author: . By the Court.—Ingraham, J.

text:
    WILLIAM Y. MORTIMER, et al., as Executors, etc., Appellants, v. THE MANHATTAN RAILWAY COMPANY, Respondent.

      Trespass—Can executors and trustees recover damages for injuries to real estate premises occurring after the death of their testator, and while tlie said premises were occupied by a tenant under a lease executed by the testator.

    Richard Mortimer, the testator of the plaintiffs, died May 30, 1882. At the time of his death the premises in question were in possession of one Gregg under a lease, executed by the testator, for a term of five years from May 1, 1880, to May 1, 1885, and continued in such possession until the expiration of said lease, paying the rent to the plaintiffs, as executors, after the death of their testator, to May 1, 1885, when plaintiffs took possession and leased the premises for five years to another tenant. This action was commenced July 28, 1886, to recover damages occasioned to said property, from the death of their testator, by the defendant’s railroads.
    At the trial the jury, under the direction of the court, found in favor of the plaintiffs in two separate amounts: (1.) For damages from June 1, 1882, to May 1, 1885, (during the unexpired term of the lease to Gregg) for $14,653.80. (2.) For damages from May 1, 1885, to July 28, 1886, for $5,875.20. The defendant moved to set aside the verdict for $14,653.80, which motion was granted by the court, “ on the ground that no damages are recoverable in this action for any injury to the rental value of the premises in' question from the death of the testator Mortimer, May 31, 1882, when the lease, which was outstanding at the death of the testator, expired. From that order setting aside the verdict for $14,653.80 this appeal was taken. Held on appeal, that the trespass committed by the defendant from June 1, 1882, to May 1, 1885, was an injury to the inheritance under section 1665 of the Code, which provides that “a person seized of an estate in remainder or reversion, may maintain an action founded upon an injury done to the inheritance, notwithstanding any intervening estate for life or for years.’ The plaintiffs were entitled to ecover for the damages caused by the trespass.
    Before Freedman and Ingraham, JJ.

      Decided February 6,1890.
    Appeal from an order setting aside a verdict rendered in favor of the plaintiffs for $14,653.80.

      John W. Pirsson, attorney, and John E. Parsons and John Alexander Beall of counsel, for appellants, argued:—•
    I. There is only one question presented by the appeal in this case. Are the plaintiffs; as executors and trustees under the will of Richard Mortimer, • entitled to recover damages for depreciation in the rental value of the property during the period between the death of Mr. Mortimer, on May 30, 1882, and the expiration of the lease to Gregg, executed by him in his lifetime ? The plaintiffs, as the holders of the 'legal title, took the property after the death of the testator, not only, subject to the lease and the burdens, but also with. all the rights and benefits which the testator had or would-have had if he had survived. And it is not disputed that, had Richard Mortimer survived until the expiration of the lease he could have, recovered damages for the whole period.
    II. There can be no doubt that there is an injury in this case, and, in accordance with the general principle of law, there should be and there is a remedy. That remedy is precisely the one sought in this action, and it seems there is no other. The remaindermen or reversioners cannot sue, for it is not damage to the inheritance strictly as such. The executors and trustees are the only other parties who can by any possibility have a right of action, and this belongs to them, for it is for the rents, issues and profits of the property devised to them, and which is the subject of their trust.
    III. The decision of the learned Chief Judge appears (for there is no opinion) to have proceeded upon the theory that the plaintiffs as trustees, devisees under the will, were purchasers, and took the estate subject to the lease made by the testator, and that their estate was not injured unless the rent thus reserved and fixed was still further reduced, or its security impaired by subsequent acts of the defendant. It is submitted that this is an extremely technical and artificial definition of the term purchaser. It is true that within the strict common-law meaning of the term—devisees are' purchasers, but instances constantly occur in which “ to purchase,” and its inflections are used in the vernacular sense of acquired by payment of a price or value. 2 Abb. Law Dict., p. 356; Durando v. Durando, 23 N. Y. 331; McCartee v. Orphan Asylum, 9 Cow. 437; Curtis v. Burdick, 48 Vermont, 166; Kohl v. U. S., 91 U. 8. 374. The words “ purchases of land made, or to be made,” in Act of 1802, “ to enable aliens to purchase and hold real estate,” was interpreted to mean “ lands bought,” and that the broader sense of purchase which would include devise was not meant, but the more natural limited and common one of buying. (Citing Twyne’s Case, 3 Rep. 83; 4 Cruise, 382) ; Priest v. Cummings, 20 Wend. 357 and 358. The plaintiffs here are not purchasers within the authorities cited. They have acquired and hold the property in question not in their own right and for their own purposes, but as trustees, and for the benefit of the cestui que trusts, some of whom at least are the heirs-at-law of the testator. The idea, therefore, of a negotiation in reference to this property, the consideration of the situation, burdens and present disadvantages, in view of all which a price was fixed and paid, is precluded; and no reason exists or can be shown why the remedy which unquestionably would have existed had the testator lived, and which would have descended to the heirs-at-law had Mr. Mortimer died intestate, should be destroyed, because he provided for the care and management of the estate by trustees for the benefit of the heirs-at-law and their issue. For such an exceptional and inequitable result surely some authority should be found, and the learned court below has cited none.
    IV. On May 20, 1879, the defendant took possession of and from that time it has operated the •railroad in front of the plaintiff’s premises. On May 1, 1880, Mr. Mortimer made the five years’ lease to Gregg, at a rental reduced by reason of the railroad by the amount established by the verdict of the jury. That the estate of Mr. Mortimer sustained a loss up to the annual amount established by the verdict during the entire term is not in dispute. Under the authorities Mr. Mortimer could not at the beginning sue for and recover the whole loss, the reason being that the law recognizes the possibility that the defendant might at any time by the removal of the structure undo the wrong which it had perpetrated. If Mr. Mortimer.had lived, to enable him to recover it was requisite that he should show : First, that by reason of the existence and operation of the railroad, the rental of his property was at the time that he gave the Gregg lease, that is to say, May 1, 1880, diminished to the amount fixed by the lease. And, second, not as creating but as maturing the claim, that the wrong perpetrated by the defendant continued during the time for which suit was brought. In other words, the wrong was done to Mr. Mortimer when the defendant took possession cf his easement in the Bowery and Division street. He had a right of action for the damage. This constituted assets of his estate, and as such passed to the plaintiffs as his executors, subject only to be reduced in amount if at any time during the term the defendant removed its railroad. As this was not done the cause of action became complete. As the plaintiffs are both executors and trustees, and sue in their dual capacity, they can recover as executors, even if the view taken by the learned Chief Justice as to their rights as trustees is correct. It is obvious that the defendant is liable. It is equally obvious that in one or the other or both capacities the plaintiffs should recover.

      Davies & Rapallo, attorneys, and Edward C. James of counsel for respondent, argued :—
    I. The plaintiffs took only the estate in reversion The lease, executed May 15, 1880, granted to Mr. Gregg an estate for years in all the property in question, continuing until May 1st, 1885, and left to Mr. Mortimer an estate in reversion during that period. 1 R. $.’723, § 12 (Vol. III., 7th ed.,p. 2176); 4Kent's Commentaries, 85, 353 to 356. The plaintiffs, as devise'es under the will of Mr. Mortimer, took title as purchasers of said estate in reversion. 1 R. S. 725, § 35 ; 2 Ib., 57, § 2. The reversion was an incorporeal hereditament. The devise passed the right to the rents, which subsequently became due upon the lease, as incident to the reversion, but not to the rents in arrear. 4 Kent's Commentaries, pp. 354,356. Until the plaintiffs’ right of entry accrued, upon the expiration of the outstanding estate for years, May 1st, 1885, they had no rights in the premises, except to collect the rent, which fell due upon said lease, after May 31, 1882, and to their statutory remedies for injuries to the inheritance. 2 R. S., 339, §§ 1, 2; Code, § 1665.
    II. No cause of action for trespasses prior to May 1, 1885. The theory upon which the defendants are held liable for damages is that they are trespassers upon easements belonging to this property. Uline v. N. Y., &c., R. R. Co., 101 N. Y. 98 ; Lahr v. El. Ey. Co., 104 Ib. 268 ; Drucker v. Manhattan Ry. Co., 106 Ib. 157, 161. There is no presumption that these trespasses will continue. Hence a recovery of damages can be had only for those committed within six years prior to the commencement of the action. Uline v. Railroad Co., 101 N. Y. 98 ; Silsby Mfg. Co., v. State, 104, Ib. 562, 559-70 ; Colrick v. Swinburne,
      105, Ib. 503, 507-8. Each day’s continuance is treated as a new and distinct trespass, (Ib). Now, trespass is ordinarily an injury only to the possession. Hence, it is necessary for a plaintiff to prove his possession or right to possession in order to maintain the action. A landlord cannot maintain an action to recover damages for trespasses, while the property is in the possession of a tenant under an outstanding term of years, unless the acts constitute an injury to the inheritance, or estate in reversion (Code, § 1665). Campbell v. Arnold, 1 John, 1 ; Wickham v. Freeman, 12 Ib. 184 ; Holmes v. Seeley, 19 Wend. 507 ; Wood v. City of Williamsburg, 46 Barb. 601 ; Edwards v. Noyes 65 N. Y. 125 ; Randall v. Sanders, 23 Hun, 611; aff’d 87 N. Y., 578 ; Cushing v. Kenfield, 5 Allen, 307 ; Holt’s Nisi Prius Cases, 543. The trespasses complained of are interferences with the easements of light, air and access. They were not and in their very nature could not be “ injuries to the inheritance.” They affected only the use and enjoyment of the property, not the property itself. They are injuries to the estate in possession, not to the estate in reversion. They fall upon the tenant for the time in question not upon the landlord. Whatever injury befell the landlord for the term of the lease occurred when the lease was made, May 15,1880, and was the outgrowth of the then existing state of affairs, and not of what took place afterward. If any one is entitled to recover damages for the acts of the defendant between June 1, 1882 and, May 1, 1885, it is the tenant and not the landlord or his devisees. The plantiff’s estate suffered no injury before May 1, 1885, when the reversion fell in.' They were appointed trustees to receive the rents and profits, and took the estate with the lease of 1880 upon it, and were bound by it. They were entitled to the rent under that lease from June 1, 1882, to May 1,1885, and nothing more, whether the railroad was there or not. If it had been taken away immediately after Mr. Mortimer died they conld derive no behefit from its removal until their right of entry" accrued, May 1, 1885. For the same reason their estate in the premises suffered no injury from its existence and operation during that time, and they were entitled to no damages for that period.
    III. No case of action as executors The plaintiffs do not sue as executors for injuries done to the estate in the lifetime of the testator, but as trustees, or as executors made trustees by the terms of the will, for injuries occurring since his death. The statute authorizes executors to maintain actions for trespass committed on the real estate of the testator in his lifetime (3 R, S., 7th ed. p. 2307, or 2 Ib. 114, § 4), but not after his death. No cause of action for' damages in the testator’s lifetime is alleged in this complaint. A separate action was brought for those damages in this court and a recovery had. They are not included in this action.
   . By the Court.—Ingraham, J.

The action is for trespass. The complaint alleges that one Richard Mortimer, deceased, was in his lifetime and since November 1, 1858, the owner in fee of the plot of land at the corner of Division street and the Bowery, 69 feet 7 inches on the Bowery and 94 feet on Division street, in the city of New York, and that said Richard Mortimer was from the date of his purchase of said property seized of and owned the land included in the bed of said Bowery and the said Division street to the centre of said streets respectively.

These allegations are denied by the answer, but as all the testimony was not inserted in the case, it must be presumed that they were proved, and that said Richard Mortimer was -the owner of the fee of one-half the streets in front of his premises.

The complaint then alleges that said Richard Mortimer died, on the 30 th day of May, seized and possessed of said premises, leaving a last will and testament, by which he devised the said premises to the plaintiffs, as trustees, and that by virtue of said will these plaintiffs have succeeded to and- now are seized and possessed of all the rights in and to the said land and premises, and in and to the lands in the bed of said Bowery and Division street to the centre thereof respectively, of which said Richard Mortimer died seized and possessed.

The will of Richard Mortimer was introduced in evidence. It appears, therefore, that since the death of Richard Mortimer, the plaintiffs have been the owners in fee of the property described in the complaint, including the fee of one half of the Bowery and Division street.

Richard Mortimer on the 15th of May, 1880, leased the property known as Numbers, 1, 3, 5-, and 7 Bowery, and Numbers 2, 4, 6, and 8 Division street to one Robert G. Gregg for a term to end the 1st of May, 1885, and the said Gregg entered on the said lease and remained in possession of the demised premises until the expiration of the time.

Richard Mortimer died May 30, 1882, when the lease had nearly three years to run.

The action was brought to recover the damages sustained by the trespass from the 30th of May, 1882, to the commencement of the action.

The jury found the damages caused by the trespass for the period from June 1, 1882, to May 1, 1885, to be $14,653.80, and from May 1, 1885, to July 28, 1886, to be $5,875.20. The defendant moved to set aside the verdict for $ 14,653.80, on the ground that the plaintiffs could not recover for the injury to the rental value from June 1, 1882, to May, 1885, when the term demised that was outstanding at the testator’s death on May 31, 1882, expired. That motion was granted by the trial judge, and from the order entered thereon plaintiffs appeal.

No opinion was written on granting the motion, and we have not the benefit of the views of the trial judge. The respondent, however, relies on the rule that possession is necessary to sustain an action for trespass, and that the plaintiffs were not in possession of the premises upon which the trespass was committed until May 1,1885. This objection, if well founded, affects the recovery for the second period from May 1, 1885, to the commencement of the action, and is fatal to plaintiffs’ right to recover in the action at all.

The premises were leased at the time of the commencement of the action, and the plaintiffs were no more in possession after they made the lease in 1885 than they were during the pendency of the old lease.

At common law, to sustain an action for trespass quare clausum fregit, there must be a possession in fact of the real property to which the injury was done—the owner of the fee could not, therefore, maintain an action fór a trespass upon demised premises in the possession of a tenant.' Campbell v. Arnold, 1 John, 512. This rule was, however, subsequently changed by statute, and the provision now in force as section 1665 of the Code passed. It is there provided that “ a person seized of an estate in remainder or reversion, may maintain an action founded upon an injury done to the inheritance, notwithstanding any intervening estate for life or for years.” Assuming that the premises upon which the trespass was committed were demised to and were in the possession of the tenant, plaintiffs were within the provision of this section of the Code, they were seized of an estate in reversion, and they could, therefore, maintain an action founded upon “ an injury done to the inheritance,” notwithstanding the intervening estate for years.

The only question is whether the trespass committed by the defendant was an injury “ to the inheritance.”

By the Revised Statutes the word “ inheritance ” is defined to mean real estate, and real estate “ shall be construed to include every estate, interest and right, legal and equitable in lands, tenements and hereditaments, except suchas are determined and extinguished by the death of an intestate seized and possessed thereof and except leases for years and estates for the life of another person.” 1 Rev. Stat., p.754, § 27. Andin the Story Case, 90 N. Y. 147, it was held, that the easement there described was property, and its owner is “a person having an estate or interest in real estate.”

It follows from this that any injury to this easement would be an injury to the “ inheritance ” which would entitle the owner of the easement to maintain an action founded upon that injury. But the interest of the plaintiffs was not limited to an easement in the street. They owned the street subject to the easement vested in the public to use it as a public street. It is so alleged in the complaint, and we must assume it was so proved on the trial. But if-this is not so, there being no evidence to show how the Bowery and Division street were opened or as to the ownership of the fee of the streets, the abutting owners are presumed to own the fee of the street. Stewart v. Metropolitan El. Ry. Co., 56 Super. Ct. 381.

The trespass was not, therefore, to the easement but to the fee of the streets of which the plaintiffs were seized.

It is well settled in this state that an action for trespass can be maintained by the owners of the land through which the road passes for an appropriation of the soil of the road. Gidney v. Earl, 12 Wend. 98 ; Cortelyou v. Van Brundt, 2 Johns, 357.

That erecting and maintaining a structure like that of the defendant’s on the lands of another is an injury to the lands and is a trespass upon the land, has been determined in the action brought by .the same plaintiffs, as executors, to recover for damages sustained by the testator in his lifetime. See 54 Super. Ct. 322, affirmed by the court of appeals, 113 N. Y. 626. I think it is clear, therefore, that the trespass committed by the defendant was an injury to the “ inheritance,” and that, under the provisions of section 1665, the plaintiffs were entitled to recover for the damages caused by the trespass.

But I do not think the tenant, under the lease of May 15, 1880, was even in possession of the property upon which the trespass was committed. Richard Mortimer was the owner of the property, and of the fee of one half of the streets at the time the lease was made. For several years before that time the elevated railroad had appropriated the street in front of his premises for the purpose of a railroad. That •being the condition of affairs, Richard Mortimer leased to Gregg “ the property known as Numbers 1, 3, 5 and 7, Bowery, and 2, 4, 6 and 8, Division street, being the same premises very recently occupied by the party of the second part.”

It is clear that this would not include either the fee of the street or the easement in the street that the lessee had not occupied for several years and that the defendant had appropriated several years before. I think, therefore, that this property in the street was never leased by Mortimer to Gregg, and was never in the possession of the tenant. The ownership of the property, however, passed under his will to the plaintiffs, and plaintiffs are entitled to recover for a trespass thereon.

I think, therefore, that plaintiffs were entitled to recover for the damages sustained by reason of the trespass from the time the plaintiffs became the owners of the property, June 1, 1882, down to. May 1, 1885.

The parties have stipulated that there was sufficient evidence to sustain the verdict of the jury as to damages occurring from June 1,1882, to May 1,1885, if plaintiffs were entitled to recover any damages for the same time ; and under that stipulation I think plaintiffs were entitled to judgment for the amount of the verdict of the jury.

It is conceded that damages have been caused by the trespass to the amount of the verdict, and it is clear that it is the plaintiffs who are entitled to the rents and income of the property, who have sustained such damages. It was not the testator, for he could not have received the rents of the property that accrued after his death. It was not the plaintiffs as his executors, because they became vested only with the personal property that belonged to the testator at the time of his death. It was to the plaintiffs as devisee of the property, for they were entitled to the rents that had accrued from the demised premises after the death of the testator, and they would have received the amount that the jury has found was the damages sustained, as rent for this property, over and above the amount that they did receive for the property that Gregg occupied; and on such proof I do not see why the defendant would not be liable to the plaintiffs. The law gives to a person injured by a trespass compensation for the injury sustained, and when the wrong is proved, and where it clearly appears that the wrong has injured a party and the amount can bé fixed with reasonable certainty, I can see no reason why the court should not award to the injured party a judgment for such an amount. The fact that had it not been for the trespass and the likehood that it would continue, Richard Mortimer could have leased the property including the use of the streets for $10,000 instead of the property he was able to lease for $6,000, and that after Richard. Mortimer’s death, plaintiffs, the owners of the property and entitled to the rents, would for these three years have received $4,000 per year more than they did receive, show that plaintiffs’ damages were caused by the injury. For •that damage defendant is liable. It is the plaintiffs who are damaged because of the wrongful act, and it is the plaintiffs who should be compensated for the wrong.

The rule is now settled in this state that the proper measure of damages for a trespass upon real estate or for the maintenance of a nuisance, is the difference in rental value free from the trespass or nuisance and subject to it. And this rule has been applied although the property was not rented but was occupied by the owner. Francis v. Schoellkopf, 53 N. Y. 154; Michel v. Supervisors, 39 Hun, 47 ; Wiel v. Steward, 19 Ib. 272. And I can see no reason why it should not be applied in this case as the measure of the plaintiffs’ damages, sustained by the wrong committed by the defendant.

The order appealed from should be reversed with $10 costs and disbursements, and the motion to set aside the verdict denied with $10 costs.

Fbeedman, J., concurred.


source: Caselaw Access Project

author: By the Court.—Ingraham, J.

license: Public Domain

text:
    CONRAD BASSERMAN, et al., Respondents, v. THE STATEN ISLAND BELT LINE RAILROAD COMPANY, Appellants.

      Action to reform a contract and to recover upon the same as reformed!— Agent, authority to, and powers of, may be presumed from the facts.

    In the case at bar, the plaintiffs’ dealings were with one Beasley who assumed to act for the defendant. Beasley wrote the contract in question, and inserted “running yard''' in place of “square yard” that had been agreed to by the plaintiffs. That after writing the contract, he read the same to the plaintiffs and read it as if it contained the words “square yard” instead of “ running yard,” and the plaintiffs signed it, and performed the work described therein, in the full belief that the contract, as executed, read “ square yard ” and not “ running yard,” and they did so because of the fact that “square yard” was what was agreed upon, and Beasley read the contract as if it contained the words “ square yard.” The evidence sustained these facts, and also the conclusion that Beasley was the agent of the defendant. Meld, that whether Beasley made a mistake in inserting “running yard,” and read the same to plaintiffs as “square yard,” and so induced them to sign it, or did the same intentionally, the company is responsible for his acts in either event; and the decree of the court below reforming the contract was fully justified.
    Before Sedgwick, Oh. J., and Ingraham, J.

      Decided February 6, 1890.
    Appeal from a judgment entered upon the decision of the court at special term.

      Richards & Brown, attorneys, and J. Tredwell Richards of counsel, for appellant.

      Henry W. Jones, for respondents.
   By the Court.—Ingraham, J.

An examination of the testimony in this case has satisfied us that there is evidence that the plaintiffs made an offer to Beasley, who assumed to act on behalf of the defendant, to do the work at $1.70 per square yard; that this offer was accepted by Beasley, assuming to act for the company ; that Beasley undertook to write out the contract to be executed to carry out such agreement ; that in writing out that contract he inserted “running yard,” in place of “ square yard”; that when he read the contract to plaintiff, he read it “ square yard; ” that plaintiff signed the contract and performed the work in the belief that the contract, as executed by him, read “ square yard”; and that he was induced to sign the contract and go on with the work because of the fact that Beasley read over the contract to him; as containing the words “ square yard.” The plaintiffs who signed this contract expressly so testified, and the contracts and letters are all in Beasley’s handwriting. The evidence to contradict this evidence is not at all satisfactory. One witness, who swears to a conversation with Beasley at the time, says repeatedly, that it was one dollar and seventy cents a running “ foot” until his attention is called to it, when he corrects his answer so as to say “yard.” This is not mentioned as showing that the witness intentionally testified falsely, but to show how easily a witness may be mistaken in testifying to a conversation that took place nearly a year before evidence of such conversation is given. It may be remarked of Mr. Moore’s testimony, that he swore positively that the contract was signed by plaintiffs and himself at the same time ; that plaintiffs were present when the contract was read by Beasley, who read it “running yard.” , All this he remembers positively, yet the two letters written by Beasley to the plaintiffs show that he is mistaken.

It is clear that plaintiffs signed the contract on July 3rd, and Mr. Moore so testifies, yet, on July 5th, Beasley writes plaintiffs a letter in which, after speaking of some facilities that plaintiffs would have to do the work, says : “ So the officers of the railroad company want you to get to work and do the paving as soon as possible * * * The president of the railroad company will have the contract ready to-morrow, when it will be sent to you,” and on July 7th, 1888, it was sent to plaintiffs by mail. It is clear from these letters that the contract was not signed by Mr. Moore first, and afterwards by the plaintiffs.

The testimony of Mr. Arents is entirely consistent with plaintiffs’ story, and it is evident that at the time he was present the contract was drawn up and signed by plaintiffs. Mr. Arents does not state that he stayed in the room until Beasley had finished drawing up the contract or until plaintiffs left, nor does he say that the words “running yard ” were spoken, nor that Moore was then present. On the other hand the plaintiffs were making a proposition to take a large contract, the difference between “ running yard ” and “ square yard ” was very great, one of the witnesses saying that the amount to be paid would be one-third less if it was “running yard” than if it was “ square yard.” Plaintiffs had made an estimate as to what they would do the work for, and it is hardly conceivable that they should make such a mistake. Considering the whole testimony, the probabilities are strongly in favor of the truth of the plaintiffs’ story.

Nor do I think that the defendant can escape responsibilities for the acts and representations of Beasley. He was their cashier, was engaged in selling the bonds of the corporation, received the income of the road and paid its bills. He had been expressly authorized by the president of the company to obtain bids for doing this work, and what he did in obtaining such bids he did as agent of the company. If, therefore, as such agent, he either fraudulently or by mistake inserted in the written bid the words “ running yard,” when in fact the real bid that the plaintiffs made was for doing the work by the “ square yard,” such act was the act of the company; and when on the basis of the written bids so obtained, the same person prepares a contract in which he again inserts the words “ running . yard ” and reads it to the plaintiffs as “ square yard,” and induces plaintiffs to sign it, supposing it contained the terms of the original oral bid, and without delivering a copy of the contract as so prepared induces the plaintiffs to go on and commence the work, and the company accepts such contract and accepts the work when completed, they cannot say that they supposed their agent was honest and careful, and so throw the loss occasioned by either the dishonesty or carelessness of their agent on the plaintiffs.

The reformation of a contract will be decreed where either there is a mutual mistake—that is a mistake common to both parties, or where there is a mistake on one hand and a fraud on the other. Welles v. Yates, 44 N. Y. 525.

In Bryce v. Lorillard Ins. Co., 55 N. Y. 243, the rule is stated “ The mistake which will warrant a court of equity to reform a contract in writing, must be one made by both parties to the agreement so that the interests of neither are expressed in it, or it must be the mistake of one party by which the intentions have failed of correct expression, and there must be fraud in the other party in taking advantage of the mistake and obtaining a contract with the knowledge that the one dealing with him is in error in regard to what are its terms.”

Whether Beasley made a mistake in inserting “running yard ” and read it to plaintiffs as “ square yard,” and so induced them to sign it, or did it intentionally, the company, by the original authority given to him and by its ratification of his action by accepting the contract and the work after it was completed, are responsible for his acts, and the court was justified in decreeing a reformation of the contract.

I think the findings of fact are sufficient to support the conclusions of law ; but conceding that the fact as to the fraud of the defendant’s agent is not expressly found, the rule “that, in the absence of express findings of fact to sustain the judgment, the court may look into the testimony, and if there be evidence which will support the conclusion of law, it may infer that there was a finding of fact by the judge or referee, though not expressed,” Marvin v. Brewster Iron Mining Co., 55 N. Y. 547, applies.

The exceptions taken to the admission of evidence have been examined, but we do not think that they require a reversal of the judgment.

The judgment appealed from should, therefore, be affirmed with costs.

Sedgwick, Ch. J. concurred.


author: ' By the Court.—Sedgwick, Ch. J.

text:
    JOHN C. ROBERTS, Respondent, v. THE PRESS PUBLISHING COMPANY, Appellant.

      Order for examination of plaintiff before answer under section 872 of the Code, what must appear in the motion papers.—Vacation of order within the discretion of the court in all cases.

    The affidavits upon which the motion or application is based, under section 872 of the Code, must set forth the nature of the defence. This implies the existence of a defence to the knowledge or information of the defendant, and the nature of such defence must be set forth, as also the further statement that by reason of defendant’s ignorance of sufficient particulars in relation thereto he is not able to plead it properly, etc., etc. It is impossible to set forth the nature of the defence when it is not known to defendant or upon some information he believes that there is a defence to the action and is able to state the same.
    The form of the affidavit in the case at bar is, that defendant and his counsel have no means of ascertaining “ the particulars wherein the said representations (the subject of the action) were false,” except from the examination of plaintiff before answer.
    Obviously there can be no knowledge or information that the representations were false in general, because any knowledge or information must relate to particulars. The whole of the affidavit, taken together, shows that the defendant does not know and is not informed, in general or particular, that false representations or pretences were made, or what was their nature. Hence defendant is ignorant of the existence of a defence and, therefore, its nature cannot be and is not set forth as required by the Code, and the order should be vacated.

      Held, that when all the matters aimed at by the proposed order are (as in the present case) such as call for an examination as to the commission of a crime, or as to something that is a link in the chain of proof of the commission of a crime, the judge should vacate the order, under the discretion given to him, on the application of the party whose examination is sought. The exercise of such discretion is analogous to the rule upon hearing a demurrer to a bill in chancery for the discovery of testimony. If the bill disclosed that the interrogatories contained therein called for evidence tending to convict the defendant of crime, the demurrer was sustained.

      Held also, that, in every case, the vacation of such an order is within the discretion of the court.
    Before Sedgwick, Ch. J., Freedman and Ingraham, JJ.

      Decided March 4, 1890.
    Appeal by defendant from an order vacating an order for the examination of plaintiff before answer.

      Ddancéy Nicoll, attorney and of counsel, for appellant, on the question considered, argued :—
    I. Even if the plaintiff could refuse to answer every possible question on the ground that to answer would tend to criminate him, he could only plead that privilege after being sworn as a witness. Greenleaf on Evidence, Vol. 1, p. 501; Corbet v. DeComeau, 54 How. 506; Corbet v. DeComeau, 5 Abb. N. C. 169; Judah v. Lane, 12 N. Y. St. Rep., 130, 131-2; Code of Civil Procedure, §§ 837, 880; Greismann v. Dreyfus, 4 Civ. Pro. Rep. 32.
    II. No privilege has at any time been pleaded by or claimed for the plaintiff, and therefore the special term erred in vacating the order for examination on the ground that he was entitled to such privilege.
    III. The defendant cannot plead justification in general terms ; the rules governing the pleading of that defence “ require in the answer the same detailed and specific information that a perfect bill of particulars would contain.” Therefore, the examination in this case is necessary; Orvis v. Dana, 1 Abb. N. C. 268, 286-7; Wachter v. Quenzer, 29 N. Y. 551-2.
    IY. If defendant is compelled to plead generally, the inevitable result will be to exclude all proof of its defence of justification upon the trial; Tilton v,
      Beecher, 59 N. Y. 176, 183; Orvis v. Dana, 1 Abb. N. C. 268, 286-7.

      George Finch, attorney and of counsel, for respondent, on the question considered, argued :—
    I. The affidavit upon which the original order was granted shows that the defendant is in possession of sufficient facts and information to frame its answer. The libel is specific and gives name, dates and other particulars of the offences charged against the plaintiff, and an answer setting up the truth of those facts would not be demurrable. Where the libel is general the answer should be specific, but where the libel is specific, an answer setting up the truth of the statements claimed to be libellous is not demurrable, although it may be open to a motion to make it more definite and certain. Van Wyck v. Aspinwall, 17 N. Y. 190 ; Wachter v. Quenzer, 29 Ib. 547.
    II. The answer may set up the truth of the statements complained of as libellous, on information and belief, and that would be sufficient answer. Strakosch v. Press Publishing Co., 17 N. Y. Civ. Proc. R. 209; Kinney v. Roberts, 26 Hun, 166.
    III. When it appears from the affidavits upon which the examination is asked, that the only facts and circumstances, as to which the defendant desires to examine the plaintiff, are such as would tend to show that the plaintiff was guilty of a crime, the effect of the examination would only be to compel the plaintiff to appear on the record as pleading his privilege, and the order should not be granted. Kinney v. Roberts, supra; Mechanical Orguinette Co. v. Haynes, 19 Weekly Dig. 535; Brandon Mfg. Co. v. Bridgman, 14 Hun, 122 ; Phœnix v. Dupuy, 2 Abb. N. C. 146.
    IV. The examination should not be allowed to enable the defendant to procure evidence to justify the libel or in mitigation of damages as the facts and circumstances to be available for that purpose must have been known to and believed by defendant when the libel was published. Kinney v. Roberts, supra; Strakosch v. Press Pub. Co., supra; Cooper v. Barber, 24 Wend. 105 ; Hatfield v. Lasher, 81 N. Y. 246; Bush v. Prosser, 11 Ib. 347.
   ' By the Court.—Sedgwick, Ch. J.

In my judgment the papers on which the order for examination was made, did not show what, under the Code, it is necessary to show to support such an order.

Under séction 872 Code Civil Procedure the affidavit must set forth the nature of the defence. This implies that a defence exists to the knowledge or information of the defendant, but that by reason of his ignorance of sufficient particulars he is not able to plead it properly. It is not possible, truly, to set forth the nature of a defence when it is not known or upon some information believed that there is a defence.

The affidavit contains the following : “ The nature of the defence which the defendant has and intends to set up is a defence of justification by pleading and proving that the plaintiff did attempt to take from the possession of several owners of property, and to obtain from such possession by color and aid of fraudulent and false representations or pretences, the sum of $5 from each of them. I verily believe that in order to entitle the defendant to prove its defence of justification, as aforesaid, it is necessary that it should plead the same particularly in its answer and should state particularly the names of the persons who were swindled by the said Roberts, as aforesaid, the representations which Roberts made to induce them severally to part with their property, and the particulars wherein said representations were false, together with the names of the persons who conspired with said Roberts to commit said crime of petty larceny. None of these' things are known to me or to the defendant, and the defendant has no means of ascertaining the same, except from the examination of the plaintiff before answer.”

This admits that the defendant does hot know whether the representations were false. Yet, that is an essential matter. If the defendant has no information as to the falsity of the pretences, he can have no belief that there is a defence. The form of the affidavit is, that he has no means of ascertaining “ the particulars wherein said representations were false;” obviously there can be no knowledge of or information that the representations were false in general. Any knowledge or information on that subject must relate to particulars.

The whole of the affidavit, taken together, shows that the defendant does not know and is not informed in general or particular that pretences were made or what was their nature.

The substance of the matter is, that the. defendant is ignorant of the existence of a defence. Its nature, therefore, cannot be set out. If, through the examination of the plaintiff, he could learn certain things, then for the first he would be able, sufficiently, to say what the nature of the defence was. At present he cannot presume that that examination will show that he has a defence, the nature of which he can now competently set out.

It is also true, for like reasons, that it does not appear that the examination of the plaintiff is necessary to the defendant’sframing an answer. It is not necessary until it is first assumed that there is some defence in fact, as to which the plaintiff can give the particulars necessary to be known for the purposes of pleading.

It does not seem that the section in question was passed for the purpose of enabling a defendant to ascertain whether or not he had a defence, when at the time he cannot affirm that one exists according to his knowledge or information.

The granting of such an order was, in my opinion, within the discretion of the court. Section 873 declares, that “where the person to be examined is a party to a pending action, the order may, in the discretion of the judge, designate and limit the particular matters as to which he shall be examined.” This describes the duty of the judge to exclude from the examination, certain matters in his discretion. As the exclusion must necessarily be based upon the opinion of the judge as to the nature of the matter excluded, rather than upon the nature of the matter permitted, I am of opinion that the judge may properly refuse to allow any examination where the whole of it is intended to be directed to matters which the judge would exclude in a case where he might allow examination as to some matters.

Where all the matters aimed at by the proposed order are, as in the present case, such as would call for an examination as to the commission of a crime, or as to something that is a link in the chain of the proof of a commission of a crime, the judge should set aside the order, under the discretion given to him, on the application of the party.

This would be in analogy to the rule upon heaping a demurrer to a bill in chancery for the discovery of testimony. If the bill disclosed that the interrogations contained in it would call for evidence tending to convict the defendant of crime, the demurrer was sustained. The right that the defendant had to be privileged from answering such questions was accorded to him then. It was not postponed to the time of answering to see whether or not he should claim his privilege in the answer.

I further think that, apart from the particular clause that has just been referred to, it is in every such case within the discretion of the court to set aside an order of this kind, and for the reason that such an examination will not produce a result beneficial to the party. Hardly anything can be more improbable, when it is foreseen with certainty that the plaintiff may exercise a right to refuse to answer, and especially when he sets up his right a short time before the examination is to take place that the plaintiff would waive that right and prove for the benefit of the defendant that lie has committed a crime. The counsel and the judge know that an examination would be useless and in vain. I am sure that actual experience confirms that.

The order should be affirmed with $10 costs.

Freedman and Ingraham, JJ., concurred.


author: By the Court.—Sedgwick, Ch. J. Ingraham, J. (dissenting).

text:
    THE LYCEUM, Appellant, v. JOHN S. ELLIS, Individually and as Trustee, et al., Respondents.

      Corporationunder Manufacturing Company Act o/1848, mortgage by—Written assent of a majority of the stockholders owning two-thirds of the capital stock required—Amount of capital stock actually issued to be considered.

    In the case at bar the appellant seeks to impeach the validity of the mortgage in-question, on the ground that the written consent of a majority of the stockholders owning two-thirds of the capital stock of the corporation had not been given to the execution of the mortgage. The capital stock consisted of 360 shares, of which only 245 shares had been issued by the company at the time the assent was given by stockholders owning 165 shares. Held, that the amount of capital stock actually issued by the company and owned by other persons at the time of such assent, must be regarded as the full amount of capital stock to which the statute applies when it provides for the written assent of a majority of the stockholders owning two-thirds of the capital took.
    In this case the capital stock actually issued was 245 shares. Stockholders owning 165 shares united in the written assent. Held to be a compliance with the statute, and that the assent was given.
    A question arises upon the validity of bonds issued by the plaintiff, some of which were sold to defendants, or some of them, at seventy-five per cent of their face value. Held, that the transaction in itself was not invalid. Assuming, however, that such of the defendants as were trustees of the company when they took the bonds and held such a relation to the company that the latter could avoid the transaction, the right to avoid was an equitable right. The transaction was not void but only voidable, and might be ratified. If the stockholders ratified the same expressly or by acquiescence after knowledge for a sufficient time, the plaintiff cannot avoid the transaction, and the facts in this case fully establishing such a ratification and acquiescence, the transaction cannot be avoided.
    Before Sedgwick, Oh. J., Fbeedmah and Ingeaham, JJ.

      Decided March 4, 1890.
    Appeal from judgment dismissing complaint, entered upon findings made at special term.

      John, H. Bird, attorney and of counsel for appellant, on the questions considered, argued :—
    I. The mortgage executed to defendant Ellis, is void, as it was not executed with the consent of a sufficient number of stockholders, and for the purposes authorized by law. The capital stock of the company consisting of 360 shares, the mortgage •required the consent of the holders of 240 legally issued shares. Laws 1848, chap. 40, §§ 2, 3 ; Laws 1864, chap. 517 ; Laws 1871, chap. 481 ; 2 Rev. Stat. 7th ed., p. 1741; Greenpoint Sugar Co. v. Whitin, 69 N. Y. 328; Vail v. Hamilton, 85 Ib. 453. The proof, however, is that the mortgage received the consent of only 125 legally issued and full paid shares. The language of the statute is that a company may mortgage its real and personal property, “ provided that the written assent of the stockholders, owning at least two-thirds of the capital stock of such corporation, shall first be filed in the office of the clerk of the county where the mortgaged property is situated.” The capital stock of the plaintiff was 360 shares, and although only 240 shares were issued at first, the 360 shares were all subscribed for, and it was the intention to issue them all from the inception of the enterprise; and, in fact, the law under which the plaintiff was organized requires that all capital stock shall be .issued and paid in, one-half within one year, the other half within two years from the time of its incorporation. Latos of 1848, chap. 40, § 10. This distinguishes the present case from the case of Greenpoint Sugar Co. v. Whitin, 69 N. Y. 328, supra. The proof is that the mortgage in question received the consent of only 125 legally issued and full paid shares. The written consent which was filed contained the alleged consent of 245 shares, but of these 80 shares were part of the stock dividend which was issued without consideration and in violation of the law which provided that stock shall all be paid in full either in cash or in property necessary, for the business of the company, and 40 shares, 20 belonging to Van Brunt and 20 to Pirsson, had only been paid for in part. These shares, therefore, cannot be counted for the purpose of making up the necessary two-thirds—to permit them to be so counted would defeat the purpose of the statute, the design of which clearly is to enable a corporation to mortgage its property to pay necessary debts upon the assent of the actual owners of two-thirds of full paid, legally issued stock, that is, those representing two-thirds of the interest and property which has been paid into or vested in the corporation. In this case, part of the assenting stock not being full paid, and a still larger part having been illegally issued, two-thirds of the interest and property, that is, the real assets of the corporation, were not represented by the assenting stockholders, but by the stockholders who had fully paid for their stock and by the creditors who had given their services and. materials to the corporation, and to permit the mortgage to stand upon such a consent would defeat the purposes of the statute and be a fraud upon the corporation and its honest stockholders and creditors. The mortgage was not issued in good faith for the purpose of liquidating the debts of the company. See Laws above cited ; Carpenter v. Black Hawk Gold Mining Co., 65 N. Y. 43 ; Denike v. N. Y. & Rosendale Lime & Cement Co., 80 Ib. 599 ; Leslie v. Lorillard, 110 Ib. 532. The statute says that a corporation “ may secure the payment of any debt heretofore contracted, or which may be contracted by it, in the business for which it was incorporated, by mortgaging all or any part of its real or personal estate,” and the above cases hold that a mortgage given to raise money to carry on its business is void. The proof in this case was that only $10,000 of the bonds were used for paying the debts of the company. The remaining $14,000 were used for giving the trustees and their friends a direct profit of $3,500, and indirectly a profit of 33¡ per cent, of the amount of stock held by them, by releasing themselves from the payment of what was due from them to the company on account of their proportion of the $12,000 stock dividend. If such a transaction as this can stand the whole purpose of the statute can be defeated.
    II. If the mortgage is valid in whole or in part, the defendants are still liable by reason of their improper acts as trustees of the plaintiff. As trustees of the plaintiff, they must account for all profits made by them out of their trust—those who bought the bonds at 75 per cent, must account for the 25 per cent, thereof wrongfully appropriated by them. Taylor on Corporation, § 612; Pomeroy’s Equity Juris., §§ 1049, 1075, 1076, 1088; Morawetz on Corporations, 2d ed., § 525; Perry on Trusts, § 428; Bolton v. Gardner, 3 Paige, 273; Butts v. Wood, 37 N. Y. 317; Barnes v. Brown, 80 Ib. 527; Wardell v. Railroad Co., 113 U. S. 651. The defendants attempt to defeat the application of this principle to this case by suggesting that efforts were made to sell the bonds at par without success, and that 75 per cent, was all that they were reasonably worth. It may be conceded that courts of equity will sustain a transaction between trustee and cestui que trust, provided the trustee (who has the burden of proof) is able “ to vindicate ” it “ from any shadow of suspicion, and to show that it was perfectly fair and reasonable in every respect.” (Perry on Trusts, § 428). It is scarcely necessary to say that the proof in this case falls far short-of this. On the contrary, it is conclusively proved that the transaction was not fair and reasonable by the following evidence : (1.) Ten thousand dollars of the $24,000 of bonds were placed at par with creditors of the company. (2.) Myers sold his bonds at par to an outsider. (3.) The defendants claim that the bonds were secured by property having a value three or four times greater than the entire amount of the bonds. (4.) The testimony of two witnesses is that with such a security the bonds could have readily been placed at par. (5.) The fact that they were not placed at par is because the directors,'and especially Ellis, wanted to get them at 75'per cent., and hence the remarkable resolution of March 5th, actually prohibiting the Bond Committee from disposing of the bonds to outsiders at any price, so long as the stockholders’ option to take them at 75 per cent, continued, and extending that option to May 15, 1885. (6.) The bonds are dated March 2, 1885, and defendant Ellis, partly for himself, and, as he now claims, partly also for his wife, took one-half of the entire issue, the first 24 bonds (Nos.T to 24), on or before March 9,1885, that is, either before or shortly after they were issued. It is preposterous to claim that the transaction can stand as to these twenty-four bonds, especially in view of the fact that about the same time twenty of the bonds were placed with creditors at par.

      ITT, Assuming for the present that all the stockholders of the plaintiff may have acquiesced in the wrongful acts of the trustees, that is not a defence to this action. It is clearly not a defence to the action so far as this action is based upon the principles stated, and seeks to invalidate the mortgage as executed in direct violation of the law. Morawetz on Corporations, § 623; Kent v. Quick Silver Co., 78 N. F 185 ; Thomas v. Railroad Co., 101 U. S. 71. Nor is the assent of the" stockholders a defence to this action, so far as it is based upon the principles stated : First—With respect to the corporate funds the directors are trustees to the corporation only, and are charged with the exclusive duty and responsibility of managing its funds. Pomeroy's Eq. Jur., § 1090 ; Conn v. Iron Co., 12 Barb. 27 ; Dabney v. Stevens, 40 How. 341; McCullough v. Moss, 5 Den. 567, 575 ; Bank U. S. v. Dandridge, 12 Wheat. 64, 113. Second—The rules governing the liability of directors to the corporation with respect to the corporate funds are founded upon public policy and the interests of the corporation, and not upon the interests of the stockholders. Taylor on Corporations, § 269 ; Morawetz on Corporations, § 623; Barton v. Plank Road Co., 17 Barb. 397 ; Kent v. Mining Co., 78 N. Y. 185; Wood v. Dummen, 3 Mason, 311; Burke v. Smith, 16 Wall, 390 ; Thomas v. R. R. Co., 101 U. S. 71 ; Bagshaw v. East Union R. R. Co., 7 Hare, 130; Phosphate Co. v. Erl anger, L. R., 5 Ch. Div. 114; Society v. Abbott, 2 Beav. 560.

      Hubbard Hendrickson arid Lemuel Skidmore, attorneys and of counsel, for respondents, on the questions considered, argued:—
    I. It appeared sufficiently on the trial that the requisite number of stockholders owning more than two-thirds of the stock had consented in writing to the execution of the mortgage ; that the only stock issued during the year 1884 was 240 shares issued to fourteen stockholders, and that no other stock was issued until February 10, 1885, when it was issued ratably to the same stockholders and the consent of the mortgage, was signed January 30, 1885, by eleven stockholders (more than a majority) owning 165 shares, which was more than two-thirds of the whole number, 240, then issued, the remainder of the stock remaining the property of the corporation plaintiff. In the case of Greenpoint Sugar Co. v. Whitin, 69 N. Y. 339, the court say: “For the purposes of this act, we think that the amount actually issued and owned should be regarded as the amount of the capital stock. The design was to confer this power of assent upon those who represented two-thirds of the actual stock. They represented two-thirds of the pecuniary interest and property of the corporation. Otherwise it might happen that .there would not be a sufficient ownership of stock to enable the company to execute a mortgage at all.” In the same case it was held (page 335) that where the consent is sufficient in form to show the intention of the stockholders to give their assent to a mortgage, and when construed with the mortgage on record gives all necessary information, that then such consent is sufficient. In order to invalidate the consent for defect of form, the court say (page 336): “We think the defects must be so radical that an intention to consent cannot be inferred,” and “if the papers themselves are defective, it was competent by parol evidence to connect the instrument with the subject matter.” In Rochester Savings Bank v. Averell, 96 N. Y. 475, the court say : “ Compliance with the condition of the statute involves the performance of two separate and successive acts, namely, the procuring of the assent of the requisite number of stockholders, and the filing.of such assent in the proper clerk’s office. The first involves an application to the stockholders, and on their part consideration, judgment and final determination, and on the part of the assenting stockholders a written expression of their conclusion. The second is the merely formal act of depositing for record the evidence that the requisite assent has been obtained. The statute does not in terms impose upon the corporation the duty of filing the assent. * * * * The purpose of the statute.in requiring the assent to be filed seems to have been to perpetuate the evidence of the fact, and to free titles acquired under mortgages by corporations from the uncertainty which would attend them if the extrinsic fact of assent was not made a matter of public record. The consent of stockholders is the important and essential thing. The filing is formal and subsidiary. The jurisdiction of equity to supply the formalities to carry out the intention of parties has been frequently exerted. Can it be doubted that a corporation having in its possession the assent of stockholders to an existing mortgage not filed could be compelled, at the instance of the mortgagee, to file the assent, and thereby complete the record of the transaction ? Would the corporation be heard to allege as a defence to the mortgage, that, although assented to, the evidence of the assent was not recorded? We think not. To permit the defendant to profit by the neglect of the corporation to file the assent, would be, under the circumstances, most inequitable. Even if the filing of the assent was essential to complete the plaintiff’s right, that may now be done as of the time the assent was given.”
    II. Some question was made as to the stock issued to T. C. Van Brunt and James W. Pirsson, because these gentlemen had not fully paid for their stock when it was issued to them. But there is nothing at all in the manufacturing corporation act to prevent the company from issuing stock subscribed for before the subscriptions are fully paid. On the contrary, the law implies at least the power to do so. 3 Rev. Stat., 8th ed., p. 1956, § 8 ; p. 1960, § 25; Billings v. Robinson, 28 Hun, 123 ; Wheeler v. Miller, 90 N. Y. 253.
    III. The sale of the 26 bonds by the Lyceum at 75 per cent, of their face value was not ultra vires. This was expressly held by Mr. Justice Andrews of the Supreme • Court in this District, in a case at special term, reported in the Daily Register of October 14, 1884, Vol. 26, No. 90, entitled Graham v. The Atlanta Hill Gold Mining & Melting Co. - He said : There is nothing in the statutes of this state which prohibits a manufacturing corporation from sellings its bonds at less than par, and sales at much less than par are declared lawful in the Central Gold Mining Co. v. Platt, 3 Daly, 263. It is utterly impossible for the court to say whether sales at 75 per cent, on the dollar would be fraudulent or ill-advised. So long as corporations are authorized by law to incur debts and mortgage their property to secure them, stockholders must protect their interests by electing directors who are faithful and competent, and not expect that courts of equity will assume the management of the corporate business, because the officers may not perform their duties in the most satisfactory manner.” See also-Ellsworth v. St. L., A. & T. H. R. R, Co., 98 N. Y. 559.
    IV. Under the authority given by the laws of 1864, chapter 517 and laws of 1878, chapter 163, manufacturing corporations have general authority conferred on them to mortgage their real or personal property for the payment of any debt, subject only to the condition of filing the requisite consent of stockholders. This statute was construed in the following cases : Carpenter v. Black Hawk Gold Mining Co., 65 N. Y. 53; Greenpoint Sugar Co. v.
      Whitin, 69 Ib. 328 ; Martin v. Niagara Falls Paper Manfg. Co., 44 Hun, 134; Lord v. Yonkers Fuel Gras Co., 99 N. Y. 554. In the last cited case, at page 554, the court say : “ Where a bond secured by a mortgage is given to the lender for money advanced at the time, the borrower becomes immediately indebted, and it would seem to be immaterial whether the money is applied by the borrower to the payment of some antecedent debt or to other purposes for which he was legitimately entitled to borrow the money.” It appeared by the testimony of P. Gr. Hubert, Andrew Gr. Myers and V. Spader, that the officers of the company endeavored in good faith to dispose of the 28 bonds not taken by the contractors at par to persons outside of the company, and at prices less than par and down as low as 75 per cent, of their face value, but could not succeed in disposing of them at all to outsiders ; and thereupon the resolution was taken to give the stockholders the option of buying them proportionately with their holdings of stock, but most of the stockholders declined to take them at 75 per cent, and at last they were taken at that price by Messrs. Ellis, Myers and Hyslop, who were trustees of the company, and Mr. Howard, who was not a trustee. It sufficiently appears by the whole case that what was done in this respect was in good faith, and for what was considered to be the interest of the company, and not from any selfish motive on the part of the trustees, or any of them, and it was so found by the court.
    Y. This decision of the court below was right because the facts constitute a plain ratification by all the stockholders of the company of the scheme for the disposal of the bonds, and preclude the company, or any new stockholder, from questioning such disposal at this late day. Parsons v. Hayes, 14 Abb. N. C. 419 ; Kent v. Quicksilver Mining Co., 78 N. Y.
      158 ; Otter v. Brevoort Petroleum Co., 50 Barb. 256; Knowlton v. Congress Spring Co., 57 N. Y. 578; Hotel Co. v. Wade, 97 U. S. 23 ; Martin v. Niagara Falls Paper Co., 44 Hun, 139 ; Ffooks v. South, etc., Railway Co., 1 Sim. & G. 142; Graham v. Birkenhead, 2 Mac. & G. 156 ; In re Magdalena Co., 16 Jurist N. S. 975 ; Royal Bank of Liverpool v. Grand Junction R. R. Co., 125 Mass. 495 ; Reed v. Hayt, 51 N. Y. Superior Ct., 121; Morawetz Private Corporations, Second Edition, Art. 623, 625, 626 and 631 ; In re Syracuse R. R. Co., 91 N. Y. 1.
   By the Court.—Sedgwick, Ch. J.

The plaintiff is a corporation formed under the act of this state for the formation of manufacturing and other kinds of corporations. It contests in this action the validity of a mortgage upon the real estate of the corporation made to secure the payment of bonds of some of which the defendants are the holders. The ground taken to impeach the validity is, that “the written assent of the stockholders owning at least two-thirds of the capital stock ” of the corporation was not given. There was a written assent. The plaintiff’s- claim as to this is, that eighty shares represented in the assent had never been lawfully issued, and that the remaining shares represented were not two-thirds of the capital. The learned judge below, in effect, found that if the eighty shares . were excluded, there were still represented in the assent two-thirds of the capital stock.

In this he was correct, under the case of Greenpoint Sugar Co. v. Whitin, 69 N. Y. 328. That case decided that “ for the purposes of this act, * * * the amount actually issued and owned, should be regarded as the amount of the capital stock. The design was to confer this power' of assent upon those who represented two-thirds of the actual stock. They represented two-thirds of the pecuniary interest and property of the corpora* tion.

The learned counsel for the plaintiff argues that the case cited makes a limitation of the general principle announced, by saying in reference to what it held to be the amount of the capital stock or the 2,000 shares, “and -for aught that appears no more was intended to be issued.” The meaning of this I take to be, that an assent to a mortgage made by two-thirds of the then capital stock, will not be sufficient if, also, then there is a definite intention of increasing the actual stock by future issuing of shares in a manner that will increase the actual stock. The intention referred to is not a general intention, that is presumed as to all shares not transferred. It would be an attempt to evade the statute, that a mortgage should be made upon the assent of two-thirds of the actual capital, when that was accompanied by the beginning of an arrangement to increase the capital, or even by an intention forthwith to make such an arrangement. That method would be fraudulent as to those who might afterwards become the owners of shares.

In the present case the fact is, that if there were an intention to issue the shares, 120 in number, of which the eighty was represented in the assent, the result would be that those 120 shares must be considered part of the actual capital, and then the “ persons to whom the issue was made would be considered the owners of the shares. In such case there was an assent of two-thirds of the capital stock upon the position taken by the plaintiff.

There was further objection taken on the ground that 40 shares represented in the assent had not been paid for in full, but had been paid for only to the extent of the nominal value of 12 shares. It is held in Wheeler v. Millar, 90 N. Y. 359, that neither the issuing of a certificate for shares, nor payment for the shares, is indispensable to a subscriber being .an owner of shares in capital stock “ whatever maybe said of a case where no fact is present as the foundation of an inference that title has passed, except the bare fact of a subscription, it is entirely reasonable that where, in addition, the corporation has explicitly recognized the alleged stockholder as such, and the latter has acted in that capacity, such facts should be deemed sufficient to justify a conclusion of ownership and make the subscriber a stockholder. ” In the present case, the facts justified the inference made by the judge below, that the persons who claimed in the assent to be the owners of the 40 shares, were, in fact, stockholders and owners of capital stock to that amount.

It is not necessary to determine that the 120 shares were or were not legally issued. They were issued to the other stockholders without any consideration received by the corporation. Whether they were legally issued or not, the result in -this case would be the same. The findings show that the judge below acted upon this view.

The plaintiff further complains of the issuing of bonds of the company to the defendants, or some of them, upon the consideration of the payment to the company of 75 per cent, of the face of the bonds. The transaction in itself is not invalid. If the obligation were given by a natural person, there might be a valid objection that they were void for usury. A corporation cannot avoid its obligations for such a reason.

Assuming, however, that such of the defendants as were trustees of the company when they took the bonds from the company, held such a relation to the company that the company could avoid the transaction, that right to avoid was an equitable right. The transaction was not void, and might be ratified. And if the stockholders ratified, expressly or by acquiescence, after knowledge for a sufficient time, the plaintiff cannot avoid. The finding below, that there was such a ratification or acquiescence by all the stockholders, was supported by direct and circumstantial evidence.

The case does not disclose any error, and the judgment should be affirmed with costs.

Freedman, J., concurred.

Ingraham, J. (dissenting).

I am unable to concur with my associates. The plaintiff was authorized by statute to execute a mortgage upon its property to secure existing debts. It has been held that when a bond of a corporation is issued, it is a debt, and that a mortgage to secure such a bond is valid, but the bond as between the obligor and the obligee, where such obligee is one of the trustees of the corporation, is only an obligation for the amount paid thereon. When, therefore, the corporation issued to its trustees bonds for which they paid seventy-five cents on the dollar, the obligee could only have recovered from the plaintiff the amount that he had advanced to the company, and the bond was a valid debt of the company to that extent only. The mortgage was valid to secure the payment of the valid debt, but was not valid to secure what never was a debt of the company.

I do not think that the evidence justified the court in finding that all the stockholders ratified the acts of the trustees in giving to themselves obligations of the company at seventy-five cents on the dollar. There was no formal act of ratification. At most it was a failure of the stockholders to take the bonds at that price when offered to them, and subsequently, after the transaction was completed, a failure to take proceedings in disaffirmance thereof. But the corporation was under the control of the same trustees who had authorized the issue of the bonds, and it does not appear that it was able to repay to the trustees to whom the bonds had been issued the amount that they had actually paid to the corporation. I think the stockholders had a right to wait until the obligations became due or the obligees attempted to enforce the obligation, and then tender the amount actually due. The delay of the stockholders has not changed the position of the parties, and there is nothing to show that either the corporation or its stockholders are estopped from asserting that the corporation is only liable to repay what it had actually received.

, It is clear that Ellis purchased the bonds for himself, paid for them with his own money, and took them in the name of Julia E. Ellis. It is not necessary to determine whether there can be any relief as against these bonds issued to Ellis in this action without making Julia E. Ellis a party.

I think that plaintiff was entitled to a judgment declaring that the bonds issued to its trustees, and now held by them, are valid only to the extent of seventy-five per cent, and allowing it to discharge such obligation on a payment of that amount and interest.

I think, therefore, the judgment should be reversed and a new trial ordered.


author: By the Court.—Sedgwick, Oh. J.

text:
    LUCIEN B. TERRY, et al., Respondents, v. HENRY BANGE, Appellant.

      Receiver appointedm supplementary proceedings—Jurisdictional facts should appear from 'the order or the papers on which it was granted—Motion for removal of .receiver.

    The order that the motion below sought to set aside was made in 1862. The principal ground for its vacation was that it did not appear on the face of the order that the judge granting the same had jurisdiction in the premises. That it did not recite the existence of facts necessary to jurisdiction. The moving papers did not set out the whole of the record of the supplementary proceedings on which the order was made. The order alone was set out, but, in some portion of the moving and opposing papers, it did appear that the necessary jurisdictional facts existed at the time of the entry of the order, and that the whole of the record at the time disclosed that the necessary facts existed and were proper. The power of the judge was derived from Section 298 of the Code.

      Held, that the judge having power and- jurisdiction to appoint a receiver, all other directions given in the order as to bond and matters of a like kind, were to be reviewed if they were erroneous by appeal, or, if matters of irregularity, by motion. The appellant has been unsuccessful in his attacks upon the order by appeals, and the irregularity as to the bond has been cured by the order now appealed from, which should be affirmed. Held, also, that it is not a substantial objection to the order that “ The N. Y. Superior Court” was named instead of the correct name, 11 The Superior Court of the city and county of New York.” The words used sufficiently identified the court.
    By the Code of Procedure, notice to the judgment creditor was not a condition precedent to the exercise of the power to appoint a receiver. If it be assumed that the receiver is not a resident of the state, and for that reason should be removed, there should be no removal without the same be accompanied by a substitution of a qualified receiver in his place.
    Before Sedgwick, Ch. J., Truax and Dugro, JJ.

      Decided March 4, 1890.
    Appeal from an order denying defendant’s motion to set aside an order appointing a receiver in supplementary proceedings.

      II. M. Whitehead, attorney and of counsel, for appellant, argued:—
    The order appointing the receiver is void upon its face for the following reasons: (1.) It is not entitled in an action in any court known to the law. There is no “N. Y. Superior Court.” It may be inferred that the Superior court of the city of New York was the court in which the action was pending, but an order appointing a receiver is a muniment of title and authority for action, and should upon its face exhibit the necessary evidence that the person had been appointed a receiver of the property of the judgment debtor in proceedings supplementary to execution by a judge or court authorized by law to make such order. (2.) The order does not recite facts necessary to show' that Samuel Garrison-, as Kings county judge, had authority to make it. The county judge in making an order for the examination of a judgment debtor and for a receiver in an action in the Superior Court of the city of New York is acting under a special statute with no general power as judge and must strictly follow the statute. Wibber v. Hobbie, 13 Hun, 382. All else is without jurisdiction. Bangs v. Selden, 13 Hun, 374.
    In supplementary proceedings before a county judge on a judgment in another court, nothing is to be presumed in favor of his jurisdiction. The facts upon which it rests must be shown affirmatively by the recitals in the order. People v. Huilbert, 5 Hun, 446. Jurisdiction would be presumed in favor of a • court of general jurisdiction without any recitals. Bangs v. Dunkelfeld, 18 N. Y. 592. But the authority of an inferior court to act must appear on the face of its proceedings. Chemung National Bank v. Judson, 8 N. Y. 260. The production of an order made by a court or judge authorized by law to make it, in proceedings supplementary to execution, reciting the facts necessary to give the court or judge authority to act in the proceedings, furnishes conclusive evidence of regularity when attacked collaterally and prima facie evidence when assailed directly. Potter v. Merchants’ Bk., 28 N. Y. 652; Wright v. Nostrand, 94 Ib. 45. In 1862 it was necessary among other things to confer jurisdiction or authority to make an order appointing a receiver in supplementary proceedings : 1st.—That the person of whose property a receiver was appointed • should be a judgment debtor. 2d.—That execution should have been returned unsatisfied by the sheriff of the county where he resided or had a place of business. Code, § 292. 3d.—That an order for the examination of the judgment debtor should have been made by a judge named in § 292. 4th.—That the debtor should have been examined under oath under such order. § 296, Code. 5th.—That the debtor should have disclosed property not exempt from levy and and sale under execution. Re. Edlings, 35 Hun, 367. The appointment can only be made on the evidence in the proceedings. Todd v. Crooke, 4 Sand. 694. The voluntary appearance and examination of the judgment debtor cannot give jurisdiction. Sackett v. Newton, 10 How. 560. The appointment will be discretionary even if the judge has jurisdiction. Dollard v. Taylor, 33 N. Y. Super. Ct. 596. And can only be made by the judge who granted the order of examination. It must be made in the same manner as if by the court under Section 244. Code, § 298. Under that section a receiver cannot be appointed without notice according to the practice of the court, except under peculiar circumstances, demanding immediate attention, appearing by the papers on which the order was applied for. People v. Morton, 1 Paige, 17; Verplanck v. Mercantile Ins. Co., 2 Ib. 438; Sandford v. Sinclair, 8 Ib. 373; Gibson v. Martin, 8 Ib. 481; Field v. Ripley, 20 Hun, 26. And in supplementary proceedings only on notice. Kemp v. Harding, 4 Hun, 178; Ashley v. Turner, 22 Ib. 226; Barker v. Johnson, 4 Abb. 435; Whitney v. Welch, 2 Abb. N. C. 442; Hohn v. Epstein, 14 Ib. 322. And verbal notice is insufficient. Ashley v. Turner, 22 Hun, 226.
    The order, therefore, should be vacated because it does not recite any of the facts which confer authority upon the county judge to make the order, to wit: 1st. That the order is made in any action in any court known to the law. 2d. That William Palen was ever appointed the receiver of the prop«erty of Henry Bange, it not being recited in the order that Henry Bange was the judgment debtor. 3d. That any execution had been issued upon the judgment to the. sheriff of any county. 4th. That any transcript of the judgment has ever been filed in Kings county where the examination was had. 5th. That the debtor resided in Kings county. 6th. That any execution had been returned unsatisfied. 7th. That the examination was completed, on the contrary it appears that it was not. 8th. That the examination was under oath as required by § 296 of the Code. 9th. That the debtor was present in the court when the motion was made for a receiver or that he had any notice of such motion. He positively denies that he was present or had any notice or knew of such appointment at the time. 10th. That the proceedings were being had under the provisions of the Code relating to supplementary proceedings. 11th. That the order was made on the motion of the judgment creditor or any other person. 12th. That the order directs a bond to “ the clerk of this court,” it not appearing what court it referred to; to be filed in the Kings county clerk’s office. According to law and the practice of the court the bond should have been filed in the clerk’s office of the Superior Court, of the city of New York, or in the clerk’s office “of the county of New York.” That order is filed in the county clerk’s office. There is no other paper of any kind filed with it by which the clerk or any other person may learn who is the judgment debtor referred to in the order. The original order was never filed in the office of the clerk of the county of New York. The title to the property therefore never vested in said receiver, and all his actions as such should be set 'aside. The acts of the receiver, including all actions in law or in equity, should be set aside upon the ground that he has not given such a bond as the order of the judge and the practice require. The receiver had no power to act until he had given a bond, and was not invested with title to judgment debtor’s property. Edwards on Recr., 89; 21 How. 469; Thomp. on Prov. Rem. 477-480; 26 Barb. 569, etc.

      Nelson Merrill, attorney, and William C. Holbrook of counsel, for respondents, argued:—
    The alleged defects in the papers in the proceedings by which Palen was appointed receiver of the property of the above-named Henry Bange are not jurisdictional defects, but are mere irregularities. See Bespondent’s Points on Appeal to the General Term, Second Department; Opinion of Dykman, J., at said General Term. All these questions have been adjudicated and passed upon, not only in the proceedings instituted by said Bange, before the county judge of Kings county and on his appeal to the general term of the second department. References last above cited; See also Opinion of Patterson, J., Palen v. Bushnell, 18 N. Y. Civ. Pro. Rep. 56. But the same were also litigated and passed upon by the supreme court in this department, on the motion to revive and continue the action against the executors of Bushnell. See Opinion of Brady, J., Palen, Receiver, v. Bushnell, 51 Hun, 423, Dismissal of Appeal, 115 N. Y. 655. The same were also adjudicated on the motion of Bushnell’s executors for leave to file supplemental answer in the supreme court. See Opinion Patterson, J., Palen v. Bushnell, 18 N. Y. Civ. Pro. Rep. 56.
   By the Court.—Sedgwick, Oh. J.

The order that the motion below asked to be set aside was made in 1862. The principal objection to it was that it* did not appear that the judge allowing the order had jurisdiction to make it. The argument was based upon the assertion that the face of the order did not recite the existence of facts necessary to jurisdiction. The moving papers did not set out the whole of the record of the supplementary proceedings. The order alone was set out. In some portions of those papers, and in the opposing papers, it appeared that the jurisdictional facts had existed at the time of the making of the order. In the opposing papers, it was shown that the whole of the record disclosed that the necessary facts existed and had been properly averred. The power of the judge was derived from section 298 of the Code of Procedure. The judge having power and jurisdiction to appoint a receiver, all other directions given in the order as to bond and its character, and matters of a like kind, were to be reviewed if they were erroneous, by appeal, or if irregular, by motion. The appellant has been unsuccessful in his former attacks upon the order so far as he has appealed. The irregularity as to the bond was corrected by the order now appealed from.

Soon after the order was made the receiver began an action to set aside as fraudulent a transfer made by the judgment debtor to third parties. The judgment debtor was made a defendant. He had in that action an opportunity to contest, if not the appointment of the receiver, yet whether by the terms of the order or from what had been done or omitted to be done the receiver had become vested with the cause of action or the right to begin an action upon it. It may be taken for granted that he did not ask, by his motion below, that the receiver should do those things which, being done, would give him the right to bring the action. So far as he asked that the appointment should be set aside he was not entitled to succeed.

It is not a substantial objection to the order that the title of the action named, “TheN. Y. Superior Court,” instead of “ The Superior Court of the city of New York.” The words used, as they were used in the papers identified the court.

I do not find that, by the Code of Procedure, notice to the judgment debtor was a condition precedent to the exercise of the power to appoint.

Whether or not the judgment has been paid is a matter to be determined in the action of the receiver who obtained by his complaint a lien upon such equitable assets as were described in it.

If it be assumed that the receiver is not a resident, and that is a reason why he should be removed, there should be no removal without that being accompanied by a substitution of a qualified receiver in his. place.

The order should be affirmed with costs.

Truax and Dugro JJ., concurred.