville & Co.; he paid me that in my office; he paid nothing else in that case; I paid about $22; cannot tell the amount exactly; I kept no account with Melville, except in my register; did not carry out the amount of services. I carried through for Melville a divorce case; we did not succeed in the action; I' think he paid me twice $10 and $25 for John Graham; this was all. 1 did not tell him I would carry through the suit for $50. What he owed me was on account of various professional services. I got jewelry on account of services to the extent of five, six or seven hundred dollars, not more, during the last seven or eight years. The letters shown I think are all the letters I received from Texas about the judgment against the Peabody estate.”

There is a conflict of testimony between the defendant and Melville as to their relations in regard to this claim and it is the only conflicting testimony in the case I think.

Melville was supported by the general uncontested facts in the case, and his statement is consistent with the situation of the parties and with the language and meaning of the order, while the version of the defendant is not consistent with the reasonable consideration of those facts, and cannot be reconciled to the language of his acceptance, and if the referee considered the evinence beyond that afforded by the order and the admitted facts, and sought further evidence of the relations of the parties, at the time of the acceptance, or of the ownership of the claim against the Peabody estate as between defendant and Melville, he certainly would have been justified in accepting and believing Melville’s testimony to the entire exclusion of that of defendant, and in such case to conclude that defendant was merely the attorney or collector of Melville in the premises, and that there was full consideration for the acceptance of the order or draft arising from those relations. The following is a copy of his findings.

“First.—That on the 14th day of February, 1868, H. B. Melville drew an order on the defendant, whereby he requested the, said defendant to pay the plaintiff herein the sum of five hundred dollars, as soon as and when funds should come into the possession of such defendant from the proceeds of the Peabody estate in Texas, sufficient to pay said order or draft; that on the 24th day of February, 1868, the said defendant accepted the said draft or order, and that the plaintiff herein thereafter became bona fide purchaser of the same, for a good and valuable consideration, and is now the lawful owner and possessor thereof.
“ Second.—That afterwards the defendant came into the possession of funds from the Peabody estate in Texas sufficient to pay the said draft, and that the date when he first became possessor of such funds was on or about the 19th day of September, 1868.
“ Third.—That the defendant has never paid the said draft so accepted as aforesaid.
“And I do further report, as conclusions of law upon the facts found:
“ That the defendant is indebted to the said plaintiff on the said draft, and that the plaintiff is entitled to recover against the said defendant the sum of five hundred dollars, with interest thereon from the 18th day of September, 1868, and amounting to the sum of five hundred and thirty-six dollars and ninety-four cents.”

If the rules of equity apply to this case, or equitable considerations can be urged in support of this judgment, there can be no doubt but that this acceptance must be construed upon its face to have been an equitable appropriation, or an assignment of this Peabody claim, joro tanto, for the payment of the acceptance, by all the parties owning the same, or interested therein, or claiming to be such (Bradley v. Root et al., 5 Paige, 632; Morton v. Naylor, 1 Hill, 583; Vreeland v. Blunt, 6 Barb., 182).

But it is very clear that the defendant has no equities as against the plaintiff. The acceptance was made by the former with a full knowledge of the relations existing between himself and Melville in regard to this Peabody claim, and their respective interests therein, and the plaintiff paid his money in good faith for said acceptance, and in an equitable and moral view the judgment should be sustained. But I can see no necessity of invoking the aid of equity in the premises, nor can I z-ealize that the existence of equities, or the condition of matters between Melville and defendant, should affect the plaintiff’s right of recovery against the defendant on the order or draft, when it is clearly established and proved without contradiction that defendant had collected and received a sufficient amount from the Peabody claim to pay the same in accordance with the terms of the acceptance. I hold, as a matter of law, that defendant by accepting this order or draft substantially stated and committed himself to the plaintiff or to any other bona fide purchaser that he accepted the same for value received. That the claim or debt therein referred to was in his hands for collection, for or on account of Melville, and that this order should be paid therefrom when he had collected the same. I hold that, under these circumstances and upon the facts clearly established in this case, defendant is estopped from denying a consideration on his part for the acceptance, or from claiming or proving that he accepted without consideration, or that he did not have the claim against the Peabody estate for collection, but owned the same absolutely, etc.

1 hold that the only defense he could interpose and maintain as against the plaintiff (no fraud, etc., appears on the latter’s part), in the action upon this instrument, must be based upon the contingency or condition upon which he had accepted the same, as to whether, or not he had collected a sufficient amount from this Peabody claim to pay the same, after he had paid what he had agreed to pay on the judgment. I hold that, upon the evidence in the case, the question of consideration was not a contested question of fact upon which the referee was bound to make and state a special finding, and that the findings of fact made by the referee are fully supported by the evidence in the case.

There is certainly no good reason of law or equity for the reversal of this judgment to be found in the evidence or the facts of the case, or that can be based thereon.

The report of the referee may not be as full on the facts, or rather in regard to the facts established in his mind, as it should have been, with a due regard to the form and substance of the same, and it is or may be defective in that respect, and possibly may not of itself sustain the conclusions of law. If the case on appeal was before the court upon the pleadings and report of the referee, and the exceptions without the evidence upon which the report was founded, I might not dissent from the judgment of the court on this appeal, but with my views of the case and the evidence before me, I can see no good reason nor find any decision of binding effect, that demands a reversal of this judgment upon the ground that the referee’s findings of fact are insufficient to support his conclusion of law, when I conclude from the uncontradicted evidence before me in the case that the facts established by such evidence are abundant and sufficient to support the conclusion of law reached by the referee.

I hold that under such circumstances an appellate court should consider the facts developed in the case by the evidence, as well as the findings or conclusions of fact stated by the referee, and if together they sustain the conclusions of law and the judgment, that the judgment should be affirmed.

I deem this error or defect in the report, if such there be, as formal and technical when appearing under these circumstances, and as not affecting a substantial right of any party to the action, and in accordance with section 176 of the Code an appellate court should disregard the same in the proceedings of an action, and that no judgment should be reversed or affected by reason of the same. For these reasons I am of the opinion that this judgment should be affirmed.


author: Freedman, J.

text:
    LOUIS CHAMBORET and ELIZA CHAMBORET, Plaintiffs and Respondents, v. JAMES CAGNEY, Defendant and Appellant.

      [Decided April 30, 1870.]
    Under subdivision 1 of section 150 of the Code, a counter-claim may be interposed in an action for a tort, provided such counter-claim arises out of the transaction set forth in the complaint as the foundation of plaintiffs’ claim, or is connected with the subject of the action.
    The term “ subject of the action ” must be deemed tornean the facts constituting plaintiffs' cause of action*

    Before Barbour, C.J., McCunn and Freedman, JJ.
    Appeal from an order made at Special Term, by Mr. Justice Jones, sustaining plaintiffs’ demurrer to the counterclaim set forth in the answer of the defendant.
    The complaint alleged as a cause of action that on September 28,1868, the defendant unlawfully and wrongfully took and carried away certain goods, chattels, household furniture, wearing apparel, and jewelry, the property of the plaintiffs, of the value of $4,170, and that he converted and disposed of the same to his own use to plaintiffs’ damage $5,000. The answer of the defendant contained a series of specific denials, putting in issue every material allegation of the complaint, and also a counterclaim for the recovery of $350—damages alleged to have been sustained by the defendant in the following manner:
    That in pursuance of a certain agreement made between the parties in relation to the hiring of certain premises, a certain chattel mortgage upon the goods and chattels described in the complaint was duly executed and delivered by the plaintiffs to the defendant; that default was made in the performance of the condition contained in the mortgage; that the defendant thereupon took possession, as he lawfully might, of so much of said property as he could find, but that the plaintiffs had, before the said taking, secreted and removed a part thereof, which could not be found; that it was subsequently discovered that the plaintiffs had no title to a part of the property taken by the defendant, although included in the mortgage, and that the same was replevied and taken from the possession of the defendant by the true owners thereof, whereby the defendant sustained loss to the amount of $350, for which amount he demanded judgment against the plaintiffs.
    The plaintiffs demurred to the counter-claim contained in the answer for insufficiency in not stating facts sufficient to constitute a counter-claim.
    The demurrer was sustained at Special Term, and the defendant appealed.

      Mr. Elias J. Beach for appellant.
    The Code prescribes no rule by which to determine the sufficiency of an answer containing a counter-claim, except that it must state facts enough to constitute a good cause of action in favor of the defendant and against the plaintiff, and that it be one of the several causes of action defined by § 150 of the Code (Allen v. Haskins, 5 Duer, 332).
    The counter-claim in this action arises out of the transaction set forth in the complaint, as the foundation of plaintiff’s claim, and is connected with it (Code § 150, subdiv. 1).
    The counter-claim authorized by the Code (§ 150) embraces both set-off and recoupment. It is broader and more comprehensive than either (Vassar v. Livingston, 3 Kernan, 256; Beardsley v. Stover, 7 How., 294).
    It secures to the defendant the full relief which a separate action at law or a bill in chancery would have secured him on the same state of facts (Gleason v. Moen, 2 Duer, 642).
    It may be for either liquidated or unliquidated damages (Schubart v. Harteau, 34 Barb., 447).
    And of an equitable or legal nature (Currie v. Cowles, 6 Bosw., 453).
    The counter-claim set up by the defendant in his answer, is one of those authorized by subdivision 1, § 150 of the Code.

      It is a cause of action which arises out of the transaction set forth in the complaint as the foundation of the plaintiff’s claim, and is also connected with the subject of the action (Code, § 150, subdiv. 1).
    A counter-claim to be available to a party must afford him protection in some way against the plaintiff’s demand for judgment, either in whole dr in part. It must, therefore, consist of a set-off or claim by way of a recoupment, or be i/n some way connected with the subject of the action stated in the comflcmd (Mattoon v. Baker, 24 How., 329).
    A counter-claim cannot be rejected on account of its being imperfectly stated in the answer. The remedy in such a case is a motion to make it more definite and certain (Currie v. Cowles, 6 Bosw., p. 453).

      Mr. J. A. Davenport for respondents.
    The Code authorizes no counter-claim to be set up in an action on tort (Code, § 150; Patteson v. Richards, 22 Barb., 143; Donohue v. Henry, 4 E. D. Smith, 162).
    The Code of Procedure provides expressly in section 150 for certain exceptions to this rule.
    The first subdivision of section 150 provides that the plaintiff may set up as a counter-claim “ a cause of action arising out of the contract or transaction set forth in the complaint, as the foundation of the plaintiff’s claim, or connected with the subject of the action.”
    The second subdivision extends the provisions of the first, by providing, that “ in an action on contract, any other cause of action arising also on contract, and existing at the commencement of the action,” may be made a subject of counter-claim.
    These are the only exceptions provided for, and the statute nowhere enacts that a counter-claim shall be allowed in an action on tort. Such actions must therefore follow the general rule.
    If counter-claims be allowed in actions for tort, the one demurred to is still bad, as it arises neither “ on a cause of action arising out of the transaction set forth in the complaint as the fomidation of the plaintiffs claim,” nor “ on a cause of action connected with the subject of the action ” (Code, § 150, subdiv. 1).
    The transaction set forth in the complaint as the foundation of the plaintiffs claim, is the seizure of plaintiffs’ furniture, clothes, and jewelry.
    The cause of action attempted to be set up as a counter-claim is founded on the alleged fact that plaintiffs had rendered defendant’s security for rent insufficient: first, by concealing a part of plaintiffs’ furniture, so that it could not be seized by defendant ; and, secondly, by having represented certain furniture to be theirs, when in fact it belonged to others..
    It cannot be said that plaintiffs’ rendering defendant’s security for rent insufficient, by transactions which must have taken place, if at all, before defendant’s seizure could have arisen out of that seizure.
    The right of the plaintiffs to claim, and of the defendant to counter-claim, must be reciprocal. Should the defendant in the present case bring an action setting up his present counter-claim in the form of a complaint, the plaintiffs in this case could not then, as defendants, interpose their present complaint as a counter-claim (Mayor of New York v. Parker Vein S. S. Co., 12 Abb., 300; 21 How. Pr. Rep., 289; Piser v. Stearns, 1 Hilton, 86).
   By the Court:

Freedman, J.

The facts pleaded and relied upon by the defendant as a counter-claim constitute a good cause of action in favor of the defendant against the plaintiffs. If greater certainty and definiteness are desired, plaintiffs’ remedy is by motion and not by demurrer. The real question, therefore, to be determined is, whether these facts can be pleaded as a counter-claim in this action, or whether the defendant is to be driven to a separate action.

The counter-claim is a creation of the Code, and since 1852 includes the defenses of set-off and recoupment as they were understood prior to that time (Pattison v. Richards, 22 Barb., 146), but is broader and more comprehensive than either. In Boston Mills v. Eull (6 Abb. Pr., N. S., 319; S. C., 37 How. Pr., 299), I discussed this question fully, citing many authorities, and pointed out the distinction between a set-off, recoupment, and the counter-claim introduced by the Code.

The first essential of every counter-claim is that it shall, of itself, be a distinct cause of action in favor of the defendant pleading it and against a plaintiff in the action, between whom a several judgment might be had as provided by section 274. If it falls short of this, it cannot be treated as a counter-claim within the meaning of the Code (Vassar v. Livingston, 13 N. Y., 248), although it may constitute a good defense as a set-off (Ferreira v. Depew, 4 Abb. Pr., 131; Duncan v. Stanton, 30 Barb., 533; Spencer v. Babcock, 22 Barb., 326). A counter-claim differs from new matter which may be set up in the answer in this: the new matter can only be used to defeat an action; a counter-claim may be used to sustain an action. It is simply a cross action to enforce a legal or equitable set-off against the plaintiff in the action.

There are two species of counter-claims authorized by the Code: one which can be pleaded only in an action arising upon contract, and another which may be set up in amy action.

I. In an action arising on contract the defendant may set up as a counter-claim any other cause of action arising also on contract, express or implied (Andrews v. The Artisans’ Bank, 26 N. Y., 301, and Lignot v. Redding, 4 E. D. Smith, 285), and existing at the commencement of the action, against a plaintiff between whom and such defendant a several judgment might be had in the action according to the provisions of section 274, and owned by such defendant at the time of the commencement of the action (Chambers v. Lewis, 11 Abb., 210; Van Valen v. Lapham, 13 How., 240) and due at said time (Rice v. O’Connor, 10 Abb., 362; Code, sec. 150, subd. 2).

II. In any other action any defendant may set up as a counterclaim against any one^ of the plaintiffs, between whom and himself a separate judgment might be had in the action as aforesaid (sec. 274; Briggs v. Briggs, 20 Barb., 477; Newell v. Salmons, 22 Barb., 647), any claim existing in favor of such defendant against such plaintiff at the time of the commencement of the action (see Chambers v. Lewis and Van Valen v. Lapham, supra), and of which such defendant is the owner (Lafarge v. Kelsey, 1 Bosw., 171), provided, however, such claim is founded upon a cause of action arising out of the contract or transaction set forth in the complaint, oe is connected with the subject of the action (Code, sec. 150, subd. 1).

Formerly the rule was that in an action for a tort a counterclaim, no matter whether arising on contract or based upon another tort, cannot be allowed; but this rule, it will be observed, has now been so far modified as to allow the interposition of a counter-claim in the full sense of the Code, whether arising on contract or based upon a tort, in an action for a tort, whenever such counter-claim is founded upon a cause of action arising out of the transaction set forth in the complaint as the foundation of plaintiff’s claim, oe whenever it is connected with the subject of the action. As soon as a defendant does bring himself within one or the other of these exceptions made to the general rule, his right to counter-claim is perfect, irrespective of the form of plaintiffs’ cause of action as set out in the complaint. This point has been expressly decided by this court, at General Term, in Xenia Bank v. Lee (2 Bosw., 694; 7 Abb., 372). See, also, to same effect, Brown v. Buckingham (11 Abb., 387; 21 How., 190).

The authorities relied upon by the appellants in the case at bar do not establish a contrary doctrine. Hpon a careful examination and analysis of them I found that every case so cited has been correctly decided, although with different result, for the reason that the defendant had failed to bring himself within at least one of the exceptions established by the Code as aforesaid. Pattison v. Richards (22 Barb., 143) was an action for a tort; defendant counter-claimed for breach of a contract made four years prior to the commission of the alleged tort and having- no connection with the subject of the action.

Donahue v. Henry (4 E. D. Smith, 162) was an action for a tort, and a proposed set-off was held inadmissible because it related to other property than the one forming the subject of the action.

Barhyte v. Hughes (33 Barb., 320) was an action for an assault and batteiy. The defendant set up, by way of counter-claim, an assault and battery committed upon him by the plaintiff jprior to the one described in the complaint. The court very properly held that the two occurrences were so independent of each other that they could not be disposed of in one action.

In Mayor, etc., v. The Parker Vein Steamship Company (12 How., 289; 12 Abb., 300; 8 Bosw., 300) the action was on a contract for the payment of rent. The counter-claim was for a wrongful conversion of certain fixtures. It neither arose out of the contract or transaction set forth in the complaint, nor could it be connected with the subject of the action. To obviate this difficulty the defendants made an attempt to sustain it under the second subdivision of section 150, which provides that in an action arising on contract any other cause of action arising also on contract may be set up as a counter-claim, and argued that they had a right to waive the tort and proceed upon the legal fiction of an implied contract to pay the value. But the court held that this could not be done under the subdivision referred to; that the counter-claim, as pleaded, was simply and purely a claim to recover damages for a tort, upon which, according to the rule laid down by the Court of Appeals in Walker v. Bennett (16 N. Y. R., 250), no recovery could be had as upon contract.

' The only remaining question therefore is, whether the defendant has brought himself within the letter and spirit of the first subdivision of section 150 of the Code. I have not been able to find that the precise meaning of the words “ subject of the action,” as used in that subdivision, has ever been judicially determined. In Borst v. Corey (15 N. Y. R., 509), the Court of Appeals held that the term subject-matter ” of suits, as used in section 49 (of 2 R. S., 301), is synonymous with the term cause of action ” used elsewhere in the same statute. Analogy as well as sound reasoning call for a similar construction of the words “ subject of the action.” These words, must be deemed to mean the subject-matter in dispute, or, to be still more explicit, the facts constituting the cause of action. In the case at bar plaintiffs brought the action for a trespass upon their property. The object of the action is to recover damages, but the subject thereof is the trespass committed by the defendant. The counter-claim interposed by the defendant is based partly upon plaintiffs’ fraudulent concealment of property not taken by the defendant, and partly upon the failure of plaintiffs’ title to property which was taken. But it is not connected with the trespass upon which plaintiffs rely, nor can it be claimed that it arose out of the transaction set forth in the complaint. I concede that section 150 of the Code was enacted to simplify and expedite the administration of justice; that it is a remedial and beneficial provision, which should, at all times, receive a liberal construction, and from the start I felt strongly inclined to uphold the counter-claim. Subsequent reflection, however, has convinced me that it cannot be done without a great stretch of the meaning of the words “ subject of the action” beyond their true and. proper significance.

The order appealed from should be affirmed, with costs.