author: By the Court.—Curtis, Ch. J.

text:
    GEORGE P. KINGSBURY and HOWARD GALLUP, Plaintiffs and Respondents, v. MICHAEL KIRWIN, Defendant and Appellant.

      Decided March 4, 1878.
    BROKERS’ CONTRACTS, THEIR VALIDITY, &c.
    Purchases of cotton for future delivery by a broker for Ms principal, are not in contravention of the statute against gaming and betting, unless it appears they intended to lay a wager (Tyler 0. Burrows, 6 Bolt. 110 ; Cassard a. Hinman, 1 Bosw. 207).
    It was a proper exercise of discretion on the part of the court (warranted by the proofs in this case), to allow the plaintiffs to amend their complaint at the trial, by inserting an allegation of due notice to the defendant, that he would be closed out if he did not keep his margin good (Lounsbury s. Purdy, 18 J7. 7. 521).
    And if, after such demand and notice, the defendant failed to keep Ms margins good, the plaintiff had a. right to close the transaction (White 0. Smith, 54 If. 7. 522).
    The defendant must be presumed, to know the usages pertaining to the matters as to which he made his agreement (Wells 0. Bailey, 49 2f. 7. 472), and the proofs establish that he was not ignorant of the meaning of the term “ closing out ” and the mode in which it is done, under like contracts, by cotton brokers.
    Before Curtis, Ch. J., and Freedman, J.
    Appeal from a judgment, entered on a verdict in favor of the plaintiffs against the defendant, and from an order denying a motion for a new trial on the minutes.
    In July and August, 1876, the plaintiffs were cotton brokers, and one of them a member of the cotton exchange. During those mo'nths, acting as brokers for the defendant, their principal, they sold one thousand bales of cotton for delivery in the months of September and October, 1876, for a certain price, and received from the defendant certain sums of money or margin to cover losses, if any should arise, by increase of the market value of the cotton as might daily occur from the changes of the market.
    It was agreed that the defendant’s margins should be kept good, and should be paid by him on demand, and that the plaintiffs should continue to act as his brokers, and carry the contracts they should make for him only so long as he did so.
    After these sales made by the plaintiffs for future delivery, the market price of cotton advanced, so that if the defendant had bought cotton to cover his sales, and made delivery at their maturity, he would have lost the difference between the two prices, and his margins deposited with the plaintiffs to meet such a loss would have become exhausted.
    The plaintiffs claimed at the trial, that when the margins became exhausted, they were liable to the other brokers, to or through whom the sales were made, by the rules and customs of the exchange, for all such losses, and that they demanded from the defendant the deficiency, and notified him that if he did not respond, they would close out the contracts of sale, and that they did so upon his refusal to keep his margins good, and settled the loss with the other parties to the transactions by paying it.
    The plaintiffs bring this action, to recover these margins advanced by them for him, and their commissions.
    The defendant claimed that the transactions were void under the statute against gaming and betting; that no actual sales or purchases were made; and that no ■ notice of the time, place and manner, of closing out was given him. Various exceptions were taken at the. trial by the defendant, and he also claimed a return of all moneys paid by him to the plaintiffs as margins.
    There was a verdict for the plaintiffs.

      Thomas Bracken, for appellant.

      Albert Gallup, for respondents.
   By the Court.—Curtis, Ch. J.

—The evidence does not sustain the defendant’s claim, that these purchases through his brokers of the cotton for future delivery, were in contravention of the statute against gaming and betting. There is no proof of any intention on the part of the plaintiffs not to deliver, or on the part of the vendees not to accept the cotton pursuant to the contracts. Such a contract as the parties to the suit entered into is not objectionable, unless there is evidence to show that they intended to lay a wager (Tyler v. Barrows, 6 Robt. 110; Cassard v. Hinman, 1 Bosw. 207).

The permission given at the trial by the court to the plaintiffs, to amend their complaint by inserting an allegation of due notice to the defendant, that he would be closed out, if he did not keep his margin good, was a proper exercise of discretion on the part of the court, and warranted by the proofs (Lounsbury v. Purdy, 18 N. Y. 521).

The answer admits, in substance, that the defendant ordered the sale of the cotton, and agreed that he would keep the margins good as the cotton advanced in the market. If then, after demand and. notice, the defendant failed to keep his margins good, the plaintiffs had a right to close the transaction (White v. Smith, 54 N. Y. 522).

There was some conflicting testimony as to the demands for margins and as to the notice, but it was left to the jury to find whether the plaintiffs made the demands and gave the defendant notice of the time and place in which they intended to close out the transaction, and also as to whether the defendant put up the margins he was notified to put up, and there is no just reason shown for disturbing the conclusion of the jury, which was adverse to the claims of the defendant in these respects, and which was in accordance with the weight of the evidence.

The defendant must be presumed to know 'the usages, pertaining to the matters as to which he made his agreement (Wells v. Bailey, 49 N. T. 472). The usages in respect to cotton brokers and the cotton exchange were in evidence, and also the fact that the defendant had been closed out on a former occasion. He had such previous knowledge of the nature of the business, that he is not in the position of a person of inexperience, and ignorant of the meaning of the term “closing out,” and the mode in which it is done, by going into the market, and buying the cotton, at the lowest price at the time that it could be bought, and using that in settlement of the contract with the buyer on the principal contract.

The court charged the jury that if the plaintiffs failed to prove to them that due notice was given to the defendant, that then the plaintiffs violated their duty to' the defendant, and that he was entitled to recover back the amount of margins he paid, with interest.

There are some exceptions to the admissibility of evidence, but they are not well taken. The refusals of the judge to charge as requested by the defendant, are sustained by our views of the law, and by what the testimony at the trial establishes. The same should be said as to those parts of the charge to which the defendant excepts.

The court left it to the jury to determine whether, as the plaintiffs claimed, the margin of $800 was demanded of the defendant on Saturday, also, whether he was told he must furnish that margin on Monday by ten o’clock, and thereupon acquiesced in it, and promised to do so. The jury were properly instructed that if they found such to be the facts, it was a sufficient and reasonable notice, because there was a time to which the defendant agreed, and an amount as to which he was notified.

The judgment and order appealed from should be affirmed with costs.

Freedman, J., concurred.


source: Caselaw Access Project

license: Public Domain

text:
    LEWIS ROBERTS, Plaintiff and Appellant, v. HENRY WHITE, et al., as Executors, &c., Defendants and Respondents.

      Decided March 4, 1878.
    INJUNCTION ORDER, DAMAGES THEREBY.
    Practice in ascertaining 'the same.
    An order of reference to ascertain the damage sustained by reason of an injunction, entered before judgment in the action, is made prematurely, and is a formal irregularity; but that irregularity is waived, when the order of reference is entered by the consent of parties (Lawton v. Green, 04 W. Y. 326). This irregularity is also waived when the order has been entered and proceedings taken upon the same, without objection, and with the acquiescence of all parties, as in the case at bar.
    Before Curtis, Oh. J., and Freedman, J.
    Appeal by the plaintiff from an order of reference made October 4, 1874, and also an appeal by the plaintiff from an order made on June 8,1877, confirming the report of the referee.

      Wm. R. Martin, for appellant.

      P. W. Ostrander and F. R. Sherman, for respondents.
   By the Court.—Curtis, Ch. J.

—This action was commenced on June 10, 1864, to determine the title to a division or party wall, and restrain its demolition by the defendants, who were constructing an immediately contiguous building, a side wall of which was to replace this division wall. The same day an injunction was granted, restraining the defendants from interfering with the wall in question. On September 19, following, an order was made vacating the injunction, and this order was affirmed on appeal October 31, in the same year, the defendants being stayed during the pendency of the appeal. On October 2, 1865, a decision was rendered after a trial of the action at special term upon its merits, in favor of the defendants. Before the entry of judgment on this decision, and on October 7, 1867, an order of reference was made to Henry Mcoll, Esq., and substituting him in place of George C. Goddard, Esq., as sole referee, to ascertain what, if any damages, the defendants had sustained by reason of the injunction issued at the instance of the plaintiff.

Under this order of reference of October 7,1867, and never appealed from, both parties proceeded and contested the question of damages from December 23,1867, to March 28, 1871. The referee under this order, after having taken the testimony, made his report on July 13, 1871, and assessed the defendant’s damages at $8,085.24.

This amount being in excess of the amount of the undertaking, which was for $5,000, was erroneous, and the matter was referred back by the court to the same referee, to ascertain the damages, and with directions to report the evidence already taken on the former order of reference in respect to damages, with the objections and exceptions also then taken by either party, and with leave to either party to furnish further testimony, and to the plaintiff to file exceptions to the report of the referee, and to any rulings by him made, and reserving all questions to be heard and determined on a motion to confirm the report. The order thus referring the matter back to the referee, was made October 4, 1875, and is the order first appealed from, by the plaintiff. In the mean time, and on June, 3, 1874, judgment in the action was entered in the defendant’s favor.

The referee then proceeded under this further order of October 4, 1875, both parties appearing before him, and additional evidence being taken for the plaintiff and the defendants. The referee reported the former proofs and additional evidence, all of which was under oath, and that the damages were over $5,000, but in view of the limitation of the undertaking, he assessed the damages at $5,000.

On June 8, 1877, this report was confirmed by the court, and the damages assessed at $5,000, and from this order of confirmation the plaintiff appeals. This is the second order appealed from by the plaintiff.

Two principal questions are raised by these appeals. First. Should the report of the referee be set aside, because the original order of reference was premature, and made before instead of after the entry of judgment? Second. What are the damages sustained by the defendants on the merits ?

In the case of Lawton v. Green (64 N. Y. 326), it was held that making an order of reference prematurely, as this was made, under section 222 of the code, to ascertain damages upon an undertaking given upon the granting of an injunction, was a formal irregularity which was waived by the consent to the order of reference.

In the present case, both the original order of reference to Mr. Nicoll, and the subsequent order which is appealed from, appear, upon their face, to have been made with the acquiescence of the plaintiff, if not upon his consent or motion. Nothing indicates that there was any objection raised on the plaintiff’s part to the making of these orders.

If the original order was, as appears, formally irregular, neither party objecting to it, and both proceeding under it for over three years, and taking testimony and neither appealing from it, it must, in view of the decision in Lawton v. Green, be regarded as acquiesced in, and that the irregularity was waived.

Again, in respect to the subsequent and supplementary order of reference, which was appealed from, it cannot be held irregular upon the ground that it was, like the original or first ordor, prematurely made, as final judgment had been entered in the action long previously to its being made. Neither can it be held to be prejudiced by the irregularity in this original order, because that must be considered, for the reasons above stated, to have been waived.

Section 222 of the code directs that the damages caused by an injunction “may be ascertained by a reference or otherwise, as the court may direct.” This language confers full power upon the court to both order a reference for this purpose, or to proceed otherwise. It was not intended to be construed as precluding the court, upon the coming in of the report of the referee, especially when, as in this case, the damages were reported in excess of the limit of the undertaking, from referring the matter back, and by a further order directing the referee to report de noto as to the damages, and also to report to the court the entire evidence taken by him under its direction. Tht case maybe one in which justice to the parties,, and due information to the court, requires this very course of procedure when the action of the referee comes up for confirmation. It is in consonance with what is reasonable, and with the practice of the courts under such circumstances, and accords with the provisions of this section of the code.

The referee’s return under the original order of reference, does not show that any objection was made by the plaintiff, until the close of the testimony, that there was an irregularity in the making of the order, or in proceeding under it. At the first hearing under the second order, the plaintiff objected to the evidence in the referee’s previous return, but assigned no ground for the objection.

The course taken by the plaintiff in respect to the orders of reference, and the proceedings on his part under them, must be construed, in the light of Lawton v. Green, as a waiver of the irregularity. If this conclusion is correct, it follows that the order appealed from, confirming the referee’s report, and overruling the exceptions of the plaintiff, should also be affirmed, unless there is some difficulty upon the merits.

The remaining question is, as to the amount of damages sustained by the defendants. The evidence supports the finding of the referee in this respect, that the damages exceeded the sum specified in the undertaking, and the referee in consequence reports only as damages the smaller amount mentioned in -the undertaking. It is true, as the referee states in his very carefully considered opinion, that the party claiming damages must do all he can to lessen them. There must be a reasonable construction given to this view. The perusal of the testimony fails to satisfy me that it would be reasonable and just for the defendants to be compelled to go on with their building, shoring up the floor timbers and corners on one side, and then. afterwards, when the injunction was dissolved, have to drive piles, and construct a foundation, and build the wall upon it to meet the floor timbers. The evidence of the witnesses Mr. Boss and Mr. Demarest satisfies me, that to incur this extra expense, and to risk cracking and damaging the remaining walls, by the action of a pile driver operating necessarily inside of the unfinished structure, would have been imprudent, and no part of the duty of the defendants. There was no negligence on their part, in awaiting the dissolution of the injunction, which they had reason, as the result shows, to suppose would be dissolved, and that too, very probably, at an earlier day that it was dissolved.

There were some exceptions taken by the plaintiff to the rulings of the referee upon the admission of testimony, but they do not call for- the reversal of either of the orders appealed from.

The plaintiff objects that there was testimony given on the reference and reported to the court by the referee, which was not subscribed by the witnesses. This, like the premature making of the order of reference, is a formal irregularity, a mere matter of practice, the remedy for which is by motion for the purpose of securing its correction (National State Bank of Troy v. Hibbard, 45 How. Pr. 287). The object of exceptions is to bring up the merits of controversies for review, and not to correct omissions in mere matters of practice, as is justly said by Daniels, J., in the opinion in the above case. This objection of the plaintiff was made at the argument, and is not presented by any exception, nor does it appear that the attention of the referee was called to it.

The two orders appealed from should be affirmed with costs.

Freedman, J., concurred.


text:
    CHAUNCEY KILMER, Plaintiff and Respondent, v. JAMES H. SMITH, et al., Defendants and Appellants.
    REFORMATION OF A WRITTEN INSTRUMENT BY A COURT OF EQUITY.
    The exercise of the power of a court of equity to reform the language of a written instrument, must be based upon the fact, appearing conclusively, “that both parties to the instrument . agreed that it should be in a different form from that expressed by the writing (Jackson v. Andrews, 59 If. 7. 347; Mead v. Westchester Fire Ins. Co., 04 Id. 455).
    Where the instrument sought to be reformed is a deed of conveyance, the contract of sale executed before the execution of the deed in question, and which provided for it, is binding upon the parties. Its terms, whereby provision was made as to the form and character of the deed to be executed, must be deemed to be obligatory and expressing at the time, the understanding and agreement of the parties.
    In this case the preliminary contract did not impose upon the respondent the personal obligation of the payment of certain existing mortgages on the premises conveyed, but did provide that the premises should be conveyed, subject to the lien of said mortgages. The deed in question, by its terms, imposed upon the respondent the personal obligation of the payment of those existing mortgages, and in this respect was a departure from the provisions of the preliminary contract, and it not appearing that this contract^was modified in its terms by the parties, and it appearing that the deed was accepted by the respondent as the fulfillment of that contract, and without knowledge of any departure therefrom,—Held, that the deed must be «reformed so as to make its terms correspond to the contract.
    No existing custom or practice to have such a clause inserted in the deed, although "not specifically expressed in the contract, would justify, in a legal or moral point of view, an act whereby the grantor was kept in ignorance of a change, the terms of which subjected him to a personal pecuniary liability not provided for in the preliminary contract ;*and the evidence offered upon this point was very properly excluded.

      Decided March 4, 1878.
    Before Curtis, Ch. J., and Freedmau, J.
    Appeal by defendants from a judgment directing the reformation of a deed, executed by the defendant Smith and wife to the plaintiff, by striking out a clause by which the plaintiff assumed and agreed to pay three mortgages and interest thereon, being liens on the premises conveyed, ás a part of the consideration or purchase money therefor.
    The action was tried at the special term, and the court made the following findings of fact and conclusions of law.
    Findings of Fact.
    I. That on or about the 14th day of April, 1874, the defendants James H. Smith and John A. Dake, made and executed the written contract specified in the complaint, and a copy of which is annexed thereto.
    II. That subsequently, and before the time appointed for the execution and delivery of the deeds therein provided, said Dake assigned his interest in that part of said contract which provided for the conveyance of the four lots situate on Seventy-seventh street, mentioned in said contract, to the plaintiff Kilmer, as collateral security toward the payment of an indebtedness then due by said Dake to said Kilmer, and directed the deed of said lots to be made to said plaintiff, and which was assented to by said defendant Smith, and thereupon, in consideration of the premises, the plaintiff duly executed and delivered to the parties, a release and satisfaction of a mortgage, which the plaintiff then held as a security for said Dake’s indebtedness to him, upon the house and lot owned by said Bake, situate in Fifty-seventh street, and the same house and lot which formed a part of the subject matter of the contract before mentioned.
    III. That neither said Bake, nor the plaintiff Kilmer, ever at any time agreed to assume and pay the three several mortgages upon the four lots in said 77th street, mentioned in said contract, and specified in the complaint, nor either, nor any part of either of them, nor did said Bake, or said plaintiff, ever, at any time, in any way assume the payment of either or of any part of said three several mortgages.
    IV. That the clause contained in the deed of the said four lots in Seventy-seventh street, made by the defendants, James H. Smith and Annie M. Smith, to the plaintiff, set forth in the complaint herein, and therein particularly complained of, and which is in the words following, viz. : “Which said three several mortgages, together with the interest thereon, the party of the second part hereby expressly assumes and agrees to pay off and discharge the sa-me, forming a part of and having been deducted by the said party of the second part from the consideration or purchase money hereinbefore expressed,” was inserted in the said deed by said defendant Smith, without the knowledge or consent of the said Bake and the plaintiff, or either of them, and the plaintiff took said deed and caused ■the same to be recorded in ignorance of the fact that the said clause, or any clause or words of like import or effect was contained therein, and supposing and understanding that the said deed in that particular (as in all other respects) corresponded to the express terms of the said written contract, and the insertion of said words and clause above recited in said deed was unauthorized by the terms of the said contract and was a fraud upon said plaintiff.

      Conclusions oe Law.
    That the plaintiff is entitled to judgment in this action as demanded in the complaint.
    That the said deed made by the defendants James H. Smith and Annie M. Smith to the plaintiff before mentioned be reformed and corrected by striking out therefrom and canceling the clause contained therein, and which is in the words following, viz. : “ Which said three several mortgages, together with the interest thereon, the party of the second part hereby expressly assumes, and agrees to pay off and discharge the same, forming a part of, and having been deducted by the said party of the second part from the consideration or purchase money hereinbefore expressed,” and the agreement and covenant purporting to be made and created, thereby requiring the plaintiff to pay off the said three several mortgages upon the said four lots in Seventy-seventh street, mentioned in said contract and in said complaint, be adjudged and decreed to be canceled and null and void, and the register of deeds in and for the county of New York be ordered to change and correct the record of said deed on the record thereof in his office, by striking out and erasing and canceling the before-recited clause and words now contained therein.
    And it appearing that none of the defendants in this action have answered and defended therein except the defendants James H. Smith and Annie M. Smith, the plaintiff is entitled to have judgment against the said defendants, James H. and Annie M. Smith, for his costs of this action.

      Julian Davies and Everett P. Wheeler, for appellants.

      Walter S. Cowles, for respondent.
   By the Court.—Curtis, Ch. J.

—It is urged on the part of the appellants, and very justly, that in the exercise of the power of a court of' equity to reform the language of a written instrument in the absence of fraud, it must be conclusively established that both parties agreed that it should be in a different form from that expressed in the writing (Jackson v. Andrews, 59 N. Y. 247; Mead v. Weschester Fire Ins. Co., 64 Id. 455).

The contract of sale, executed before the execution of the deed in question, was binding upon the parties to the latter. By its terms provision was made as to the form and character of the deed to be executed, which must be deemed to be obligatory, and as expressing the understanding and agreement at the time of the parties.

By the contract of sale, preliminarily executed for greater caution and certainty, and to define and protect the duties and rights of the respective parties, and in fulfillment of which the deed was agreed to be executed, it will be seen that no obligation was imposed upon the respondent, to assume the payment of the mortgages upon the premises conveyed. The deed was to be given of the property simply subject to these existing mortgages.

The deed sought to be reformed by reason of this departure from the provision of the contract, differs in this respect from those cases where a change is sought in the absence of a contract of sale, that the parties to this instrument have preliminarily reduced to writing, and formally declared their understanding and agreement, as to the obligations resting upon each party.

Unless some modification or change was agreed to by the parties, it was clearly the duty of the appellants, Smith and wife, to have delivered their deed to the respondent with the subject clause only, and not to have inserted an additional and uncalled-for clause, by which the plaintiff agreed to assume and pay these mortgages.

The court found, at the trial, that neither the plaintiff nor his assignor Dake at any time agreed to assume or pay the three mortgages, or any part of them ; that the insertion in the deed of the clause to that effect was without the knowledge of either the plaintiff or Dake; that the plaintiff took and recorded the deed in ignorance that it contained such a clause, and supposing that it corresponded with the contract; that the insertion of such clause was unauthorized .by the contract, and was a fraud upon the plaintiff.

If the evidence sustains these findings of the court it tends 'strongly to support the judgment for the reformation of the deed.

The plaintiff testifies, that he did not know that the deed failed to agree with the contract, but supposed it did agree with it; that he would not have taken it if he had known it contained the covenant in question ; that the deed was handed to hiip by the defendant Smith, a day or two before it was to be delivered, who said he wanted him to examine it, and that it was drawn up according to contract; but that he had no distinct recollection of reading it, and that he had no counsel in closing the sale. The witness further testified, that he handed it to Mr. Cowles when delivered, to put on record, with whom it remained until the following May, when witness discovered the clause, and directed Mr. Cowles to take steps to have the deed reformed. Mr. Dake testifies that he did not know or have notice, that this clause was inserted in the deed, and that no change, verbal or otherwise, to his knowledge was made in the contract after the written contract was made.

Mr. Cowles testifies he went to the office, where the deed was delivered, with some certificates of continuations of searches, as his office boy was out, and he had no one to send; that he had not seen, and did not examine the contract, that he did not examine the deed or the title of the property, and first had his attention called to this clause in the deed, the last of May, or early in June, in the year following.

On the part of the appellant, Mr. Smith, one of the appellants, testifies, that he did not examine the contract to see if there was this clause in it, nor did he know whether there was such a clause in it after he signed it; that he directed his attorneys to put this clause in the deed, though he then knew the clause was in addition to what was in the written contract; and that he had it inserted for the purpose of making the plaintiff personally responsible for the mortgages, and that he was advised by his counsel, who had inspected the contract, that otherwise the plaintiff would not be liable to pay the mortgages. He further testified that this direction to his counsel was given in pursuance of his understanding of the original agreement, and that he did not notify Kilmer of the insertion of this clause in words, or otherwise than by presenting him the deed.

The attorney who drafted the deed testified that when the contract was brought to the office he observed that this clause was not in it; that Mr. Cowles examined the deed very critically and very carefully, and made no objection to it; that he did not know that he called Mr. Cowles’ attention to the assumption clause, but that he recollected saying to him that the “deed, as we understand it, was expressly according to the views and understanding of the parties.”

One of the counsel for the appellant Smith who was present at the closing of the contract, testified that he has no recollection of this clause being called to the attention of any party in the office that day, or that Mr. Cowles examined the deed.

The plaintiff Kilmer, and Mr. Hake, being recalle,d, testify that nothing was said in their hearing about this assumption clause in the deed, on the day of the passing of the deeds ; and Mr. Cowles further testified, he was there by accident, and had no idea of that clause being there.

There is not much conflict in this evidence. Even if Mr. Cowles did examine the deed carefully and critically, it matters little, for he was not employed by the respondent to do so; nor is there any proof that the respondent held him out, or represented that he was his counsel to protect his interests in passing the deeds or to act for him in any respect, except to have some searches continued and brought there that day, and jto take the deed for the purpose of having it recorded.

The appellant Smith’s alleged understanding, that the respondent was to assume the mortgages, and pay them, if any such existed, is not shown to have been based upon any knowledge or supposition as to what was contained in the original contract, or upon anything subsequently passing between him and the respondent. It was, at best, a vague idea on his part, of which the respondent was ignorant, and which could neither be supported nor inferred from anything the respsndent had done or said. Its existence forms no reason for releasing the appellants from giving a deed in accordance with the obligations of the contract.

The evidence shows that the respondent was mistaken as to the contents of the deed delivered to him ; and that he was misled into its acceptance, and it supports the findings of the court.

The memorandum upon the back of the contract, signed by the parties when the deeds were passed, to the effect that the contract was completed and merged in the deeds, places the appellants in no better position. It was prepared and presented in furtherance of, and to give effect to, the clause inserted in the deed. Ifc is evident, that if the respondent had not been mistaken and misled as to the agreement of the deed with the contract, he never would have signed it. If the disputed clause in the deed cannot be sustained, except by the operation of that indorsement, it has to rest upon a basis that partakes of all the elements that pertain to the insertion in the deed of the clause itself. It in no way relieved the appellants, whose duty it was, under the contract, to deliver the deed, from their obligation to deliver such a one as the contract called for, and it in no way obviates the effect of any disingenuousness, or concealment, or suppression, or misrepresentation, as to the deed tendered in fulfillment of the contract.

One of the counsel of the appellant, at the passing of the deeds, was asked on his direct examination in regard to the clause in dispute this question : “Was it not at that time, and had it not been for years, very common, in the city of New York to have such a clause inserted in a deed, although it was not specifically expressed in the contract ?” The ruling of the court sustaining the objection to the question that it was immaterial, was excepted to. I am not aware that any such practice exists, or that it is ever done under such circumstances as the proofs disclose in this case. Nothing would justify, in a moral point of view, such an act, where the grantee is ignorant, and kept in ignorance of the change by which it is sought to subject him to a pecuniary liability. No custom or practice would warrant it, and the existence of any such custom could not be construed to sustain such a wrong. It was properly excluded.

There are other exceptions to the admission of evidence, but none that are tenable.

The objection that if the deed is reformed, the parties cannot be restored in statu quo, because the property has depreciated since the making of the deed, is without force. The reformation of the deed restores the parties to their legal rights, and whether the property has increased or decreased in value has no relation to the question affecting the legality and existence of the assumption clause in the deed to one of them.

The judgment appealed from should be affirmed, with costs.

Freedman, J., concurred.


text:
    ABRAHAM VAN DOLSEN, et al., Plaintiffs and Respondents, v. WILLIAM P. ABENDROTH, Impleaded, &c., Defendant and Appellant.
    U. S. DISTRICT COURT, PROCEEDINGS THEREIN IN BANKRUPTCY, JURISDICTION, &c.—RES AD JUDIO ATA.
    In this case the plaintiffs sought to recover judgment against the defendant upon a promissory note made by .the firm of Griffith & -Wundram, upon the ground that defendant was a general partner of that firm. Defendant claims by his answer to have been only a special partner in that firm, and to have been adjudged as such, in proceedings in bankruptcy against said firm in the U. S. district court, to which proceedings the plaintiffs were parties, and that they were hound by the said adjudication.

      Held by the court, that the adjudication in the U. S. district court appears to embrace all the elements to sustain the defense of res adjtdieata. The court was of competent jurisdiction, and the parties were before it to have their respective rights determined ; they were actors and participants in the proceedings, and also in the administration and disposition of the property and assets affected by the decision of that court, and the same question sought to be raised and decided in this action was then and there determined, and under such circumstances it would be inconsistent with well-established rules, that the parties or their privies should be allowed to again litigate a subject matter which was or which could have been determined in the proceedings in the U. S. district court. The facts pleaded in defense are sufficient.

      Decided March 4, 1877.
    The case of Durant «. Abendroth (reported in 41 N. T. Super. Gt. [9 J. & /S'.] 53), wherein this court held that this defendant was a general partner in the firm of Griffith <& Wundram, noticed and reviewed by the court.
    Before Curtis, Oh. J., and Freedman, J.
    Appeal by the defendant Abendroth from so much of the interlocutory judgment rendered herein, at a special term of this court, as determines that the new matter alleged in his answer as a third defense upon its face does not constitute a defense, and is upon its face insufficient in law as a defense, and that the demurrer to such new matter, alleged as a third defense, is sustained and allowed.
    And also from so much of the interlocutory judgment as determines that the new matter alleged in his answer as a fourth defense, upon its face does not constitute a defense, and is upon its face insufficient in law as a defense, and that the demurrer to such new matter alleged as a fourth defense is sustained and allowed.
    And also from so much of the interlocutory judgment, as amended by the order of October 18, 1877, as provides that defendant shall pay plaintiff $10 costs of the motion to resettle the interlocutory judgment when it appeared that such judgment had been entered without notice to defendant.
    This action was commenced in April, 1877, upon a promissory note made by the firm of “Griffith & Wundram,” and signed by that firm’s name, and the defendant Abendroth is sought to be charged as a general partner in that firm, he claiming by his answer to be only a special partner, and to have been adjudged to be such in proceedings in the U. S. district court, to which the plaintiffs were parties and by which they were bound.
    The third and fourth defenses pleaded in the defendant’s answer were as follows :
    And for a further and third defense :

      First. On or about November 23, 1872, voluntary and involuntary proceedings were duly instituted in district court of the United States for the southern district of New York, in bankruptcy, wherein the said firm of Griffith & Wundram was duly adjudged and declared to be bankrupts, as by said proceedings, a reference being had thereto, will more fully and at large appear.

      Second. The claim of the plaintiffs arose upon a money demand on contract, and was provable in said proceedings in bankruptcy, under and by virtue of the provisions of the act of congress of the United States, entitled “ An Act to establish a uniform system of bankruptcy throughout the United States,” approved March 2, 1867, and of the acts supplementary thereto, or amendatory thereof. Plaintiffs were then the lawful owners and holders of said claim, and were duly made parties to said proceedings in bankruptcy ; they made due proof of their debt against said firm in bankruptcy, and the same was duly allowed and filed.

      Third. Both before and after the plaintiffs had duly presented and filed their said claim, and while they were owners thereof, such proceedings were had, to which the plaintiffs were parties, that it was duly adjudged and determined, that John Griffith and George W. Wundram, the bankrupts in this bankruptcy, were the general partners in the limited partnership of Griffith & Wundram, of which William P. Abendroth, this defendant, was the special partner.

      Fourth. In the course of said proceedings in bankruptcy, a meeting of the creditors of the said special partnership of Griffith & Wundram was duly held, and in it the plaintiffs participated ; at said meeting, this defendant was duly chosen the assignee in bankruptcy of said firm, and thereafter, he duly qualified as such, and entered upon and discharged the duties of his said office ; all of which was done by and with the assent of the plaintiffs, who were then and there the lawful owners and holders of said claim.

      Fifth. “After said adjudication that said firm of Griffith & Wundram was a limited partnership, of which this defendant was the special partner, and the appointment of this defendant as assignee in bankruptcy, this defendant, in the course of the discharge of his duties as such assignee, duly paid to the plaintiffs, they then being the owners and holders of said claim, a dividend of six per centum upon the claim in suit, out of the proceeds of the assigned estate of Griffith & Wundram, being the sum hereinbefore alleged to have been paid on said claim, and the plaintiffs accepted the said payment.

      Sixth. The said adjudication that Griffith and Wundram were general partners, and this defendant was special partner, was made more than one year before the commencement of this action, and the same now remains in full force and effect.

      Seventh. This defendant pleads the said proceedings in bankruptcy, and each and every part thereof, and the adjudication and determinations therein, and the acts of the plaintiffs in bar and in abatement of this action.
    For a fourth and last defense :
    Before the commencement of this action, another action was brought in the court of common pleas in and for the city and county of New York, in the State of New York, for the same cause of action as set forth in the complaint herein, in which said action the plaintiffs herein were plaintiffs, and John Griffith and George W. Wundram, two of the defendants herein, were defendants, and were sued as forming the partnership of Griffith & Wundram.
    The said action is now pending and undetermined, having been stayed by order of the United States district court in bankruptcy in the matter hereinbefore forth.
    Wherefore this defendant demands judgment, that the complaint be dismissed as against him, with costs.
    The plaintiffs demurred to the new matter contained in the answer of the defendant Abendroth, and alleged as a third defense, upon the ground that, upon its face, such new matter did not constitute a defense.
    The plaintiffs also demurred to the new matter contained in the answer of the defendant Abendroth, and alleged as a fourth defense, upon the ground that, upon its - face, such new matter did not constitute a defense.
    The demurrer of the plaintiff to these defenses was sustained and allowed, and an interlocutory judgment upon such decision entered, which was subsequently amended, by granting leave to the defendant Abendroth, to serve an amended answer upon payment of of costs, and ten dollars costs of the motion made for a resettlement of the interlocutory judgment, and for such leave.

      Wm. Henry Arnoux, for appellant. .

      Carlisle Norwood, Jr., for respondents.
   By the Court.—Curtis, Ch. J.

—It may be true that in a similar action, entitled Durant v. Abendroth (reported in 41 N. Y. Super. Ct. [9 J. & S.] 53), this court held that the defendant Abendroth was a general partner in the firm of Griffith & Wundram, he having claimed to be only a special partner, and that such decision was affirmed by the court of appeals in March, 1877. But if we look beyond the record before us, to determine to what extent the action in which the decision was so made and affirmed was similar to this, or governs this, it will appear that the question was not considered, as to how far the adjudication of the United States district court that the firm of Griffith & Wundram was a limited partnership, and Abendroth, the defendant, was the "special partner, was binding upon these plaintiffs and the other creditors of such firm, who were parties to such proceedings and adjudication.

The chief question raised by the demurrers is whether the proceedings and adjudication in the United States district court, considered as truly stated in the answer, constitute a matter judicially acted upon and decided, by which the plaintiffs are precluded from raising the question as to the status of the defendant Abendroth, in the firm of Griffith & Wundram.

The answer alleges the due institution of proceedings in the United States district court in bankruptcy, under the act of congress of March 2, 1867, and the acts supplementary and amendatory thereto, to which proceedings the plaintiffs were parties, and in which they proved and established this claim now sued upon, and that in these proceedings it was duly adjudged and determined, that George Griffith and George W. Wundram, the bankrupts, were the general partners in the limited partnership of Griffith & Wundram, of which William P; Abendroth, this defendant, was the special partner.

The answer further states that the plaintiffs participated in a meeting of the creditors of such special partnership, at which the defendant Abendroth was chosen assignee by and with the plaintiffs’ assent, and that after such adjudication they received a dividend out of the proceeds of the assigned estate of Griffith & Wundram.

It would thus appear that the plaintiffs were parties to these proceedings, in which it was competent for them to have had the defendant Abendroth adjudged a general partner, if they had interposed such a claim, and established it by proof. But it appears that they did not do so, for reasons, if any, not apparent in the pleadings. They did, however, participate in the fruits of the adjudication in bankruptcy.

By this adjudication the defendant Abendroth was held to be a special partner, and hence in the position which the State law declares, of not being liable for the debts of the partnership beyond the sum contributed by him as capital. The adjudication that the firm of Griffith & Wundram was a limited partnership, limited the plaintiffs, and other creditors, who were parties to the proceedings, to a remedy against the sum contributed as capital to the firm, as far as the defendant Abendroth is concerned. If they deem themselves entitled to anything more, or that such adjudication was not in accordance with the proofs, they should have availed themselves of the relief and of the means of review afforded them by the acts of Congress affecting proceedings in bankruptcy, and not wait and participate as far as possible in benefits afforded them by the-determination of the federal court, and then.resort to a State court, upon the theory that the former erred in passing upon the character of the partnership.

This adjudication appears to embrace all the elements, to sustain the defense of res adjudícala. The court was of competent jurisdiction. The parties were before it to have their respective rights determined. They were actors in the proceedings, and actors and participants in the administration and disposition of the property and assets, affected by its judicial decision. The same question sought to be raised anew in this action, was there determined. Under such circumstances, it would be inconsistent with well-settled rules, that the parties or their privies should again be allowed to litigate a subject matter which was, or even which could have been determined, in the proceedings in the United States district court.

It is enough that the facts pleaded in the third defense are sufficient to confer jurisdiction upon the United States district court, and it is not for us to consider, on this appeal, whether in point of fact the plaintiffs can, as they claim, show that this defendant was a third general partner, neither petitioner nor petitioned against, and that consequently there was no sufficient jurisdiction conferred upon the court. We cannot look beyond the sufficiency of the allegations of the defense as stated in the answer.

In reference to the fourth defense, setting forth that John Griffith and George W. Wundram, were sued for the same cause of action as in the present suit, and that the same is now stayed by order of the United States district court, the same principle must govern. The act of congress authorizes this stay. It is a part of the proceedings in bankruptcy. Under it the assets of the firm, including the capital contributed by the defendant Abendroth, were held and protected for the benefit of the creditors of the firm. The plaintiffs, having been parties to the adjudication confirming such stay, and participants in the subject matter of the proceedings, are precluded from maintaining an action for the same cause, and against parties who are held to be the same parties under the adjudication which binds the plaintiffs.

The application for relief or for a remedy on the part of the plaintiffs, should be directed to the federal court, and on the basis of "the proceedings there already had. To nullify this stay would be, in effect, to hold that the matters pleaded in the defendant’s third defense were insufficient, and would tend to open the State courts to the review of questions collaterally, that by proceedings under the bankrupt laws have been determined and put at rest in the federal courts.

The suit in the court of common pleas originally" operated as to the defendant, Abendroth, to the extent of his capital in the firm of Griffith & Wundram. The present suit can extend no further, if it is governed by the existing adjudication. The maintenance of the former suit being prohibited by law, to hold that by bringing a new suit for the same cause of action, the effect of the existing adjudication can be avoided, would be to sustain an evasion of the bankruptcy laws and of the just and competent adjudication in this respect rendered thereunder.

The question as to the costs of the motion was properly determined in the discretion of the court at special term. So much of the interlocutory judgment appealed from other than that directing the payment to the plaintiff of $10 costs of motion is reversed with costs.

Freedman, J., concurred.