text:
    James E. Brett and Others, Plaintiffs, v. The Harlan and Hollingsworth Company, Defendant.

      G barter party — bow construed — demurrage.
    In the construction of charter parties, each must stand upon its own language, and upon the intent of the parties to be gathered therefrom; the intent, if susceptible of ascertainment, must control.
    A charter party contained the following words:
    “It is agreed that the lay days for loading and discharging shall he as follows (if not sooner dispatched) commencing from the time the vessel is ready to receive or discharge cargo, the captain having given written notice to that effect: Thirty-five running days, Sundays excepted, for loading and discharging. * * * The cai.g0 to be received alongside within reach of ship’s tackle, and to he delivered alongside within reach of vessel’s tackles on the railroad company’s pier at Santos, where she can safely lay afloat. Lighterage, if any he necessary, to he at the expense of consignees. Yessel to haul once only to loading or discharging wharf at her own expense. If required to move a second time charterers to pay towage. * * * Yessel to he allowed free wharfage at Wilmington.” It further provided: “Bills of lading to he signed as presented without prejudice to this charter.”
    In the hills of lading was the statement “ Goods to he discharged at Railway Wharf.”

      jHeld, that under the terms of the charter party, for the compensation provided, the owner of the vessel undertook an employment and a voyage which was not completed until the vessel had secured a berth alongside the railroad company’s pier at Santos;
    That the voyage was not completed and the lay days did not commence to run until the vessel was permanently berthed at the railway wharf at Santos, and ready to deliver her cargo alongside, within reach of her tackles, on the railway wharf, and until the captain of the vessel had given notice to that effect.
    Motion by tbe plaintiffs, James E. Brett and others, for a new trial on a case containing exceptions, ordered to be heard at the General Term in the first instance upon the verdict of a jury in favor of the plaintiffs for $233.14, rendered by direction of the court after a trial at the New York Circuit on the 10th day of April, 1894.

      John, A. Dead/y, for the plaintiffs, for the motion.

      Henry B. B. Stapler, for the defendant, opposed.
   O’Brien, J.:

This action is brought by the owners of 'the barkentine Eleanor M. Williams to recover from the defendant, the charterer of said vessel, freight and demurrage due undér a charter party. The defendant did not contest the freight money, and for the amount thereof a verdict was directed by the court. Its liability for demur-rage was contested, and presents the only question upon this appeal.

Under the charter, the vessel went to Wilmington, Del., loaded there and took a cargo of car material for two railway companies, and sailed thence for Santos, in South America, where she arrived on or about the 6th of February, 1891. On the tenth, the captain of the vessel gave written notice to Hampshire & Go., defendant’s agents at Santos and consignees of the cargo, that the vessel was ready to discharge. The agents refused to accept the notice, upon the ground that it could not be given until the vessel had been berthed at the pier or wharf ready to discharge cargo. It is conceded that when such notice was given the vessel was in the stream and there remained until about the twenty-fourth of March, when, for the first time, she reached the railway pier and was berthed ready to discharge the cargo. There she remained only two days, engaged in discharging, when, yellow fever having broken out in Santos, the vessel was ordered to quarantine, where she lay several weeks before again reaching the wharf and discharging the cargo, which latter was completed on the twentieth of June. The testimony shows that there was but one wharf at Santos suitable, by reason of depth of water and size, to afford facilities for discharging, and that this was owned or controlled by the Sao Paulo railway, and was “ the railroad company’s pier at Santos ” mentioned in the charter party. At such railway wharf there were nine berths for vessels of the size of the Williams, and it would appear that during the time from the tenth of February to the sixteenth of March, while the vessel was in the stream, there were berths vacant at the railway wharf. No satisfactory explanation is given why, under these conditions, the vessel was not berthed, except that both parties claimed that the duty of procuring a berth rested upon the other; the plaintiffs on the one hand insisting that it was the fault of the defendant, who had control of the pier, and the defendant, that its agents had no such control, and that it was under no obligation under the charter party to procure a berth for the vessel.

The question of fact thus presented, as to whether or not the agents of the defendant had control of the railway wharf, we think must be resolved in tbe defendant’s favor. The master of the vessel assumed that the defendant’s agents were obliged to procure him a berth, and that having control of the pier they should have done so; but beyond this, there is no evidence in the case tending to show that the agents of the defendant, who were the consignees, had any supervision, direction or control of the railway wharf. When the plaintiffs’ witnesses were asked the question directly, as to whether Hampshire & Co., defendant’s agents, had any control of the pier, they answered that it was called the Sao Paulo Railway pier, but that they did not know whether Hampshire & Co. had any control or anything whatever to do with the pier; and it is conceded that the Sao Paulo railway was not one of the railways for which any portion of the cargo was intended. In the absence of evidence showing that defendant’s agents had such control, the fact cannot be assumed, and we cannot proceed to determine the question upon plaintiffs’ theory that, having the control and management of the pier, it was the duty of such agents to facilitate and not delay the berthing of the vessel. The question of fact thus disposed of we think important, because if it had appeared that, having the right to determine what vessels should use the pier for the purpose of unloading, they had permitted vessels arriving after the Williams (which it appears those who owned the pier did) to unload, thus giving a preference and causing the delay, they would have been, upon the ground that it was due to their default, legally chargeable with demurrage.

This brings us to a consideration of the question of law which must determine the rights of the parties upon this appeal, as to whether, under the contract between the parties, the lay days during which it was agreed the defendant should unload the vessel should commence to run from the time that the vessel arrived in the stream at Santos and gave notice of readiness to discharge, or whether such time only began to run when the vessel was berthed alongside the railway wharf and ready to discharge her cargo.

Hpon this subject the charter party says: “ It is agreed that the lay days for loading and discharging shall be as follows (if not sooner dispatched), commencing from the time the vessel is ready to receive or discharge cargo, the captain having given written notice to that effect: Thirty-five running days, Sundays excepted, for loading and discharging. * * * The cargo to be received alongside within reach of ship’s tackle, and to be delivered alongside within reach of vessel’s tackles on the railroad company’s pier at Santos, where she can safely lay afloat. Lighterage, if any be necessary, to be at expense of consignees. Vessel to haul once only to loading or discharging wharf at her own expense. If required to move a second time charterers to pay towage. * * * Vessel to be allowed free wharfage at Wilmington.” It further provided': Bills of lading to be signed as presented without prejudice to this charter.”

The charter party then, with the bills of lading, constitute the contract between the parties ; but, as, seen from the px’o vision just quoted, the bills of lading are subject to the charter party. If resort may be had to the bills of lading upoxx this questioxi of wlxexx the lay days commenced to run there will be found thereixx this statement : “ Goods to be dischax-ged at Railway Wharf.” As the bills ■of lading were, under the charter party, to be xxxade subject thereto, we think the question here presented is to be determined by the construction of the charter party itself, and we are to gather tlxerefi’om what were the obligations, respectively, of the parties as to berthing the vessel at the railroad pier. If this obligation was upon the defendant, then clearly xxpon the vessel’s arrival in the stream at Santos, and giving notice of readiness to dischaxge, the lay days would commence to run, and for any tixxxe thereafter occupied the defendant would be liable for demurrage. On the other hand, if the voyage was xiot completed and the plaintiffs’ duty fulfilled until the vessel was permanently berthed at the railway whax’f at Santos and ready to deliver her cargo, then the delay that ensued in procuring such berth, unless, as already said, plaintiffs were prevented by the defendant or its agents, the ownership or control of the pier would not make the latter liable for demurrage.

We have been x’eferred to many cases where the construction of charter parties was involved ; but as these turn upon the construction of 'coxxtracts, similar it may be, but not in all respects like to the one here involved, no advantage can be gained froxn collating and discussing them,' thinking, as we do, that, with respect to questions arising upoxx contracts of this charactex*, just as in the constxTxction of wills or other written instruments, each must staxxd upon its own language and upon the intent of the parties to be gathered therefrom, the intent, if susceptible of ascertainment, to control.

By express language the defendant undertook the obligation of providing a berth at the place of loading, and the absence of any express agreement to provide one at the place of discharge is significant. Moreover, the language already quoted from the charter party, showing that at a berth to be provided by the defendant the cargo was to be received by the plaintiffs within reach of ship’s tackle, and “ to be delivered alongside, within reach of vessel’s tackles, on the railroad company’s pier at Santos,” seems to us clearly to point out that for the compensation provided the plaintiffs undertook an employment and a voyage which was not completed until the vessel had secured a berth alongside the railroad company’s pier at Santos.

It will ■thus be seen that our conclusion agrees with that of the learned trial judge, that under the charter party the voyage was not completed and the lay days did not commence to run until the vessel was permanently berthed at the railway wharf at Santos and ready to deliver her cargo alongside, within reach of her tackles, on the railway wharf, and the captain had given notice to that effect.

It is unnecessary to discuss the question of the defendant’s duty in respect to providing lighterage, because the evidence shows that if the cargo had been placed upon lighters the latter would have been required to be berthed at the pier before the cargo could have been delivered to the consignees, and it was not shown that there were any greater facilities for securing a berth for the lighters than there was for procuring a berth for the vessel itself.

We think that the exceptions should be overruled and the motion for a new trial denied, with costs, and a judgment is ordered to be entered upon the verdict as directed.

Yak Brunt, P. J., and Follett, J., concurred.

Exceptions overruled and motion for new trial denied, with costs, and judgment ordered on verdict.


source: Caselaw Access Project

author: Yan Brunt, P. J.:

license: Public Domain

text:
    Farmers’ Loan and Trust Company, Trustee, Respondent, v. Bankers and Merchants’ Telegraph Company and Others, Defendants. In the Matter of the Claim of The Third National Bank of the City of New York, Appellant.

      Claim against a corporation for money loaned — not entitled to a preference although the money was used for' the same purposes as the proceeds of receiver’s certificates — claims of bondholders and of an attaching creditor — construction of a stipulation in regard to.

    Where a corporation borrows money to secure the payment of which collateral security is given, which subsequently proves to be insufficient in amount to repay the loan, the fact that the money borrowed has been partially expended by the borrower, for purposes for which the receiver of the corporation might have asked the court for leave to borrow money upon receivers’ certificates, is not sufficient to give a preference to the claim of such creditor over the claims of the holders of bonds issued by such corporation and secured by a trust mortgage given by such corporation upon its property.
    A written stipulation was entered into between a creditor of a corporation, who had obtained attachments against its property in foreign states, and the trustee named in a trust mortgage given by such corporation, which was in the process of foreclosure, in the following words:
    “ It is stipulated that in case the petitioner shall establish on a reference to be ordered herein, that it is entitled to share in the proceeds of the sale in preference to the bondholders, then the petitioner shall be paid the amount that it may be adjudged as entitled to receive out of such proceeds before the distribution of the proceeds, and that in case the proceeds are distributed before the decision on any such reference, the petitioner shall be given, before such distribution, a bond in the penal sum of §25,000, with satisfactory sureties, conditioned for such payment as aforesaid.”
    Held, that by the stipulation the creditor released its claims under the attachments, if any it had, and elected to base its claims upon a right of payment in preference to the claims of the bondholders;
    That it was only in case such right was established, that such creditor was to be entitled to participate in the distribution of the amount realized upon the foreclosure sale.
    Appeal by the Third National'Bank of the City of New York from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 3d day of July, 1894, confirming the report of a referee and directing a distribution by him, and also from an order of the Supreme Court, made at the New York Special Term and entered in said clerk’s office on the 3d day of July, 1894, adjudging the claim of the appellant not to be a preferred claim, and denying the prayer of its petition.

      Everett P. Wheeler, for the appellant.

      W. W. Coolce, for the respondent.
   Yan Brunt, P. J.:

Prior to June, 1884, the Bankers and Merchants’ Telegraph Company was engaged in business in the construction and operation of certain telegraph lines. In or about said month an application was made to the Third National Bank of the city of New York by one of the officers of that company for a loan of $50,000 for the purpose, according to his statement, of meeting current supplies, contract payments, etc. It was also stated that the company was in great straits for want of the amount thus requested, but that with the aid of such advance the company could meet its pressing liabilities of the description thus stated, and would also be able to pay its coupons on its first mortgage bonds, which would fall dire on the first of July. On the 3d of June, 1884, the Third National Bank loaned to the Bankers and Merchants’ Telegraph Company $50,000 upon its note7 and upon its giving as collateral security $300,000 of the first mortgage bonds of the company; The note was payable sixty days after date, and authorized the bank to sell the securities forthwith on failure to pay the note, without notice. Upon the maturity of the note on August 4, 1884, a payment of $10,000 on account was made and a new note for $40,000 was given, and an additional $100,000 of the bonds were deposited as collateral for the payment of the same. In September, 1884, a creditor’s action was commenced against the company, and on the twenty-fourth of September receivers of all the property of the company were, appointed. In December, 1884, the bondholders commenced a suit and the same receivers were appointed. In the latter part of March, 1885, the Third National Bank was served with a copy of the judgment in the bondholders’ suit. About April 25, 1885, the Farmers’ Loan and Trust Company, as trustee, under a $10,000,000 mortgage, commenced a suit to foreclose the same, and a receiver was appointed to succeed the receiver who was then holding in the bondholders’ action. He turned over to the receiver in the foreclosure suit all the property of the Bankers and Merchants’ Telegraph Company. On the 1st of May, 1885, receivers were appointed in the foreclosure suit, and on the 5th of May, 1885, the Third National Bank commenced attachment suits in Rhode Island and Massachusetts. On the eleventh of June the bank was enjoined from prosecuting the same, and upon the next day obtained leave to sell the bon ds that it held as collateral security, and on the twenty-sixth of June it gave notice that it would sell the collaterals, which it sold on the next day for the sum of $19,361.80. On the twenty-fourth of June the Farmers’ Loan and Trust Company obtained its judgment of foreclosure and sale. On the twenty-fifth of July a stipulation was made on behalf of the Third National Bank as follows: “It is stipulated that in case the joetitioner shall establish, on a reference to be ordered herein, that it is entitled to share in the proceeds of the sale in preference to the bondholders, then the petitioner shall be paid the amount that it may be adjudged as entitled to receive out of such proceeds before the distribution of the proceeds, and that in case the jiroceeds are distributed before the decision on any such reference, the petitioner shall be given, before such distribution, a bond in the penal sum of $25,000, with satisfactory sureties, conditioned for such payment as aforesaid.”

On the 31st of July, 1885, the property of the Bankers and Merchants’ Telegraph Company was sold under the judgment of fore■closure. On the sixteenth of September the bank obtained an order of reference under and by virtue of the stipulation aforesaid. On the 23d of January, 1886, the bank filed a petition to set aside the injunction that had been granted on the 12th of June, 1885, and for leave to go on with its attachment suits in Rhode Island and Massachusetts. On the 18th of February, 1886, an order to show cause was obtained requiring the Third National Bank to show cause why the said bank should not withdraw, cancel and°annul the attachments obtained by it as above mentioned, and on the 19th of March, 1886, it was ordered and adjudged, among other things, that the Third National Bank cancel and annul of record the attachments in these suits, and that in case the petitioner should establish on the reference hereinafter ordered that it is entitled to share in the proceeds of the sale in preference to the bondholders, it should have the same priority in the distribution of such proceeds as it would have had under the laws of said States respectively (referring to the States in which the attachments were issued) with respect to the property levied upon; and thereupon a refereee was appointed to take proofs and report to the court with his opinion thereon as to the liens of the said attachments, the value of the property upon which the same were levied, and in case the said Third National Bank should establish that it was entitled to share in such proceeds of the sale in preference to the bondholders, the referee was directed to report the interest of the bank in said proceeds by virtue of said attachments, etc. The referee, after a hearing, reported that the Third National Bank had no claim which could be considered superior to the bonds or would entitle it to rank with the receiver’s certificates. And from the order thereupon entered this appeal is taken.

The foundation of the claim of the appellant rests upon the doctrine of subrogation; and we are called upon to extend a preference to its claims as though it held receivers’ certificates (these certificates having been invented for the purpose of giving a preference to unsecured claims over liens acquired by express contract, a recognition of which invention by our courts has brought such discredit upon all classes of our securities in the eyes of the commercial world) for borrowed money for which collateral security was taken at the time, but which subsequently turned out not to be quite as valuable as was imagined, upon the ground that the money borrowed had been partially expended by the borrower for the purposes for which the receivers might have asked the court for leave to borrow money upon receivers’ certificates.

We have examined the interesting brief of the learned counsel for the appellant to ascertain whether contractual rights had been to this degree set aside by the courts, but have been unable to find that with all their liberality towards the payment of unsecured claims in the case of insolvent corporations they have yet taken this step.

It is apparent upon reading the stipulation to which attention has been called, that the Third National Bank released its claim under the attachments, if any it had, and elected to base its claims upon a right of payment in preference to the bondholders; and that it was only in case (upon this reference so ordered) such right was established that such bank was to be entitled to participate iii the distribution of the amount realized upon the foreclosure sale. There seems to be no other interpretation to be given to this stipulation, and, it having so elected, it cannot now be permitted to establish a claim by reason of the attachments, if any it may have had.

We are of opinion, therefore, that the orders appealed from should be affirmed, with costs.

Parker and O’Brien, JJ., concurred.

Orders affirmed, with costs.


author: O’Brien, J. :

text:
    James Murray and Another, Appellants, v. Mathew Micolino and Another, Respondents,

      Dismissal of a complaint for defect in proof— cannot be sustained, for defeat in the complaint — action by a sub-contractoi'under a building contract — election of the owner to complete the contract — effect thereof on the rights of the parties.

    Upon an appeal from a judgment dismissing a complaint where it was expressly stated by the court that such dismissal was not because of any defect therein, but on account of defect of proof, the ruling of the court cannot be sustained on the ground that the complaint was defective if no objection was made to it on such ground upon the trial.
    Upon the trial of an action it appeared that the plaintiffs, two sub-contractors, had a valid claim against a building contractor, and that there remained in the owner’s •ands anh amount available for the payment of the plaintiffs’ claim in whole or in part, and that the contractor had assigned his interest in such amount to an extent sufficient to provide for the payment in whole or in part of such claim.

      Meld, that the election of the owner to complete the contract, instead of insisting upon the performance thereof by the contractor, modified the relation of the parties by constituting the owner the agent of the contractor and created a new fund upon which the plaintiffs’ claim, fortified by an order given them on the owner by the contractor, attached. That instead of the balance due under the terms of the contract to be paid to the contractor upon the completion of the contract work, another fund was substituted, namely, so much of th6 con, tract price as remained unpaid in the owner’s hands after deducting what he had expended to complete the work provided for in the contract.
    If persons, other than the plaintiffs in such an action, are entitled to any portion of such fund, it is a matter of defense in the action, and, if there is a dispute as to who is entitled to such fund, the owner has it in his power to bring in all those who have any interest therein, or he can assume the responsibility of con- • testing on t-lieir behalf the right of the plaintiffs to any portion of the fund, and in this connection may show the situation of the fund and the legal claims against it.
    Appeal by tbe plaintiffs, James Murray and another, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 21st day of February, 1894, upon the dismissal of the complaint directed by the court after a trial before the court and a jury at the New York Circuit.

      James A. Seaman and G. S. Bloomfield, for the appellants.

      Wm. JET. Ostrander, for the respondents.
   O’Brien, J. :

The defendant Micolino was the owner of property, and entered into an agreement with the defendant Wood as contractor, under the terms of which the latter was to furnish material and do all the carpenter work on the two houses to be erected, for which Micolino was to pay in installments as the work progressed, the final payment to be made “ when buildings are completed and this contract is fulfilled.” The contract further provided that if the contractor, should fail to supply a sufficiency of workmen or materials, or to prosecute the work with promptness and diligence, the owner could, on notice, provide such labor and materials, and the expense of furnishing the same, and the damage resulting to the owner from the contractor’s failure, should be deducted from any moneys that might become due the contractor under the contract. It further provided that a final payment should not be made until the contractor should give the architect satisfactory evidence that there were no liens or claims chargeable against the contractor; and, further, that if there were any, the owner could retain from any payment a sufficient amount to indemnify him completely against the same until they should be satisfied and discharged.

The contractor,Wood, entered into a sub-contract with the plaintiffs, by which the latter were to furnish certain trimmings for the buildings at an agreed price, and thereafter plaintiffs commenced performance of that agreement. Subsequently Wood gave to the plaintiffs a written order upon the owner to pay to plaintiffs certain amounts as therein specified, and to charge the same to his (Wood’s) account. The testimony is that this order was delivered to Micolino, and retained by him for consideration; but whether it was accepted by him, or whether the payment made subsequent thereto was in accordance with the terms of such order, or by another arrangement between the parties, is in dispute, one of plaintiffs’ witnesses testifying that the order was accepted, and that the pay-i ment was made under the order. However .this may be, after the order was given, the contractor having failed to perform his contract, the owner, after notice, entered upon and completed the buildings, employing suitable persons to furnish the work and materials, and paying them therefor out of the moneys held by him and reserved for the final payment; and after such payments made there remained in Micolino’s hands the sum of $1,821.35, out of which the plaintiffs claimed the balance due them of $1,662.50.

The trial judge dismissed the complaint, upon the ground that, even if it were proved that the order was delivered, jfiaintiffs could not recover, because “ the conditions precedent stated in the contract have not,been complied with.” The specific conditions were not pointed out by the judge, but we assume one to be that as the final payment was to be made “when balance of material is delivered and carpenter’s contract entirely finished,” no recovery could be had on account of the contractor’s failure fully to complete. This might have been a correct ruling if the contract had provided for the finishing by the original contractor, but the contract itself showed that in the event of the contractor not finishing the owner had the right to complete the work at the expense of such contractor. In other words, upon the failure of the contractor to complete as required by the terms of the contract, the owner, as the agent for the contractor, had the right to finish the work and deduct the expense thereof from the final payment coming to the contractor. This was the course followed by the owner, who testified that he went on and finished the buildings under the contract, and after finishing and making the payments there remained in his hands the sum already mentioned.

As the complaint was drawn, it would seem that the theory of the plaintiffs’ action was to charge the defendant Micolino personally with the obligation of the payments under the order, upon the ground that he had accepted the same; and, if the motion to dismiss had been predicated upon defective pleadings, there might be a basis for the ruling made dismissing the complaint. The court, however, expressly stated that its ruling was not upon any defect in pleading, but was on account of defect of proof; and, therefore, as the complaint might have been amended if such objection had been made, we have a right to consider the proof for the purpose of determining whether the plaintiffs were entitled to any relief. There was some evidence, though slight, upon the question of acceptance. But apart from this, upon the question of delivei’y of the order, there was sufficient evidence for it to go to the jury as a question of fact, and upon this appeal we must assume that it might have resolved in plaintiffs’ favor.

Assuming, therefore, that the order was delivered, though not accepted, its effect has been deteimined in two cases which seem to dispose of the questions presented. (Lauer v. Dunn, 115 N. Y. 405 ; Beardsley v. Cook, 143 id. 143.)

In Lauer v. Dunn, which, like this, was a controversy over payments under a building contract, it was provided that the final payment should be made “ within thirty days after the final completion of the work and its acceptance by the architect.” It was also provided that in case any liens should exist upon the property at the time any payment was to be made, such payment, or such part thereof as should be equal to not less than double the amount of such liens, should not be payable at the stipulated times. Upon the completion of the buildings there was due the contractor $750, against which an order was drawn directing payment to sub-contractors for $700, with a request that it he charged to the contract. The sub-contractors presented'the order, but it was not paid. A few days after liens were filed by various parties. In an action brought by plaintiffs upon the order, commenced more than thirty days after the completion of the building, plaintiffs were nonsuited. “ Held, error; that the order amounted in law to an assignment, pro tcunto, of the fund in the owner’s hands; that it having been made in good faith and for a valuable consideration, and notice thereof given to the owner prior to the filing of any lien, no subsequent liens could defeat plaintiffs’ right to the money, and the owner would have been protected in its payment; that the provision respecting the owner’s right to retain double the amount of any lien filed simply meant that if, when moneys were payable to the contractor, liens existed, the owner might reserve double the amount claimed under them for such moneys, and as no such liens existed, plaintiffs were entitled to recover.” And in Beardsley v. Cook (supra) it is said: “ The acceptance of the order by the defendant operated as an equitable assignment of so much of the last payment to the plaintiff, and the plaintiff’s right could not be affected by payments made by the defendant in advance of the work or by the liens of mechanics or materialmen filed subsequent to the assignment.” The opinion continues: “ But unless that payment became due and payable by the defendant, the plaintiff could not, under the circumstances disclosed by the record, recover upon the order as an absolute and unconditional promise. The plaintiff’s right to recover the payment, or that part of it assigned to him by the order, was contingent upon performance of the contract, so as to render the last installment, or at least some part of it, due and payable. The contract was not performed by the builders, but by the defendant himself, who was obliged to complete the houses. The assignment to the plaintiff was subject to any deduction which the defendant had a right to make from the payment on account of the reasonable and fair expense to him in completing the houses. He could claim payment of the order only from the balance. * * * ”

Upon the proof as it stood, therefore, at the close of plaintiffs’ case, it appeared that they had a good claim against the contractor; that there remained in the owner’s hands an amount available for the payment of plaintiffs’ claim in whole or in part, and that the contractor had assigned his interest in such amount to an extent sufficient to provide for the payment in whole or in part of such claim. The election of the owner to complete the contract, instead of insisting upon the performance thereof by the contractor, modified the relation of the parties by constituting the owner, the agent of the contractor, and created a new fund upon which the plaintiffs’ claim, fortified by the order of the contractor, attached — that is, instead of the balance due under the terms of the contract; another fund was substituted, namely, so much of the contract price as remained unpaid in the owner’s hands after deducting what he had ■expended to complete tbe work provided for in the contract, which, .as shown by the testimony, was $1,821.35. If there were persons other than the plaintiffs entitled to any portion of the fund, that was a matter of defense. Here was a fund which had been substituted for the balance or final payment under the original contract, and if in respect thereto there was a dispute the owner had it in Ms power to bring in all those who had any interest in the fund, or he could assume, as he did, the responsibility of contesting on their behalf the right of the plaintiffs to any portion of it, and in this ■connection could have shown, had he been put to Ms defense, just what the situation of the fund and the legal claims against it were. As the evidence stood, however, at the close of plaintiffs’ case •(assuming that the pleadings would have been amended to conform to the proof), sufficient had been shown to entitle plaintiffs to a payment in whole or in part of their claim.

Under such circumstances, the dismissal of the complaint was error, for which the judgment should be reversed and a new trial •ordered, with costs to appellants to abide the event.

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

Judgment reversed, new trial ordered, costs to appellants to abide •event.


author: O’Brien, J.:

text:
    New York Security and Trust Company, Respondent, v. Ernest Lipman and Others, Defendants ; B. W. Blydenstein and Others, Impleaded, etc., Appellants.

      A decision and judgment of one Special Term cannot be vacated by another — undertaking given upon the issuance of a temporary injunction — determination of the right of damages thereunder.

    A judge sitting at Special Term cannot, on a motion, upon the allegation that another judge at Special Term has erred as to any of the questions submitted for his determination, set aside his decision and the judgment entered thereon.
    'The final outcome of a suit, and not the order vacating a temporary injunction granted therein, determines the right to damages under an undertaking given upon the obtaining of a temporary injunction.

      Appeal by the defendants, B. W. Blydenstein and others, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 29th day of October, 1891, denying the appellants’ motion for a reference to assess damages on an injunction bond and for an amendment of the judgment rendered in the action.

      Antonio Knauth, for the appellants.

      Howa/rd A. Taylor and Edwa/rd I. Sam/ford, for the respondent.
   O’Brien, J.:

The defendants B. W. Blydenstein & Co. made a motion to modify a judgment entered in the above-entitled action, and for a reference to assess their damages suffered by an injunction issued against them. The action was one in equity, brought to determine the respective rights and titles of the plaintiff trust company and the various defendants, among them Blydenstein & Co., all claiming an interest in the proceeds of some or all of 200 bales of burlaps in the possession of the trust company and sold by it.

The trust company had agreed that certain of the defendants, including Blydenstein & Co., should be held subject to the same rights as the claimants would have had in the bales themselves. An accounting and marshaling of these proceeds among the claimants was a part of the relief demanded in the complaint, also an injunction restraining all of the defendants from litigation with the trust conrpany over their respective rights in these bales or their proceeds in any other action. A temporary injunction was granted against the defendants, from which an appeal was taken by Blydenstein & Co., and the order of injunction was reversed, which reversal was subsequently affirmed by the Court of Appeals. Blydenstein & Co. were, therefore, at liberty to and did pursue their action at law in the United States court against the trust company for the conversion of the number of bales of burlaps claimed by them, but upon the trial their complaint was dismissed upon the merits, from which Blydenstein & Co. have taken an appeal. The judgment in the Federal court was offered in evidence in this action, which, in effect, held that they had no claim against the trust company at common law. They not having appeared, the judgment in this action directed that their share of the proceeds of the burlaps, after paying the trust company, should be paid over to a receiver, with leave to them to recover the same, and permanently enjoining them from pursuing any further remedy as against the trust company. The motion to modify the judgment and for a reference to assess the damages was made before a judge other’ than the one whose judgment was sought to be modified.

As said in the case of People v. Nat. Trust Co. (31 Hun, 20), would justify the order appealed from. It was therein said: “ * * * ‘It would be a very unwise administration of * justice and lead to much vexatious litigation if a judge holding one Special Term could, upon a mere motion, set aside the decision and judgment of another judge at Special Term, upon allegations that the latter had erred as to any of the questions submitted for his determination.’ ”

As the judgment stood, therefore, finally determining that the plaintiff was entitled to an injunction, no liability on the undertaking could arise with such judgment standing in force and effect, because the condition of such undertaking is that the damages are not to be payable unless “ the court finally decides that the plaintiff was not entitled ” to the injunction. The rule that the final outcome of the suit, and not the order vacating the temporary injunction, determines the right to damages under the undertaking is well settled. (Methodist Churches v. Barker, 18 N. Y. 463; Musgrave v. Sherwood, 76 id. 194; Palmer v. Foley, 71 id. 106.)

We think, therefore, that the order was right and should be affirmed, with ten dollars costs and disbursements.

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

Order affirmed, with ten dollars costs and disbursements.


author: O’Bbibn, J.: Tan Brunt, P. J.

text:
    In the Matter of the Application of the United States Mortgage Company, Appellant, for Leave to Change its Name to “ United States Mortgage and Trust Company.” United States Trust Company of New York, Respondent.

      Ohange of name of a trust company — -approval of the Bup&t'intendent of Banks — application improperly denied, — use of word “trust” — a corporation cannot be designated by two names — protection against the use of a name simila/r to its own —use of names as trade mas'ks.

    Prior to the amendment of the Code of Civil Procedure by chapter 366 of the Laws of 1893, the power to authorize a change of name by a trust company was vested exclusively in the Superintendent of Banks, and that circumstance, together with the fact that, under the Code of Civil Procedure [as amended by chapter 366 of the Laws of 1893], the petition by sucli a corporation for a change of its name must be approved by the Superintendent of Banks, must be taken into account in the consideration by the court of an application made by a trust company to change its name.
    The word “trust” is a general and descriptive term, universally recognized as belonging to a certain class of corporations, and there is no objection to a corporation using such word in its corporate name where it is truly descriptive of the actual power exercised and business transacted by the company, provided that confusion or deception will not result by reason of the addition of such word to the title of the corporation, on account of the similarity of the proposed new name to the name of an existing corporation.
    A corporation existing under the laws of the State of New York cannot, in legal proceedings, be properly designated by two names, and cannot, except as authorized by law, change its name, either directly or by user, nor can the public give it a name by which it can be recognized in judicial proceedings, other than that of its creation.
    An existing corporation is entitled to protection against the use of a similar name by a competing junior corporation.
    Where an application is made by a corporation for a change of its name, which is opposed by another corporation on the ground that the proposed new name of the petitioner will result in confusion, the absence of any element of fraud is not controlling, as the court, apart from any question of fraud or fraudulent intent, will interfere where there is reasonable ground to conclude that the granting of the application will result in injury to the complaining corporation, or in imposition or deceit upon the public, by destroying the identity of such corporations.
    An application was made by the United States Mortgage Company, which was authorized by law to do a business similar to that of a trust company, to change its name to the United States Mortgage and Trust Company ; the application was approved by the Superintendent of Banks, who certified that the name the petitioner asked to assume was not the name of any existing corporation doing business in New Yorb, and did not so nearly resemble the name of any other corporation as to create confusion in the public mind. The application was opposed by the United States Trust Company of New York on the ground that the similarity of its name to the proposed new name of the applicant would result in its injury and in confusion. Both of these corporations had been carrying on the business of mortgage loans in the city of New York with extensive foreign connections for upwards of twenty years.

      Held, that the order of the Special Term of the Supreme Court refusing the application of the petitioner was erroneous and should be reversed upon appeal. (Yan Brunt, P. J., dissenting.)
    To entitle a name to equitable protection as a trade mark the right to its use must be exclusive, and not one which others may employ with as much truth as those who use it. Equity will not enjoin parties against telling the truth, and there is no principle more firmly settled in the law of trade marks, than that words or phrases which have been in common use, and which indicate the character, kind, quality and composition of the thing, may not be appropriated by any one to his exclusive use. Words are but symbols, and when they are used to signify a fact, or when with whatsoever purpose used, they do signify a fact, which others may by the use of them express with equal truth, others have an equal right to them for that purpose.
    Appeal by tbe petitioner, tbe United States Mortgage Company, from an order of tbe Supreme Court, made at tbe New York Special Term and entered in tbe office of the clerk of tbe county of New York on tbe 19th day of July, 1891, denying its motion for leave to change its corporate name to United States Mortgage and Trust Company.

      Julien T. Davies and Oha/rlton J. Lewis, for tbe petitioner, appellant.

      Edwa/rd W. Sheldon, for tbe United States Trust Company of New York, respondent.
   O’Bbibn, J.:

Tbe United States Mortgage Company petitions, under section 2111 of tbe Code of Civil Procedure, for leave to assume tbe name of “ United States Mortgage and Trust Company.” It was chartered in 1871, with power to lend on.bond and mortgage, issue its bond against such loans, receive deposits and invest in real or personal estate, though it has confined itself mainly to mortgage and bond business. By chapter 271 of tbe Laws of 1891 it was authorized “ to receive deposits of trust moneys, securities and other personal property, from any person or corporation * * * and accept and execute any other municipal or corporate trust not inconsistent with the laws of this State.” It is conceded that by this act the petitioner had conferred upon it all the powers and rights of a trust company. With a view to designate its corporate powers and its actual business, it applied to have added to its name the word “ Trust,” so that its corporate title thereafter should be “ United States Mortgage and Trust Company.”

The statute provides that before any change can be made in the name of any corporation, it must present a petition to the court, which, if it be a banking corporation, “ must be authorized by a resolution of the directors of the corporation and approved * -x- -x- ky -j-pg superintendent of banks ” (Code Oiv. Proc. •§ 2411); that the petition must specify the present name of the corporation “and the name it proposes to assume, which must not be the name of any other corporation, or a name so nearly resembling it as to be calculated to deceive ” (Id. § 2412); “ if the court to which the petition is presented is satisfied thereby, or by •the affidavit and certificate presented therewith, that the petition is true, and that there is no reasonable'objection to the change of name proposed,” the court may make the order. (Id. § 2414.)

The petition was authorized by resolution of the board of directors and approved by the Superintendent of Ranks, who certified that the name the petitioner asked to assume was not the name of any existing corporation doing business in New York, and did not so nearly resemble the name of any other corporation as to create confusion in the public mind. Subsequently an effort was made to induce the Superintendent to withdraw such approval, which, after considering the objections presented, he declined to do. Such certificate of approval is attached to the petition, and is supported by the affidavits of presidents of different corporations, all of whom declare that no injury can result to the objecting company or confusion ensue by the change of name proposed. On the other hand, the application is opposed by the respondent company, whose position is supported by the affidavits of the presidents of the leading trust companies, who express the opinion that injury and confusion will result.

Prior to the amendment of the Code of Civil Procedure in 1893, the power to authorize the change of name by a trust company was vested exclusively in the Superintendent of Banks, and this eircumstance, together with the one that under the existing law the petition must be approved by him, should be taken into consideration. Notwithstanding the weight to be attached thereto, the court at Special Term concluded upon a consideration of all the facts that confusion would arise, and refused to permit the change, and it is from that determination that this appeal is taken.

The word “ trust ” is a general and descriptive term, universally recognized as belonging to a class of corporations, and no question arises here but that the petitioner comes within that class, and that the use by it of the word “ Trust ” in its corporate name would be truly descriptive of the actual power and business of the company. "Were it not, therefore, for the confusion or deception which it is claimed might follow, no reasonable objection could be presented against the assumption of a word truly descriptive of its powers and business. Notwithstanding the unquestioned right of the petitioner in the abstract to the use of the word “ trust ” as part of its corporate title, the question before the court is, whether the name, taken as a whole, which it proposes to assume, is the name of any other domestic corporation, or a name so nearly resembling it as to be calculated to deceive or produce confusion.

The title of the objecting company is “United States Trust Company of New York,” and the name of the petitioner, if leave were granted to add the word “ Trust,” would be “ United States Mortgage and Trust Company.” It is to be noticed in passing that the affidavits, other than those of the president and vice-president, used in opposition to the petition, speak of the respondent, not by its full title, but as the “ United States Trust Company; ” and this is explained by the affidavits of the officers referred to, who, while admitting the correct corporate name as above given, aver that it is commonly known as the “ United States Trust Company,” instead of by its real corporate name of “ United States Trust Company of New York.” It has been held that “A corporation existiiig under the laws of this State cannot in * * * legal proceedings be properly designated by two names. * * * A corporation cannot, except as authorized by law, change its own name, either directly or by user. It cannot do such an act for itself, neither can the public giveht a name other than that of its creation • — ■ that is, a name by , which it can be recognized in judicial proceedings.” (McGary v. People, 45 N. Y. 160.) And again: “ The use by defendant of the words ‘Employers’ Liability’ in its corporate name would not be enjoined on the ground that confusion would result as to the identity of the two companies, in that it was the custom to refer to insurance companies by abbreviated titles, since defendant would be permitted to do business only in its corporate name, which is distinguishable from that of plaintiff.” (Employers' Liability Assurance Corporation, v. Employers' Liability Insurance Company, 10 N. Y. Supp. 845; S. C., 24 Abb. N. C. 368. See, also, Boston Rubber Shoe Co. v. Boston Rubber Co., 149 Mass. 436.)

In determining the question before us then we should consider what would be the true legal name of the petitioner were the change granted, and compare it with the real legal designation of the objecting company. Is the name “ United States Mortgage and Trust Company” likely to produce confusion between it and “ United States Tnjst Company of New York ? ” It is insisted by1 the respondent that this would be calculated to deceive the public regarding the identity of the two corporations, and that it would constitute an unwarranted interference with its vested rights. It is well established that an existing corporation is entitled to jmotection against the use of a similar name by a competing junior corporation. "Whether we have regard to the numerous cases determining in what instances the court will prevent the assumption by a new company of a title similar to that of an older company, or determine the question here by the language of the statute, which states the considerations that are controlling in granting or refusing a change of name, it will be found difficult, if not impossible, to formulate any general principle that will control all situations, but each application must be determined upon its own facts. It is for this reason that it is impossible to reconcile the conflicting cases; but an examination will show in nearly every instance that the conflict is apparent rather than real, because in all the same general principles are applicable, but they are affected or controlled by the particular facts of the case before the court. This has been attempted to be pointed out in the case of Farmers' Loan & Trust Co. v. Farmers' Loan & Trust Co. of Kansas (21 Abb. N. C. 113), wherein it is said : “ A name, whether of an individual or corporation, as well as any other mark or symbol, will be protected in a proper case, and that irrespective of whether such name is an arbitrary one or not, if other considerations entitling it to such protection are present.”

Here there is no claim that by fraud or fraudulent means the petitioner seeks to avail itself of the business reputation or standing of the respondent. The absence of any element of fraud, however, is not controlling, as the court, apart -from any fraud or fraudulent intent, would interfere where there was reasonable ground to conclude that the act complained of would result in injury to1 the individual or corporation complaining, or in imposition or deceit upon the public, by destroying their identity. Both companies for more than twenty years have carried on the business of mortgage loans in this city, with extensive connections in Europe and different parts of the United States, without injury or suggestion of interference or confusion. The words “ United States ” have been common to the names of both companies, and it is not claimed that either could be deprived of these, which concededly have a tendency, if confusion is to result, to produce it. If the words United States ” were eliminated from the titles of both companies, and we should compare what then remained, it is clear that no confusion could arise from the use by the petitioner of the name “ Mortgage and Trust Company,” as compared with the use by the respondent of the name “Trust Company of New York.” If, however, we add the words common to both • — •“ United States,” having in mind the past history of the two companies, that for over twenty years they had been engaged, so far as loaning money on bond and mortgage is concerned, in a similar branch of business, the fact that they both have existed and carried on business for such a length of time without a claim being advanced that any confusion in the identity of the corporations or injury to the business of either resulted, must be regarded as significant in determining the question before us. We know that the words “ United States,” just as we know that the word “Manhattan,” or the words “New York,” have been applied to various kinds of corporations organized for trust, investment, insurance, building and various other purposes, and that the use of such prefixes by different companies has been common in this city and throughout the country. Thus in this city alone, without enumerating all the companies with almost similar names that use the prefix “New York,” we have as using the word “Manhattan,” the Manhattan Trust Company, the Manhattan Investment Company and the Manhattan Company. The public, familiar as they _ necessarily must be with this fact, are accustomed to seize on some characteristic word or words in the title of a company, to distinguish it from all other companies, which, as part of their titles, might have words similar to those by such company employed. So, here we think that the words “ Mortgage Company,” the title under which the petitioner established its business, would be its distinguishing feature and prevent confusion of identity, even though the word “ Trust ” were added to its corporate name.

This addition, as we have said, is indicative of the increase of the petitioner’s powers, and unless it appeared that there was reasonable ground for thinking that deception or confusion would result, the court should not prevent the use of a word that expresses to the public its business. And in regard to the use of this word “ Trust,” what was said in Canal Co. v. Clark (13 Wall. 311) is applicable: “ To entitle a name to equitable protection, as a trade mark, the right to its use must be exclusive, and not one which others may employ with as much truth as those who use it. * * * Equity will not enjoin against telling the truth.” Or as said in Caswell v. Davis (58 N. Y. 233): “There is no principle more firmly settled in the law of trade marks than that words or phrases which have been in common use, and which indicate the character, kind, quality and composition of the thing, may not be appropriated by any one to his exclusive use.” And again (Id. 235): “ "Words are but .symbols. "When they are used to signify a fact, or when with what purpose soever used, they do signify a fact, which others may, by .the use of them, express with equal truth, others have an equal right to them for that purpose.”

There is force, therefore, in the contention of the petitioner, that, having the right to do a trust business, it has the right to use an appropriate name, and cannot be required to invent a new one; that being a trust company, it has a right to signify the fact by the only word that clearly and truthfully expresses it. The cogency of this reasoning is only to be affected by considerations which would lead to a conclusion that the similarity between the titles of the two corporations was such as to mislead the public or produce confusion; and in the end, it being conceded that, but for this circumstance, the petitioner has an undoubted right to the name it seeks to use, it must be determined by a comparison of the two names, and thus the aid ordinarily given to the court by reference to other cases which have been cited by both counsel is absent. Most of these are cases where one corporation has sought to restrain another from using a name that had become the trade mark of the objector, or so similar as to produce confusion and loss. It is obvious that these can have no direct relation to a situation such as is here presented, where the question to be determined is under the statute, whereby it is made the duty of the petitioner to satisfy the court that there are no reasonable grounds for concluding that deception or confusion will follow the granting of the application. Ubwever much, therefore, they may serve to illustrate or present analogies, they are in no respect controlling as authorities, and we are left to determine, under the plain wording of the statute, whether the petitioner has complied with its provisions.

Our conclusion, upon applying the statute to the facts here appearing, is that it cannot with reason be asserted that there is a probability of confusion ensuing, or of the identity of the two cor- ■ porations being destroyed. A mere possibility by the suggestion of extreme instances that might never occur should never be the basis of the court’s action, its duty being to determine what, with reasonable certainty, would be the natural consequences of granting the ap2>lication. As in the past both companies have done business side by side without injury resulting to the older company, or confusion being created in the public mind, we think this is • an assurance that the addition of the word “ Trust ” will not work injury or confusion in the future.

We think, therefore, that the court below erred in refusing the ap2ilication, and for that reason that the order should be reversed and the application granted, with ten dollars costs and disbursements.

Follett, J., concurred.

Tan Brunt, P. J.

(dissenting):

I cannot concur in the conclusion arrived at by Mr. Justice O’Brien in the case at bar. There is no doubt but that great confusion would arise in case the application of the appellant was granted. It is not the question whether business and financial men would he misled by similarity of names, but it is to protect those who are not familiar with the precise titles of corporations that the provisions of law in respect to change of name were enacted. In wills and deeds naming executors, trustees and guardians, or legatees, we find' chiefly the erroneous descriptions of corporations which cause confusion, and in such cases there is always a similarity of: names which is catching to the ear and impresses itself upon the mind. And in case this application were granted, we should find where instruments such as have been above mentioned are executed and trusts created, the use of the words “ United States Trust Company ” where it was intended to designate one or the other of the two corporations in question, and it would become a matter for the courts to decide as to which corporation was intended, which could only be determined by action. The United States Trust Company is neither the precise appellation of the respondent or of the appellant, hut both would claim it; and where there has been no previous dealings between the person executing the instrument and those companies, it would be mere' guesswork upon the part of the court as to which was intended.

I do not think that under such circumstances an application of this kind should be allowed.

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

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


author: Parker, J.: O’Brien, J.

text:
    Louise Meise, Respondent, v. John H. Doscher and Another, Appellants.

      Indorsement of a note in blank —extent of the authority thereby conferred to fill in blanks therein — additions which vitiate the note as to the indorser — the question of payment is for the jury.

    The indorsement óf a note in blank and the delivery of the same by the indorser is, in legal effect, an authorization to the person, to whom the note is delivered, to fill up the blanks therein; but if, in addition to filling up the blanks in the printed note, the words “ with interest at the rate of five per cent per annum, .payable semi-annually,” be added thereto in the presence of the maker and the holder thereof, such insertion operates to invalidate the note as between. the indorser and the holder in the absence of proof of authority conferred by the indorser to make such addition to the note. Per Parker, J.
    Upon the trial of an action brought upon a promissory note, the defendant testified that he gave a check for a certain amount, personally, to the plaintiff, and the cashier of the bank upon which the check was alleged to. have been drawn testified that about that time the bank paid for .the defendant and charged to his account a check in that amount; the defendant also testified that he was unable to produce the check because it had been burned up. The plaintiff denied having received the check, or that the defendant at that or any other time gave her a check in such an amount.

      Held, that an issue was raised upon the question of payment which should have been submitted to the jury. Per Parker, J.
    O’Brien, J., dissenting.
    Appeal by tlie defendants, John H. Doscber and another, from a judgment of tbe Supreme Court in favor of tbe plaintiff, entered in the office of the clerk of the county of New York on the 18th day of October, Í894, upon the verdict of a jury rendered by direction of the court after a trial at the New York Circuit.

      Joseph G. Rosenbamm, for the appellants.

      J. George Flcmnmer, for the respondent.
   Parker, J.:

McGrath v. Clark (56 N. Y. 34) and Farmers' National Bank v. Thomas (79 Hun, 595) are not distinguishable from the case presented by this record and require that the judgment shall be reversed, as to the defendant Newman. About January 30,1891, the defendant Henry Newman, at the request of John H. Doscher, who was engaged in business under the name of Doscher & Co., indorsed a note in blank and delivered it to Doscher.

The printed matter, upon the face of it, was like that in general use, and its delivery to Doscher had the legal effect of an authorization to him to fill up the blanks. But, in addition to filling up the blank spaces, there was also inserted the words with interest at .the rate of five per cent per annum, payable semi-annually.” All the writing upon the face of the note, with the exception of the signature of “ Doscher and Company,” was placed thereon by the plaintiff’s attorney in her and Doscher’s presence. Unless then there was other authority, in respect to the form of the note conferred upon. Doscher by Newman than is evidenced by the delivery of the blank indorsed by him, the insertion of the provision relating to interest operated to invalidate the note as between this plaintiff and Newman.

The evidence does not suggest that at the time of this indorsement in blank Doscher and Newman discussed the matter at all. Indeed, the only evidence tending in that direction even consists ofk the fact that the three notes surrendered by the plaintiff, at the time the note in suit was given, also drew interest at the rate of five per cent per annum.

Newman testified that he had indorsed other notes in blank for Doscher, and whether the notes then held by plaintiff were so indorsed or whether Newman was to take them up, and, if so, whether Newmian was aware of the addition of the words relating to interest, the record is silent. Indeed, there is no evidence that Newman knew that this note was given to the plaintiff as a renewal of other notes, or that he had any information of the particular use which was to be made of it by Doscher.

Under this evidence, therefore, it is at least doubtful whether there was sufficient evidence to go to the jury upon the question whether authority was given Doscher to fill in the words .relating to interest, but we need not consider that question, as perhaps a different state of facts may be shown on the retrial.

As between the plaintiff and the defendant Doscher, the question of payment should have been submitted to the jury. The defendant Doscher testified that he gave a check for $1,562.50, personally, into the hands of the plaintiff, and the cashier of the bank upon which it was alleged to have been drawn testified that at about that time the bank paid for the defendant Doscher and charged to his account a check in that amount.

The defendant Doscher said he was unable to produce the cheek, because it had been burned up. Plaintiff denied having received the check, or that the defendant Doscher, at that or any other time, gave her a check in such an amount. There was other evidence bearing upon the question, but we have referred to enough of it to make it clear that it was for the jury to say whether the defendant Doscher paid to the plaintiff the sum testified to by him by means of a check. The exception taken by the defendants to the refusal of the court to submit that question to the jury was well taken.

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

Yan Brunt, P. J., concurred in the result.

O’Brien, J.

(dissenting):

I dissent from the views of the majority of the court in this case. The plaintiff, in 1889, claimed an indebtedness against the defendant Doscher of $4,500, for which she held three promissory notes for $1,500 each, made by him and indorsed by the defendant Newman, which notes contained a statement, with interest at five per cent per annum.” In adjustment of such indebtedness the defendant Doscher, in addition to cash, gave two notes of $1,500 each, one of which is the note in suit, and thereupon surrendered the notes that he then held. It is conceded that the two notes for $1,500, which included the one in suit, were indorsed by the defendant Newman in blank at a time when there was nothing written on the face of the notes, and that at the time of the settlement between the plaintiff and the defendant Doscher the blanks in the notes were filled up. It is insisted, therefore, that as there was nothing on the face of the notes but the printed matter at the time of the indorsement, the adding of the words, “ with interest at five per cent per annum, payable semi-annually,” subsequent to the indorsement, was a material alteration of the instrument which relieved the indorser from liability.

Upon this contention Mr. Justice Parker says: “ McGrath v. Clark (56 N. Y. 34) and Farmers’ National Bank v. Thomas (79 Hun, 595) are not distinguishable from the case presented by this record, and require that the judgment shall be reversed as to the defendant Newman.” I think that this case is to be distinguished from both.

In McGrath v. Clark the defendant indorsed a promissory note, with the time and place of payment in blank, and delivered the same to the maker, who filled the blanks and added the words with interest.” It was held, that while the delivery of the note to the maker gave him authority to fill the blanks by inserting any time and place of payment he chose, it did not authorize the addition of the words “ with interest,” and that this was a material alteration which invalidated the note as against the defendant, in the absence of proof of some authority therefor aside from the delivery. The distinction between that and the case at bar seems to me marked. There the only thing remaining to make a complete note was the filling up of the blanks for the time and place of payment; and the inserting of the words “ with interest ” necessarily increased the obligation by adding the amount of interest, and this without any evidence of authority, either express or to be implied from the nature of the blanks that were to be filled up. In the case at bar all blanks were to be filled up, and the note was given for the purpose of taking up another note of similar tenor, which in addition to the amount included interest; and it seems to me that there was just as much authority, upon these facts, to add the words in relation to interest as there was to insert the principal obligation represented by the notes that were retired.

The Farmers’ National Bank v. Thomas is equally distinguishable. In that case it appeared that many times prior to indorsing the blanks upon which the notes in suit were written, one Seward had indorsed blank notes for the defendant Sanford as the notes in suit were indorsed. ■ All of these notes had been made payable at specified times after date, usually about three months, and without interest; and it was, therefore, very properly held that by a delivery of a note in blank, indorsed by the person delivering the same, no implied authority is given to the person to whom the same was delivered to fill in in such note the words “ with interest,” when there was no blank left therefor, or to write in the blank preceding the words “ after date,” the words “ on demand.” As therein said : “ The form of the blank notes indorsed clearly evinces that they were intended to be filled out and used as bank notes; that the holder was authorized to insert therein a specified time after date for their payment; that they were to be used by being discounted at the bank, and that they were not to be so drawn as to become a continuing security for the debt of the maker with interest. This not only appears from the form of the note, in which there was no blank for the words £ with interest,’ and in which the blank preceding the words £ after date ’ plainly indicated that a specified time was to be inserted; but it also appears from the course of dealing •between the parties which had existed for several years before the notes in suit were given. * * * When changed to a note payable on demand with interest, it became a continuing security for the amount of the note and interest. On such a note the indorser’s liability would be measured neither by any definite time nor definite amount. He would remain liable until an actual demand was made. If kept alive as to the maker, it might remain unpaid and the indorser’s liability continue until the interest equaled or even exceeded the principal debt, and the Statute of Limitations would be no bar to an action thereon.”

Here the note in suit, although it contains the words “ with- interest at the rate of five per cent per annum, payable semi-annually,” is a renewal and was intended by all parties interested to take the place of other notes similarly drawn and likewise bearing interest at the same rate.

Apart, however, from this, I do not think there was any proper plea of 'unauthorized alteration of the note, nor do I think the evi•dence offered sufficient to sustain any such defense, and upon the record as it stood on this question I think the court was right in directing a verdict.

Upon the question of payment no evidence was presented tending to show that any payment was made upon the two notes of which this in suit is one, the answer alleging that when the settlement was made and the two notes given the plaintiff falsely and fraudulently stated that Doscher was indebted to her in the sum of ■$4,922.86 as a balance owing in certain transactions between them, •and that believing such statements to be true and relying thereupon, he was induced to pay the plaintiff $1,922.86 in cash and deliver to her the note in suit: As said, Doscher admitted that no claim had ever been made by him that payment had been made on account of the note in suit since its delivery to the plaintiff, but he attempted to show that at the time the settlement between him and the plaintiff was entered into, he was not indebted in the amount of $4,922.86, because lie had made prior to that time other payments for which he had not received credit. This would have been •entirely competent and proper, and would have presented a question Tor the consideration of the jury if the other portion of the defense had been in any way sustained, that at the time of the settlement any false or fraudulent representations had been made by the plaintiff. It clearly appears, however, that at the time of the settlement the plaintiff made no representations, false or otherwise, but, upon a claim that an amount represented in notes was due her, an adjustment was had between the parties, and the note in suit, with the other note and cash was given in settlement.

In this state of the record, I do not see that there was anything else for the court to do but to direct a verdict, because there was no evidence of any payment upon the note in suit, and that portion of the answer alleging that the plaintiff falsely and fraudulently represented an indebtedness which was not due utterly failed. I think, therefore, that the judgment was right and should be affirmed,, with costs.

Judgment reversed, new trial granted, costs to appellants to abide event.


author: Parker, J.:

text:
    William Ottman and Company (Incorporated), Appellant, v. Milton Robbins, Individually and as Trustee, and Ada L. Conner, as Administratrix, etc., of William M. Conner, Deceased, Respondents.

      Sill of sale and chattel mortgage — when they must be considered together — when claims an'e deemed to home been discharged — when entries in boohs are unnecessa/i'jf — chattel mortgage — when not fraudulent by reasonofits amount — action brought to set aside a transfer— the plaintiff therein cannot ash that the transfer be adjudged valid as a trust created in pa/i't for his benefit.

    Where a bill of sale and a chattel mortgage constitute parts of the same transaction they must be read and considered together.
    It was agreed between a debtor and certain of his creditors that the creditors should advance a certain amount of cash to pay certain liabilities of the debtor, and that they should satisfy their claims against the debtor, and that in consideration thereof the debtor should transfer to them certain furniture and a certain lease.' Such agreement was carried out, except that the debtor, when it was afterwards discovered that the lease contained a provision forbidding the assignment thereof, instead of giving an assignment of the lease, gave a chattel mortgage thereon for the entire amount which the debtor was obtaining from his creditors. By means of this mortgage the parties intended to effectuate the performance of the debtor’s original agreement to transfer the lease.

      Held, that the purchasers in fact acquired nothing more by the giving of the mortgage than they were entitled to under the original agreement with their debtor;
    That the mortgage was operative to prevent the debtor from mortgaging the lease to third parties in violation of the purchasing creditors’ rights ;
    That the giving of such chattel mortgage, in the amount of the entire consideration moving to the debtor, was not fraudulent as to his other creditors ;
    That when the debtor did those things which the creditors agreed to accept in satisfaction of their debts, such debts were in fact satisfied and discharged, and that the making of entries in the several books of the creditors and debtor, respectively, was not necessary to accomplish such result.
    "Where an action is brought upon the theory that a certain transfer is fraudulent and void as against the plaintiff, the plaintiff in such action is not in a position to ask that the transaction be regarded as a valid transfer to certain of the defendants as trustees, under an agreement under which such transfer was to be held by them in part for the benefit of the plaintiff.
    Appeal by the plaintiff, 'William Ottmanand Company (Incorporated), from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 23d day of November, 1893, upon the decision of the court rendered after a trial at the New Yoi-k Special Term dismissing the plaintiff’s complaint upon the merits.

      3£. A. Kursheedt and Joseph Fettretch, for the appellant.

      FUhu Boot and F. G. Duvall, Jr., for the respondents.
   Parker, J.:

For some little time prior to August 17,1891, William 1VL Conner, who was the proprietor of the St. James Hotel, in this city, had been conducting the business with the result that on that day his situation was substantially as follows: His indebtedness was about $86,000, of which $36,000 was due for rent and water rates. As security for the payment of rents his lessors held a chattel mortgage covei’ing all the furniture in the hotel. They had already applied " to this court by petition for leave to foreclose 'the mortgage, upon which an order to show cause had been issued, returnable before the court on the seventeenth of August. The lessors had also commenced proceedings in the Sixth District Court to dispossess Conner for non-payment of rent.

The value of the hotel furniture, apart from the lease, was about $16,000. From this statement it is at once apparent that unless money could be promptly had with -which to pay the rent, so as to stop the proceedings instituted to dispossess Conner and foreclose the chattel mortgage, his interest in the lease would be cut off and the furniture taken from him, leaving substantially nothing for the unsecured creditors, having claims aggregating $50,000.

Conner was powerless to prevent it, for he neither had $36,000 in money nor the means of getting it. In the presence of this situation his creditors held a meeting at which this plaintiff was represented.

It was suggested by one of the creditors that if the proceedings pending against Conner could be terminated so as to give the creditors time to find a purchaser for the lease, furniture and good will, something substantial might be received on account of their claims, and to that end it was proposed that $35,700 should be advanced by the creditors in,proportion to their claims and applied in satisfaction of the rent and Croton water charges, and that the creditors should cancel their claims against Conner in consideration of a conveyance to them of the furniture in and lease of the hotel premises.

Creditors, including the defendant Robbins, representing about $35,000 of the $50,000 indebtedness, agreed to enter into such an arrangement and advance the sum of money needed. No creditor made any objection to the plan, but some of them, including this plaintiff, although requested to enter into it upon equal terms with the others, refused to do so. The agreement was entered into in accordance with the original plan with one exception. An examination of the lease disclosed that it contained a provision forbidding an assignment of it, so a transfer of the lease was attempted to be made by means of a chattel mortgage, which was intended to accomplish the entire divesting of Conner’s interest therein either through foreclosure or through a surrender and new lease. Thereafter the St. James Hotel was conducted by the defendant Robbins and the other purchasing creditors, under the direction of an agent employed by them, until the middle of November, 1891, when the property was sold and conveyed to Gustave Dorval for the 'sum of $80,000. This was accomplished by giving a bill of sale of the furniture to Dorval, and default being made in the payment of rent so that the lessee and his mortgagee under the chattel mortgage should be dispossessed, and the purchaser Dorval should enter under a„new lease, which was made.

It will be observed that the result of the entire transaction was to vindicate the business foresight and courage of the creditors who, combining together, advanced more money to save the interest, which Conner then had in the property, than their claims against him aggregated, the outcome of the transaction being that they received back the money thus advanced, together with the payment of their claims in full, with a sufficient overplus to at least defray the costs and expenses incident to the transaction. By this suit the ■ plaintiff seeks to share in the-fruit resulting from the enterprise and thrift of its co-creditors, notwithstanding its refusal to aid in its . production.

The ground of the action as stated in the fifth article of the complaint is, That by the execution and delivery of the several instruments, and the transfers herein referred to, it was intended to transfer all the property of the said William M. Conner to the defendant Robbins for the benefit of himself and certain other creditors of the said William M. Conner, exclusive of the plaintiff. That all of the foregoing was done with a view to hinder, delay and defraud a number of the creditors of the said William M. Conner, including this plaintiff, and with a view of giving unlawful preference to the defendant Robbins and certain other of the creditors of the said William M. Conner, exclusive of the plaintiff, and in violation of chapter 466 of the Laws of 1877, as amended by chapter 503 of the Laws of 1887.”

And the relief demanded is that the transfers be declared null and void as against the plaintiff; that a receiver be appointed of all the property and effects included in such transfers, and the plaintiff’s judgment paid out of the funds that may come into his hands. IJpon this appeal the plaintiff presents still another ground, upon which it predicates a claim for relief, which will be considered later.

It is apparent from the facts stated that the learned trial court was right in reaching the conclusion that there was no fraud in fact in this transaction, for it was openly and fairly conducted, with a view of securing such benefits as might result to all creditors who should come in and share the risks of the undertaking on equal terms. The plaintiff, who is the only creditor complaining, was invited to be present at the meeting of creditors, and to come in and share with its co-creditors in the gain or loss which should result from the transaction. It sent a representative to the meeting of August seventeenth, who listened to the discussion and heard the propositions, and, while it refused to join its co-creditors in an execution of the plan adopted, it made no objection to the making of the arrangement by the other creditors. It is apparent, therefore, that in the whole transaction as against the plaintiff there was no element of concealment, of unfair advantage or of disregard of its rights.

The alleged badges of fraud are: • (1) That by the bill of sale everything contained in and belonging to the St. James Hotel, including the good will of the business, was transferred for the expressed consideration of one dollar and other sufficient consideration, when as a matter of fact the dollar was not paid, and the other sufficient consideration specified appears to have been made up by a pretended cancellation of the claims of the defendant Robbins and the other creditors who were parties to _ the transaction.

This statement is erroneous, in that it fails to recognize that the entire transaction must be considered together.

The bill of sale cannot be separated from the chattel mortgage and the subsequent proceedings to divest absolutely the title of Conner in the lease. If the transfer of the lease had been accomplished by means of an assignment, as at first contemplated, instead of the method adopted of divesting Conner’s interest in the lease, made necessary by the clause in the lease prohibiting an assignment, there would be no excuse for the suggestions which are made on this appeal against the legal integrity of the transaction.

It appears, however, that the bill of sale and chattel mortgage constituted parts of the same transaction, and they must be read and considered together. Thus considered, we find that the bill of sale, and chattel mortgage, and the submission by Conner to being divested of all his title in the lease by the proceedings which were contemplated, and subsequently took place, constituted the consideration moving from him for that which came from the creditors, while the payment of $35,100 and the cancellation of the purchasing creditors’ claim furnished a consideration moving from them for all that came from Conner. The appellant says that there was no proof of cancellation of the purchasing creditors’ claims other than that it was so entered in the books of Conner. That in addition to that there should have been proof of cancellation in the books of the creditors. But this suggestion is without merit, for the purchasing creditors agreed to satisfy their claims in consideration of 1 Conners executing the bill of sale and chattel mortgage, and submit to a divesting of his title in the lease. And when Conner did the things which the creditors agreed to accept in satisfaction of the debts, such debts were, in fact, satisfied and discharged. Entries in their several books were not necessary to accomplish that result. A debt is discharged by payment, not by an entry in the creditors’ books.

(2) The fact that the chattel mortgage was taken by the defendant Robbins, “individually and as trustee,” to secure the payment of an alleged indebtedness of $75,000 on demand, is alleged to furnish evidence that the scheme was fraudulent.

No inferences of fraud can be drawn from the mortgage, considered in the light of the entire transaction. The giving of the mortgage was intended to be but a step in the direction of the transfer of title. The purchasing creditors were about to pay $35,700 in cash, for which tliéy were to receive, outside of the mortgage on the lease, nothing except furniture of the value of $16,000.

The most valuable part of the consideration for which they were to advance this sum of money, and in addition satisfy their claims aggregating about $35,000 against Conner, consisted of this lease. As they were prevented from getting an assignment of the lease, because of the clause prohibiting an assignment, they took a lien upon the lease for the entire amount of the consideration which Conner was getting from them, and by the mortgage the parties intended to effectuate the performance of Conner’s original agreement to transfer the lease. The purchasers acquired nothing more by the giving of the mortgage than they were entitled to under the original agreement with Conner, but it operated to prevent Conner from mortgaging the lease to third parties in violation of the purchasing creditors’ rights.

(3) The appellant claims that the cancellation of a certain agreement by the defendant Robbins and his fellow committeemen, was fraudulent as against the plaintiff and the other creditors of Conner. This agreement, called a trust agreement, was entered into between Conner and his creditors, other than his lessors, in February, 1891, by the terms of which a committee of three, of whom the defendant Robbins was one, were to represent the creditors in the conduct of the hotel business, until the indebtedness, due to the several creditors named in the agreement, should be paid. It is conceded that under this agreement there was not accomplished the results hoped for.

Indeed, from the time of its execution down to its cancellation in August, the business of every month resulted in a loss instead of a profit. One of the provisions of this agreement was: “And it is also further agreed by and between the said parties that, should the result of any one month’s business show a loss or ■ a profit of less than the sum of $2,500, that then, and in that event, at the option of the said parties of the second part, or their said committee, this agreement may be forthwith abrogated, canceled and annulled.”

At the meeting on the seventeenth of August the result of the business was placed before the creditors, and after discussion a vote was taken upon a motion that the agreement be canceled, and no creditor voted in the negative, although this plaintiff' had a representative at that meeting. The secretary thereupon noted upon the agreement that it had been canceled by a vote of the creditors, and the committee indorsed thereon, in pursuance of the provision which we have quoted, the following: “ The within paper canceled and abrogated in pursuance of the provisions therein contained,” and signed their names thereto.

It is perfectly clear that the committee had full authority to cancel this agreement, and that which they did operated to put an end to it. There was no concealment about it whatever; the matter was fully discussed in the presence of the creditors, and all either voted that it be done or acquiesced in it by their silence. Our assertion, that the effect of the action of the committee on the seventeenth of August, was to cancel and put at an end the agreement of February, 1891, furnishes sufficient answer to the claim of the appellant, that if any title to the furniture and lease was transferred by the bill of sale and chattel mortgage, and the proceedings had thereunder, it was impressed with the agreement of February, 1891, and, therefore, the plaintiff became entitled to relief in equity against Robbins and his associate committeemen as trustees.

But there is another answer; the complaint does not refer to the lease, nor assert any rights under it. On the contrary, the cause of action alleged is wholly inconsistent with any such claim. It proceeds upon the theory that the transaction of August seventeenth, and the whole of it, was fraudulent and void as against the plaintiff. Plaintiff is not, therefore, in this suit in a position to ask that the transaction be regarded as a valid transíer to the defendant Robbins and others as trustees under the agreement of February, .1831, and the trial court properly so held.

The judgment should be affirmed, with costs.

Tan Brunt, P. J., concured.

Judgment affirmed, with costs.