author: Lewis, J.;

text:
    In the Matter of the Estate of Julia A. Smith, Deceased.

      Section 2 of chapter 399 of 1892 —foreign religious corporations not exempt thereunder — the statute applies to domestic corporations only.

    The provisions of section 2 of chapter 399 of the Laws of 1892, exempting a person who is a bishop, or a religious corporation, from the tax imposed by such act, do not apply to foreign religious corporations.
    A statute of the State of New York granting powers and privileges to corporations must, in the absence of plain indications to the contrary, be held to apply only to corporations created by the Stale oí New York and over which it has. the power of visitation and control; and although it is the policy of society to encourage benevolence and charity, it is not the proper function of the State of New York to go outside of its own limits to devote its resources to the support of the cause of religion, education or missions’for the benefit of mankind at large.
    Appeal by R. Titus Coann, as county treasurer of Orleans county, from that portion of the decree of the Surrogate’s Court of the county of Orleans, entered in Orleans Oounty Surrogate’s Court on the 20th day of July, 1893, which adjudges that certain societies are exempt from paying the collateral inheritance tax as provided in chapter 483 of the Laws of 1885, and the laws amendatory thereof and supplemental thereto.

      JS. B. Simons, for Orleans county treasurer, appellant.

      D. W. Perkins, for certain Massachusetts religious corporations,1 respondents.
   Lewis, J.;

Mrs. Julia A. Smith, deceased, by her will, which was admitted to probate by the surrogate of Orleans county on the 23d day of March, 1891, made bequests to three foreign missionary societies, namely, the American Baptist Missionary Union, the Woman’s American Baptist Home Missionary Society, and the Woman’s Baptist Foreign Mission Society, to one the sum of $1,000, and to the others the sum of $2,000 each. This proceeding was instituted before the surrogate of Orleans county for the assessment and collection of the collateral inheritance tax on such bequests. The learned surrogate held and decided that the societies mentioned were not liable for the legacy tax ou the sums so bequeathed to them for the reason that they were exempt from the payment thereof by the provisions of section 2 of chapter 399 of the Laws of 1892. The treasurer of the county of Orleans, who was a party to the proceeding,, appealed from the decree. 'Whether said societies are liable for the tax is the only question presented for our decision, and that involves' the construction of our collateral inheritance statutes.. Chapter 483 of the Laws of 1885 was the first act passed providing; for such a tax. It was amended by several subsequent statutes.. A general law was passed covering the entire subject, being chapter-399 of the Laws of 1892, which took effect on the thirtieth day of April of that year. The first section of the act provides for imposing a tax of five per cent upon the transfer of any property, real or personal,, of the value of $500 or .over, when the transfer is by will, or by the intestate laws of the State, of any person dying seized or possessed of the property while a resident of the State, or when the transfer is by will, of property within the State, and the decedent was a non-resident of the State at the time of his death, except as otherwise prescribed in section 2 of the act. Section 2 provides for a tax of one per cent upon the property passing by such transfer to the use of certain relatives of the deceased mentioned in the section. The following provision is contained in this section: “ But any property heretofore or hereafter devised or bequeathed to any person who is a bishop, or to any religious corporation, shall be exempted from and not subject to the provisions of this act.” The learned surrogate held that the institutions mentioned were in consequence of this provision exempt from the payment of the tax, and whether the construction givén to the section is correct depends upon whether the words “ religious corporation ” includes the corporations of that character, foreign as well as domestic. The language of the proviso is quite general, and says that any property heretofore or hereafter devised or bequeathed to any person who is a bishop, or to any religious corporation, shall be exempt and not subject to the provisions of the act. We are not referred to any reported case deciding this precise question. The Court of Appeals in The Matter of the Estate of Prime (136 N. Y. 347) gave construction to the act, chapter 553 of the Laws of 1890. The purpose of the latter act was to limit the amount of property, as well as the income therefrom, which might be held by any religious, educational and other societies mentioned. There was a provision in the act that chapter 483 of the Laws of 1885, entitled An act to tax gifts, legacies and collateral inheritances in certain cases, and the acts amendatory thereof, shall not apply thereto, nor to any gifts to any such corporation by grant, bequest or otherwise. Certain foreign corporations were named in Prime’s will as legatees, and they claimed exemption from the inheritance tax. It was held by the Court of Appeals that the statute had application to domestic corporations only, and did not include foreign corporations. While the question before us was not involved in the decision of the Prime case, the court very elaborately discusses the rights of «foreign corporations under the statutes of our State, and enunciated a general rule of construction which would seem to fully cover the questions presented in the case at bar. Chief Justice Andrews in his opinion says: “We are of opinion that a statute of a. State granting powers and privileges to corporations must, in the absence of plain indications to the contrary, be held to apply only to corporations created by the State, and over which it has the power of visitation and control. Such is the natural interpretation of such legislation in the absence of a contrary intention appearing on the face of the act. The Legislature, in such cases, is dealing with its own creations, whose rights and obligations it may limit, define and control.” He further says: “ It is the policy of society to encourage benevolence and charity. But it is not the proper function of a State to go outside of its own limits and devote its resources to support the cause of religion, education or missions for the benefit of mankind at large.” The Prime case was decided by the General Term in April, 1892; it was appealed to the Court of Appeals and decided by that court in January, 1893.

The act of 1892, which we are considering, became a law April thirtieth of that year. The members of the Court of Appeals were undoubtedly aware of the provisions of the act of 1892, and may have intended, in laying down the doctrine for the construction of the statute above referred to, to establish a rule for the guidance of the courts in cases which might arise thereunder. The act of 1892 grants certain privileges to religious corporations, but as there is an absence of any plain indications in the act that it is intended to .apply to foreign corporations, we are inclined to hold that under the doctrine of the Prime case, the three societies mentioned are liable to the payment of the' legacy tax. The decree of the surrogate appealed from should be reversed, and the proceedings remitted to that court, with directions to determine the amount of tax, to the payment of which the legatees mentioned are liable, without costs •of this appeal to either party.

Dwight, P. J., Haight and Bradley, JJ., concurred.

Decree of the Surrogate’s Court of Orleans county appealed from reversed, without costs of this appeal to either party, and proceedings remitted to that court to proceed therein.


source: Caselaw Access Project

author: Lewis, J.:

license: Public Domain

text:
    Maude Marie V. Parcells, Respondent, v. The City of Auburn, Appellant.

      Evidence mfficient to raise the question of contributory negligence in cm action for personal injuries.

    A person walking on a sidewalk in the evening stepped into a hole, partially concealed from view by grass which had grown in and about it; immediately before stepping into the hole she had met four people walking upon the sidewalk, two abreast, and had turned aside to pass them, and in so ■doing, without noticing the hole, stepped into it and fell; she had passed over the walk once or twice before and knew that there were defects in it, but thought that she had passed by the bad places before she met with the accident.

      Held, that the evidence was sufficient to justify the trial court in submitting to the jury the question of contributory negligence on the part of the plaintiff.
    Appeal by the defendant, The City of Auburn, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Cayuga on the 28th day of May, 1893, upon the verdict of a jury for $9,000 after a trial at the Cayuga Circuit.

      W. II. Burby, for the appellant.

      Frank F. Oady and 8. E. Payne, for the respondent.
   Lewis, J.:

The plaintiff recovered a judgment against the defendant for $9,000 for injuries she sustained by a fall upon a defective sidewalk in the city of Auburn. The appeal was from the judgment, and only one point is presented for our consideration by the appellant’s counsel. He makes no cpiestion as to the amount of the recovery, nor as to the defendant’s negligence, but claims that the plaintiff failed to show herself free from negligence contributing to her injuries. An examination of the evidence has satisfied us that there was sufficient evidence to justify the trial court in submitting that question to the jury*

The plaintiff’s fall was caused by her stepping into a hole in the sidewalk; it occurred in the evening; it was dark at the.time; the hole was partially concealed from view by grass which had grown in and about it; immediately before stepping into the hole she had met four people walking upon the sidewalk, two abreast; she turned aside to pass them, and in so doing, without noticing the hole, put one of her feet into it and fell.

She had- been in the city but a few weeks before the accident occurred; she had passed over this walk only once or twice; she knew that there were defects in the walk; she had passed some of them on this occasion before arriving at the one in question; she testified that she supposed that she had passed by the bad places before she met the people.

The jury was justified from the evidence in finding that the plaintiff was free from negligence contributing to her injuries.

The verdict seems to be fully sustained by this evidence.

The judgment should be affirmed.

Dwight, P. J., Haight and Bradley, JJ., concurred.

Judgment appealed from affirmed.


author: Bewis, J.:

text:
    Pascal P. Pratt, Respondent, v. The New York Central and Hudson River Railroad Company, Appellant.

      JSviden.ee — objection, when made intime — opinions of witnesses- — -action to recover damages to veal property — error in the reception of evidence — objection, when sufficiently specific — when a judgment will not be reversed.

    Where, upon the trial of an action, a witness answers a question propounded by the counsel of the party by whom he is called, before the counsel for the adverse party has an opportunity to interpose an objection thereto, and the objection is made immediately after the giving of the answer, it is made in time.
    The opinions of witnesses as to the causes which occasioned the decrease of rental value of real estate, as well as of the amount of damages done by an interference with the easements of light, air and access appurtenant thereto, are improper, as witnesses should state facts and should not draw conclusions or give opinions.
    Upon the trial of an action brought to recover damages resulting from the depreciation in value of real estate by reason of the operation and maintenance of a railroad, one of the plaintiff’s witnesses was asked, “What, in your judgment, Mr. Pratt, would be the rental value of that property during the years from 1885 to 1891, with the railroad absent?” The counsel for the defendant said, “I object to that on the ground that it is incompetent and improper; that the proper foundation has not been laid for the asking of that question; that it is speculative, and not the proper method of proving damages.”

      Held, that the objection was sufficiently specific to be available to the defendant upon an appeal from a judgment rendered against him;
    That the objection was improperly overruled, and such error required.a reversal . of the judgment.
    It is the duty of counsel making an objection to the introduction of evidence to state his grounds so specifically that the exact point is presented, so that the form of the question can, if desired, be so changed as to avoid the objection.
    Judgments will not be reversed in order to allow a party to re-try a cause of action where only nominal damages are involved.
    Appeal by tbe defendant, Tbe New York Central and Hudson River Railroad Company, from a judgment of tbe Supreme Court in favor of tbe plaintiff, entered in tbe office of tbe clerk of tbe county of Erie on tbe 21st day of September, 1893, upon tbe verdict of a jury' for §12,000 after a trial at tbe Erie Circuit, and also from an order entered in said clerk’s office on tbe 21st day of September, 1893, denying tbe defendant’s motion for a new trial made upon a case and exceptions.

      Jom.es F. Gluck, for the appellant.

      Shermam 8. Rogers, for the respondent.
   Bewis, J.:

The plaintiff is the owner of a lot 216 feet front abutting on the southerly side of a street in the city of Buffalo known as the Terrace.

He is also the owner as tenant in common of an undivided oneialf of the fee of the street, in front of his said lot.

The defendant, in the year 1879, wrongfully entered upon 'said street and constructed therein in front of plaintiff’s said premises two railroad tracks, and has ever since maintained such tracks and operated trains thereon.

Plaintiff brought this action against the defendant, and claimed in his complaint that by reason of the presence of said tracks and the operation of trains thereon, access and egress to and from his said premises had been interfered with and rendered hazardous, and that the rental value thereof had been thereby depreciated and greatly injured, to his damage. He recovered a verdict of $12,000.

The defendant claims that the judgment should be reversed because of errors committed upon the trial. The plaintiff w7as called as a witness in his own behalf and testified to the rental value of his property with the railroad in the street.

He was then asked the following questions: “ What, in your judgment, Mr. Pratt, would be the rental value of that property during the years from 1885 to 1891, with the railroad absent ? ”

Mr. Gluck.— “That I object to on the ground'that it is incompetent, improper and speculative, and not the proper method of proving damages.”

The question was not then answered; the witness 'went on to give a review of the changes in the location of the retail business in the city, showing that it had, during the time the defendant had maintained said tracks, moved up town and in a measure away from the plaintiff’s premises.

The question was repeated, and before any objection was interposed the witness answered, “ Ten thousand dollars.”

Counsel for the defendant immediately thereafter said, “ I object to that on the ground that it is incompetent and improper; that the proper foundation has not been laid for the asking of that question ; that it is speculative and not the proper method of proving damages.”'

The objection was overruled and the defendant excepted.

The court thereupon asked the question: “ Ten thousand dollars' per year?” The witness answered, “Yes, sir.” The witness evidently answered the question propounded by the plaintiff’s counsel before the defendant’s counsel had an opportunity to interpose his-objection, and we think it must be held that the objection was fimely.

It is the contention of the defendant’s counsel that the question was improper as it called for the opinion of the witness, and that presents one of the questions for our decision.

The competency of such evidence has been much discussed of late by the Court of Appeals.

McGean v. The Manhattan R. Co. (117 N. Y. 219) was an action brought to recover damages for injuries occasioned to the easements of air and light and access to the property of the plaintiff by the erection and maintenance of an elevated street railroad in a street of the city of New York.

The court held that opinions of witnesses as to the causes which occasioned the decrease of rental value as well as the amount of damages done thereby were improper; that witnesses must state facts and not draw conclusions or give opinions. The question was again before the Court of Appeals in Roberts v. The N. Y. E. R. R. Co. (128 N. Y. 455). The prevailing opinion elaborately reviews the authorities upon the question of the admissibility of such evidence, and it was held to be inadmissible, and the doctrine of McGean v. Manhattan R. Co. (supra) was commented upon and approved as laying down the correct rule.

The Court of Appeals has since steadily adhered to this rule of evidence and has reversed numerous judgments because of the admission of such evidence.

Our attention is called to the case of Rumsey v. The N. Y. & N. E. R. R. Co. (133 N. Y. 19) as laying down a different rule. While some remarks, made in the opinion of the court, might be construed as conflicting with the cases heretofore cited, we do not understand that this precise question- was before the court for decision, and we assume they did not intend to disturb the doctrine so carefully and deliberately laid down in the Roberts case.

This rule was again announced in Hunter v. M. R. Co. (141 N. Y. 281), and seems to be so well settled as to be no longer open for discussion.

We, therefore, come to the question whether the grounds of the objection to the evidence were sufficiently broad and specific to avail the appellant upon appeal.

The grounds stated were that it was incompetent and improper; that the proper foundation had not been laid for asking the question; that it was speculative and not the proper method of proving damages.

The grounds of objection in the case of McGean v. The Manhattan R. Co. (supra) were that the evidence was incompetent, irrelevant, hypothetical, and the witness not competent to give an opinion.

The court held that they were not sufficiently'specific to raise the question as to the admissibility of the evidence, and remarked: “ The objections seem to imply that opinions were competent on the subject.” The trial seems to have been conducted on both sides, and more particularly on that of the defendant, upon the theory that all opinions were admissible as to rental value of the premises and the causes which affected it.

In Carter v. N. Y. E. R. R. Co. (134 N. Y. 168) the grounds of the objection were that it was immaterial, incompetent and hypothetical, and that the difference in value was not the measure of damages. It was held that the objection was not sufficiently specific.

In Ward v. Kilpatrick (85 N. Y. 416) it was held that the objection that the witness was not a competent judge and the inquiry involved a conclusion of law, would not answer. In the Roberts case (supra) an objection that the evidence was incompetent, that it was for the court alone, and not for the witness, to determine the amount of damage, was held to be sufficient, as it called the attention to the vice in the question, that is, that it made the witness the judge - of the damages, while that was the province of the court or jury. In the case at bar, in addition to the grounds which were held not to be sufficient in the cases cited, there was added, “ that it' is speculative and not the proper method of proving damages.”

It was held in the Roberts case that the objection that the evidence was “ speculative ” was sufficient.

Pudge Peckham in his opinion says: “ It is speculative upon the very question, and upon the only question which the court or the jury is called upon to decide, and tlie question calls for tlie opinion of tlie witness upon that very subject.” It had, as we have seen, been held that the word “ hypothetical ” was not sufficiently specific. This rule was approved in Doyle v. The Manhattan R. Co. (128 N. Y. 494).

As to the second ground stated, all agree that the true measure of •damages was the difference between the rental value of the premises with, and their rental value without, the railroad present in the street.

The defendant’s objection was to the method the plaintiff was pursuing to prove his damages.

If the objector intended by his objection to raise the question of the propriety of that rule or theory or method of proving the damages, it was clearly insufficient, for the plaintiff was entitled to prove such difference by competent evidence.

If, on the other hand, the ground of the objection mentioned was .sufficiently specific to call attention to the point that the opinion of the witness, as to the amount of damages, was not admissible, but that the witness should state facts and not draw conclusions, it was sufficient.

It was for the counsel making the objection to state his grounds ,so specifically that the exact point would be presented, so that the ■form of the question could, if desired, have been so changed as to have avoided the objection.

In the absence of an authority we might entertain some doubts as to the latter ground of the objection being sufficient; we find, how-over, upon reference to the case of Kernochan v. The Elevated R. R. (128 N. Y. 559), that this same ground of objection to such evidence was held to be sufficient.

Upon the strength of these authorities we are constrained to hold that the defendant’s objection was sufficiently specific, and that it was reversible error to admit the evidence.

The complaint alleged that plaintiff owned the entire fee of the street in front of his premises; the proof was that he owned the undivided one-lialf only; the defendant was permitted upon the trial to amend his answer setting up the non-joinder of the other tenants in.common with the plaintiff.

The defendant asked at the close of the case for a dismissal of the action because it appeared that the plaintiff was not the sole owner ■of the fee in the street.

The plaintiff was the owner of the entire fee of the abutting lot, and' the damages he sought to recover were to the rental value of that lot. The damages to the fee of the street were nominal.

The jury were instructed by the court that the plaintiff was entitled to recover six cents only for injury to the street proper.

Plaintiff’s co-tenants in the fee of the street were not interested in the question of the damages claimed in the complaint. They, at most; would have been entitled to only one-half of the six cents.

If the action had been simply for injury to the fee of the street, the damages would have been nominal. (City of Buffalo v. Pratt 131 N. Y. 299.)

Judgments will not be reversed to allow a party to re-try a cause of action where only nominal damages are involved.

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

Dwight, P. J., Haight and Bradley, JJ., concurred.

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


text:
    Daniel B. Wesson, for the Benefit of Himself and Other Creditors, etc., of George D. Chapman, as Receiver of The Lackawanna and Pittsburgh Railroad Company, Plaintiff, v. George D. Chapman, as Receiver of The Lackawanna and Pittsburgh Railroad Company, and Others, Defendants. In the Matter of the Claim of R. Dunlap & Co., Creditors, Against George D. Chapman, as Receiver of The Lackawanna and Pittsburgh Railroad Company.

      Receiver of a corporation— not a representative of the corporation — he cannot issue notes oi' certificates without an order ofthecou/i't — notes improperly issued — when holders thereof a/re entitled to equitable relief.

    The receiver of a corporation is not a representative thereof, in such sense as to charge it with liability by reason of his improper conduct. He is simply the instrument employed by the court to take charge of the corpus of the estate pending a litigation.
    Without an order of the court a receiver has no power to issue notes or certificates which are binding upon the trust estate, and purchasers of notes issued by a receiver as sucb without authority, who could have discovered by an examination of the same that they did not purport to be issued by authority of the court, have no claim thereon against the trust estate.
    While it is not incumbent upon the holders of notes or certificates, issued by a receiver pursuant to an order of the court, to show that the proceeds of the sales thereof were devoted by such receiver to the benefit of the trust estate, the same rule cannot be held to apply to the holders of notes issued without authoritj’-, and the holders of such notes must at least show that the money paid therefor was used for the benefit of the trust estate before they can make a, claim for equitable relief.
    Appeal by Bobert Dunlap & Co. and another from a judgment of the Supreme Court, entered in the office of the clerk of the county of Erie on the 11th day of July, 1892, upon the report of a. referee, and from so much thereof as determines that the appellants, are not entitled as creditors of the receiver to a lien against the property of the trust estate.

      M. Floyd Ciarle, for the appellants.

      William L. Maroy, for the respondents.
   Lewis, J.:

This action was commenced by the plaintiff, Daniel B. Wesson, in behalf of himself, as the owner and holder of receiver’s certificates, and others similarly situated, to obtain a judgment declaring their claim a first lien upon the said railroad property and franchises, and for the sale thereof, etc.

The action was referred to James M. Townsend, Jr., as sole referee, to hear, try and determine the issues in said action, and to ascertain the amount of the outstanding indebtedness of the receiver, George D. Chapman, togetherwith the names of the holders of said indebtedness and the amounts due to each, and the validity and priority of said claims as liens upon the property and franchises of the Lackawanna and Pittsburgh Bailroad Company. The referee found as facts that the Lackawanna and Pittsburgh Bailroad Company is a domestic corporation, created and existing under the laws of the State of New York; that it was formed by the consolidation of two' other railroads which constituent railroad companies had theretofore mortgaged their respective properties to secure their bonds, and that the new company had also mortgaged its property to secure its bonds, and that thereafter, and on the 8th day of December, 1884, an action was commenced in the name of the People of the State of New York for the purpose of dissolving said corporation and distributing its assets; that at a Special Term of the Supreme Court, held in the city of Buffalo, George D. •Chapman was duly appointed receiver of said company, and thereafter, on the application of said receiver, an order was granted authorizing and directing him to issue receiver’s certificates to the amount of $100,000, to be sold by him and the proceeds of the sales used for the benefit of the property of said road, and of the owners and holders of its stock and bonds. The order provided that the certificates when issued should be and become the first lien on the said railroad property and franchises prior to the lien of said mortgages. Said Chapman issued certificates amounting to $100,000; ten of said certificates he sold to the ¡Dlaintiff, who paid therefor full value, to wit, the sum of $10,000; the certificates became due and payable on the 1st of January, 1890. Thereafter, upon the application of said receiver, an order was duly granted by the Supreme Court authorizing him to issue receiver’s notes to the aggregate amount of $50,000; the order provided that when so issued they should be a lien upon all the railroad property and franchises of said Lackawanna and Pittsburgh Railroad Company prior ,and superior to the liens of said mortgages mentioned; under the authority thus conferred said receiver duly issued and negotiated receiver’s notes to the amount of $50,000, of which there were at the date of the referee’s report $45,000 outstanding. Some of said notes were sold at par by the receiver ; others were pledged as collateral security to his individual notes, which were sold at less than par, the aggregate amount realized being $44,000. The receiver operated the road from the time of his appointment in December, 1884, to September 1, 1888, and during most of the time the receipts and income therefrom were not sufficient to pay its current •expenses. Attached to each of the genuine notes issued by the receiver was a certificate which stated that the notes were issued pursuant to an order of the court authorizing their issue; that they were to be a debt of the receiver for the benefit and protection of the property of said railroad and of the creditors and holders of the stock and bonds thereof, and were to be a first lien on said property prior to the lien, of the said several mortgages. After the said receiver had issued the said notes to the amount of $50,000, and after he had ceased to operate and manage the road as receiver, and in the month of December, 1888, he entered into negotiations with the appellants looking to the borrowing of $10,000 from them, and to accomplish his purpose he issued what purported to be receiver’s notes to the amount of $10,000, and sold them to the appellants at par, they believing them to be the genuine notes of the receiver when they purchased them. There was attached to said notes so sold to the appellants a writing which recited that they were issued as the notes of George D. Chapman, as receiver of said road; it did not, however, state by what authority they were issued nor that they were to be a first lien upon the railroad property and its franchises. The appellants at the hearing before the referee presented their notes and asked to have them allowed as a claim against the receiver and the railroad company with the same force and effect as the certificates and notes issued as aforesaid by virtud of the orders of the court. It was not shown that the proceeds of the appellants’ notes, nor any part thereof, were in any way used for the benefit of the railroad; as their sale to the appellants occurred after the receiver had terminated his connection with the road it is quite evident that they were not so used. The referee held that the appellants were not entitled to come in as creditors of the railroad company and participate in the assets of the company. The report of the referee having been confirmed and judgment entered thereon this appeal was taken by Dunlap & Co. The case comes here upon exceptions only. No evidence is contained in the record, •so that questions of law only are presented. It is the contention of the appellants that having advanced money to the receiver appointed by the court upon the strength of notes purporting to be issued by him as such receiver, that they are entitled to share pro rata with the holders of genuine certificates and notes in the assets of the company; if not tó the full amount of their notes, to at least the sum of $6,000, which the receiver had not obtained from the sales of the notes of $50,000 issued by the order of the court, there being, the appellant contends, an actual over issue of only $4,000. Without the order of the court the receiver had no power to issue notes or certificates which would be binding upon the trust estate. (Newbold v. Peoria & Springfield R. R. Co., 5 Bradw. [Ill.] 861.)

He had no authority to issue the notes purchased by the appellants, and had the appellants examined the notes and the accompanying papers before purchasing them they would have discovered that they did not purport to be issued by authority of the court. While it would not be incumbent upon the holders of notes or certificates issued by the receiver pursuant to the order of the court to show that the proceeds 'of the sales were devoted by him for the-benefit of the road, the same rule cannot be held to apply to the holders of notes issued without authority.

The holder of such notes must at least, show that his money was. used for the benefit of the estate before he can make a claim for equitable relief. The receiver had exhausted his powers when he issued the amount of notes provided for in- the order, and when he. assumed to issue the notes purchased by the appellants he was acting outside of the power conferred upon him, and to permit the holders of such notes to participate in the assets of the company upon an equality with those holding genuine notes would destroy the market value of genuine certificates or notes issued by receivers under the order of a court; to allow such instruments to take precedence of existing mortgages would destroy the market value of such securities. The cases to which we are referred where courts have given relief to the holders of stock and instruments improperly issued by directors of corporations, the corporations were held liable for the reason that the improper conduct was that of their agents or representatives. The receiver here was not the representative in that sense of the corporation; he was simply the instrument employed by the court to take charge of the eorpms of the estate pending the litigation. We know of no principle upon which plaintiffs notes can be reformed so as to make them appear to have been issued by order of the court. The only remedy open to the appellant is. against the receiver personally.

The judgment appealed from should be affirmed, with costs.

Dwight, P. J., Haight and Bradley, JJ., concurred.

Judgment appealed from affirmed, with costs.


text:
    Edwin Einstein, Respondent, v. The Rochester Gas and Electric Company and Another, Appellants.

      Agreement to gire a certain proportion of any stock thereafter to be issued — right of a stockholder thereunder and of the assignee of his stock.

    An agreement should be read as of the time it was executed, having in mind the conditions as they then existed.
    When a stockholder in a corporation sells his stock therein, he ceases to have any interest in the property of the corporation, or voice in its management, and the person to whom he sells the stock takes his place and becomes entitled to all his rights in the corporation.
    By an instrument in writing executed between an individual and a corporation, in consideration of the issue and delivery to such person of §48,000 paid-up capital stock of such corporation, being forty-eight per cent of its capital stock, certain patent rights were transferred by him to it, and the corporation agreed that if at any time its capital stock should be increased (otherwise than for stock issued for cash, paid therefor at the time of such issue, at par, to the extent of §100,000), in addition to its other capital stock, forty-eight per cent of the issue should be issued and delivered to such person, or his successors or assigns, fully paid up, and it was also provided therein that in case of any increase of the capital stock of such corporation for money paid at the time thereof, such person or his assigns should have the right to subscribe to such increase in the first instance on the same terms as the other stockholders.

      Held, that such agreement-treated such person as a stockholder of such corporation owning a certain percentage of its stock, and that it was in that light that the clause in regard to the issuing to him of a proportion of any increase in its stock must be read, and being a stockholder he must have issued to him his proportionate share of any increase in the stock;
    That the “ successors or assigns ” of such person were the person or persons who had succeeded him, or to whom he had assigned his stock in the corporation;
    That the agreement was with such person as a stockholder for the purpose of protecting him as such, and upon another succeeding to his stock, his successors or assigns became entitled to the protection which the contract gave to him;
    That the forty-eight per cent mentioned in the contract had reference to his proportionate share of the stock as it then stood, and a consent given by such person to the increase of the capital stock of the corporation, without the receipt of his proportionate share of the increase, would operate to change the rate in case of a subsequent increase.
    Appeal by tbe defendants, The Rochester Gas and Electric Company and another, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Monroe on the 2d day of December, 1893, upon the decision of the court rendered at the Monroe Special Term, overruling the defendants’ demurrer to the complaint.

      Edward Harris, for the appellants.

      George F. Dcmforth, for the respondent.
   Lewis, J.:

The demurrers interposed are placed upon the ground that the Complaint does not state facts sufficient to constitute a cause of action. The complaint demands judgment that the defendant, The Rochester Gas and Electric Company, issue to the plaintiff certificates for $480,000 at its par value of its paid-up stock, and in default thereof that the defendants, one or both, be required to pay him that sum.

It appears from the allegations of the complaint that the Brush Electric Company of Cleveland, Ohio, was the exclusive owner of valuable patents and inventions for the manufacture of electricity for electric lighting and other purposes, and was the manufacturer of machines and machinery for producing and using electricity, and was the proprietor of what was known as the Brush electric light and double arc light. That on the 4th day of March, 1881, it entered into a written agreement with one C. M. Rowley of New York city, by which it gave to him the exclusive license and agency for the sale of the dynamos, electric machines and apparatus made by it, or the patents owned and controlled by it, for electric lighting, etc., in the county of Monroe, State of New York.

This agreement we shall for convenience designate as Exhibit “A,” and hereafter refer to it by that name. On the 19th day of May, 1881, Rowley entered into an agreement with James W. Whitney and George E. Mumford of Rochester, N. Y., in which they agreed to organize a stock company with a capital of not less than $100,000, for the purpose of introducing the Brush electric light in the city of Rochester. In pursuance of such an agreement they appear to have organized such a corporation, and thereafter, and on the 8th day o'f June, 1881, Rowley, as party of the first part, entered into an agreement with the corporation so organized, known as the Brush Electric Light Company of Rochester, N. Y., as party of the second part, the material portions of which are as follows: “Now, therefore, this agreement witnesseth, that the said party of the first part, for and in consideration of the issue and delivery to him of $48,000 paid-up capital stock of the said party of the second part,, being 48 per centum of the said capital stock, and the agreement of the party of the second part that if at any time hereafter the said capital stock of the said party of the second part shall be increased (otherwise than for stock issued for cash, paid therefor at the time of' such issue, at par, to the extent of one hundred thousand dollars [$100,000]), in addition to the present capital, 48 per centum of the par value of such increase shall be issued and delivered to said party of the first part, or his assigns, full paid up, has assigned, transferred and set over, and by these presents doth assign, transfer and set over unto said party of the second part, its successors and assigns, the exclusive agency and license in the said city of Rochester and county of Monroe in the State of New York, for the sale and use of the Brush dynamo, electric machines and apparatus made and sold and to be made and sold by, or the patents which are or shall be controlled by the Telegraph Supply Company of Cleveland, Ohio (now the Brush Electric Company), as the same are or shall be held and controlled by said party of the first part hereto under and by virtue of said contract hereto annexed, subject, however, to all the terms and conditions, contained in said contract, so far as the same are applicable to said party of the second part, for and during the said term of 17 years from said 24th of April, 1877, and for and during any renewals 'or extensions of said patents, or any or either thereof. And the said party of the second part, for itself, successors and assigns, covenants, promises and agrees to and with said party of the first part, his successors and assigns, that in case at any time hereafter the capital stock of said party of the second part shall be increased (otherwise than for cash paid for the said increase at the time, at par, to the extent of one hundred thousand dollars [$100,000]), in addition to the present capital, that then and in that case said party of the second part will issue and deliver to the said party of the first part, his successors or assigns, 48 per centum in amount of the par value, fully paid up, of such increase, as a part of the consideration for this agreement; and in case of any such increase for money paid at the time the said party of the first part or his assigns shall have the right to subscribe for such increase in the first instance on the same terms .as other stockholders.” This agreement we shall designate as Exhibit “ C,‘” and hereafter refer to it as such.

Thereafter, and on the 13th day of June, 1881, Rowley assigned all his right, title and interest in Exhibit “ A ” to the plaintiff, who subsequently, and on November 5, 1881, assigned all his right, title .and interest in Exhibit “ A” to the Brush Electric Light Company. These assignments, together with that incorporated in Exhibit “ 0,” were subsequently approved by the Brush Electric Company of Cleveland, Ohio.

On the 2'Tth day of February, 1883, the Brush Electric Company of Cleveland, .Ohio, the plaintiff and Rowley all joined in the execution of an instrument to the Brush Electric Light Company in which they recite the provisions of Exhibit “ 0 ” relating to the increase of capital stock of the company; and also that the purchase and improvement of the water power at the lower falls in Rochester has involved the expenditure of a much larger amount of money than was contemplated, thus requiring an increase in the capital stock beyond the original amount contemplated, and concludes as follows : “ Now, therefore, in consideration of the premises and for value received we, the undersigned, assignees of the said Charles M. Rowley of the said contract, and the present owners and holders of the rights and privileges secured to said Rowley in and by said contract, do hereby consent and agree that the said company (referring to the Brush Electric Company of Rochester) shall have the right to increase its capital stock to the extent of $200,000 in cash in ■addition to the present capital, instead of $100,000, as stated in said contract, they not being required to issue and deliver to said Rowley ■or his assigns any portion of such capital stock fully paid as ■stated in said contract, and that said contract may be and is changed and modified in the particulars herein stated and not otherwise.”

Thereafter the Brush Electric Light Company of Rochester increased its capital stock in the amount of $150,000, making its total capital stock $250,000.

The conpplaint further alleges that the Brush Electric Light Company of Rochester continued to do business in that city until about August 1,1892. That about that time it was thought by the officers, directors and managers of the Rochester Gas Company, the Brush Electric Light Company, the Edison Electric Illuminating .Company and the Rochester Electric Light Company that the interest of the stockholders of each would be promoted by consolidating those companies with a largely increased capital stock and thus obtaining a monopoly of the business of furnishing light to the city and the people of Rochester by either gas or electricity. But the plaintiff’s right to forty-eight per cent with any increase in the capital stock of the Brush Electric Light Company furnished an obstacle to the formal consolidation of the four corporations. That thereupon indirect means were resorted to by the directors and managers of the four corporations to accomplish, in fact and effect, a consolidation by putting the property and management of the business into the hands of a new corporation and thus obtain a monopoly of the lighting business in Rochester and yet cut the plaintiff out of his right to the forty-eight per cent of the increase of the capital stock of the Brush Electric Light Company. For the purpose of putting this scheme into execution, on the 11th day of July, 1892, the Rochester Gas Company, the Edison Electric Illuminating Company and the Rochester Electric Light Company entered into a contract of consolidation into a single corporation to be called The Rochester Gas and Electric Company,” organized under chapters 566 and 561 of the Laws of 1890.

The capital stock of this company was fixed at $4,300,000, represented by 43,000 shares of the par value of $100 each. The contract contained a provision that this company should retain in the treasury 12,500 shares of its stock with which the directors were authorized to purchase not less than two-thirds of the capital stock of the Brush Electric Light Company, paying therefor not more than five shares of the stock of the consolidated company for each share of the stock of the Brush Company.

The new company, as organized, issued to the stockholders of the Gas Company 20,500 shares of its capital stock; to the stockholders of the Edison Illuminating Company, 6,000 shares; to the stockholders of the Rochester Electric Light Company, 4,000 shares; and with the 12,500 shares retained it purchased from the stockholders of the Brush Electric Light Company all of the outstanding stock of that company, paying therefor five shares of the stock of the new company for each share of the stock of the old. company. It is alleged that the new corporation immediately commenced business, took possession of the property of the old corporations, and that its stock is now worth par.

The plaintiff claims that the transaction was, in effect, an increase of the capital stock of the Brush Electric Light Company in the sum of $1,000,000, that he was entitled to forty-eight per cent, amounting .to $480,000 of such issue, and that the defendant should deliver to him that amount of stock, or pay him therefor.

Assuming that the plaintiff is the owner of Exhibit C,” and entitled to all the rights and privileges secured by it, we are brought to a consideration of those rights and privileges. What are they ? As construed by the plaintiff, the contract entitles him to recover forty-eight per cent of any increase in the capital stock of the company over and above the $250,000 authorized by him, whether he is or is not a stockholder. His position may be made more clear by illustration. The original stock was $100,000 ; of this, $48,000 was issued to Rowley, and $52,000 retained by the other stockholders. Suppose the stockholders were of the opinion that their property was worth $500,000, and should decide to increase their capital stock to that amount, each person holding a share of the old stock would be entitled to five shares, so that Rowley, holding $48,000 of the old stock, would have His increased to $240,000, and the other stockholders, who held $52,000 of the original stock, would have $260,000 ; but, under the contract, Rowley is also entitled to forty-eight per cent of the increase; there being an increase of $400,000, his proportion thereof would amount to $192,000, which must come out of the stockholders, and reduce the amount going to them in that sum. As stockholder, he gets his share of the increase, and as owner of the contract he gets forty-eight per cent in addition, making about three-fourths of the entire increase. Rowley was the owner of forty-eight-one-hundredths of the plant, property and business of the corporation, which we have assumed was worth $500,000. Suppose that Rowley had sold his stock before the increase, and received therefor his proportion, $240,000, the persons who purchased from him would stand in his place and be entitled to their proportion of any increase in the capital stock which should be made. Assume an increase to have been made as above stated: Rowley would still be entitled to demand an additional $192,000, even though he had ceased to be a stockholder and had received his forty-eight-one-hundredths of the,entire value of the property of the corporation.

Again, take the figures as actually presented in this case: Rowley received $48,000 of the capital stock ; the other stockholders received $202,000, making a total of $250,000. Assume that the capital stock was increased in the sum of $1,000,000, making a total of $1,250,000 : Of this sum, Rowley, if he still held the stock originally issued to him, would receive $240,000, and the remaining stockholders $1,010,000. But of the $1,000,000 increase, he is entitled to his forty-eight per cent, amounting to $480,000, which must come out of the stockholders. He thus gets not .only his forty-eight per cent of this increase, but in addition thereto his proportionate share as stockholder.

These results are, to say the least, extraordinary, and cause us to hesitate to assent to such an interpretation of the instrument. Is it possible that the agreement was ever so understood by the parties ? Is such a conclusion rational and logical ? Let us see. The agreement should be read as of the time it was executed, having in mind the conditions as they then existed. The Brush Electric Light Company had not then commenced business. By this agreement Rowley conveyed to it the right to use the Brush patents and machines. The company in turn transferred to Rowley his $48,000 of the capital stock. The stock of itself had no value. Its value consists in the property and business which it represents. The value of the property, or the magnitude of the business, is not dependent -upon the amount of the stock which has been issued to represent it, and its actual value is the same before as it is after an increase of the stock. Fifty-two thousand dollars of the capital stock was held by the other persons. Rowley was in the minority, and it was but natural that he should wish to guard himself and prevent his stock from being depreciated. He, as we have seen, was the owner of forty-eiglit-one-hundreths of the entire property of the corporation. If the majority of the stockholders should see fit to increase the capital stock, without paying therefor, and issue it to themselves or others, in common parlance, to water it, the effect would be to reduce his interest in the property of the corporation. He had the right to guard against this.

Consequently it was incorporated into tbe agreement that in case of an increase he should have issued to him forty-eight per centum of ■ such increase, which, at that time, was his proportionate share. The agreement treats him as a stockholder owning that jiercentage of the stock, and it is in that light that the clause in question must be read. Being a stockholder he must have issued to him his proportionate share of any increase in the stock, and thus jneserve to him his share or interest in the property of the corporation, and evidently the .agreement only contemplates him as a stockholder. The property of the corporation is represented by stock. If Rowley should sell his stock he would cease to have any interest in the property of the corporation or voice in its management. As soon .as he sells the purchaser takes his place and becomes entitled to all of his rights in the coiporation. Such purchaser is then interested in maintaining his proportionate share of the stock, and in receiving his just proportion of any new stock which may be issued. This the parties evidently had in mind when the provisions of the contract were framed, for we find that in case it should be determined that the capital stock should be increased “ that then, and in that case, said party of the second part will issue and deliver to the said party of the first part, Ms successors or assigns, forty-eight per cent in amount,” etc. Who are Rowley’s successors or assigns here referred to ? Can they be other than, those who have taken his place in the •corporation, the person or persons who have succeeded to, or to whom he has assigned, his stock? We think not. The purchasers of this stock in turn became entitled to the percentage. If one individual purchased his entire stock the percentage would have continued the same.

Had he purchased but a portion thereof his proportion, of course, would be rated accordingly.

If we are correct in this view the agreement was with Rowley as a stockholder for the purpose of protecting him as such, and upon another succeeding to his stock, his successors or assigns in turn became entitled to the protection which the contract gave to him.

The forty-eight per cent mentioned in the contract has reference to his proportionate share of the stock as it then stood, and as it was then, doubtless, expected to remain. Had he sold part of his $48,000 he could not expect his percentage to remain the same, and by consenting to the increase of the capital stock, without the receipt of his proportionate share of such increase, operated to change the rate in case of a subsequent increase. If, as is claimed, that the transaction with the Rochester Gas and Electric Company was in effect an increase in the capital stock of the Brush Electric Light Company in the amount of $1,000,000, and Rowley still owned the original stock issued to him, he received his ratable proportion of the new stock. If he had transferred his stock to others they ■ received it in his stead.

We have thus far considered the provision of the contract per-. tabling to an increase of the stock when no money is paid, when the increase is in the nature of a stock dividend.

It appears to us that our view is made more clear by the provision which follows pertaining to an increase of stock for money paid. “ And in case of any such increase for money paid at the time, the said party of the first part, or his assigns, shall have the right to subscribe for such increase in the first instance on the same terms as other stockholders.”

In this provision we have no reference to Rowley’s forty-eight per cent, and for reasons which áre obvious. If cash is paid for the stock it would go into the treasury of tlife company, and Rowley would thus get his proportion of the benefits. In case the increase is for cash, he is not given forty-eight per cent thereof, but is given the right to subscribe for such increase on the same terms as the other stockholders. He is thus placed on an even footing with them, and given the power to maintain his proportionate share in the company’s property.

But, assuming that Exhibit “ C ” should be construed as contended for by the plaintiff, we do not understand that there has been an increase of the capital stock of the Brush Electric Light Company. It is not claimed that there has been any such increase in fact. It is only claimed that the effect of the transaction described is the same as if there had been an increase, and that this plan was resorted to for the purpose of preventing the plaintiff from acquiring any rights under Exhibit “ O.” The question presented is one of right under that contract, and if the stockholders had the right to do what they did do, their intent becomes immaterial.

The Brush Electric Company has not become merged in the new company, for it is alleged that directors have been elected, and a separate corporate existence maintained.

It was not a party to the consolidation agreement upon which the new corporation was organized. Each individual stockholder sold his stock to the Rochester Gas and Electric Company, each receiving for each share so sold five shares in that company. This they were given the power to do by the express provisions of Exhibit “ C.” The business of the two corporations was similar. The new corporation had the power to purchase the stock of the old corporation, and its president or other officers were eligible to become officers of such corporation the same as if they were individual stockholders therein. The statute provides that Any stock corporation, domestic or foreign, now existing or hereafter organized, except moneyed corporations, may purchase, acquire, hold and dispose of the stocks, bonds and other evidences of indebtedness of any corporation, domestic or foreign, and issue in exchange therefor its stock, bonds or other obligations. * * * "When any such corporation shall be a stockholder in any other corporation as herein provided, its president or other officers shall be eligible to the office of director of such corporation, the same as if they were individually stockholders therein, and the corporation holding such stock shall possess and exercise in respect thereof, all the rights, powers and privileges of individual owners or holders of such stock.” (Laws of 1892, chap. 688, § 40.)

The plaintiff is not alleged to have been a stockholder in the old corporation. He, therefore, had no voice in its management or control, nor right to share in any of its property, assets or profits of its business.

It is, therefore, not apparent that he suffered by what was done.

The interlocutory judgment should be reversed, and the defendant’s demurrers sustained with costs, but with leave to the plaintiff to amend his complaint within twenty days upon payment of the costs of this appeal and of tide demurrers.

Dwight, P. J., and Bradley, J., concurred; Haight, J., not taking part.

So ordered.