author: Barnard, P. J. :

text:
    FRANK B. KNOWLTON, Respondent, v. THOMAS J. ATKINS, Appellant.

      Declaration of tmst — limitation over wpon the death of the ehild/i'en — the benefieim'y must survive the children.

    By a declaration of tmst in lands it was provided that the lands were to be sold for the best interests of the widow and children of the grantor; one-third of the income to go to the widow for life and the remaining two-thirds to be equally divided among two children of the grantor, the trust to determine when the youngest child should be twenty-one, when the estate was to be conveyed to the children subject to the dower rights of the widow; and, further, “in case of the death of both of said children before the age of maturity, then I am to convey all and every part of said property then remaining unsold, and to pay over all income and proceeds of sales in my hands, deducting charges and expenses, to said Cordelia (the mother), for her sole use and benefit forever.”
    The widow died in 1873, the two children in 1881, at the ages of ten and eleven years, respectively.

      Held, that the provision that the mother should take, in case of the death of both children during minority, was not intended to create an estate in her unless she survived the children.

      Hennessy v. Patterson (85 N. Y., 91) distinguished.
    That the widow, at the time of her death, left no estate, expectant or contingent, which survived her.
    Appeal by the defendant Thomas 4. Atkins from an interlocutory judgment, entered in the office of the clerk of the county of Kings on the 4th day of November, 1889, with notice that on the hearing of said appeal the General Term would be moved for a new trial, upon the exceptions taken in the action, under section 1001 of the Code of Civil Procedure.
    The action, and the issues joined therein, were referred to a referee to hear and determine the same, who found as conclusion of law:
    .“That the defendant convey to the plaintiff by deed, to be approved as to form by the court, an undivided three-quarters of the lands described in the complaint, originally conveyed to the defendant by Osmin W. Atkins, the elder, and which have not been conveyed by the defendant, and also of the lands since conveyed to the defendant in exchange for lands formerly of the elder Atkins, which the defendant has conveyed; that, upon the accounting herein, it be duly ascertained for the purpose of such conveyance to be made by the defendant, which of the lands so original^ conveyed to him he has conveyed, and what lands he has received in exchange therefor; that the defendant account to the plaintiff herein for, and upon the accounting be charged with, three-fourths of all the proceeds of such sales of the premises, whether in money or lands or in any other form received by the defendant; that as to the property conveyed as aforesaid by Osmin ~W. Atkins, the elder, or received as aforesaid by the defendant in exchange, the defendant also account to the plaintiff for, and upon the accounting be charged with, three-fourths of all income thereof which has been received by him since the 7th of September, 1871, and which is in his hands, or ought lawfully to be there; that upon the accounting the defendant be allowed three-fourths of all reasonable payments he has made for taxes, assessments, insurances and otherwise, in properly preserving and caring for the property until the present time; and that the defendant be also allowed, in addition to his payments, three-fourths of a reasonable compensation for his services as trustee and in charge of the property until the commencement of this action; that the plaintiff recover from the defendant the amount which, upon such accounting, shall be found to be due to the plaintiff from the defendant; or if the amount of the allowances so made to the defendant shall exceed the amount of the charges so made against him, that he have a lien upon the real estate so to be conveyed by him to the plaintiff for the excess of the allowances, and that in such case the payment of such excess, if not paid by the plaintiff, may be enforced by the defendant by a sale under, the direction of the court herein of the premises so conveyed, or á sufficient portion thereof or otherwise as the court may direct; and that the question of costs and all other questions be reserved until the final judgment herein.”

      W. W. Mao JJcvrland, for the appellant.

      James B. Ludlow, for the respondent.
   Barnard, P. J. :

Osmin "W. Atkins, on the 7th day of September, 1871, conveyed a large landed estate to his brother, the defendant. The deed was absolute. The grantor had a wife and two very young children. The consideration expressed was $3,000, and the wife of the grantor joined in the deed. In November following, and after the death of Osmin W. Atkins, the defendant executed a declaration of trust in the land. In September, 1872, another declaration of trust was executed by defendant in respect to the same land. The declarations are substantially alike. The trust was expressed to be for the sale of the land for the best interest of the widow and children of the grantor in the judgment of the trustee. One-third of the income was to go to the widow for life, and the remaining two-thirds to be equally divided between the two children of the grantor. The trust was to terminate when the youngest child should be twenty-one, and then the estate was to be conveyed to the children subject to the dower rights of the grantor’s wife, and the proceeds of land sold were to be paid over to the children after the widow’s claim therein was paid. The declaration of trust of September, 1872, contains this clause, out of which the controversy arises.

“ Fifth. In case of the death of both of said children before the age of maturity, then I am to convey all and every part of said property then remaining unsold, and to pay over all income and proceeds of sales in my hands (deducting charges and expenses) to said Cordelia, for her sole use and benefit forever.”

The widow died in 1873. The two children were both drowned in 1881 at the ages of ten and eleven years, respectively. The widow took no remainder of the estate which existed if she died before the children, and they died during their minority. The scheme of the transaction was to create a title for the better management of the lands during the minority of the children. One-third of the proceeds was to go to the widow and the two-thirds was to be applied to the necessities of the children. The trustees could, by the terms of the trust,, terminate the same with the wife’s assent and convey the lands to the infants, subject to the life use of said Cordelia in one-third thereof.” The trustees could, by the terms of the trust, pay a gross sum to the widow, and then convey to the children and to their heirs forever equally.

By the terms of the deeds of trust, when the trust terminated by the limitation of the same, the conveyance was to be made to the children subject to the dower rights of the said Cordelia.” The provision that the mother shall take, in case of the death of both children, during minority, was not intended to create an estate in her, unless she survived the children; this contingency never happened. If she had survived her children, the trust deeds would have carried the estate to her, and so would the statute of descents without the deeds. In other words, the wife and children would be left as to the succession as if no deeds existed.

In Hennessy v. Patterson (85 N. Y., 91), the gift over was of land to one John Fooley if the testator’s daughter die without child or children. Fooley died before the testator and the daughter left no children at her death. The Court of Appeals held that Fooley had a contingent remainder, which vested in him at the death of the testator and which descended to his heirs. This case is not an authority for the judgment appealed from. If the construction be held that no estate was created in the widow, except her dower right, there was no contingent or expectant estate to be considered under the case of Hennessy v. Patterson. The dower right, of course, would not be such an estate under the circumstances proven in the case. The law favored a construction which caused the land to descend in the course of ancestral blood. (Quinn v. Hardenbook, 54 N. Y., 83; Wood v. Mitcham, 92 id., 375.)

We conclude, therefore, that the widow at the time of her death left no estate expectant or contingent which survived her. These views render unnecessary an examination into the evidence claimed to support a finding that one of the children survived the other.

The judgment should, therefore, be reversed and a new trial granted at Special Term, costs to abide event.

Dykman and Pratt, JJ., concurred.

Interlocutory judgment reversed and new trial granted at Special Term, costs to abide event.


source: Caselaw Access Project

author: Pratt, J.:

license: Public Domain

text:
    FIRST NATIONAL BANK OF MIDDLETOWN, NEW YORK, Respondent, v. COUNCIL BLUFFS CITY WATER-WORKS COMPANY, Appellant.

      Estoppel — power exercised, without authority, by an agent, of executing notes in the name of his principal — implied authority.

    The mere fact that an agent has, in one or more instances, made notes in his principal’s name and applied the proceeds in part to the payment of his principal’s debts without the latter’s knowledge, creates no liability on the part of the principal for notes subsequently made by the agent in the name of the principal.
    In order to create such an agency, by representation or estoppel, it is essential that the principal should have knowledge of the assumption by the agent of the powers he has exercised.
    There is nothing in the nature of the business of a water company from which it can be implied that its treasurer, by virtue of his office, has authority to borrow money and to give notes of the company therefor.
    Appeal by the defendant, tlie Council Bluffs City Water-Works Company, from a judgment, entered in the office of the clerk of the county of Orange on the 18th day of December, 1889, in favor of the plaintiff, upon the report of a referee.
    The action was brought -to recover upon two promissory notes alleged to have been made by the defendant corporation, and to have been negotiated to the plaintiff for value before maturity. The defendant alleged in its answer, among other things, that the notes mentioned in the complaint, and each of them, were made, executed, issued and delivered, if at all, by one Harry Allen, purporting to act as treasurer of the defendant, but not for any just debt or in connection with the business of the defendant; but that the said Allen, thereby intending to cheat and defraud the defendant, issued and delivered said notes, and each of them, signed with the name of the defendant, after he had ceased to be treasurer of the defendant, for his own individual and personal use.

      James L. Bishop, for the appellant.

      William, Yanamee, for the respondent.
   Pratt, J.:

It is plain that a gross fraud has been perpetrated upon the defendant in this case, and the main question is whether the company has so acted as to be estopped from denying the validity of the notes sued upon in this action. The general principle that the officers of a corporation are special agents and have only the authority conferred on them by the by-laws, and that all persons who deal with them are bound to take notice of the extent of their authority, is too well settled to require comment or citation of authorities.

The notes in suit were never made under any authority of the by-laws or board of directors, but it is sought to hold the defendant liable upon the ground that Allen was a financial officer of the corporation, and, therefore, held apparent authority to indorse the notes so far as bona fide purchasers are concerned ; and, second, that the previous conduct of Allen had been such in issuing the notes of the corporation that the corporation must be held to have authorized the making and indorsement of the notes in suit (Citing Bank of Batavia v. New York, Lake Erie and Western Railroad Company, 106 N. Y., 195, and other cases; also Bank of Auburn v. Putnam, 1 Abb. Ct. App. Dec., 80, etc.), and the question is whether the facts bring the case within the rules just cited.

There was no evidence that any part of the proceeds of the ■ notes sued on came to the use of the company. The bonds and money which Allen received for these notes he retained. As to the bonds, the evidence was that he still had them. As to the money, it went into his individual bank account and he refused to say that he paid any debt of the company out of that bank account after he received the money. He would not even say that he kept the money for the payment of what the company owed him, although he tried to produce that impression. There was no evidence, however, that the company owed him anything, except his general statement that they owed him something, but what the something was he did not attempt to say. Of course, as treasurer of the company, he could not issue its notes and sell them and pocket the proceeds under the pretense that the company owed him money, without showing some authority outside of himself for such a transaction, and without establishing in the most satisfactory manner that the company was indebted to him for the amount which he so obtained.

The referee found that the proceeds of some of the previous notes made by Allen were applied, “ to at least some extent,” to the payment of the debts and obligations of the defendant. This fact would tend to establish the company’s liability for the notes sued on under the theory that they were responsible in thus having held Allen out as their agent to make their notes. But in order to create such an agency by representation or estoppel, it is essential that the principal shall have knowledge of the assumption by the agent of the powers he has exercised. In order to create a liability in this case, therefore, it was necessary to go a step further in the findings and to find that the company had knowledge of the fact that Allen had so applied the proceeds of these notes. There not only is no such finding, but the referee has expressly found that the directors had no knowledge that Allen had assumed to make the notes of the company and that they never authorized him to do so. The finding with regard to the application of the proceeds of these notes, therefore, does not go far enough to establish a liability in this case. The fact that an agent has in one or more instances made notes and applied the proceeds in part to the payment of liis principal’s debts, without his knowledge, creates no liability on his part for the agent subsequently making notes in the name of the principal.

Again, the notes sued on were delivered to Yan Steenburgh on February twenty-eighth. lie says that he agreed to buy them, and to give Allen bonds to the amount of $8,500, and $4,600 in cash. Only two of the bonds for $500 each were delivered on that day, and the rest of the bonds and the cash were not to be delivered until Yan Steenburgh discounted the notes. Allen was removed as treasurer on February twenty-eighth, and the notes were not discounted by the plaintiff until nearly a month later. Allen could tell nothing aboirt what he did with the two bonds lie received, and was very indefinite and uncertain as to when he received them. The story as told by these two witnesses is not very satisfactory. It looks as though the truth really were that Mr. Yan Steenburgh proposed to take the notes of the company provided he could get them discounted, and to give Allen some of the proceeds and to sell some of his bonds; but it is extremely doubtful whether he ever agreed to take the notes until after he should first ascertain whether the bank would discount them. That seems to be very probable from the testimony of Mr. Boyce, the bank president. 'Whether the notes had a legal inception before February twenty-eighth is certainly very doubtful, bnt if they did, the referee’s finding, that Allen had no authority to make the notes of the company, and that the board of directors never authorized hum to make the notes, and never knew that he had previously assumed to do so, puts this case upon a single point, that some of the proceeds of some of the previous notes had been used by Allen to pay the debts of the company without the knowledge of the company or its officers, and that, therefore, the company became liable for Allen’s acts in subsequently issuing the notes of the company and applying the proceeds thereof to his own use. The evidence that Allen had applied any of the proceeds of any of the previous notes to any of the debts of the company was of the most unsatisfactory character. His evidence is made up of loose, general statements and conclusions. He does not specify any debt of the company, nor does he point out any entry upon his own books nor upon the books of the company of any such payment. And upon cross-examination it was made to appear, that wdien he was talking about the debts of the company, he included in that term his own individual liability, or certain debts of Mr. Hopkins which he had assumed to pay. This finding of the referee, therefore, stands upon evidence which will not bear critical analysis or examination. But it is a misnomer to say that some of the proceeds of the previous notes were used for the company, as it is clear that the proceeds-went into the private bank account of Allen & Head, and that if they paid any obligations of the defendant it was in pursuance of a private arragement with other parties, and was only what Allen had agreed to do personally; and it was, therefore, his own debt, the defendant company having provided for all its obligations by an issue of bonds. In other words, the defendant issued bonds for all its purposes. Parties, among whom was Allen, became possessed of the bonds, agreeing to pay all the obligations of the company. It was to pay this personal obligation of Allen that the money, “ to some extent,” as the referee says, was used. In fact, these .notes were never authorized, and no part of the proceeds were ever used for the benefit of the defendant.

This water company was not a trading or banking corporation, and there was nothing in the nature of the business that implied that the treasurer, by virtue of his office, had authority to borrow money and give notes therefor. Under all the circumstances, it becomes a serious question whether the plaintiff was not put upon inquiry as to the power of Allen to make these notes (Claflin v. Farmers and Citizens' Bank, 25 N. Y., 293), Allen having drawn the notes payable to his own order.

Under all the circumstances, we think there was no real or apparent authority in Allen to issue the notes; that none of the proceeds of these notes or any previous notes of the company ever went to the benefit of the company, and. that the judgment must be reversed and new' trial had before the same referee.

Barnard, P. J., and Dykman, J., concurred.

Judgment reversed and-new trial granted, costs to abide event.


author: Pbatt, J.:

text:
    LEOPOLD MICHEL, Respondent, v. MAX HALLHEIMER, Appellant, Impleaded, etc.

      Conveyance of land, when rescinded where there is a failure to perform the agreement under which it is conveyed.

    Although, as a general rule, a failure to perform an agreement under which land is conveyed will not afford a ground for rescinding the conveyance, yet an exception to that rule arises when the remedy at law for the breach of the agreement would not give adequate relief.
    Appeal by the defendant Max Hallheimer from an order denying a motion made by said defendant to set aside the verdict of a jury and for a new trial of the issues in the action, made at the Kings County Circuit on January 23, 1890, and entered in the office of the clerk of the county of Kings. *
    The action was brought for the partition and division of certain premises according to the respective rights of the parties therein, or for a sale thereof and division of the proceeds. The answer alleged that all the interest which the plaintiff had in the premises was acquired from the defendant Max Hallheimer, who, on or about the 29th day of May, 1887, was the sole owner of a certain contract, whereby he was entitled to purchase the same at a price which was much below the real value thereof; that the plaintiff, while said contract was in force, applied to said defendant for a half interest in said contract of purchase, and represented that if he was admitted to said interest in the contract, he would pay the remainder of the purchase-money of the premises, which had not been paid by said defendant, and would advance the necessary sums to improve the premises; that, pursuant to said understanding between the parties, the title to the premises was conveyed to the plaintiff and the said defendant as tenants in common; that the plaintiff had failed to perform the agreement on his part, whereby the said defendant had been greatly damaged. The defendant asked judgment that the plaintiff be compelled to convey to him the one-half interest in the premises which he had acquired in the manner aforesaid, and that the plaintiff’s complaint be dismissed on the merits.
    Upon the trial the plaintiff’s counsel moved the court to direct a verdict in favor of the plaintiff, that he was seized and entitled in fee to the undivided half interest in the premises in question as set forth in the complaint, which was indefeasible in him, and that his right to the same could not be affected by the matter set forth in the answer. The court granted the motion and directed the jury to so find, which they did.

      Charles J. Patterson, for the appellant.

      Ira Leo Bamberger and William J. Qaynor, for the respondent.
   Pbatt, J.:

"We think that a valid counter-claim is set up in the answer and that the defendant should have been allowed to introduce his proofs. If it be that, as a general rule, a failure to perform an agreement upon which land is conveyed will not afford ground to rescind the conveyance, an exception to that rule must arise when the remedy at law for the breach of the agreement would not give adequate relief.

In the case at bar the contract for the improvement of the land is not sufficiently specific to enable a court to decree performance. Nor could the injured party prove damages with adequate precision. No one can tell exactly what profits defendant would have made had plaintiff carried out the contract with entire good faith.

Perhaps no profits woxxld have beeix realized, bxxt defendant was entitled to the chance ; for that supposed advantage he was willing to yield certain rights to the plaintiff. Now that the consideration is withheld on which those rights were given, defendant should be reinstated in his title on such terms as shall be just. To hold otherwise would hold out a bounty to bad faith.

Judgment reversed and new trial, granted with costs to defendant to abide the event.

Barnard, P. J., and Dykman, J. concurred.

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


author: Pratt, J.: Dykman, J.

text:
    AMI K. STRANG, Appellant, v. CATHARINE PETERSON and Others, Respondents.

      Duress — a security given, to a third party, in order to raise money with which to compound a crime under threat of the prosecution of ct son.

    A payment made through fear of a criminal prosecution of a near relative is- made under duress.
    A security, which is given by a mother to a third party to obtain money from him, with which to pay the amount due to the creditor of a son whose obligation to pay arose out of a forgery, and to prevent the criminal prosecution of the son, will be void. (Dykman, J., dissenting.)
    Appeal by the plaintiff Ami K. Strang from a judgment, entered in the office of the cleric of Westchester county on the 16th day of September, 1889, dismissing the complaint, with costs.
    The action was brdhght for the foreclosure of a bond and mortgage given by the defendant Catharine Peterson for the purpose of seeming the payment to Ami K. Strang, the plaintiff, of the sum of $961 and interest. The defendant Catharine Peterson was permitted by the referee, upon the trial of the action, to amend her answer setting up fraud and duress in the procurement of the bond and mortgage, and alleging that they wore obtained and executed under an agreement to suppress a criminal prosecution against her son.
    The referee, before whom the action was tried, found, among other things, that Herman F. Peterson, who was a son of the defendant Catharine Peterson, the owner of the mortgaged premises, being indebted for the purchase of cattle, made his promissory notes, payable to the order of Ami TL Strang, and indorsed the same with the name of said Ami K. Strang, and delivered the said notes to Bonnett Miller and Edward B. Brady, respectively, to each of whom he was indebted, without the assent of the said Ami K. Strang, whose name upon said note was forged; that subsequently Strang consented to indorse the above-mentioned notes, provided he could be secured, and at the suggestion of some of the parties Strang called on the defendant Catharine Peterson to learn if she would give a bond and mortgage on her real estate to secure him, the said Strang, for his indorsement of said notes, which she was finally induced to do, and in consequence thereof the bond and mortgage in question was executed by her to the plaintiff, with the understanding that if she gave such bond and mortgage the parties interested in said forged notes would refrain from prosecuting her son criminally for such forgeries; but that if she did not give such bond and mortgage, her son would then be prosecuted.

      Travis (& Smith, for the appellant.

      Eugene B. Travis, for the respondent Catharine Peterson.

      Elbert P. James, for the respondents Whitney and White.
   Pratt, J.:

It is entirely clear that the motive impelling Mrs. Peterson to make the mortgage in suit was her belief that her son had been guilty of forgery and would be punished criminally if she did not secure the debt. The referee has found that the son was thus guilty, and that a prosecution therefor' was stopped by the giving of the mortgage. There is abundant evidence to sustain the referee’s conclusion. It is now suggested by plaintiff that the referee was in error in this finding. That he should have given faith to the testimony that Peterson was authorized to place Strang’s name on the note, in which case no crime had been committed and the course of justice was not interfered with by giving the mortgage. But such facts would not make the mortgage valid. Eadie v. Slimmon (26 N. Y., 9) is authority that fear of a prosecution of a near relative is such duress that a security obtained by means thereof cannot stand. Bayley v. Williams (4 Giff., 638; affirmed, Williams v. Bayley, 1 H. L. [Eng and Irish App.], 200), is to the same effect. (See, also, Pollock on Contracts, 557.)

The judgment should be affirmed, with costs.

Barnard, P. J., concurred.

Dykman, J.

(dissenting):

This is an action to foreclose a mortgage made by Catharine Peterson to the plaintiff. Catharine Peterson answered the complaint, setting up her coverture and the consequent invalidity of the bond and mortgage, and denied the execution of those instruments with knowledge of their character.

The administrators of Seth Whitney were afterwards brought in as defendants, and they served an answer denying that they had any lien upon the mortgaged premises subsequent to the lien of the plaintiff’s mortgage and claiming priority of lien for a mortgage which they held.

In this state of the pleadings the action went to a referee to be tried and determined, and during the progress of the trial, Catharine Peterson and the administrators of Whitney were permitted by the referee, against the objection and exception of the plaintiff, to amend their answers by setting up fraud and duress in the procurement of the bond and mortgage, and that they were obtained and executed under an agreement to suppress a criminal prosecution for forgery against the son of Catharine Peterson.

The trial was then continued under the new pleadings, and the referee decided in favor of the defendants and dismissed the plaintiff’s complaint.

The allowance of the amendment to the answers by the referee upon the trial was clearly erroneous. New issues were thereby introduced into the case which entirely changed the character of the defense, and that is inadmissible upon the trial.

We will make no further examination of that error, however, as our view of the whole case is essentially different from that of the referee who rendered the judgment.

The material facts are these: Herman E. Peterson, the son of Catharine F. Peterson, the mortgagor, was a butcher, and prior to March 13, 1880, the date of the mortgage in question, Herman became indebted to Bonnett Miller and Edward B. Brady in considerable sums fox cattle purchased of them, respectively, and for such indebtedness he had made his promissory notes to each of them, payable to the order of the plaintiff, Ami K. Strang, and indorsed them himself with the name of Strang and delivered the same to Miller and Strang, respectively. Such indorsements were forgeries.

When it became known that Strang denied the authenticity of the indorsements upon these notes, the holders began to demand payment or security, and used language indicative of a purpose to invoke the aid of the criminal law if some. arrangement was not made for the payment of their claims.

Under pressure of those circumstances, Herman endeavored to induce Sti’ang to take an assignment of some claims of his and assume the payment of the notes, which Strang declined to do. Then Strang, at the request of Herman, had an interview with his mother, and an arrangement ivas made by which she was to give Strang a mortgage upon her property and he was to undertake the payment of the notes. In pursuance of that arrangement the mortgage in suit was executed and delivered to Strang and he paid the notes. Upon this subject the finding of the referee is, that Strang called upon the mortgagor to learn if she would give him a mortgage on her real estate to secure him for his indorsement of the notes, and she finally, consented to do so.

The referee has found that the bond and mortgage were made under an agreement that their execution would prevent the prosecution of her son criminally for the forgeries of the indorsements of Strang, and that the parties interested in such notes would refrain from such prosecution; and that the only consideration to' her for giving the bond and mortgage was to save her son from such prosecution.

Assuming, as we may, that the referee intended to find that the execution of the bond and mortgage was induced and obtained by threats of imprisonment of the son of the mortgagor, then she could avoid those instruments if they had been given to the creditors of her son to secure the payment of his liabilities to them. (Adams v. Irving National Bank, 116 N. Y., 606; Eadie v. Slimmon, 26 id., 9.)

This case, however, is not like that, of Adams and others of a kindred character, for in all those cases where the doctrine has been applied the threats of arrest have proceeded from the creditors, and the payments have been made or the securities executed to them. Here the case is very different. Strang had nothing at stake, and no reason to institute criminal proceedings against Herman. The spurious paper was not passed upon him and the forgery gave him no concern. If the criminal law was to be set in motion, the creditors alone were interested in its movement. He simply agreed to assume the payment of the notes upon receiving security for the assumption of such liability. In substance and legal effect, he agreed to make a loan of money to discharge the debts evidenced by the notes, and he made the loan in reliance upon the security he received, and the purpose of the loan or the use to which the money was to be appropriated ivas a matter of entire indifference to him. Suppose the bond and mortgage had been made to another person, they could not be avoided because their execution was induced by a desire to raise money to prevent the arrest and imprisonment of the son of the mortgagor, and we suppose the same rule applies to Strang. He has been induced to make a loan in reliance upon the bond and mortgage, and the mortgagor having thus obtained his money should not now be permitted to repudiate the transaction.

The question of priority between the two mortgages must be settled upon another trial. It must be borne in mind that this is not a case of the composition or compounding óf a felony, and the decision proceeds upon no such ground, and is not in hostility to the decisions in the cases where that question has been involved.

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

Judgment affirmed, with costs.


author: Dykman, J.:

text:
    GEORGE W. DIDSBURY, Respondent, v. J. WESLEY VAN TASSELL, as Sheriff of Dutchess County, Appellant.

      Chapter 30 of 1881 does not prohibit the transaction of legal business — service of a summons in a suit against a sheriff for an escape — addition of “sheriff” to his name.

    Tlie provisions of chapter 30 of the Laws of 1881 do not prohibit the commencement of actions or the transaction of legal business upon the holidays mentioned in said act.
    In an action commenced against a sheriff for an escape from the jail limits the summons may be properly served on the under-sheriff, and the addition of his official title to the name of the sheriff in such an action is only by way of description, and is a superfluous addition.
    Appeal by the defendant from an order, entered in the office of the clerk of the county of Dutchess on the 14th day of January, 1890, which denied a motion to set aside the service of the summons on the grounds :• Eirst. That the service was made on December 25, 1889 (Christmas Day).' Second. That service was made on the under-sheriff. Third. That there was no such firm of attorneys as appeared on the summons, and was not at the time of the commencement of the action.

      W. L. Thorn, for the appellant.

      MoOroslcery & Seeger, for the respondent.
   Dykman, J.:

This action was commenced against the sheriff for an escape from the jail limits, and the summons was served on the under-sheriff on the 25th day of December, 1889. Thereupon a motion was made at Special Term to set aside the service because it was made on Christmas Day, which was a holiday, and on the under-sheriff instead of the sheriff. It seems also that an objection was raised against the form of the action, because it was not commenced against the sheriff individually, but even if that objection can be made available upon a motion to set aside the service, it is baseless. The action is against the sheriff individually, and the addition of his official title is only by way of description, and is a superfluous addition.

The service upon the under-sheriff was justified by the third subdivision of section 426 of the Code of Civil Procedure by the following language: “ If the action is against a sheriff for a cause specified in section 158 of this act (which this action is), by delivering it to the defendant in person or to his under-sheriff in person.” * f "x'

The objection to the service, because it was made on Christmas Day, is based upon chapter 30 of the Laws of 1881, and the solution of the question involved depends upon the exposition of that statute, which has never been construed or expounded by the Supreme Court, or Court of Appeals so far as we can ascertain, yet it is often brought forward, as.'it was in this case, and its consideration becomes appropriate and necessary. The title of the act is “ An act to amend chapter 27 of the Laws of 1875, entitled ‘An act to designate the holidays to be observed in the acceptance and payment of bills of exchange, bank checks and promissory notes,’ ” and the second section amends the title of the act of 1875 by adding thereto the words “ and relating to the closing of public offices.”

It is to be observed, generally, that no law in this State has ever interdicted the service of any legal process or the holding of any court on a holiday. Such days have heretofore been designated for certain specified purposes connected with commercial paper, and in no statute creating them have legal proceedings ever received mention. No coui’t can be opened for the transaction of business on the day of any general or special election, or on Sunday, with some exceptions, unimportant here, and that is the extent of such inhibition in this State. Beyond those days legal proceedings are left untrammeled, and courts may be opened and litigation may be continued on any other day. Neither has the, new law set up any different rule. It neither has nor professes to have any application to the courts or their operations or any judicial transactions. It embraces but one subject, and amends an act to designate the holidays to be observed in protesting of bills, checks and notes, and closing public offices, and the text of the law adheres with fidelity to the restricting phrase of the title. The first portion of section 1, as amended by chapter 289 of 1887, recapitulates certain days, including Christmas Day, and every Saturday afternoon, which “shall for all purposes whatever as regards the presenting for payment or acceptance, and of the protesting and giving notice of the dishonor of bills of exchange, bank checks and promissory notes made after the passage of this act, be treated and considered as the first day of the week, commonly called Sunday, and as public holidays or half holidays.” Then follows other provisions specifically relating to paper bills down to the insertion of a provision continuing every Saturday as a secular day down to twelve o’clock noon, unless it be a whole holiday. Then the section closes with these words: “And the days and half-days aforesaid shall be considered as the first day of the week commonly called Sunday and as public holidays or half-holidays for all purposes whatsoever as regards the transaction of business in the public offices of this State, or counties of this State.” There is nothing new in this law, except the annexation of Labor Day and Saturday afternoon to the former holidays, and the purposes for which they are so set apart from secularity are specifically stated to be for purposes connected with commercial paper, and no language is employed to give the statute any broader scope or wider operation or any application to any other subject.

Then the days and half-days specified are, by the closing sentence quoted, declared to be considered as Sundays and public holidays or half-holidays for all purposes respecting the transaction of business in the public offices of this State and the counties therein.

Holidays are periods of relaxation and am usement and exemption from labor, and it was the object of the law under review to enlarge their number and provide for their enjoyment. That end was attained by considering the designated holiday as Sunday for all purposes of business in the public offices, and authorizing the protest of dishonored paper the day before. The closure of the banks and public offices was thus secured, and that released a large number of persons.

The civilians employed the latin term “ dies juridiens” to denote the days for legal purposes or judicial proceedings, and the term “dies non juridieus” was used by them to designate the days in which judicial proceedings were prohibited, but, with the exception of Sunday, we have no such days, and there is no reason for their augmentation. The avenues of approach to the courts should be open on all secular days, and great inconvenience and positive loss and injury will result from their diminution. We cannot, therefore, impute to the legislature an intention to diminish the number of judicial days without unequivocal language expressive of such a design.

The legislature has declared this to be an act to designate the holidays to be observed in the acceptance and payment of bills of exchange, bank checks and promissory notes and relating to the closing of public offices, and no design is expressed either in the title or the text to embrace any other subject in this legislation. If the legislature entertained the purposes of abridging the days or limiting the times in which actions could be commenced in this State, it would have employed plain, unequivocal language for the accomplishment of that end.

It would have been easy to prohibit the commencement of actions and the transaction of legal business upon holidays and make them Sundays for all purposes, but it was not done, and the issuance and service of legal process remains unrestricted as it was anterior to this law, and holidays are yet juridical.

Our examination has failed to discover any case where judicial proceedings have been set aside or nullified because they were instituted, continued or terminated on a legal holiday. The defendant cannot escape from the service, and the other grounds of appeal are untenable.

The order should be affirmed, with costs and disbursements.

Pratt, J., concurred; Barnard, P. L, not sitting.

Order affirmed, with costs and disbursements.


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    QUEENS COUNTY BANK, Respondent, v. ELIZA M. LEAVITT, Appellant.

      Note of a wife made for the husband’s accommodation — •salid in the hands of a party discounting it for the husband.

    A note made by a married woman for the accommodation of her husband, and with knowledge of the fact that he was about to procure it to he discounted for his benefit, does not create a contract obligation between the husband and wife, and is a valid obligation as against the latter in the hands of a party by whom the same has been discounted.

      Appeal by the defendant Eliza M. Leavitt from a judgment, entered in the Queens county clerk’s office on the 15th day of October, 1889, after a trial before the court and a jury at the Queens County Circuit, at which a verdict was rendered for the plaintiff for the sum af $2,899.50.

      C. A. 8. Vcm JVostrand, for the appellant.

      JVathcm JJiyur, for the respondent.
   Dykman, J.:

This action was brought upon a promissory note of which the following is a copy:

“ $2,800. Flushing, November 5, 1888.

Four months after date I promise to pay to the order of Buf us W. Leavitt, twenty-eight hundred dollars at the Queens County Bank, Long Island City, value received.

“ In consideration of one dollar to me in hand paid, I hereby bind my separate estate for payment of the above amount.

“ ELIZA M. LEAVITT.”

At the time of the execution of this note the maker was a married woman, and the wife of the payee, Bufus W. Leavitt, and the note was made without consideration as between the husband and wife, and was made for the accommodation of the husband, and he indorsed the same and delivered it to the Queens County Bank for the propose of taking up another note which the bank held against him, which was also made by his wife.

Upon the conclusion of the testimony at the trial the court directed a verdict for the plaintiff, and the defendant has appealed from the judgment entered thereon. We can discover no error. The note in suit was made with full knowledge of the use to which it was to be appropriated, and there is no claim interposed of any diversion of the paper. The note was made by the wife for the accommodation of her husband, and the existence of the debt from the husband to the bank was a sufficient consideration between them to sustain the transfer of the note to the bank. (Schepp v. Carpenter, 51 N. Y., 602.) Being an'accommodation note it did not inure as a contract between them, because it had no inception until it was discounted or taken by the bank in place of the old note. (Bowery National Bank v. Sniffen, 54 Hun, 394.) There never was any intention to create an obligation of the wife to the husband by the execution of the note in question, and ' the paper had no inception as a contract until the delivery of the same to the bank in payment of the old note. These remarks are made to show that chapter 381 of the Laws of 1884, respecting the capacity of married women to make contracts, and the reservation and proviso contained in the second section of that act can have no application to this action.

It was the evident intention of the defendant to become surety for her husband, and she had capacity and competency to enter into such obligations previous to the larv of 1884, and her obligation thus assumed is valid and binding. (Corn Exchange Bank v. Babcock, 42 N. Y., 613.) We find no exception well taken and no error.

The judgment should be affirmed, with costs.

Barnard, P. J., and Pratt, <L, concurred.

Judgment affirmed, with costs.


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    DAVID T. BAYLES and Another, Respondents, v. HOWARD WALLACE, Appellant.

      Statmte of frauds — when an agreement to be responsible for the p\Lrchase-price of lumber furnished, to a third, person is an original conVraet.

    Where a party furnishing lumber for the erection of a building, after the delivery of a portion thereof, becomes suspicious as to the solvency of the contractor and refuses to furnish more lumber unless the owner of the property shall become responsible therefor, and such owner agrees to become responsible for the lumber delivered subsequent to that time, the contract with such owner is an original undertaking and does not fall within the statute of frauds, and he becomes the original debtor for the lumber thus furnished in consequence thereof.
    Appeal by the defendant from a judgment, entered in the Suffolk county clerk’s office on the 27th day of December, 1889, in favor of the plaintiffs, after a trial at the Suffolk County Court before the court and a jury, at which a verdict was rendered in favor of the plaintiffs for the sum of ninety-seven dollars and thirty-eight cents; and also from an order denying defendant’s motion for a new trial made upon tlie judge’s minutes.
    The action was brought to recover the sum of ninety-seven dollars and thirty-eight cents and interest, the balance due from one Samuel H. Brewster to the plaintiffs D. T. Bayles & Son, and was based upon the alleged special promise of the defendant Howard Wallace that he would pay the same.

      Thomas J. JZitch, Jr., for the appellant.

      Thomas S. Moimt, for the respondents.
   Dykman, J.:

This is an appeal from a judgment entered upon a verdict rendered in the County Court of Suffolk Coxmty in favor of the plaintiffs, against the defendant, and from an order denying a motion for a new trial on the minutes of the court. The action was brought for the recovery of a balance due upon an account for lumber xxsed in the erection of a building for the defendant.

The contractor for the erection of the building was Samuel H. Brewster, and the agreement to furnish the lumber was originally made with him, but the claim of the plaintiffs upon which this action is based is, that after they had delivered some lumber under their agreement with said Brewster they became suspicioxxs and informed the defendant that unless he became responsible for the lumber they would furnish no more, and that the defendant then agreed to become responsible for the lumber delivered sxxbseqxxent to that time.

That agreexnent was denied by the defendant, and the two theories were presented to the jury with instructions to render a verdict for the plaintiffs if the agreement was made as they claimed, and to find for the defendant if it was not made.

The jury rendered a verdict for the plaintiffs, and we must, therefore, assume that the agreement was made according to the testimony of the plaintiffs. Assuming the existence of the agreement, the defendant became the original debtor and the contract did not fall within the statxxte of frauds, because it was an original undertaking. There was no error in the charge of the trial judge, but, on the contrary, the case was properly presented to the jury by the charge. The vei’diet is evidently just, and fully sustained by the evidence.

The judgment and i order denying the motion for a new trial should be affirmed, with costs.

Barnard, P. J., and Pratt, J., concurred.

Judgment and order denying new trial affirmed, with costs..


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    CLARISSA J. BARRETT, Respondent, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY, Appellant.

      Service of a summons upon a general superintendent of a corporation — good.
    Personal service of a summons in an action against a corporation upon the general superintendent of the company, who has charge of one of the departments of the corporation, is sufficient.
    It is not essential that the person served should have the entire charge or control of the corporation or of its business.
    Appeal by the defendant from an order, entered in the office of the cleric of the county of Putnam in February, 1889, which order was made at a Special Term held in Kings county on the 19th day of February, 1889, denying a motion made by the defendant for an order dismissing the action, and vacating and setting aside the service of the summons therein, upon the ground that the said summons was not served upon the defendant company in accordance with the provisions of section 481 of the Code of Civil Procedure.

      Melville Egleston, for the appellant.

      W. B. Yeomans, for the respondent.
   Dykman, J.:

The defendant in this action is a domestic corporation, and the action was commenced- by the personal service of the summons on the general superintendent of the company. Thereupon a motion was made to set aside the same because it was not in accordance with the provisions of the Code of Civil Procedure, prescribing the manner of service upon a domestic corporation. That motion was denied and the defendant has appealed from the order of denial.

The provision of the Code respecting the service of process, to which the defendant appeals, is this : Personal service of the summons upon a defendant, being a domestic corporation, must be .made by delivering a copy thereof within the State * * * to the president or other head of the corporation, the secretary or clerk to the corporation, the cashier, the treasurer or a director or managing agent.” (Code of Civil Procedure, § 431.) While this section should be reasonably construed like all other laws, yet it should not receive a construction which would place unnecessary obstructions in the way of commencing actions against corporations. Those intangible bodies must always act through servants, and they must also necessarily be reached through officers or agents. Service of process must be made upon some person, and the object of the legislature was to provide for such service upon an officer or agent of the company who should be charged with some general duty, and have some general control of the affairs of the corporation, one who should occupy a position of responsibility and have an interest in the general 'management and prosperity of the company. The whole end and aim being to have the process placed in the hands of a responsible person who would yield attention to the same so that the company might suffer no default, and sustain no injury.

It is not essential, to the satisfaction of the statute, that the person served should have the entire charge or control of the corporation or of its business. If he sustains sufficient character and rank to render it reasonably certain that the corporation will be apprised of the service, the requirement of the statute is answered. In this case the service was made personally upon the general superintendent of the company, an officer having the general charge of one of the departments of the corporation, the same as the treasurer has the general charge of his department and the secretary has the general charge of another. The service so made was as certain to come to the knowledge of the corporation as if made upon the secretary or treasurer, and service on either of those officers would have been valid beyond doubt.’ The powers of the person served in this case were broader and more general than those of the person served in the case of Palmer v. Pennsylvania Company (35 Hun, 370), and we held the service sufficient in that case, and our decision was sustained by the Court of Appeals. (99 N. Y., 679.) In the case of Rochester, etc., Railroad Company v. New York, Lake Erie and Western Railroad Company (48 Hun, 190), service of process upon a division superintendent was held sufficient.

We deem the service in this case sufficient, upon principle and authority, and the order should be affirmed, with costs and disbursements.

Barnard, P. J., and Pratt, J., concurred.

Order affirmed, with costs and disbursements.


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    JOHN W. KISSAM, Appellant, v. ROBERT C. JONES, Respondent.

      Personal inyury from a vicious horse— duly of the owner to inform one hiring the horse of his vicious habits — evidence.

    In an action to recover damages for injuries received in a fall from a carriage, caused by a vicious horse which the plaintiff had hired from the defendant, it appeared that the plaintiff inquired at the defendant's stable, of a man in charge thereof, if the horse was all right and was told that he was just a little ‘ ‘ skeery. ” After the plaintiff had driven about a mile and a half the horse commenced to shy, then started up, turned around and ran down a hill until the plaintiff checked him. When he started to go back the horse turned around and upset the wagon.
    The defendant admitted on the trial that he knew the horse would shy when he saw anything on the road and would turn around.

      Held, that it was the duty of the defendant to have fully informed the plaintiff of the vicious propensities of the horse, and that he was legally liable in damages to the plaintiff because of his failure to impart to him such information.
    That, in view of these facts, evidence as to what were “the principal characteristics of that horse ” was inadmissible, as the uncontradicted testimony showed that the horse was vicious and had caused the accident by the very habit which the defendant knew that he had.
    Appeal by the plaintiff from a judgment, entered in the office of the clerk of the county of Suffolk on the 20th day of May, 1889, after a trial before the court and a jury at the Suffolk County Circuit, at which a verdict was rendered in favor of the defendant.

      Edward II. Kissam, for the appellant.

      Thomas J. Ritoh, Jr., for the respondent.
   Dykman, J.:

This action is for the recovery of damages for the injury sustained by the plaintiff in a fall from a carriage caused by a vicious horse which the plaintiff hired from the defendant. The cause was tried at the circuit before a jury and the defendant obtained a verdict. The plaintiff has appealed from the judgment, and although a motion was made for a new trial on the minutes of the court and denied, yet the plaintiff has taken no appeal from the order denying such motion. On this appeal, therefore, we are confined to questions of law solely.

We cannot review the case upon the facts to determine whether the verdict was against the evidence, but we can review the testimony to ascertain whether there was any evidence to support the verdict; and if we find none, we can reverse the judgment, for then the verdict was erroneous as matter of law. Such an examination of the testimony discloses the fact that the evidence is not contradictory and stands substantially uncontradicted. The plaintiff applied to the defendant to hire a horse and wagon to drive around the town, and the defendant agreed to furnish the same. In the afternoon of the same day the plaintiff went to the stable of the defendant and saw there a colored man and a boy, and found the horse harnessed to a buggy and tied. An examination of the horse excited some suspicion in his mind and he inquired if he was all right, and he was told that the horse was just a little skeery; ” and to an inquiry if there was any harm he received an answer, “ Oh, no, only a little skeery.” The answer disarmed his suspicion and he understood only that the horse might shy. He also informed the people at the stable that he was to take out a lady and wanted a good horse on that account, and while he was hesitating whether he should take the horse the colored man assured him that he was all right, “ only a little skeery.” The suspicions of the plaintiff were thus allayed, he did not think there would be any trouble and took the horse, and after taking in the lady he drove about a mile and a half when the horse commenced to shy, but not very seriously. After he went a little further the horse started up, turned around and ran down the hill, on a run, until the plaintiff checked him, then he started to go back and the horse turned around and upset the wagon and the plaintiff received very serious injuries from the fall. In the effort' to control the horse one of the lines broke, and then all control of the horse was lost and he became unmanageable.

In his examination, in his own behalf upon the trial, the defendant stated that he remembered the plaintiff coming to him and asking him if he had a horse that he could hire to go out riding, and he said to him: “Yes, I have got a horse, if you think you can drive him you can have him.” He also said that he knew the horse would shy, and that when he saw anything in the road he would shy and turn around; that he had told his employees not to let the horse out without telling them the kind of a horse he was. He does not state or claim that he gave the plaintiff any notice of any vicious propensity of the horse, that he would turn around in the road, or that he had any vice whatever. One of the defendant’s employees, Joseph Smith, testified that the defendant had told him whenever the horse went out, to tell people about him, and that he told the plaintiff that he wanted to look out for him, that he would go all right, to keep a taut rein on him; so that the testimony is substantially uncontradicted. The defendant let this horse to the plaintiff and gave him no notice of any vicious propensity, when he knew that the horse had the habit of toning round in the road, than which nothing can be more dangerous. If a horse turns suddenly around before a four-wheeled vehicle, it is almost certain to be upset, and injury is almost certain to result therefrom.

"When the defendant let this horse to the plaintiff the law cast upon him the duty and obligation to give the plaintiff a horse that was manageable«and safe. The law is that the defendant warranted the horse, wagon and harness to be fit for the use contemplated, and such warranty is always implied where the quality or fitness of the article for the use specified is not visible and the defect is not discernible by an ordinary observer. The keeper of a livery stable engaged in the business of letting carriages and horses on hire, is bound to furnish a customer with a carriage and harness reasonably strong, safe and secure for the purposes of the journey. (Edwards on Bailm., § 373.)

It was the duty of the defendant also to inform the plaintiff fully of the vicious propensities of the horse, and he is legally liable for the damages which resulted to the plaintiff in consequence of his failure to impart to him such information.

It is easy to see that the suspicions of the plaintiff were lulled instead of excited by what the defendant told him, and by what the servants of the defendant told him at the stable. He could only infer from the language used to him that the horse was a little flighty or might shy, but that if he used proper care and caution in the use of the animal, and held-upon him a taut rein there was no danger. The information should have extended further, and the plaintiff should have been fully informed of the particularly danger! ous habit of the horse, before it can be claimed that he assumed any risk.

There is, therefore, no evidence to sustain the verdict, and it should be set aside.

There is also a fatal exception in the case which will require a new trial. One of the witnesses for the defendant, who had stated that he had frequently driven the horse, was asked this question: “State to the jury what are the principal characteristics of that horse ? ” This was objected to as immaterial. The objection was overruled and the plaintiff excepted.

After the uncontradicted testimony that the horse was vicious and had caused the accident by the very habit which the defendant knew he had, the evidence respecting the character or disposition of the horse was improperly admitted. It was entirely immaterial what the general disposition or character of the horse was. In obedience to his well-known vicious propensity, he had turned round suddenly in the road, upset the wagon and injured the plaintiff, and that gave him a cause of action and imposed liability upon the defendant for the result; and evidence of the character of the horse was entirely immaterial and was well calculated to divert the attention of the jury from the proper consideration of the real question at issue. (Buckley v. Leonard, 4 Denio, 500.)

In that case, where the owner of a dog, which had bitten other persons, had notice of the fact, and afterwards suffered him to be at large, when he bit the plaintiff, it was held that it was no answer to the action for the injury to the plaintiff that the dog was generally inoffensive; and Jewett, J., in giving the opinion in that case, said: “ The evidence given by the defendant of the mild character and deportment of the dog, I think, was improperly admitted; it was immaterial. If the evidence proved that the dog bit the plaintiff, that the defendant was the owner, and knew or had notice that the dog had been accustomed to bite others, he was responsible for the injury, however high the character of the dog for mildness stood among the neighbors. Such evidence was well calculated to divert the jury from a proper consideration of the real point in issue. * * * The evidence of the injury to the plaintiff, of the dog having previously bitten others, and that the defendant had notice of it, stands uncontradicted, and these facts were abundantly sufficient to require the jury to find for the plaintiff.”

The same principle applies to this case. So our conclusion is, first, that the verdict is entirely unsupported by the evidence, and, second, that a fatal error was committed in the admission of the testimony respecting the characteristics of the horse. As the testimony stood at the close of the case the evidence required a verdict for the plaintiff; and the trial judge would have been entirely justified in directing the jury to find for the plaintiff, leaving the question of damages alone for the consideration of the jury.

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

Pratt, J., concurred.

Judgment and order denying new trial 'reversed and new trial granted, costs to abide event.


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    CHARLES E. SKINNER, as Trustee of the SMITH MOQUETTE LOOM COMPANY, Appellant, v. WARREN B. SMITH and Others, Respondents.

      Sight of all the directors, shareholders and credito?’s in a corporation to transfer to themselves patentrights held by the corpoi'ation and substitute therefoi' their notes— right to wind up a private cmporation.

    No principle of law or of public policy is violated by an agreement by which all the directors and shareholders of a trading corporation, the capital stock of which is represented by a patent which such parties have assigned in payment therefor, take reassignments to themselves of such patent from the corporation and give their promissory notes to the corporation in place thereof, where there are no creditors of the corporation.
    There is no obligation to the State or to the public imposed upon a private manufacturing corporation to carry on the business for which it was formed. It may, at any time, put an end to its transactions and voluntarily wind up its affairs.
    Appeal by the plaintiff Charles E. Skinner, as trustee of the Smith Moquette Loom Company, from a judgment, entered in the office of the clerk of the county of Westchester on the 27th day of March, 1888, dismissing the complaint in the above-entitled action, with costs and disbursements, and fi-om an order, entered in said office on the 28th day of February, 1888, granting to the defendants an extra allowance.
    The action was tried before the court, without a jury, at a Special Term held in the county of Dutchess on the 24th day of March, 1888. The complaint demanded judgment that certain resolutions of the defendant, the Smith Moquette Loom Company, be rescinded; that the defendants, other than said company, render an account for certain certificates, representing shares of the capital stock of said company, and that certain assignments specified in the complaint be set aside, rescinded and canceled, and that the defendants, other than said company, be required to execute suitable instruments, in writing, for the purpose of vesting in the Smith Moquette Loom Company the legal title to a certain patent, with the invention thereby secured, and any and all reissues thereof, etc.; and that they also be compelled to account for all accounts, profits and advantages by them in any manner made by reason of the transactions set forth in the complaint.

      Theron Q. Strong, for the appellant.

      Joseph U. Choate and Theodore Fitoh, for the respondents.
   Dykman, J.:

On the 15th day of January, 1877, letters-patent of the United States were granted to Alexander Smith for an improvement in looms, and the invention thereby secured was very valuable. When he died he left two children, Warren B. Smith and Eva S. Smith, now the wife of William F Cochran. There were, likewise, letters-patent for a similar invention granted by foreign governments, and at the death of Alexander Smith all the patents came to his two children and belonged to them. Later, however, it appears that William F. Cochran became the owner of one quarter of the patent and his wife retained a quarter also, while Warren B. Smith continued to own the one-half.

Being thus the owners of all the patents, on the 13th day of December, 1878, those three persons organized the Smith Moquette Loom Company under the general manufacturers’ act of 1848, with a capital stock of $40,000, and transferred the title of the patents to the corporation at that valuation, for the purpose of collecting and distributing the dividends to accrue from the royalties for the use of the patents; and while the certificate of incorporation recited other objects for which the company was formed, yet no other business was transacted by the company down to the 21st day of September, 1880, when the corporation was re-organized in the manner to be hereinafter stated.

At that time the demand for moquette carpets was large, and the future prospects of manufacturing were encouraging, and the defendants concluded that it would be advantageous to the company to engage in such manufacturing; and as they were unwilling to part with the exclusive ownership of the patent and invention, they concluded to retransfer the same to themselves individually at the same nominal figure at which they had transferred it to the company, and to enable the company to go into manufacturing, erect the necessary buildings, buy machinery and to manufacture, that its capital stock should be increased to $600,000, all of which should be issued to themselves; $40,000 of that amount of money to be paid in by them for .the retransfer of the patent in lieu of the 40,000 shares originally issued to themselves which were to be surrendered; $23 0,000 of that amount to be paid in cash by themselves and the residue of $350,000 for án unlimited license to use the patents upon payment of the same royalty paid by the Alexander Smith & Sons Carpet Company, namely, twenty cents per yard.

The proceedings under the act for authorizing the proposed increase of capital were completed. The resolution was passed by the board of trustees of the company on the 19th day of October, 1880, to transfer the patent and invention to the defendants individually for the sum of $40,000 in the following proportions : Two equal undivided fourth parts to Warren B. Smith; one equal undivided fourth part to William F. Cochran, and one equal undivided fourth part to Eva S. Cochran, reserving, however, the right and license to manufacture and sell carpets under its United States patents, upon issuing to the assignees 3,500 shares of this capital stock and paying, as a royalty therefor, at the same rate as that paid by the Alexander Smith & Sons Carpet Company under its existing license. On the same 19th day of October, 1880, assignments of the letters-patent, and the invention secured thereby, were executed and delivered by the Smith Moquette Loom Company to Warren B. Smith, William F. Cochran and Eva S. Cochran, respectively, in the proportions above named, each of which assignments ivas expressly made subject to two licenses held by said Smith Carpet Company and the Hartford Carpet Company, and reserving the license and right to manufacture and sell the •patented improvements to the end of the term of the patent, upon payment of a royalty therefor at the same rate as then paid by the Alexander Smith & Sons Carpet Company and the Hartford Carpet Company, it being understood that such royalties were to be paid to the assignees and owners of the patent.

The entire amount of stock of the company, to wit, 6,000 shares, was issued to the defendants on the 18th day of November, 1880, as.follows: To Warren B. Smith one certificate for 3,000 shares; to William F. Cochran one certificate for 1,500 shares, and to Eva S. Cochran another certificate for 1,500 shares. The consideration therefor being, in the aggregate, $40,000 to all the defendants for the retransfer of the patent, and in lieu of the original 400 shares which were surrendered by them; $210,000 in cash subsequently paid by said defendants for such amount of stock at par, and $350,000 for the right or license to the company to use an unlimited number of looms under said patent upon payment of a royalty of twenty cents per yard license to manufacture under said patent, being limited to only two other companies in the United States, one of which had the right to run about one hundred and the other sixty-two looms. From the incorporation of the Moquette Loom Company until the issuance of the 6,000 shares of stock, after the issue thereof was authorized, and until the 1st day of March, 1881, no person other than the defendants had any interest in the corporation. There were no other stockholders, and they held all the stock and were the only trustees and officers. They alone had any interest in its business or property, or in its continuance or dissolution, and there were no creditors.

The original transfer of the invention and patent by the individual defendants to the company for $40,000 was made by them without any regard to its actual value, which was many times greater than that sum, and solely as a convenient mode of holding and enjoying title to the same, and to the royalties to be derived therefrom for their exclusive benefit, as the sole owners. At the time of the retransfer of the patent and invention the value thereof had not materially changed, and the retransfer at the same price at which the same had been conveyed to the company was made by the defendants without regard to its actual value, in good faith, in the belief that they had the legal right to cause the retransfer to be made by the company on the terms on which it was made, and without any design or intent to injure or defraud any person who might thereafter become the holder of any of the increased stock to be issued by the company, and no such person, or any person, was injured or defrauded thereby.

The unlimited license to manufacture under the patent, upon payment of a royalty of twenty cents per yard, was necessary for the manufacturing business of the Smith Moquette Loom Company, and was not an inadequate consideration for the amount of 3,500 shares of its capital stock, then issued therefor to the defendants according to their belief and expectation at that,time as to the manufacturing possible to be done by said company, and the issue thereof for that consideration was made by them in good faith and with no intent to defraud the company or any future holder of stock therein. Although the capital stock of the company was authorized to be increased to $600,000 by a certificate filed September 23,1880, it was not actually increased until the 6,000 shares of capital stock were issued to the defendants on the 18th day of November, 1880. "When the patent was sold to the defendants for $40,000 and the assignments thereof were executed and delivered to them on the 19th day of October, 1880, the amount of its capital stock was only $40,000. Subsequently the defendants surrendered the certificates issued to them on the 18th day of November, 1880, and received in exchange therefor certificates of various amounts aggregating, however, the same amount of shares as such surrendered certificates.

On the 31st day of March, 1881, the defendants assigned 1,000 shares of the stock so held by them to the plaintiff and Eugene Tymeson, each of whom received 500 shares, being 250 shares from Warren B. Smith, 125 shares from William E. Cochran and 125 shares from Eva S. Cochran, the certificates for which aggregate amount of 1,000 shares were assigned by the defendants out of their stock and the consideration for which was given to the Moquette Loom Company, consisting of an assignment of certain letters-patent held by the plaintiff and Mr. Tymeson for improvements in looms. The plaintiff and Mr. Tymeson, at and before the time they assigned the patents to the Moquette Loom Company and took an assignment of such certificates of stock, had knowledge that the Loom Company did not owii the Smith Moquette Loom Patent, but had only a right or license to use the same upon payment of a royalty, and that the patent had been transferred to the original owners, Warren B. Smith, William E. Cochran and Eva S. Cochran.

The negotiations for the purchase of the Tymeson and Skinner patents were continued between the plaintiff and the defendant Smith, and the defendant informed the plaintiff, before the same were closed, that the Smith Moquette Loom Patent had been reassignéd to the original owners, himself and Mr. and Mrs. Cochran, and that the capital stock had been increased to $600,000, and that had all been issued to the defendants, who were to put in $250,000 in cash, and that the company was to have a license to manufacture upon a royalty of twenty cents a yard. No misrepresentations were made to the plaintiff or Mr. Tymeson to induce them to assign their patents or accept any stock.

While the f actory of the, company was being built, the individual defendants sold 1,000 shares of the stock of the company held by them to W. J. Sloane, who took their stock from the defendants at par, paying them $100,000 therefor, and the stock therefor was thereupon issued to John Sloane, 500 shares on the 16th day of September, 188.1, and 500 shares on the 14th day of January, 1882; and John Sloane became a stockholder and trustee of the company, and before he purchased his stock he was informed of the fact that the company had assigned the loom patent to the individual defendants and held only a license, and sought only to manufacture, under said patents upon payment of a royalty of twenty cents per yard; and that the patent had been purchased for the sum of $40,000 from the company by the individual defendants, and that they had also paid $210,000 for that amount of stock; and that 3,500 shares of the stock had been issued to them for the right or license to the company to manufacture upon payment of said .royalty; and Mr. Sloane was cognizant of, and approved of, all the prior and subsequent proceedings of the defendants in regard to the affairs of the company. The only other stockholder to whom the defendants assigned any of their stock was Frank T. Holder, who became a trustee of the company, and who learned of the facts immediately above stated and approved of the proceedings of the defendants, and held his stock merely at their pleasure and as their property, and parted with no cohsideration therefor.

Hnder the management of the defendants the company proceeded to erect factory buildings, purchased looms and machinery and the necessary stock and commenced the business of manufacturing moquette carpets, and continued the same until about the close of the year 1882, and all of the money required therefor was furnished by the individual defendants. In addition to the sum of $250,000 in the treasury of the company arising from the $40,000 realized upon the retransfer of a patent to the defendants, and the sum of $210,000 in cash- contributed by them for that amount of stock, a much larger sum was loaned by them to the company in order to meet its business necessities, which sum so loaned was $378,750.20, and with interest thereon from November 1, 1882, on the 1st day of February, 1883,- amounted to $384,627.40, at which time the defendants made a demand in writing upon the company for the payment of the amount of the indebtedness.

The manufacturing business had been done at a loss, and at the beginning of the year 1883 there was stagnation in the demand for moquette carpets, the market was over-stocked, and there was no prospect of continuing the manufacturing business of the company at a profit, and no business could be carried on without additional money, which the defendants were unwilling to advance, and there was no means of procuring the same; and at that time it appeared that the continuance of the manufacturing business could only result in an increase of the loss already incurred. At a meeting of the trustees, held February 3, 1883, the resolutions offered by Mr. Sloane and set forth in the complaint were unanimously adopted, whereby it was determined to cease manufacturing, to lease to the Alexander Smith & Sons Carpet Company the real property and the machinery of the Moquette Loom Company for fifteen months from February 1, 1883, at an annual rent of $15,000, and payment of taxes and assessments accruing during said term; also to sell to the same company the merchandise and stock on hand, and pay over the net proceeds realized therefrom to the individual defendants, to apply on account of the company’s indebtedness to them; also to give to the individual defendants, who were such creditors, a bond for the residue of the account secured by mortgage,- both on the company’s real estate and also upon its machinery, tools and fixtures, provided the assent of the majority of the stockholders owning at least two-thirds of the capital stock should first be filed in the "Westchester county clerk’s office; also authorizing the due execution and delivery of the proper papers required to carry the resolution into effect. The defendants and Mr. Sloane voted for the resolutions in good faith, believing that there was no other way to save the Moquette Company and its stockholders from further loss, and that the acts and proceedings therein directed were for the best interest of the company and its stockholders, and such was the fact; and the defendants in passing the resolutions did hot intend to injure or defraud the plaintiff, as a stockholder of the company, and did not, in fact, injure or defraud him. The resolutions so adopted by the board of trustees were necessary and were for the best interest of' the company and the stockholders, and no better or other arrangement to save the company and its stockholders from further loss was practicable.

Immediately prior to the meeting of the board of trustees, on the 3d day of February, 1883, a meeting took place between the defendants John Sloane and the plaintiff, at which meeting the plaintiff was apprised of the necessity of closing the business of the company, but he made no suggestion in respect to a remedy for the difficulties in which the company was involved. The resolutions of February 3, 1883, were carried into effect; the lease to the Smith Carpet Company was executed, thé merchandise and stock on hand was sold to the same company, at cost price, for the sum of $207,605.85, which amount, less $25,511.23, the sum due to the carpet company from said loom company, was paid by the carpet company to the loom company, and by it applied to that extent in liquidation of the indebtedness of the loom company to the defendants. The bond and mortgage from the company to the defendants was executed and delivered, the assent of the majority of the stockholders owning at least two-thirds of the capital stock of the company, having been first obtained and filed in the Westchester county clerk’s office. About fifteen months later proceedings were commenced to foreclose the bond and mortgage. The judgment of foreclosure and sale under the real estate mortgage was entered in this court on about June 2, 1884, and the factory property described therein was sold by the refei'ee appointed by the court for that purpose, at public auction, and on the 24th day of June, 1884, after due notice, to Warren B. Smith, for the sum of $50,000, and a deed therefor was delivered to him by the referee, and the amount realized upon said sale was applied pursuant to the terms of the judgment in payment of the amount due the mortgagees as adjudicated by the court. The order confirming the report of said referee was entered about June 27, 1884, whereby it appeared that the deficiency upon the judgment was then $143,660.62, with interest from June 24, 1884, for which judgment was then entered against the company. Thereafter, due proceedings were had for the foreclosure of the chattel mortgage upon the machinery, tools and fixtures, and the same was sold at public auction to Warren B. Smith for $100,000, and the net amount so realized was applied to that extent in payment and liquidation of the amount of $143,660.62, with interest, then due to the said defendants. Both of these mortgage sales were regularly and fairly conducted, and the amount bid for the property, and for which the same was sold, was an adequate and sufficient consideration for the property. The defendant Smith still holds the title to the real and personal property, and in purchasing the same he acted for himself and William F. Cochran and Eva S. Cochran, and all his acts and proceedings were in good faith and without any fraudmlent or .improper motive. There are no creditors of the Smith Moquette Loom Company other than the individual defendants in this action.

The principal dispute respecting the facts, related to the knowledge of the plaintiff of certain transactions of the loom company previous to the acquisition of his stock; but most of the facts recited were found by the trial judge, and they are well sustained by the evidence. With the facts thus before us we are prepared for the examination of the case. It is the primary object of the action to procure the nullification of the reconveyance of the patents to the individual defendants by the loom company, and, second, to procure the surrender of the 3,500 shares issued to the defendants for the unlimited license to manufacture carpets under the loom patent; and, third, to annul the proceedings of February 3, 1883, and to set aside .the judgment and the proceedings in the foreclosure suit and compel the defendants to account for the property received. The action is brought under section 1Y81 of the Code of Civil Procedure, which is sufficiently comprehensive to justify its commencement.

The plaintiff invokes the provision of the Revised Statutes in condemnation of the retransfer of the loom patents to the defendants upon the re-organization of the company in September, 1880. That statute reads as follows, so far as it has any application to this action: "It shall not be lawful for the directors or managers of any incorporated company in this State to make dividends excepting from the surplus profits arising from the business of such corporation; and it shall not be lawful for the directors of any such company to divide, withdraw or in any way pay to the stockholders or any of them any part of the capital stock of such company, or to reduce the said capital stock without the consent of the legislature.” (3 R. S. [8th ed.], 1728.) This statute fell under the consideration of the Court of Appeals in the case of Williams v. The Western Union Telegraph Com pany (93 N. Y., 187), and this was the construction it there received: “ These provisions were intended to prevent the division, distribution, withdrawal and reduction of the property of a corporation below the sum limited in its charter or articles of association for its capital, but not to prevent its increase above that sum. The purpose was to prevent the depletion of the property of the corporation, thereby endangering its solvency. All the other provisions of the section show very clearly that such was the intention. Careful provision was made that the whole amount of capital stock should be paid in, and hence there was a prohibition against receiving a note or other evidence of debt in payment of any installment actually called in and required to be paid; and in case the directors violated any of the provisions of the section they were made individually liable to the corporation and to its creditors, in the event of its dissolution, to the full amount of the capital stock of the company so divided, withdrawn or reduced. All these provisions show that it was the purpose of the legislature, by means of them, to create a property capital for the corporation, and then to keep that intact so as to secure the solvency of the corporation and its responsibility to its creditors. The £ capital stock5 in this section does not mean share stock, but it means the property of the corporation contributed by its stockholders or otherwise obtained by it to the extent required by its charter.”

This elucidation of the statute makes it plain that it can have no application to this case. It was designed to suppress fraud and protect creditors and persons who might become creditors or stockholders in reliance upon false appearances. Making dividends without surplus profits or dividing, withdrawing or paying to stockholders any part of the capital of the company or reducing its capital stock are all acts of maladministration, and fail under the condemnation of the statute, but neither of these acts have been committed by these defendants.

Turning back for a moment to the formation of the loom company, we -find it organized by three persons with the sole and only object of placing the ownership of the patents in a corporation as a convenient agency for the issuance of licenses and the collection of royalties, and where the title would be perpetuated and free from the uncertainties of life, bankruptcy and other contingencies.

The three incorporators owned the patent before its assignment to the company, and, in equity, they owned it afterwards, for they owned all the stock issued for the patent by the company. There were no creditors, and there could be none, for the company embarked in no business requiring credit. It engaged in nothing but the collection of royalties. The patent was its only property and its only wealth, and the company had more of the attributes of a partnership than of a corporation. In reality, and in substance, it was a special partnership, as all trading corporations are, and members of such corporations are never merged in the company. (Bank of United States v. Deveaux, 5 Cranch, 61.)

The incorporators owned the patent before they put it into the company, and they owned it afterwards. They owned the company and all it represented, and they could dissolve it and resume their private ownership of all its property, or they could re-organize it in any manner and on any basis. There was no purpose of deception or fraud, and there was no one to be deceived but themselves. Towards the public and the law it maintained the attitude of a partnership, and there were none to molest it, and none to interfere with the absolute control and management of the company by the members and shareholders. Thus the company pursued the business for which it was originally organized, collecting the royalties, distributing them as dividends among the three individual defendants in this action until the time of the re-organization of the company, when they concluded to commence the manufacture of carpets, and for that purpose to increase the capital stock of the company. Preliminarily, and for the purpose of retaining the ownership and control of the patents, they determined upon their retransfer to themselves individually, and that was done in the proportions in which they held them at first. Then they increased the capital stock of the company to $600,000, all of which they issued to themselves in the manner already recited. Down to that time no persons but the original incorporators had any interest in the company; they held the entire stock and were the only trustees. They might have dissolved the corporation themselves and taken back their patents and then made up a new company so long as these defendants alone were interested. Instead of adopting that method for the withdrawal of the patents, they substituted a promissory note of $40,000 in the place of the patent, leaving the other $560,000 to be raised by the issuance of new stock for cash and property at its full value. All the demands of the law were thus satisfied and the rights of future creditors and stockholders were fully protected.. The trustees were the corporation, and they were thé shareholders, and the legal title to the patents was held by the company for their benefit alone, and the withdrawal of the patent and the substitution of the note therefor was not a violation of the statute. No principle of law or public policy is violated by an agreement between parties about to form a trading corporation, by which the capital stock is to be represented by property which they contribute, if the transaction is free from fraud. As, therefore, these original contributors and trustees capitalized a patent at $40,000, they might withdraw the same and substitute their promissory note for that sum as so much cash. There was none to object. The actors included the directors and shareholders, and there were no creditors.

The circumstances surrounding the case are peculiar, in that the individual defendants in this action in all their transactions in the formation of the company and in its re-organization were really dealing with themselves and with their own property, and our conclusion is that the return to the defendants of the patents and the payment to the company of $40,000, representing all the stock issued before that time, was not a withdrawal of capital within the prohibition of the Revised Statutes.

The claim to invalidate the issuance of the 3,500 shares of stock issued to the defendants for the license to manufacture under the patent cannot be enforced by or for the benefit of the corporation. When that stock was delivered to the defendants it became their property free from any liability of the corporation itself. (Farnsworth v. Wood, 91 N. Y., 308.) But there is no basis here for a liability to any one in respect to those 3,500 shares, because there was no fraudulent pui’pose in its acquirement and no intention to evade the statute.

Neither can this action be maintained .for the purpose of setting aside or invalidating the resolutions of February third for closing the business of the company. The finding of the trial judge competely established the good faith of the defendants and the absolute necessity of the resolutions and transactions in order to save the company from further loss. The enterprise for which the corporation had been re-organized had failed, and its business from the beginning had been conducted at a loss. It had contracted a very large debt and it seemed to be impossible to continue the business without further means, and the defendants had made the advances beyond the power of the company to secure them. In all trading corporations it is entirely competent for a majority of the stockholders to dissolve the company and bring its business to adose.

“Commercial corporations are ordinarily formed solely for the benefit of their shareholders. It is, therefore, no more than reasonable that the corporators should be authorized' to give up their speculation and wind up the company’s business, if it should turn out to be unprofitable or otherwise undesirable.”

“ The law is settled accordingly, and it may be stated as a rule, that it is an implied condition in the charter of every corporation formed solely for the pecuniary profit of its shareholders, such as an ordinai’y trading or manufacturing corporation, that its business may be wound up whenever the majority deem this to be expedient. Under these circumstances, the .majority may, without the consent of the minority, sell the whole of the company’s property, close ujd the business, distribute the assets and surrender, the charter to the state.” (Morawetz on Corporations [1st ed.], § 211; Treadwell v. Salisbury Company, 7 Gray, 393.)

There is no obligation to the State or to the public imposed upon a private trading corporation to carry on the» business for which it was formed. It may at any time put an end to its transactions and voluntarily wind up its affairs. Its franchise of acting in a corporate capacity is merely permissive, and not obligatory, hence in such case a forfeiture for non-user of franchise cannot be based upon neglect of duty upon the part of the company. (Morawetz on Corporations, § 651.) The theory and arguments of the plaintiff are based upon technical rules of law applicable in particular cases for the protection of creditors and the prevention of frauds upon stockholders, but they cannot be applied to this case. The plaintiff has received everything he was entitled to receive, and so has the company, and the corporation cannot recover from the shareholders what the trustees and officers have agreed they should receiv^ in the absence of fraud. Why should there be any interference with these defendants ? They have done what they would with their own, and they have done no more, and all they did was in the management of their own property and business, and neither the public nor the legislature have any interest in either.

,¥e can discover no principle of law or equity that justifies the demand of the plaintiff in this action. An adjudication that would direct the retransfer of the patent to the company, and invalidate the issue of the 3,500 shares of the stock and the unlimited license to manufacture carpets under the patents, would be equivalent to an order for the transfer of the private property of one person to another.

The judgment should, therefore, be affirmed, with costs, but we find no basis for the support of an additional allowance, and the appeal from that order must be sustained and the order reversed.

Pratt, J\, concurred; Barnard, P. L, not sitting.

Judgment and order affirmed, with costs, except that the order granting an extra allowance is stricken out.