author: Campbell, J.

text:
    Bennett v. Williamson and Burns.
    It is not libellous to charge a man with having pleaded the statute of limitations in defence of an- action at law, when there is no charge that he made the plea dishonestly. A publication of this kind imports no offence, nor has it a necessary tendency to expose the plaintiff to ridicule, hatred, or contempt.
    The defendants were the proprietors of a weekly paper in the city of New York, in which they charged the plaintiff with having requested the holder of a note, of which he was the maker, to wait for payment, after the same had matured; that the holder accordingly waited, and afterwards, the note being sued, the plaintiff “ pleaded the statute of limitations, and got off scot free.” In an action against the defendants, held, that the words were not libellous per se.

    There is a distinction between words spoken and the same words printed or written. The latter may be actionable, and the former not.
    (Before Doer, Mason, and Campbell, J. J.)
    May 18, 20;
    June 22, 1850.
    Demurrer to declaration.
    This was an action against the'defendants, who were the proprietors of “ The Sunday Dispatch,” a weekly paper published in the city of New York, to recover damages for an alleged libel published in that journal. The alleged libel is fully set forth in the opinion of the court. The declaration contained several counts, setting forth the language complained of, with different inuendoes, averring that it was intended to be understood as charging the plaintiff with having bee» guilty of swindling and cheating in the transaction therein referred, to. To this declaration, the defendant pleaded, 1st, not guilty ; 2d, that the supposed libels in the declaration mentioned were not, nor was any or either of them, maliciously or falsely published by the defendants, but that the same, and the several matters and things therein contained, were true in substance and fact; and 3d, that the alleged libels were not published by the defendants maliciously, and that the plaintiff had not sustained any damage by reason of their publication.
    The plaintiff demurred to the second and third pleas of the defendants, and the defendants joined in the demurrer. The grounds of the demurrer are sufficiently stated in the opinion of the court.

      B. Galbraith, for the plaintiff.
    I. It is not a good plea in bar of an action on the case for a libel, to plead that the libel is true in substance and fact. (Cook v. Cox, 3 Maule & Sel. 110; Wright v. Clement, 3 Barn. & Ald. 503; Saloman v. Lawson, 8 Q. B. R. 823; Duncan v. Thwates, 3 Barn. & Cress. 566; Flint v. Pike, 4 Ibid. 473.)

      II. A plea in bar of an action on the case for a libel must state issuable facts. (Holmes v. Catesby, 1 Taunt. R. 543; J'Anson v. Stewart, 1 Term R. 748; Newman v. Bailey, 2 Chitty’s R. 665 ; Hickenbotham v. Leach, 10 M. & W. 361; Jones v. Stevens, 11 Price’s R. 277.)
    III. A party by demurring confesses nothing but that which is well pleaded. (Jones v. Stevens, 11 Price, 277; Wheeler v. Haynes, 9 Ad. & Ellis, 286; Evens v. Harlow, 1 Dav. & Merivale, 507.)

      S. Owen and M. S. Bidwell, for the defendants.
    First. Upon the demurrer to the second plea there should be judgment for the defendants.
    I. If the alleged libels were not published maliciously, the plaintiff has no cause of action against them. This defence may be shown by a special plea, (Brooke v. Montagu, Cro. Jac. 90,) and is not demurrable as amounting to the general issue. (Dunn v. Winters, 2 Humph. Rep. 512.) As this defence is matter of justification or excuse, regularly by the common law, it must be pleaded specially. (Co. Litt. 282, b. 283; Com. Dig. Pleader, E. 15.)
    II. It was not necessary for the defendants to set forth particular circumstances to prove that the publication was not malicious, that would be pleading evidence; the fact to be pleaded was, that the publication was not malicious; the circumstances to prove this fact are to be given in evidence, not pleaded. (Church v. Gilman, 15 Wend. R. 656, 665; Daniels v. Hallenback, 19 Wend. R. 410, 411; Sanderson v. Colman, 4 Mann, and Gr. 221.)
    III. The other allegations in the plea are a bar to the action. This case is distinguishable from one, where the alleged libel consists of a general charge, or general abuse, and the plea merely affirms generally, that such libel is true. In this case, the alleged libel is a statement of facts, with as much particularity and certainty as would be necessary in a plea of justification. The plea is virtually the reiteration of these facts. An averment is not required to be in any particular form. The plea, therefore, is positive and certain. As to the form of the plea see Weaver v. Lloyd, 2 B. & C. 678.
    Secondly. There should be judgment for the defendant on the demurrer to the third plea. The reasons and authorities adduced on the first point, are applicable to this point. If the plaintiff has sustained no damage, he has no cause of action. This defence may be set up specially by plea in bar. (Starkie on Sland. 334.)
    Thirdly. The declaration shows no cause of action. The alleged publication is not libellous or actionable. (Goldstein v. Foss, 4 Bing. R. 489.) No special damage is alleged. It is not a libel of the plaintiff in any trade or profession. (Gilbert v. Field, 3 Caines, 329; Van Tassel v. Capron, 1 Denio, 250; Oakley v. Farrington, 1 J. C. 129.) It contains no statements which are per se libellous. (Tappan v. Wilson, 7 Ham. Ohio R. 190; State v. Farley, 4 McCord’s R. 317.) There is no averment of special damage. (1 Saund. 243, 6 (n. 5).) The inuendoes cannot enlarge the meaning of the words. (Rex v. Alderton, Sayer’s R. 280 ; 1 Saund. R. 243. (n. 4); Goldstein v. Foss, 4 Bing. R. 489.) They are not traversable, or the subject of proof. It is for the court to say whether they are warranted by the words themselves. (Commonwealth v. Snelling, 15 Pick. 335 ; Van Vechten v. Hopkins, 5 J. R. 226; The State v. Henderson, 1 Richardson’s R. 179, 186.)
    The case of Stone v. Cooper, 2 Denio, 293, is decisive on all these points.
   By the Court.

Campbell, J.

This action was brought by the plaintiff to recover damages against the defendants for a libel published by them in a newspaper called the “Sunday Dispatch,” in January, 1848, which was as follows:

“Sometime about the year 1834 there was a Sunday paper in this city termed the ‘ Sunday Courier,’ which was started by John Tryon. This establishment, Tryon sold to Bennett, who gave his note for the purchase money, and which note Tryon paid away without recourse to himself. The man who took the note was at that time well off; the money was of no consequence to him', and Bennett got possession of the types, press, &c., but he not having the ability.to make a Sunday paper go, it died off. When the note became due, Bennett could not pay, and begged the holder of the note to wait. The man did wait, and, some years after, Bennett having got on, the note was sued, but Bennett pleaded the statute of limitations, and got off scot-free.”

There are several counts in the declaration by different inuendoes ini which, averring, among other things, that the defendants meant and intended it to be understood that the plaintiff “■first dishonestly delayed, and afterwards refused to pay, &c. also that he was “ poor and without money, and unable to pay his debtsalso, that he “ by humble solicitation, obtained further time for the payment of his said supposed note, which time" he afterwards artfully contrived and successfully used- as grounds for resisting the payment of the said supposed note;” also, that the defendants thereby intended to insinuate and cause it to be believed, “that the plaintiff-had been guilty of swindling and cheating the holder of the said supposed note out of its supposed value, and that he was a cheat and swindler;” and that they thus “ intended to, and did, hold the plaintiff up to ridicule, contempt, and infamy,” &c. There-is no averment that the plaintiff has sustained any special damages. The defendants pleaded first, not guilty; second, that the supposed libels Were not,’ nor was either of them, published maliciously or falsely, but the same are true in substance and fact; and third, that they were not published maliciously, and that the plaintiff has not suffered any damage whatever. The plaintiff demurred specially to the second and third pleas. .

We were all of opinion, upon the argument of this cause, that the second-plea was good; that the.plaintiff having set forth fully the’ whole of the supposed libel, it was sufficient for the. defendants to plead -that the same was true in .substance and fact. We were also Of opinion that the-third plea, which alleges that the supposed-libel was. not published maliciously and that the plaintiff has suffered, no damage, was bad, and that upon the demurrer to’that plea the .plaintiff was entitled to judgment. But the more serious question raised by tbe defendants on tbe argument, and presented by them for our consideration with great earnestness, is whether this publication is or is not libellous.

Our attention was called to the earlier periods in the history of the common law, when there was no distinction between written and spoken slander. But it may be remarked that libelling could not be the crime of an illiterate people, and in the former days of English jurisprudence, when few could read and write, it might well have been considered that the poison of spoken, would diffuse itself as. generally as that of written slander. But it is now nearly two centuries since the distinction was taken, and the press, then feeble, has now become powerful for good and for evil, speaking, as it does, almost instantaneously to a whole nation by its million tongues. It is too late to question the law which has become well, and, we think, wisely settled on both sides of the Atlantic, that, opinions of character which are not slanderous when merely spoken, become libellous when printed and published. It is not to be denied that a partial difficulty has attended the application of any rule which seeks to prescribe what is or what is not libellous. Mr. Cook, in his law of defamation, (87 Law Library, N. S., page 18,) considers that every publication may be tried by the rule laid down by Bay ley, Justice, in McGregor v. Thwaites, 3 Barn. & Cress. 33: “ That any writing is a libel, provided the tendency of it be to bring a man into hatred, contempt, or ridicule.” Chancellor Walworth, in Cooper v. Stone, 2 Denio, 299, says: “But to sustain a private action for the recovery of a compensation in damages for a false and unauthorized publication, the plaintiff in such action must either aver and prove that he has sustained some special damage from the publication of the matter charged against him, or the nature of the charge itself must be such that the court can legally presume he has been degraded in the estimation of his acquaintances, or of the public,, or has suffered some other loss, either in his property, character, or business, or in his domestic or social relations, in consequence of the publication of such charges.” (See Goodrich v. Davis, 11 Metcalf, 473 Parmiter v. Coupland, 6 Mees. & Welsh. 105) We must throw out of view in this case, all the authorities which' support the doctrine that a man shall recover for special damage sustained by reason of a publication affecting his trade or profession, because there is ño averment or pretence that the plaintiff has sustained any special ' damage in his business or in any other form, or that the article was written in reference to any occupation' or calling in which he may be engaged. Then does’ the publication' in‘question charge the plaintiff with áñy offence which renders him amenable to punishment ? or does it necessarily tend to hold him up to ridicule, hatred, contempt, or infamy ? It is no crime to interpose the statute of limitations as a defence to an action at law. On the contrary, it may, under certain circumstañces, be not only right, but meritorious,' as where a defendant has actually paid the claim, but has lost the evidence "of the payment, or where, in any action for damages, the witnesses, by whom he might successfully have defeated a recovery, have died during the time that the commencement of the . action has been delayed. It is a statute of repose, tending to quiet strife, and, looking at the frailty of human memory and the natural destruction and loss of the evidences of transactions, presumes that obligations have been discharged which have not been recognized as binding for a term of years. We cannot, therefore, see how it can be deemed libellous to charge a man with having pleaded the statute" of limitations. The article alleged to be libellous, was published in 1848. It refers to transactions which commenced in 1834, fourteen years previous! ’ It states that in that year the plaintiff entered into a business operation'; that he'purchased a newspaper establishment, and gave his note for it; that he could not succeed and was unable to pay the note7 that he begged for delay; and that subsequently, when sued upon the note, he pleaded the statute of limitations successfully. There is no charge that he interposed the plea dishonestly.' For aught: that 'appears, it may have been fairly and honestly interposed.’ "There was abundance óf time for him to have asked and obtained delay, to have afterwards paid the note, to have lost the evidence of such payment, and to have meritoriously pleaded the statute. The note was transferred without recourse, and, for aught that appears, the plaintiff might have been misled and. deceived by the person of whom he purchased the newspaper establishment, either as to its subscribers or income, by which he became poor and unable to pay his note; that such misrepresentation and deception on the part of the payee of the note would not constitute a defence in the hands of a bona fide holder,, and he interposed the statute as a legal bar to support an equitable defence. In short, we are unable to see that this publication imputes any offence, or that its necessary tendency is to expose the plaintiff to ridicule, hatred, or contempt.

The law of libel ought to be considered, and is, in its spirit, a benevolent and salutary provision for the peace and security of community, but it cannot redress every injury sustained by a breach of morals or of good manners. We may not approve of the taste of publications, such as is set forth in the declaration in this case. We may lament the existence* of a disposition to make private character too much the subject of comment and abuse, without having it in our power, through the instrumentality of the law, to arrest the evil. It is for another .tribunal to dispose of such questions.

-Upon the whole cáse, therefore, there must be judgment for the defendants.


source: Caselaw Access Project

author: Mason, J.

license: Public Domain

text:
    Ledyard v. Jones.
    In an action against a sheriff, for neglect of duty in not levying and returning an execution, the plaintiff is prima facie entitled to recover the amount of the judgment, with interest. But it may be shown by the sheriff, in mitigation of damages, that the whole sum, could not have been collected by due diligence on his part
    Jt is no answer to such an action to show that the defendant in the execution still has abundant property, out of which the judgment may he collected.

      The plaintiff delivered an execution to the defendant, a sheriff, upon a judgment against one A. The sheriff neglected to make a levy, nor did he return the execution at the time limited, but he subsequently made a false return, viz., that the execution was superseded-by a writ of error. In an action against the sheriff, for neglect of duty, held, that the true measure of damages was the amount of the judgment, with interest, it being admitted that the judgment debtor had sufficient property out of which the execution might have been collected.
    (Before Duek, Mason, and Campbell, J. J.)
    May 14, 15 ;
    June 22, 1850.
    This was an action of trespass upon the case, brought in the supreme court, against the defendant, the late sheriff of the city and county of New York, to recover damages for not levying, and for making a false return of an execution, issued out of this court, upon a judgment in favor of the plaintiff against Jacob Acker. The declaration contained several counts, averring the neglect to levy, the non-return of the writ at the expiration of the 60 days limited thereby, and that, subsequent to the return day, the defendant had falsely returned that it had been superseded by a writ of error. The plea was the general issue.
    The cause came on for trial before the Hon. Selah B. Strong, one of the justices of the supreme court, and a jury, on the 11th day of February, 1848. Upon the trial, it appeared in evidence that on the 11th of June, 1844,- the plaintiff recovered a judgment in the superior court of the city of New York against Jacob Acker, the former sheriff, for the sum o.f $588.58. On the 24th October, 1844, a fi. fa. was issued upon the judgment and delivered to the defendant, then sheriff, by whom it was subsequently returned on the 20th of May, 1845, with this indorsement “ superseded ly writ of error.” On the 5th of April preceding, a writ of error, with an order staying proceedings upon the execution, was granted by one of the circuit judges, and notice thereof given to the attorney of the plaintiff. The sureties in the bond upon the writ of error having been excepted to, and having failed to justify within the proper time, the writ of error was superseded by an order of the judge, granted on the 15th of May, and notice of the supersedeas was served on the attorney for the plaintiff in error. Prior to this, however, and on the 10th of May, notice was served upon the attorney for the defendant in error, (the plaintiff in this suit,) that a new bond had been filed, and that the sureties thereto would justify, on the 17th May, before Judge Edmonds. In consequence of the filing of this new bond, an order was granted staying the proceedings of the defendant in error, and on the 4th June following, the supreme court granted a motion to vacate the supersedeas, which had been granted, restoring the writ of error, and at the same time allowing the sufficiency of the justification of the sureties. It appeared by the evidence of the attorney who recovered the judgment for the plaintiff against Acker, that he called on the sheriff a number of times subsequent to the return day of the execution, and that the sheriff said that he had done nothing on the execution, and had not attempted to do any 'thing. It was admitted that Acker, the defendant in the judgment, had personal property and real estate in the city of New York, out of either of which the execution might have been collected, and upon which real estate the judgment was a lien.
    The plaintiff rested his case, and the defendant’s counsel moved for a nonsuit, on the grounds, that although it might have been shown there was neglect on the part of the defendant, yet no damage had been proved by the plaintiff, and it was a case of damnum absque injuria; that the allegation of a false return was unsupported, the return made being true; and that even if a technical breach of duty had been shown, it did not appear that the plaintiff had sustained any damage. The motion was denied, and the counsel.for defendant excepted. The defendant’s counsel then read in evidence the writ of error and transcript and return, in the suit of the plaintiff against Acker.
    The court charged the jury, that the defendant was bound in law to levy during the time limited by the fi. fa., if the defendant had property; and it being admitted that he had both real and personal estate, and there being nothing to restrain him from proceeding, he should have made the levy, and for his neglect- to do so, was liable; also, that in not making a return to the fi. fa., within the tiine limited, he was guilty of negligence, and for this he was liable. That, as to the damages, the plaintiff was entitled to recover the real damages she had sustained; and the action being.against a public officer, the jury was entitled to take a liberal view of them, and award liberal damages. To which charge the defendant’s counsel excepted,'and requested the Court to charge that the plaintiff was entitled to recover no more than her actual damage. The judge declined to charge further than he had already done' on that point. The defendant’s counsel further requested the court to charge that, under the evidence, the plaintiff was only entitled to nominal damages, and that the only damage to which a party is entitled for the nonpayment of money due is'the interest upon such amount, and .that this rule was applicable.here. The judge refused so to charge, and directed the jury that theymight draw their own inference as to the damages, but must not go out of the facts of the case to do so. To which charge defendant’s counsel excepted.
    The jury found a verdict for the plaintiff for $200 damages and six cents costs, and the defendant moved for a. new trial in this court, to which the cause was transferred.

      G. R. J. Bowdoin, for the plaintiff.

      N. B. Blunt, for the defendant.
   By the Court.

Mason, J.

The plaintiff was clearly entitled to recover on the fifth,- sixth, eleventh, and twelfth counts. The defendant did not make a levy under the execution, nor did he return the execution at the expiration of the sixty days, and the return, when made, was a false return; for he returned that the execution was superseded by a writ of error, when in fact such writ of error was not issued until nearly five months after the return day of the execution.

The only question, therefore, is the amount of damages, and upon that point the cases of The Bank of Rome v. Curtis, (1 Hill, 275,) and Pardee v. Robertson, (6 Hill, 552,) seem to us decisive. It was held in those cases, that in an.action under the statute against the sheriff for not duly executing and returning an execution delivered to him, (2 R. S. 440, § 77,) the debt due from the defendant in the original suit is prima fade the true measure of damages, but that the sheriff is at liberty to mitigate the amount by showing that the whole sum could not have been been. collected by due diligence on his part. The same rule had been adopted in respect to an escape from,mesne process, in Patterson v. Westervelt, (17 Wend. 543,) which appears to have been well considered; and in an action against a surety for the jail limits, (Kellogg v. Monro, 9 John. 300.) It is also in conformity with the rule adopted by the courts in Massachusetts, (Weld v. Bartlett, 10 Mass. 474,) and in Vermont, (Hall v. Brodis, 8 Verm. 485,) and in Alabama and Kentucky the. same rule is given by statute.

The case of Stevens v. Rowe (3 Denio, 327) has been urged upon the court as establishing a different doctrine, and as in fact overruling the previous decisions on this subject. . That, was an action on the case against a sheriff. The first count in the declaration alleged, that the defendant levied and made the amount, mentioned in the execution, of the personal property of the defendant therein, but that the sheriff had not the money so levied, or any part thereof, a,t the return day, and that he had not paid, the same to the plaintiff, noi had he the .writ at the return day, or at any time .since. The second count averred that. the defendants in the execution had goods and chattels, whereof the sheriff might have made the money, but that he did not levy the money, or at the return day make return of the writ. On the trial, the plaintiff introduced proof to show that the defendants in the execution had personal property out of which the debt might have been levied and' paid, and the defendant offered evidence to .the contrary. The jury found that only,$17.82 cents could have been made out of the personal property,, and gave a verdict for that amount in favor of the plaintiff; and the verdict was sustained by the court. Th¿ plaintiff also offered to show, that the defendant in the execution had real estate out of which the money might have been made, but the judge excluded the evidence on the ground that there was no allegation to that effect in the declaration j and his ruling was confirmed. So that the decision of this case was not contrary to the prior decisions of the supreme court, but in so far as it related to the rule of damages, was entirely in accordance with them. For the court distiúctly held, that prima facie the sum to be recovered was the full amount of the execution, but that the defendant might reduce that amount by showing that the money could not have been collected; and the amount was in fact reduced to the sum which the jury found might have been collected. The case, therefore, is a direct authority for the position that the sheriff is liable for whatever amount he might have obtained under the process. It is true that Judge Beardsley, who delivered an opinion in the case, controverts the doctrine of the previous decisions, and maintains that the defendant may mitigate the amount to be recovered against him, not only .by showing his inability to collect the money, but by proof that the debt is still safe and collectible. If this be so, it will be impossible, in the great majority of cases, to recover any damages from a sheriff, for not executing and returning process' delivered to him. He will have one of two answers always ready; either that the defendant in the execution had no property out of which the money could have been raised, and which, if established, it is admitted would be a sufficient defence ; or, that the defendant had property abundantly sufficient to pay the debt, and therefore the plaintiff had sustained no real damage. The mere statement of the proposition seems to' carry its own refutation along with it. The statute expressly gives to a plaintiff, a right to recover damages against a sheriff who neglects to execute and return process delivered to him, and a construction which leaves to the plaintiff more than nominal damages, upon the express admission by the defendant that he had neglected his duty, and that he might have collected the debt, for the very reason he might have collected it, and might still do so, cannot be the true one.

The doctrine, however, if good as to one execution is good as' to any number of successive executions issued on the same judgment. Whether the sheriff made no return, or made a false return, the ability of the judgment debtor ultimately to respond is a sufficient answer to any attempt by the creditor to recover damages against the sheriff.

It proceeds also, on the assumption that a new execution would certainly bring the money if due diligence were used. But many events may happen to defeat the collection. The judgment debtor may fail before a new execution is issued, and his personal property may go into the' hands of assignees, and the debt or execution be postponed to other debts, so as to be either entirely or partially lost; or the debtor may die, and the preference which had been gained by the execution lost by the intervention of other debts entitled to priority of payment in the course of administration.

With regard to real estate, such are its fluctuations in value, that the same piece of property which, when the first execution was issued, might have brought the whole amount of the plaintiff’s debt, may not on a subsequent occasion produce a tithe of it.

It was contended, however, that the judge should have charged as requested, that if plaintiff was entitled to more than nominal damages, it could only be the interest on the debt, that being the damage to which a party is entitled for the nonpayment of money when due. But if the debt itself is safe, so it is to be presumed is the interest, and the plaintiff would be entitled to recover interest, as well as principal, on a new execution. The same reasoning applies to the interest, as well as the principal, and the only damage, on this theory, which could bp sustained, would be for interest on the interest for that he could not recover by a new execution.

By refusing, therefore, to allow the plaintiff to recover from the sheriff the full amount of his debt, when it might have been collected had due diligence been used, the court withhold from him damages presently sustained, upon a speculation that perhaps he may realize the amount upon a fresh execution. Such a rule of damages has not yet been adopted in any case in this state. It was not adopted in Stevens v. Rose. The opinion given in that case,apparently sustains it,.but it is manifestly fhe individual, opinion of Justice Beardsley, and not that of the court. We prefer to adhere to the opinion in the Bank of Rome v. Curtiss, and in Pardee v. Robertson, as laying down the correct rule on this subject.

. Whether the sheriff cttn have recourse to the defendant, for whose debt he may have thus made himselfdiable, and can collect the amount from him, or can in any way be substituted in the place of the judgment creditor, are questionsmot now before us,'and on. which we therefore, express no opinion.

The result at which we have arrived then, is, that the plaintiff might have recovered against the sheriff, in -this suit,, the full amount of her claim against Acker., The jury found, .under the direction of the judge, two hundred'dollars — much less than the amount due the- plaintiff. Although .the charge was incorrect on this point, yet.it was- more favorable for the.defendant than it ought to have been, and he has no right to eomplain, and as the plaintiff is satisfied, it is not our province to enlarge it.

The motion for a new trial must be denied.


text:
    Hasbrouck v. Vandervoort and Hayward.
    Where a certificate of .stock is delivered to a creditor, as collateral security for an existing debt, the transaction is a pledge, and not. a mortgage, of the stock; and the legal title passes to the pledgee.
    Although a pledger cannot, in every case, come into equity to redeem the pledged goods, yet, where any special ground is shown, as if an .account of dividends received by the pledgee is wanted, or there has been an assignment of the pledgee, a bill in equity will lie.
    (Before Düer and Campbell, J. J.)

    May 22;
    June 22, 1850.
    InEquity. Demurrer to bill for want,.of-equity. The.bill stated the following, facts. In 1839, Peter H. Schenck was created a trustee of certain property, which eventually included some shares of stock- in the Matteawan Company, (a manufacturing corporation,) by marriage articles between Wm. L. Pickering and Mrs. Wilkins, and immediately afterwards the marriage took place between the two latter. ■
    Prior to 29th November, 1842, Mr. Pickering had borrowed various small sums of money of the defendants, and having possession of a certificate of one share of the stock so held in trust, worth over $1000, he, with the consent of his wife and her trustee, on that day delivered it to the defendants, as collateral security for the payment of $426, with a power of attorney to transfer it, so as to vest the title in them for that purpose and no other. There remained due on this debt, on the 30th of December, 1843, $226.29, for which Mr. Pickering gave his note at four months, with the understanding that the stock should remain as security for that amount. On the 31st of January, 1844, the defendants discounted a note for Mr. Pickering, dated on that day, payable at six months, for $300,- with the understanding that the stock should remain as a security for that note also, in addition to the preceding one. The first note was paid and taken up at maturity, and the stock--left as security for the $300 note only. The defendants then dissolved their connection in business, and the stock and noté passed to the defendant Yandervoort, who on July 12th, 1845, received a dividend of $150 on the stock. The $300 note was not paid when it fell due, and on 22d June, 1846, there remained due upon it, deducting the dividends, $181, which Pickering tendered to the defendant Yandervoort, and demanded a re-delivery of the stock, &c., which he refused, and claimed the stock as absolutely his own. Subsequent to this, he has received several dividends on the stock, amounting in all to $380, being sufficient to repay the amount due, and leaving a balance due to the estate of Mrs. Pickering. The plaintiff was substituted as trustee in the place of Mr. Schenck, by an order of the supreme court, made 8th September, 1847, and Mr. Schenck duly conveyed the trust estate, and transferred the stock to him. The stock still continues to pay dividends, which the defendant Yandervoort receives, and claims a right to receive; and the stock stands in his name. The bill prayed for an answer without oath: That the defendants might be decreed to transfer and'redeliver the stock to plaintiff; That they might account for all the dividends received, and pay any balance, over and above the amount justly due on the note, to plaintiff; That a receiver might be appointed, to receive any dividends declared, or to be declared on the stock; That an injunction might issue, to restrain defendants from assigning the stock, and from collecting or receiving any dividends made upon it; and for general relief.
    The defendants put in a general demurrer to the bill, for want of equity, which was allowed by Mr. Justice Edmonds, in the supreme court, and the cause now came up on an order granting a re-hearing; the suit having been transferred to this court:

      Wm. Curtis Noyes, for the plaintiff.
    I. The-transactions between the defendants and Mr. Pickering, amounted to mortgages of the stock, redeemable when the notes successively became due. (2 Story’s Eq. Jur. §§ 1029, 1031; Brown v. Bement, 8 John R. 159; Huntington v. Mather, 2 Barbour’s S. C. R. 538; Little v. Wilson, 2 Comstock, 443.) .
    II. When the last note became due and remained unpaid, the title to the stock at law, vested absolutely in the defendants, subject only to the equitable right of redemption in equity. (Burdick v. McVanner, 2 Denio’s R. 172; Charter v. Stevens; 3 Ibid. 33.) The tender of the money due after the time for payment had expired, did not revest the title to the stock in the plaintiff. (Post v. Arnot, 2 Denio’s R. 344.)
    III. The plaintiff therefore properly filed his bill to redeem the stock, the amount due having been tendered and refused, and the defendants being more than overpaid by the dividends received; for the excess of which,,they were liable to account. (2 Story’s Eq. §§ 1030, 1031; Hart v. Ten Eyck, 2 John Ch. R. 62, 100; Kemp v. Westbrook, 1 Vesey Senior, 278 ; Denandray
      v. Metcalf, Pre. in Chy. 429; Harrison v. Hart, Comyn’s R. 392.)
    IV. The court of chancery had jurisdiction of the relief sought by the bill. (1.) There was.no remedy at law, either for the stock or dividends, the plaintiff’s title having become absolute there, by the non-payment of the mortgage money when it became due. (2.) The plaintiff’s remedy was in, equity, because the defendants had not filed a bill to foreclose, but might do so, or sell the stock on notice, and the plaintiff was authorized to anticipate and prevent such proceedings by this suit. The right to foreclose, and the right to redeem, are reciprocal. (1 Powell on Mortg. by Rand, 385.) (3.) The jurisdiction of equity was necessary to compel a re-transfer of the -stock ;• the plaintiff was not bound to be content with damages, even if there was a remedy at law. .(4.) It was also necessary to restrain the defendants from receiving dividends, and from ' transferring the stock, as well as for the appointment of a receiver of. the dividends themselves, all of which are distinctly prayed for. (5.) The account was also necessary to be taken of the amount due, and the dividends received, and this alone, made the subject matter of the suit, one of concurrent equitable jurisdiction.

      J. M. Mason, for the defendant.
    I. The complainant has a complete and adequate remedy at law.
    II. A bill to redeem stock that has been mortgaged or pledged, is allowed only upon the ground that a discovery or account is necessary. (2 Story Eq. Jurisp. § 1032; Kempt v. Westbrook, 1 Ves. Sen. 278; Jones v. Smith, 2 Ves. Jr. 372.)
    III. The jurisdiction of the court in taking an account is consequent upon the discovery, and is not upheld when the discovery fails, or is not asked for by the bill. (1 Story Eq. Jurisp. §§ 456, 458; Ibid. § 74, and sections immediately preceding; Jeremy’s Eq. Juris. 504; Dunwiddie v. Bailey, 6 Ves. 136; 15 Ves. 358; Frietas v. Don Santos, 1 Young & Jer. 574;
      King v. Rossett, 2 Ibid. 33; and see Crane v. Burrell, 10 Paige, 333.)
    IV. The complainant, by waiving an answer under oath, nas waived-the only ground on.which the bill can be sustained, and the bill should be dismissed.

       Mason, J., was formerly counsel in the cause..

   Bv the Court.

Campbell, J.

The bill was filed to redeem stock in a manufacturing company, and for an account of profits of the stock, and the defendant demurs.

It is said that a mortgage passes the title to the mortgagee, subject to be defeated on payment of the mortgage debt. And it is admitted, that in case of forfeiture by non-payment on the day, the mortgagor may come into a court of equity for the purpose of redeeming. But it is -insisted that in case of a pledge, though the possession passes to the pledgee, the title remains in the pledger, and in case of non-payment, the pledger must bring his action at law for the redemption of the article pledged; or rather for its return, or for compensation in damages. Admitting the transaction in this case, according to the ruling in Wilson v. Little, 2 Comstock 443, (S. C. 1 Sand. S. C. R. 351;) was a pledge and not a mortgage of the stock, yet though termed a pledge the legal title passed, and the same reason might exist, therefore, for coming into equity to redeem. In that case, and in that of Allen v. Dykers, 3 Hill 593, which were both actions at law,, the plaintiff did not seek a return of the stock, but compensation in damages. Here the • plaintiff asks for a re-transfer of the stock. In Kemp v. Westbrook, 1 Vesey Sen. 278, Lord Hardwicke says: “ I will not say in general that there is a right to come into equity in every case to redeem pledged goods, yet there are cases where it may be. As the pawnee of stock is not bound to bring a bill of foreclosure of the equity, of redemption of the stock, but may sell it, and notwithstanding the mortgagor may bring a bill here for an account of what is due, and to have a transfer to him.”

It would seem that in case of pledging stock, where the legal title passes, the remedy would be the same as upon mortgages. Indeed-, the distinction seems to be only in name in this respect, though it may be considered as real, as was the case in Wilson v. Little, where the action was for the recovery of damages, and not for a re-transfer.

“ But if any' special ground is shown, as if an account or a discovery is wanted, or there has been an' assignment of the pledge, a bill will lie." (2 Story’s Equity, § 1032.)

Here an account is wanted, and the bill avers that the loan was made of the firm which was composed of the defendants; that the certificate of stock was first given to the defendant Hayward, for the security of the .firm; that the firm was subsequently dissolved, and Hayward transferred the certificate to the other defendant, Yandervoort, who has continued to receive the dividends.

It appears to us to be, therefore, a proper case for a bill in equity, and we think the plaintiff selected the right forum for the determination of the controversy.

The demurrer must be overruled.


author: Duer, J.

text:
    Breck v. Cole.
    When a composition is made with creditors, every agreement or arrangement, by which an advantage is secured to any one of the creditors, which is withheld from the others, is a fraud upon the creditors from whom it is concealed, although it never has had, nor can have, the effect of depriving them of any portion of the amount which they had agreed to receive.
    Every' composition deed is, in its spirit, if not in its terms, an agreement between the creditors themselves, as well as between them and the debtor. An additional security, therefore, or an agreement for such security, not provided for in the deed, and secretly given to a particular creditor, is illegal and void as against the other creditors.
    And where such security or agreement is taken from the debtor himself, as a condition of his discharge, it is void, upon the ground of moral duress, as well as of fraud. •
    "Where a debtor, in the course of compromising his debts by notes made by h¡3 brother, was required to and did give to one of his creditors, his own note for the balance of the debt, as a condition of such creditor’s signing the deed of composition, tlie other, creditors being ignorant of the transaction, it was held that the note was illegal and void.
    The date of an instrument in writing is only presumptive evidence of the time of its actual execution. This presumption, whenever fraud or mistake is alleged, may be rebutted by parol evidence.
    (Before Duna,'Mason, and Campbell, J. J.)
    June 16, 17;
    June 22, 1850.
    This was an action upon a promissory note made by the defendant for $103.86, dated .July 12th, 1847, and payable to the plaintiff six months after date.
    The cause was tried in the supreme court, before Mr. Justice Edmonds, on the 27th September, 1848, when the plaintiff rested, after proving the note. The defendant’s counsel called Barnum Cole, the brother of the defendant, as a witness who testified, that in 1847 .the defendant failed in business and compromised with his creditors. That upon the settlement, the creditors were-paid forty cents on the dollar of their debts, by the witness giving to them his own notes for that amount, whereupon they executed a composition deed in full release and discharge of their claims against the defendant.
    ■ The counsel for the defendant then offered in evidence the deed of composition, which was objected to by the plaintiff’s counsel. The court overruled the objection, to which decision the plaintiff excepted. The deed of composition was thereupon proved and read in evidence. It was executed by twenty-four different houses, creditors of the defendant, among whom was the plaintiff, and was in these words:
    “We, the undersigned creditors of Philo Cole, have respectively .'received from him, and hereby accept the promissory notes of Barnum Cole, payable at two, six, nine, twelve months from the fourth of May last, for the sum of forty cents on the dollar of the amount of our respective debts against said Philo, on compromise thereof in full release and discharge of our said debts respectively. Witness our hands and seals this 8th June, 1847.” '
    The witness further testified, (the plaintiff’s counsel objecting to the evidence,) that when he called on the plaintiff to procure his signature to the composition deed, the plaintiff said he would execute the deed, provided the defendant would give him in addition to the composition note, his own note for $103.86, which the defendant agreed to do; that the witness accordingly delivered to the plaintiff his own note for the composition, which was $65.45, and the defendant’s note.for $103.86, (being the notes in suit,) whereupon the plaintiff executed the composition deed. This was on the 12th or 13th July, 1847. This agreement was unknown to the other creditors. The note given by the witness was paid-at maturity:
    The testimony here closed, and the judge charged the jury, that under the testimony, the note given in evidence was given for an unlawful purpose, and was fraudulent and void, and that the defendant was entitled to a verdict. To which charge the plaintiff’s counsel excepted. The j ury under the charge of the court rendered a verdict for the defendant.
    The case was thereafter transferred to this court, and the plaintiff moved for a new trial.

      A. Grist, for the plaintiff.

      G. F. Wetmore and D. Marvin, for the defendant.
   By the Court.

Duer, J.

We cannot suppose that the learned judge who tried this cause, when he instructed the jury to find a verdict for the defendant, meant to deny their exclusive right to decide upon the facts of the case, but in reality there were no facts in dispute, since the witness on the part of the defendant, by whom all the material circumstances were proved, was not impeached nor contradicted. The fair interpretation of the judges’ charge, therefore, is, that assuming-the truth of the facts to which the witness had sworn, the defendant was in law entitled to a verdict, and it is upon the propriety of this direction to the jury that the case, as presented'to us, wholly turns.

There is no weight in the objection that the evidence of the witness Barnum Cole ought to have been rejected, as inconsistent with the 'relative- dates1 of. the note in* suit andthe deed of composition signed by the creditors. The date of'an-instrument In writing is only presumptive evidence: of the time- of its actual" execution, and it is settled -and -familiar law, that this presumption, whenever fraud or mistake is alleged, may be contradicted-by parol evidence. • Were it otherwise, were the dates and the-contents of written instruments to be held itt all cases to be conclusive, relief upon the:-ground of fraud .or mistake would -soon become an-obsolete title- in the-law¡. The jurisdiction would continue to exist, but would be limited in its actual exercise to the .rare cases in‘which the fraud is apparent upon the face of the instrument.

-We shall, therefore, proceed to consider--that which we have stated as the only question ‘which the case presents, namely; whether the judgewas right- in.-saying- to the jury that, upon the testimony, the note in > suit- was- given for amunlawful-purpose, and was; therefore, void. It is-needless to'repeat the facts upon which the question arises, si nee. it-would hardly.be possible to. state them more succinctly and clearly than they appear in the* testimony of the witness. It is sufficient to say; that the note in suit was given to the plaintiff to induce him to sign the composition deed; and that this agreement was kept secret from the other creditors.

-The learned- counsel for the plaintiff admitted the general rule as- stated by Chief Justice Nelson, (lO Wetid. 47-9,) namely, that when there is' a-composition- with creditors; every security given to an individual creditor, for a larger ¡amount-than-the composition deed purports- to secure, and- without the knowledge -of the other creditors;-is inoperative and void; but he insisted that the rule.is-onlyapplicable where the transaction operates as a fraud upon-the other creditors; from its tendency-to diminish the fund which-’the composition .deed provides,-or to-lessen the ability of the debtor to meet-.its .stipulated payments ;■ and he urged that as¡-iri the-present-case these1’consequences- could mot -possibly follow,, it ought not to be considered as embraced within the general-rule:'" Here the creditor .relied- for the payment of the composition solely- upon' the notes :of -Barhum Cole,1 and it was assumed to be clear that the value of this security was not at all affected by- the note given -by the defendant to the plaintiff.

Could we admit the premises of the counsel — his exposition of the meaning of the rule — we should still be compelled to deny his .conclusion. Although. the defendant was discharged from all direct liability to the other creditors, it by no means follows that the effect of the additional security which the plaintiff obtained from him, was not ■ to. diminish the value of that upon which these creditors relied. The. defendant, as the notes of his brother, Barnum Cole, were .given-at his request, was bound to reimburse him, and, so far as his.means extended, was bound to supply the funds for the payment of these notes as they arrived at maturity. The ability of Barnum to meet the notes may have depended, wholly or in part, upon the moneys which the defendant was expected to pro vide,, and we have no right to say that the creditors did .not Took to the means, which the defendant was bound to place, in the hands of his brother, as a portion of the security upon -which they relied. , Hence the note, of the defendant, as it diminished his ability to reimburse his brother, diminished in the same proportion the value of the security which his brother gave-to the creditors.

It is needless, -however, to dwell upon this topic. The argument ,of the plaintiff’s counsel is not only illogical in its conclusion, but is unsound in its premises. The wise-and salutary rule which we are bound to follow, is far from resting upon the narrow foundation that.the counsel supposed. Whenever a composition is made with creditors, every agreement or arrangement,, by which an advantage, is -secured.to. any one or -more of the creditors, which, is. denied-to others, is, a fraud upon the creditors .from whom it .is concealed, although it neither has, nor can .have, the effect-of depriving them of any portion, of the amount which they -had agreed to. receive. , It is in all cases the-concealment of a fact, which, it was material for. them to know, and the knowledge of,which might have.prevented them from assenting to the composition. (Britton v. Hughes, 5 Bing. 466, per Best, C. J.) .Every composition deed is in its spirit,Tf not in its terms, an agreement'-between the creditors;themselves as well as between them and the debtor. It is an agreement that each shall receive the sum, or the security which the deed stipulates to be paid or given, and nothing more, and that upon this consideration the debtor shall be wholly discharged from all the debts then owing to the creditors who signed the deed. An additional security, therefore, secretly given to a particular creditor, violates the equality on the faith of which the other creditors consented to sign, and when the security is taken from the debtor himself, it is inconsistent with the entire discharge which the deed purports to secure to him, and which, we are bound to presume, was contemplated "by all who signed it. Hence, either the composition deed itself, upon the ground of the failure of one or more of the considerations upon which it was founded, or the private agreement which seeks to evade, and if valid, would defeat it, must be set aside, and sound policy and the principles of good faith plainly require that the latter course should be followed. It is perfectly just that every creditor who signs a composition deed should be estopped from setting up any private agreement repugnant to its terms or inconsistent with its intention and spirit, and we have no hesitation in holding, that every private agreement which secures to a creditor any benefit or advantage whatever which is withheld from other creditors is of this character, and consequently, that every security which is the fruit of such an agreement is illegal and void.

Prom the multitude of decided cases upon this subject, we shall select a few, which will be found to sustain very clearly and'fully all the positions that we have stated. Smith v. Bromley, (Douglas, 696, n.,) is one of the "earliest of these cases. 1 The defendant had -refused to sign the certificate of a bankrupt, until the plaintiff, who was a sister of the bankrupt, had consented to pay him a portion of the debt, and the action was brought to recover back the moneys so paid. It was strongly urged upon the part of the defendant, that this payment was not á fraud upon the other creditors who signed the certificate, since the money paid being that of a third person, and the payment being voluntary, there was no possible diminution of the effects of the bankrupt, which was the only fund upon which those creditors relied; but notwithstanding this objection, the jury, under the direction of Lord Mansfield, found a verdict for the plaintiff; and in a subsequent case, Jones v. Barkley, (Douglas, 684,) the court of King’s Bench adopted and followed his decision.

In Cecil v. Plaistow, (1 Anstruther, 202,) the defendant had signed with all the other creditors a composition deed, by the terms of which, however, the creditors did not agree to abate any portion of their demands, but only to receive the whole amount in successive instalments. The defendant inserted in the schedule annexed to the deed, only a portion of his debt, keeping back and concealing from the other creditors the residue of his demand, for which he had obtained from the debtor a separate bond. The court of exchequer held that the security retained was rendered void by the concealment, upon the ground that the concealment gave a superior advantage to the defendant, and was, therefore, a fraud upon the other creditors, and that in all cases, a creditor who signs a composition deed is estopped from setting up any other claim or demand than that which is there disclosed. Cecil v. Plaistow was decided partly on the authority of Middleton v. Lord Onslow, (1 P. Will. 768.) In this case the creditors agreed to discharge the debtor upon receiving a certain proportion of their claims from the separate estate of his wife, with her assent and that of her trustees, but some of the creditors withheld their consent to the arrangement until they had privately obtained from the husband his notes and bonds for the payment, at a future day, of the balance of their demands, and upon the petition of the wife and her trustees these securities were ordered to be delivered up to be can-celled.

It was said by the counsel for the plaintiff, that this case was not applicable, as the transaction was held to be void, not as a fraud upon the creditors, but upon the wife and her trustees. It is plain, however, that it was not otherwise a fraud upon them than as it prevented that entire discharge of the debtor which they meant to secure. The case is, therefore, a direct authority to prove that a creditor who has signed a Composition deed, is not permitted by a private agreement with the debtor to take from him any security for any portion of'the debt, which he has consented to release, but- that full effect must be given .to the release by declaring the security so taken to be fraudulent and void. Middleton v. Lord Onslow, in other respects, bears a close analogy to the present case. The composition deed and the securities taken from the-debtor were executed on the same day, and some of the latter were post dated, but they derived no protection from this circumstance, nor does it seem to have occurred to the Lord Chancellor that it precluded an inquiry into their validity.

Knight v. Hunt, (5 Bing. R. 432,) is a remarkable case. - The debtor compounded with his creditors’for 10s. in the pound, for which he gave them his Own notes, signed by the defendant,'as his surety. The plaintiff,; who was a creditor for £300, refused to accede to the proposed composition, until the brother of the debtor spontaneously agreed to supply him with coal equal in value to the residue of the debt. ■ This agreement was not known to the - other creditors, and was fully performed by the brother, by the delivery of the- coal. The plaintiff then-brought his suit against the defendant upon the composition note; and the judges of the common pleas were Unanimously of opinion that he was not entitled to recover; ■

The grounds of the decision were, that the private agreement with the brother was a fraud Upon the other creditors, and that the plaintiff, having-received his 10s.;-in the pound in coal, could not recover- it again in mdney. ■ The note had,- therefore, been satisfied. The chief justice, -(Best,) in' delivering his opinion, said, that it had been argued: that the debtor was not injured, nor the fund for other creditors rendered less available, but while he admitted that these topics'had been urged in some of the cases, he justly observed that it is always a material question whether the judgment of the creditors is not influenced by the supposition that all are- to suffer in the same proportion. When, without any previous contract, a debtor' having discharged his engagements-under the composition deed, honorably adds the remainder, the. case is; clearly- distinguishable, and-.wholly different,- from that, where, by, a previous express contract, the whole.of, his debt, qr an equivalent, is,-secured to a-particular creditor; evidently meaning that- in the latter case the transaction is, in its. essence a, fraud upon the creditors-from whom.it is concealed. -.. It. was: said that:thjs case. is.¡anomalous, and therefore of slight, weight ,as an authority,, but,dn- truth it was only novel-in. its circumstances, and,, as. the chief justice re•marked, was clearly within, the principle to be extracted .from analogous decisions; and in the subsequent-case of Britton v. Hughes, (5 Bing. 465,) this principle was .stated,by -the.same learned .judge in the following terms,: “ That upon a composition deed, all thq, partieé are supposed to stand in the same situ-: ation, and if -there is any one of .them .who .refuses to do. so,-he must announce,-it.at-the.time.” ... - ' . .

The strongest cases .as illustrating, ¡the, cxtent.fo. which this principle, is .carried, and the last .that we shall now cite, are Leicester v. Rose, (4 East. 372,) and Sadler. v. Jackson, ex parte, (15 Vesey, 52.) In each of these cases, a-private/agreement with a particular creditor was- held to be-void, although, its effect was not.,to ,-give, to .the,.creditor, any larger.sum than.all under., the composition deed had agreed to .receive, but. only to provide a-better, security for. .its eventual, payment. . Here there was no diminution of. a common fund, and n.o„ injury- to the debtor, .but, the transaction .was-held to be -void; upon the. single ground that by its concealment the other creditors were deceived and misled.. \ They had .signed the.composition deed in ,the confidence that .under it the rights. of all would be equal, and it was impossible.to say ¡that they would, have signed'it at all,-had it been known to,-them .that a.better security was.¡tobe given to any one-creditor than that which,-by-the.-terms. of the .deed, all had consented, to- take. -. .

No addition can.be. made -to. the authority of .these cases, when we state that, in the first; the decision, was pronounced by .Lord Ellenborough, and in the second, by. Lord Eldon-.- ■ ...

The cases ,in. o.ur own reports,¡although .differing in circumstances, coincide in principle with the EnglishHecisions... -Those: to which we would particularly refer are Payne v. Eden, (3 Caines, 213 ;) Wiggins v. Bush, (12 Johns. 309 ;) and Russell v. Rogers, (10 Wend. 499.) In none of these cases, as we understand them, was the decision of the supreme court placed on the grounds that are now assumed to be the true and sole foundation of the general doctrine. In the last of them, Chief Justice Nelson cites, with marked approbation, several of the English cases, particularly Knight v. Hunt, to which we have referred, and he lays down the general rule in terms that plainly exclude the-limitation to which it is alleged to be subject.

Nor is this all. When an additional security, privately given to a particular creditor, is taken from the debtor himself, it is not merely upon the-ground that it is a fraud upon the creditors from whom it is concealed, that it is held to be void. The creditor, who exacts such a security as the condition of his own assent to a composition deed, takes an unfair advantage of the distressed condition of the debtor. He is guilty of oppression and coercion. The unfortunate debtor is not a free agent, but is subjected to a moral duress, as odious to the law as the grossest fraud. It was upon this ground, and this ground alone, that Mr. Justice Buller placed his opinion in Cockshot v. Bennet, (2 Term R. 763,) using the strong language, that the conduct of a creditor thus abusing his power over the debtor, “ is equivalent to actual compulsionand in Jackson v. Lomas, (4 Term R. 166,) it was upon this ground that the opinions of all the judges were mainly rested.

It is needless to pursue the discussion. It is the clear and inevitable result of the decisions, that where a composition is made with creditors, every security given to a particular creditor, not provided for in the terms of the deed, and not disclosed, is void as a fraud upon the creditors from whom it is concealed, and where it is taken from the debtor himself as a condition of his discharge, is void upon the ground of duress, as well as of fraud. Hence the direction to the jury in this case was exactly such as the law required to be given.

The exceptions to the charge of the judge are overruled, and the motion for a new trial denied.


text:
    Bogardus v. The Rosendale Manufacturing Company and others.
    A bill in equity cannot be filed against a manufacturing corporation and its officers, upon a mere legal demand, praying for a discovery of the names of the stockholders at the time the debt was contracted, for the payment of the debt, and for a receiver, before the creditor has established his demand in a suit at law, and without any allegation of the insolvency of the corporation, <&c.
    The proper course for the creditor is, first to establish his demand, in a suit at law, and then file his complaint, in the nature of a creditor’s bill, against the company; to which he may make the officers parties, for the purpose of discovering the names of the stockholders. And such stockholders, when discovered, may be made defendants by a supplemental bilL
    (Before Duer, Mason, and Campbell, J. J.)
    May 23 ;
    June 22, 1850.
    In Equity. This was a demurrer by the defendants 'to the plaintiff’s bill of complaint. The bill was originally filed in the supreme court. It alleged that previous to the 28th of June, 1846, the defendant Livingston, president of the Rosendale manufacturing company, a corporation incorporated by and under the laws of the state of New York, by an act passed for that purpose, on or about the 16th of April, 1847, applied to the plaintiff for the purchase of a certain machine or mill manufactured by the plaintiff; that after some negotiation, Livingston, acting for the company, purchased such machine from the plaintiff; that the same was purchased by Livingston for the Rosendale manufacturing company, and was received and applied to the use of such company, and became its property; that for the purchase money Livingston gave to-the plaintiff a promissory note in these words:

      “New York, June 28th, 1846.

      “ Ninety days after date tbe Rosendale Manufacturing Company promise to pay to tbe order of James Bogardus, eight hundred dollars, for value received.
    (Signed,)
    “John R. Livingston, Jun., .
    $800. President,
    16 Wall-street.”
    The bill alleged that the plaintiff was ■ still the holder and owner of the note, and that the same, with interest, was still due and unpaid. That by the ninth section of the act. of incorporation of the Rosendale manufacturing company, it is among other things in substance provided — ■
    “ That the stockholders of the said corporation shall be holden in their individual capacities, jointly and severally, for the payment of all debts contracted by the said company, to .the nominal amount of the stock held.by such stockholders respectively, and any person having any demand against the said company, may sue any stockholder singly, and any two or more stockholders thereof jointly, and recover in any court having cognizance thereof, provided such suit shall not be maintained without proof that such demand had been presented to the proper officer of the said company for payment, and the payment thereof neglected- or refused.” ■ ' '
    The bill alleged the presentment of the note for payment, on the day it fell due; at the office of the company in New York, and the protesting thereof for non-payment, and another demand of payment made of the defendant, Livingston, as president, on the 11th of January, 1848, and a refusal to pay. The bill further alleged,- upon information and belief; that the- stockholders of the Rosendale; manufacturing company, at the time of the contracting of the debt, were numerous, and their names and residences, and the number of shares of stock held by each or any of them were unknown to the plaintiff, and could not be ascertained from any source of information accessible to him, and only by an examination of the books of the company in the custody of its officers, or from the officers .themselves. That the defendant, Livingston, as such president, and the defendant, Driggs, as the secretary of the company, .had,■, or one of them had, the custody, at the office of the said company, of the books of the’company, and had knowledge” of who were the stockholders, and of all other matters in relation thereto necessary to the plaintiff; and that the plaintiff was wholly unable, without a discovery from them; under-their .oaths ■ respectively, of the names of the stockholders of the company, at the time of the contracting of -such- debt, and of their residences, and the number of shares of their stock, respectively, at that time, to make the necessary parties to the plaintiff’s bill, so as to procure the release to which he was-entitled. The plaintiff further alleged that he had, through his- attorney,-.made application-to the defendant Driggs, as such secretary, at the office of the company, in New York, for permission to refer to the books of the company, to- ascertain the names of its stockholders; which application was refused.’ • That Livingston was a stockholder in the company, but to what amount the plaintiff'was ignorant, and he claimed a full discovery. The prayer of-the-bill-was, that the defendants might answer-and discover who were the-stockholders of the company, at the time of the contracting of the debt to the plaintiff, and at the -time of making of the promissory note, -and their residences respectively, and the number of shares of stock held by each, and the -nominal amount of such stock so- held-by each, and the -nominal value of a share of the stockand that a receiver of the several sums of money for which the stockholders were liable, by virtue of the act of incorporation, might be appointed;-and; that the claims of the plaintiff might be established by ai decree against-the company, and that hé might be paid his claims, &c.
    To this bill the defendants demurred; and the demurrer being brought on for -argument at a special term of the supreme court held on the-8th of*November,-1848, the’same was overruled.- . From that decision the defendants-appealed to’-the general term of the supreme court; and the cause was subsequently-transferred to this-court. -

      JR. JE. Mount, Jun., for the appellants.

      A. F. Smith, for the respondent.
   By the Court.

Mason, J.

The plaintiff is not entitled to the relief sought by this bill against the company. It sets forth a mere legal demand upon a promissory note. There is no allegation in it of the insolvency of the company for one year, or of any of the facts enumerated in the 38th section of the statute concerning proceedings against corporations, (2 R. S. 463,) which would authorize the court to pronounce this corporation dissolved. (Slee v. Bloom, 19 John. 456; Briggs v. Penniman, 8 Cow. 387.) Nor does the bill contain any prayer for a decree of dissolution. It merely prays for payment of the note, and for a discovery of the names of the stockholders, and for a receiver, and for further relief. Livingston and Driggs are made defendants solely for discovery, and if the plaintiff is not entitled to the relief sought by the bill against the company, he is not entitled to the discovery; the discovery being incidental to the relief. (Vermilya v. Fulton Bank, 1 Paige, 37; Story’s Eq. Pl. § 312 & notes.) There are no statutory provisions allowing a bill to be filed on a mere legal demand, in the first instance, either against a corporation of this liind, or against one or more of the stockholders. But the creditor, if he wish to obtain a decree, such as is sought for in the present bill, must first establish his demand in a suit upon the note, and then file his complaint, in the nature of a creditor’s bill against the company, to which he may make the officers parties, for the purpose of discovering filenames of the stockholders, and such stockholders, when discovered, may be made defendants by a supplemental bill. (Judson v. Rossie Galena Co., 9 Paige, 598; Morgan v. New York & Albany Railroad Co., 10 Paige, 290.) .It is true that the 45th 'section of the statute referred to authorizes a proceeding in equity on behalf of the creditors of a corporation, against stockholders, on account of any liabilities created by law, and the act incorporating this company renders the stockholders liable in their individual capacity for all debts contracted by the company. But the difficulty in this case is, that the fact is not yet legally ascertained that the plaintiff’s claim is a debt of the company. For aught that appears, there may be a perfect defence to it; and although a creditor might, perhaps, in a suit at law against a stockholder, be allowed to prove that the claim against the company was a valid and subsisting demand, yet the remedy given by the 45th and subsequent sections cannot, we think, be enforced until after the claim is established against the company, for until then the liability of the stockholders created by law is not ascertained.

It is only in the case of banking and insurance companies, or companies authorized to loan money on pledges or deposits, that a bill like the present could be sustained, if at all. A creditor of other corporations cannot make the stockholders or directors, who are personally liable, parties to a suit until after a decree against the corporation, and then by supplemental bill or otherwise. (2 R. S. 464, § 39 to 44 inclusive.)

The decree at the special term must therefore be reversed, the demurrer allowed, and the bill dismissed with costs.


text:
    Morris v. Husson.
    The defendant was the indorser of a promissory note. Annexed to his indorsement, he had written “13 Chambers-street.” At the time of the indorsement, and the subsequent dishonor of the note, he had an office in the city of New' York, where he transacted his business, and received his letters, but his residence, as also the maker’s, was in Brooklyn. The note had been deposited by the holder, in a bank at Brooklyn for collection, and upon its dishonor, a notice of protest was put in the post-'office at Brooklyn by a clerk of the bank, acting for the notary, directed to the defendant, “ 13 Cliambers-st., New York.” In an action against the defendant, held, that,the service of notice was sufficient.

      Held also, that the addition of “ 13 Chambers-street,” to the indorsement, must be regarded as a direction as to the place where notice was to be sent in case of the dishonor of the note, and that the service of notice was therefore in compliance with the directions of the indorser.
    Notice of protest sent to the post-office, where the indorser usually receives his letters, although in a different town from that in which he may reside, ia a valid and sufficient service.
    In an action by the indorsee of a promissory note against the indorser, service of notice of protest upon the indorser is not excused by showing that the indorser and maker had been partners in business, and the note was given for a partnership debt.
    (Before Duer, Mason, and Campbell, J. J.)
    June 4;
    June 22, 1850.
    Motion to set aside the report of a referee, in an action brought to recover the amount of a promissory noté indorsed by the defendant. . The note was as follows :

      “ Brooklyn, May 5, 1846.
    “ Four months after date, I promise to pay to the order of Joseph Husson four hundred and fifteen T2^ dollars, for value received. Edward Lynch.”
    Indorsed: “ Joseph Husson, 13 Chambersrstreet.”
    Upon the trial, after proof of the indorsement of the note by the defendant, the plaintiff’s counsel called as a witness, a clerk in the Long Island Bank, (of Brooklyn,) where the note had been deposited for collection, who testified, that on the day the note matured; which was September 11th, 1846, he presented the same and demanded payment, at the residence of the maker in Brooklyn, and payment was refused; that on the same evening he deposited a notice of protest, in the usual form, in the post-office of Brooklyn, directed to the defendant at “No. 13 Chambers-street, New York city.” The notice was signed with the name of Benjamin D. Silliman as notary public of the Long Island Bank.
    It appeared in the cross-examination, that the witness was not a notary public, but was' in the habit of protesting notes and serving notices of .protest at the request of Mr. Silliman, the notary, and that he had protested the note in suit, and served the notice of protest, at his request; that he did not know the reputed place of residence of the defendant,- and was guided by the indorsement upon the note in the service of notice. He knew some years before that the defendant lived in-Brooklyn, and had ’never-heard of -his-removing from that city. After proof of the amount of interest, the plaintiff .rested.
    It appeared in evidence, on the part of the .defendant, that the defendant has resided in Brooklyn for a number of years, and resided there at the time of the protest of the note in suit; but that he carried on business in New York, and received-his letters - at the post-office -in that city. It- also .appeared that at that time his office, was at .75 Nassau-street, although formerly it was at 13 Chambers-street. ■ The defendant rested.
    The plaintiff, then-proved, that in the fall of 1845 the defendant and Edward Lynch,-the maker'of the note, became partners in the carrying on of a distillery, and continued to be partners until January, 1846; and. that in the Course-of that,business, they were in the habit of giving notes made by Lynch and indorsed by the defendant; that the note ‘in suit was given for materials and labor furnished during the partnership, towards the erection of the distillery. This evidence was objected to by-defendant’s counsel.
    The' plaintiff again rested his.case; when the defendant’s coun-sel called-Mr.. Clarkson, who testified that- he- occupied an office with the defendant -in September,.1846; that on-the - 26th of that month he called-at the.New York post-office, at.defendant’s-request, for an advertised letter-directed to him,-which defendant had pointed'out to him in a-list1- of advertised letters in a paper of • that date, -and witness then received .the notice of pro- ■ test of the -note-in suit, which he delivered:to .'the defendant. Mr. Clarkson proved -that the: defendant carried eon business, when the note; was- given and: protested,.:.in-the-city of New York,-and received his -.letters from- the post-office-in that city. In 1845 his: office was -at 43 Chambers-street. ■ The: testimony here closed, and the referee reported-in favor .of- the: plaintiff

      T. Brady, fox the defendant,
    cited Seabury v. Hungerford, 2 Hill, 80; Story on Prom. Notes, § 301, and § 297; 10 Wend. 116; 18 John. 230, 240; Burke v. McKay, 2 Howard S. Ct. R. 66; 2 R. S. 212, §§ 44, 45. 46; Onondaga County Bank v.
      Bates, 3 Hill, 53; Sheldon v. Benham, 4 Hill, 129; Lowrey v. Scott, 24 Wend. 358; Ransom v. Mack, 2 Hill, 591; Spencer v. Bank of Salina, 3 Ib. 522; Cayuga County Bank v. Bennett, 5 Hill, 241; Story, § 322, 350; Commercial Bank of Erie v. Norton, 1 Hill, 501; National Bank v. Norton, 1 Hill, 577; Prosser v. Luqueer, 4 Hill, 420; Hall v. Newcomb, 7 Hill, 416.

      A. Schell, for the plaintiff,
    cited Cowperthwaite v. Sheffield, 1 Sand. Sup. Ct. Rep, 416; Coddington v. Davis, 1 Comstock Rep. 186; Bank of Utica v. Smith, 18 John. R. 229; Hartford Bank v. Stedman, 3 Conn. R. 489; Sheldon v. Benham, 4 Hill, 129; Ransom v. Mack, 2 Hill, 587; Bank of Geneva v. Howlett, 4 Wend. 330; Howard, Pres't v. Ives, 1 Hill, 263; Dobree v. Eastwood, 3 Carr & Payne, 250; Commercial Bank v. Hughes, 17 Wend. 94.
   By the Court.

Mason, J.

The notice of protest of the note was sufficient, we think, in this ease, to bind the indorser. Although his residence was in Brooklyn, yet his place of business was in the city of New York; and it is also in evidence that he received his letters from the post-office in New York. It has been held, and we think correctly, that notice of protest of a note should be sent to the post-office where the indorser usually receives his letters, although in a different town from that in which he resides. (Ransom v. Mack, 2 Hill, 591.) The object of giving notice is to apprise the party of the'fact as soon as possible, and an indorser would have just reason to complain if he should be held by a notice directed to a post-office to which he is not in the habit of resorting, though in the same town where he resides, instead of the place from which it is known that he receives his letters, but which is out of the geographical bounds of the township in which he resides. Besides, the addition by the defendant of the words “13 Chambers-street,” beneath his indorsement, could have no other meaning than a direction as to the place where notice should be sent in case of the dishonor of the note, and the notice put in the post-office addressed to him, as was the notice in this case, to No. 13 Chambers-street, was given strictly in compliance with his directions.

The referee erred in admitting proof of the original consideration of the note, for the purpose of rendering the defendants liable as partners. (National Bank v. Norton, 1 Hill, 577.) The plaintiff, who was a mere indorser of the note, could not sue on the original consideration.

Yet as the defendant Husson was liable as indorser, the report of the referee was right and must be confirmed.


text:
    Micklethwaite and others v. Thebaud and others.
    Promissory notes, taken by R. as consignee and factor, in payment for goods of his principals sold by him, were delivered by the former to 0., to enable him to get them discounted for R. A bill being filed by the principals against R., for an account of the goods sold by him, and praying for an injunction and a receiver, and against 0., to reach the notes so delivered to him by R., or their proceeds, alleging that he received the same without paying any consideration therefor, and with knowledge that they belonged to the plaintiffs; held, that a possession unaccompanied by ownership being first shown in 0., in order to protect himself as a bona fide purchaser, he was bound to prove that he paid Value for the notes. And that a mere allegation by his administrator, upon information and belief, that C. subsequently discounted them himself, was not sufficient.
    One receiving negotiable notes or bills, before maturity, from a factor, as his -agent- or bailee, cannot, as against the factor's principal, rely upon his possession of the securities alone .as evidence that he is a bona fide holder for valué.
    (Before Doer, Mason, and Campbell, J. J.)
    June 5;
    June 22, 1850.
    Prior to 1816, Joseph Rhodes, of New York, was the consignee and factor of the plaintiffs, who were manufacturers in England, under the name of Thomas Harriot & Sons. In October of that year, they filed their bill in chancery against him; stating, in substance, that he had sold a large part of the merchandise consigned, and had not paid over all the proceeds; and that he. concealed a large quantity.of- the merchandise and. notes and bills received by bim on sales; that he had repeatedly promised to pay over, and account and deliver the remaining goods, but filially neglected to do so ; and the plaintiffs prayed an account, and receiver, and an injunction against his disposing of the goods, and bills and notes received for goods on hand. The injunction and receiver were ordered, and the plaintiffs, having discovered that Yictor Crassous had received from Rhodes, before their maturity, certain notes and bills, which had been given to him as their factor and for their goods sold by him, filed a supplemental bill, in which they alleged that when he received the notes he did not pay any consideration for them, and, also, that he knew they were the plaintiffs, &c., and asking that the receivership be extended over them. This was ultimately done.
    Before the subpoena was served, upon this bill, Crassous died, and Eugene S. Thebaud, his administrator, was made a party, by another supplemental bill. Thebaud put in answers to both supplemental bills, in which he admitted that he did not know, though he was a partner of Crassous in the produce commission business, that he paid any thing for the notes; tha-t they kept books in that business, but none as to such money transactions; that since Crassous’ death, no entry or papers could be found in regard to these notes, and that he knew of no entry or evidence that he did pay any thing; but that he was present bn one occasion, when Rhodes asked him, and he agreed, to discount some notes, (though he does not say positively what notes they were;) and that he was not present when any discount was consum-. mated, though he was when they commenced calculating it; but that he was informed and believed Crassous paid Rhodes for the notes.
    The cause was put at issue as to all the defendants, including Rhodes’ executor, and referred to Murray Hoffman, Esq., who made a report in favor of a decree that Crassous was a bona fide holder of the notes, and directing the receiver to assign them and their proceeds to Thebaud, as his administrator. He also reported that Rhodes was indebted to the plaintiffs in the sum of $>15,822.67, over and above a considerable amount which the receiver had secured. A decree was entered accordingly at the special term of the supreme court.
    The plaintiffs sought to reverse the decree entered upon this report, so far as it related to Crassous.
    The cause was transferred to and argued in this court. Some of the facts are set forth in the opinion delivered.

      W. G. Noyés, for the plaintiffs.

      H. Wharton Griffith, for the defendant Thebaud.
   By the Court.

Campbell, J.

There, is no doubt that the promissory notes were taken by Rhodes in payment for the goods of the plaintiff’s, and that the latter are entitled to the proceeds, unless Victor Crassous in his lifetime became a bona fide holder of them for val he. We may concede the law to be, as laid down by the referee, that possession of negotiable paper is prima facie evidence of honesty in obtaining it. But the difficulty on the part of the defendant Thebaud is this. The notes are shown by his own admissions to have been placed yn the hands of Victor Crassous, for the purpose of enabling Crassous !to get them discounted for Rhodes. A possession, unaccompanied by ownership, is first shown. Thebaud adds, that Crassous agreed subsequently to discount them, and he has been informed and believes that Crassous afterwards discounted them. He was present when the notes were delivered to Crassous for him to get them discounted, but only knows from information that Crassous afterwards discounted’ them himself. From whom the information was derived, and when, does not appear. As then Crassous came into possession merely as a bailee, and as there is no evidence of the payment of any consideration, except the statement of Thebaud, derived from information, we might, perhaps, consider the question as disposed of.

But did Victor Crassous, in point of fact, discount those notes and pay the proceeds over to Rhodes? We are free to say that we think he did not. This transaction is alleged to have taken place at Crassous & Thebaud’s place of business, on the 19th of September, 1846. On tbe 2d of December, Crassous died in-: testate, and on the 9th of January, 1847, letters of administration-on his goods and chattels were granted to the defendant Thebaud, who was his-partner and brother-in-law.

Under the provisions of the statute, (2 E. S. 77, § 42,) Thebaud was examined on oath touching the value of the personal prop-'erty of which Crassous died possessed; and after stating that the intestate was his brother-in-law, -.he says, “ that said deceased died a natural death, and died possessed of certain personal property in the State of New York, the value whereof does not exceed the sum of about three hundred dollars, as I have been informed and believeThe explanation which Thebaud makes, that he was mistaken in the law, and supposed he must give an account only of the property which would remain after the payment of the debts, is not satisfactory. Ée was not only examined on oath, but gave a bond in the penalty of six hundred dollars, with two sureties. Whether any other person was examined as to the value of the property does not appear. But the proceedings were regular and formal, and we must presume that the surrogate took the bond according to law, in a penalty double the. amount of personal property of which the intestate died possessed. It is true, that in November, 1847, some ten months, afterwards, and when, perhaps, the importance of this matter was seen, another bond was filed, in the penalty of three thousand dollars, and which the clerk from the surrogate’s office spoke of on his examination before the referee as purporting “ to be an administration bond in the penal sum of $8000 by the said, Eugene S. Thebaud and Joseph Bouchaud, with the name of one surety, Edmund Thebaud, but that he had not signed or-justified.” As remarked, the defendant Thebaud was the bro-; ther-in-law and partner of Yictor Crassous, and Crassous kept, the banking account of the firm, as well as his own, in his indi-; vidual name. The alleged discount took place on the 19th of September; on the 16th November, Crassous was seized with the fatal illness of which he died. When the notes were placed; in his hands, he reported that he could not get them discounted, and. yet, according to Thebaud’s information, Crassous, whose' estate according to his own construction of his affidavit, on the 9th of January following, amounted to only $800, after a little persuasion discounted the notes at simple interest, though he had been un,able to sell' them in Wall-street, ands he must therefore have paid over to Rhodes* between three and four .thousand dollars. It seems to us that if this had been so, The-baud could have .given better evidence of. it than is contained in his answer that he is informed and believes that Crassous discounted the notes. In answer then, to the question, when was .Thebaud informed that Crassous discounted the notes, we are •constrained to say, that in our judgment, it must have been after Crassous’ death. By whom' he was informed would only be matter of. conjecture. Rhodes died without having answered .the bill. At the time of this transaction one of the plaintiffs was in New York, where he had- arrived from England, and was pressing Rhodes for a settlement and payment of the large balance due them. What could have been the real object of Rhodes, in leaving these notes in the possession of his friend Crassous, w.e have no means of ascertaining, and are not called upon to determine. Even if the notes did not- come into possession of Crassous as bailee, we think, under the circumstances of this case, Thebaud should have proved that Crassous paid value for them. There is no proof, we think, that he ever paid •for them, and we think, as a matter of fact, that he did not pay for them.

The order or decree entered on the referee’s report must be so far modified, as to require the receiver to pay over the pro- ■ ceeds of the notes to the plaintiffs instead of the defendant Thebaud.