text:
    Hecla Powder Company, Appellant, v. Sigua Iron Company, Respondent.

      Contract —damages for its breach — am, agreement to deliver an interdicted article in a foreign country — a fine imposed upon the consignee may be recovered from the consignor.

    In a case where, if an event happens, it must inevitably cause loss and damage to one or the other of two contracting parties, the party who has contracted that such an event shall not happen, although he cannot specifically perform the contract, because the event may result, through the act of God or inevitable necessity, must stand the risk and make good the loss.
    Parties who enter into a contract in reference to the carrying on of any business are presumed to know how it is usually carried on.
    In an action brought to recover upon a draft given by the defendant to the plaintiff, it appeared that the plaintiff entered into a contract with the defendant to-deliver a certain amount of powder in Santiago de Cuba, both parties understanding that this powder was an interdicted article in Cuba,' and that unless permission to enter it was obtained a fine and seizure might result; when the powder arrived at Santiago it was seized by the Spanish authorities, and the defendant’s agents were fined an amount which was made the basis of a counterclaim. *
    Held, that as the plaintiff failed to deliver the powder it had no cause of action upon the draft;
    That the fine imposed upon the defendant was a damage which was the natural and probable result of the breach of the contract, and that the loss must be. borne by the party who was guilty of the breach;
    That it was, therefore, a proper subject for a counterclaim.
    AppeAl by the plaintiff, the Hecla Powder Company, from a. judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 11th day of March, 1895, upon the verdict of a jury rendered after a trial at the New York Circuit, and also from an order bearing date the-4th day of March, 1895, and entered in said clerk’s office, denying the plaintiff’s motion for a new trial made upon the minutes.

      William P. Quinn wiá Alexander T. Goodmi/n, for the appellant.

      Frederic J. Swift, for the respondent.
   O’Brien, J.:

The action was brought to recover $950 and interest upon unaccepted draft which defendant gave for Hecla powder, bought from plaintiff, to be delivered in Santiago de Cuba. Defendant denied tliat tlie powder had been delivered, and set up a counterclaim based upon the plaintiff’s attempt and failure to make the delivery, alleging that it neglected to procure the proper and necessary permit from the Spanish government to enter and land the powder in Santiago, and failed to give defendant the agreed notice, by reason of which the powder was declared contraband and seized by the Spanish government, and a fine of $3,44249 imposed upon the defendant by such government, which it was obliged to pay, .and did pay under protest.

The plaintiff made a contract with the defendant to deliver 5,000 pounds of Hecla powder to defendant’s agents, .'Brooks & Co., in Santiago de Cuba. The parties understood that this powder was an interdicted article in Cuba, and that, unless permission to enter it was obtained, a line and seizure might result. The plaintiff had made previous shipments to Cuba, and, in addition to the knowledge thus obtained as to the laws and regulations in regard to entering the powder, its attention was specifically called to the difficulty of •delivery by the agents of defendant, at the time the contract was made, by the latter’s expressing a doubt as to plaintiff’s ability to land the powder, and by entering into a contract which required plaintiff to obtain tlie necessary permits of the Spanish consul in New York, and to take such other measures as might be necessary to get the powder into Cuba. Upon this point the defendant’s witnesses testified that plaintiff agreed to send it and its agents previous notice of the shipment of the powder, and to forward the permit to enter it together with tlie bill of lading, so that defendant’s agents might have them at the time of the arrival of the vessel. These conditions were disputed, the plaintiff claiming that there was no agreement to ■send previous notice or to forward the documents mentioned. The fact, however, is that plaintiff obtained a permit from the Spanish ■consul and a bill of lading, but these were not mailed, but were handed to the captain of the vessel carrying the powder for his own ■use and for transmission to defendant’s agents, but whether as a .matter of fact they were ever delivered to the latter is left in doubt.

After considerable delay, the powder was shipped, and upon arrival of the vessel in the harbor of Santiago it was seized by the .Spanish authorities, but whether such seizure was on board the vessel. and the powder was then placed upon the custom house lighters, or whether it was seized after it was placed on lighters that had been brought there by the defendant’s agents, was a disputed question of fact upon which there was slight if any evidence, the plaintiff claiming that it was seized after delivery to defendant’s agents, and the defendant as strenuously contending that the evidence shows it was seized on the vessel. Such seizure occurred notwithstanding that the bills of lading, invoice and the consular-permit were handed to the custom house officials; and whether their act was a mere arbitrary and wanton one, or was pursuant to any law of Cuba, is not made clear. This same remark is applicable to nearly all the testimony appearing upon the disputed questions of fact, which has been presented on both sides in such a misty and shadowy way as to leave in doubt everything but two salient facts; one, that the plaintiff entered into a contract to deliver the powder-in Santiago de Cuba; and the other, that it was seized when it arrived there by the Spanish authorities and the defendant’s agents were fined the amount which is the basis of the counterclaim.

There was no serious dispute or- question as to the amount of the fine paid by the defendant and fonnd by the jury, and the parties not having litigated that below, it is too late to urge it upon the appeal.

With such facts conceded and with the unsatisfactory light shed by the rest of the testimony, we are to dispose of the two questions presented: First, as to whether the plaintiff made out a cause of action upon the draft; and the second, as to whether by way of counterclaim the defendant was entitled to recover the amount of the fine paid by its agents at Santiago. Respecting the former, little need be said. It is beyond dispute that plaintiff’s contract was to deliver the powder to the defendant’s agents at Santiago ; and that there was a failure to prove such delivery the jury has found.

The more serious question is as to the liability of the plaintiff to reimburse the defendant for the fine which was imposed by and paid to the Spanish authorities. At first blush it might seem difficult to predicate a liability on the plaintiff’s part to reimburse the defendant for what, so far as appears, might have been the unlawful and unwarranted act of the Spanish government in seizing the powder and imposing the fine. The law only recognizes damages which are natural and probable, and not those which are extraordinary and unlikely to be foreseen. Remote consequential losses cannot be recovered. (Putnam v. B’way & Seventh Ave. R. R. Co., 55 N. Y. 108, 119 ; Sedgwick on Damages [8th ed.], §§ 122, 124.) And it is urged by appellant that the payment of such a fine would not be the direct or natural consequence of any act or omission on its part, and the possibility of a fine being imposed upon the defendant or its agents was exceedingly remote. "Without quarreling with this argument, we think that when consideration is taken of the contract between the parties and what it included, and the duty that devolved on each, we can reach a conclusion as to who should bear a loss which in the first instance was suffered by the defendant.

It was within the knowledge of both the contracting parties that the introduction of powder into Cuba was a matter of difficulty, requiring the taking of certain precautions, including the obtaining of a consular permit, and with knowledge of such difficulties and of the risk assumed, the plaintiff, for a consideration, agreed not only to sell the powder, but to assume the risk of delivering it to defendant’s agents in Santiago de Cuba. The jury having found that it did not perform its contract, and did not deliver the powder to the defendant’s agents — from which the inference naturally flows that it was seized while still in the possession of the plaintiff— we are brought to a point where, upon well-settled principles of law, we must hold that the loss resulting froiii the breach of such contract by the plaintiff should be suffered by it. If, as claimed by defendant, the testimony shows that the usual precautions which the plaintiff agreed to take were not taken, such as giving the defendant’s agents previous notice of the shipment and the name of the vessel, and forwarding to them the necessary documents for the entry of the powder, then is added another ground, that of negligence, upon which plaintiff’s liability might be predicated. Such conduct was not only negligent, but a breach of the express contract which, according to the defendant, was entered into. If, however, we eliminate the disputed terms of the agreement as to the notice and the transmission to defendant’s agents of the permit and other documents, and consider the admitted terms of the agreement which placed upon the plaintiff the obligation of delivery to defendant’s agents at Santiago, which, as the jury found, was never performed, then the failure and neglect to discharge the duty and obligation in this respect, which the plaintiff owed to defendant, established a cause of action in favor of the defendant; and where, as here, the damages resulting are certain in their nature and amount, and flow actually from the breach, they are recoverable.

In support of the proposition that a cause of action arises in favor of the defendant, we would refer to the cases of Harmony v. Bingham. (12 N. Y. 107); Pollett v. Long (56 id. 200); Tompkins v. Dudley (25 id. 273); Phillips v. Taylor (49 N. Y. Super. Ct. 318); Bigler v. Hall (54 N. Y. 167), and Mill Dam Foundry v. Hovey (38 Mass. 441). In the latter case the court said : “ The good sense of the rule seems to be this, that in a case where, if an event happens, it must inevitably cause loss and damage to one or the other of the contracting parties, the party who has contracted that such an event shall not happen, although- he cannot specifically perform that contract, because the event may happen through the act of God or inevitable necessity, yet he shall stand to that risk and make good all the loss which shall occur in consequence of the happenings of the event contemplated. The party thus contracting takes the consequences.

“ Parties who enter into a contract in reference to the carrying out of any branch of business are presumed to know and understand how that business is usually carried on, how it must necessarily be conducted, and to have reference to such known circumstances in their contracts.”

Upon the proposition that such damages as defendant here suffered from the breach of the contract to deliver, and which flowed naturally from such breach and being certain in their nature, are recoverable, authority is to be found in the cases of Griffin v. Colver (16 N. Y. 489); Dodds v. Hakes (114 id. 260); Allen v. McConihe (124 id. 342). In addition to these we have the leading case of Hadley v. Baxenddle (9 Exch. Rep. 341, 353), wherein Alderson, B., thus states the rule: “Now, we think the proper rule in such a case as the present is this: Where two parties have made a contract, which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i. e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made tire contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendants, and thus known to both parties, the damage resulting from the breach of such contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under the special circumstances so known and communicated. Put, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. Por, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them.”

Our conclusion, therefore, is that, as the plaintiff agreed to deliver, and in the attempt, which was abortive, but which plaintiff agreed would be successful, the defendant was placed in a position where it suffered loss flowing naturally from a cause covered by the contract, such loss should be borne by the one guilty of the breach.

In addition to these questions, we have the subsidiary ones based upon certain exceptions taken to rulings upon evidence, and one exception to the charge of the learned trial judge. An examination of such has not shown that any error was committed sufficient to disturb the verdict which, upon conflicting evidence and under what might be designated as a fair preponderance of evidence, was reached by the jury.

We think that the judgment and order were right, and should be be affirmed, with costs.

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

Judgment and order affirmed, with costs.


source: Caselaw Access Project

author: O’Brien, J. :

license: Public Domain

text:
    Charles E. Jackson and Abram Vanderbilt, Respondents, v. The Builders’ Wood Working Company, Appellant.

      Sale — ■ memorandum, — parol evidence, when admissible — writing construed against the one who drew it- — understanding of a witness as to the meaning of a contract ■ — inadmissible when it is the result of conversations not had with or in the presence of the other party to the contract.

    Where tlie written memorandum of a contract of sale is clear and explicit in its terms, parol evidence is not admissible to vary or contradict it.
    Where, however, it represents only a part of the contract, parol evidence is admissible to establish the whole contract, the purpose being not to contradict the contract, but to explain it.
    Where a written instrument is susceptible of two constructions that construction should he adopted which bears most strongly against the person who drew the instrument.
    Upon the trial of an action brought to recover the difference between the full inventory price paid by the plaintiffs for certain moldings and the inventory price of the quantity thereof delivered, it appeared that the moldings had been purchased under a bill of sale which contained the following provision: “Lot of moldings, being all those in both molding rooms at our manufactory described in our inventory of Ooto. 2, 1892, as of to-day, F. O, B. cars Brooklyn, 83,018.00.”
    There was a dispute as to the meaning of the words “ as of to-day,” and three witnesses for the vendees, who had been present when the written contract was entered into, and through whose efforts the sale had been effected, were permitted to testify as to their understanding of the expression; hut, although the transactions attending the execution of the hill of sale took place at the defendant’s factory, there was no proof that the defendant’s treasurer (who took part in the negotiations and who signed the agreement on behalf of the defendant) heard or assented to the conversations in which such understanding was reached.

      Meld, that the admission of such evidence was erroneous and justified a reversal of the judgment in favor of the plaintiffs.
    Appeal by tbe defendant, The Builders’Wood Working Company, from a judgment of tbe Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 4th day of May, 1895, upon the report of a referee..

      Fran7ó R Field, for the appellant.

      Wallace Macfarlane and Max J. Fohler, for tbe respondents.
   O’Brien, J. :

The defendant was indebted to one Stone, representing himself and tlie firm of E. B. James & Oo., in the sum of $2,102.65. With knowledge that some of the defendant’s notes had gone to protest and in anticipation of the failure of defendant, Stone and Harris, one of the firm of E. JB. James & Oo., came on from Boston, and together with the plaintiff Jackson, a lumber dealer, went on November 12,1892, to the defendant’s factory in Brooklyn, where they remained during the day, endeavoring to arrange a settlement by a sale to Jackson of a sufficient amount of moldings to cover the indebtedness to Stone and E. B. James & Oo., of $2,102.65. After negotiations had lasted through most of the day, an agreement was reached by the parties, a memorandum of which in writing was drawn by Harris, reading as follows:

“ BROOKLYN, N. Y., Nov. 11th, 1892.

ce O. E. Jackson & Oo., Patterson, N. J.

To Builders’ Wood Working Co., Dr.

“ Lot of moldings, being all those in both molding rooms at our manufactory described in our inventory of Octo. 2,1892, as of to-day, F. O. B. cars Brooklyn, $2,018.00.”

Upon this bill the defendant wrote the following:

“ Messrs. O. E. Jaokson & Oo.:

“ Please pay the amount of the above to F. C. Stone.

“BUILDERS’ WOOD WKG. CO.,

“ Jas. R. PeriNe, Treas.”

And Jackson thereupon wrote the following acceptance :

“We hereby accept the above order.

“ 11 —12—92. OHAS. E. JACKSON & OO.”

Stone then surrendered to the defendant its obligations, and on or about the 14th day of November, 1892, and before delivery of any of the moldings, plaintiffs paid to Stone, as requested by defendant, the sum of $2,018. Thereafter and between November 15 and December 29, 1892, the defendant shipped and the plaintiffs received four carloads of moldings. While not admitting nor disputing the fact that all the goods in both molding rooms were included in the delivery, the plaintiffs, after measuring the moldings delivered and finding that they amounted to less than two-thirds of the quantity and value stated in the inventory, made a demand upon the defendant to supply the short shipments or to pay back the difference between the full inventory price paid by them and the inventory price of the quantity delivered. This balance, amounting to $829.11, was the amount sued for and for which a recovery was awarded by the referee.

It will thus be seen that the plaintiffs contend that the moldings were sold according to the inventory, and that the-agreement was that they should receive the full inventory quantity; while the defendant contends that the sale was in bulk of such moldings as then were in the molding rooms, without reference to the inventory, and that the memorandum drawn by Harris expressed the contract. In determining which contention is right resort must be had to the written memorandum, and if clear and explicit in terms, then, under well-settled principles of law, parol evidence would not be admissible to vary or contradict it.

The ambiguity in the written memorandum, if any, is created by the use of the words “ as of to-day,” which, the defendant claims, means-9. aslound in the molding rooms to-day,” and which, the plaintiffs claim, means that the inventory should be made good as of to-day. In other words, the plaintiffs claim that the phrase “ as of to-day,” instead of meaning the moldings described in the inventory as they exist to-day, was intended to be a warranty that if there was not as much now as described in the inventory the defendant would make the difference good. As between these contentions and irrespective of any contemporaneous parol evidence, we should be inclined to adopt the defendant’s version, because, taking the form of the memorandum, if it was intended to be a sale of moldings, not in bulk but according to an inventory, which so far as it was lacking in quantity was to be made good, then the language used was most inapt and ill chosen. This view is strengthened when we recall the rule applicable to the construction of a writing, which requires that as between two constructions, other things being equal, that should be adopted most unfavorable to the one who formulated it, or, as it is expressed, most strongly contra prof erentum, i. e., against the author of it. Here it is conceded that it was written by Harris, who, with Jackson and Stone, made up the party that was endeavoring to obtain from the defendant some benefit.

Assuming, however, as the referee did, that the writing in question was only part of the contract, and that parol evidence was admissible to establish the whole contract, the written portion not being contradicted, but only explained, then we must examine such evidence as bears upon the subject-matter, the relation of the parties, their acts and declarations, to enable the court to put itself in the place of the contracting parties, and to determine what was the meaning of the language used and what was the contract between them. The testimony shows that the subject-matter of the contract was the sale of a lot of moldings to Jackson with a view to satisfying the claim held by Stone, which the latter was anxious to have adjusted, anticipating the insolvency of the defendant. The plaintiff Jackson went with Stone and Harris to the factory of the defendant in Brooklyn, on the day stated ; there they examined a large quantity of these moldings which were in the molding rooms in the factory, and were shown defendant’s inventory of the moldings. It appeared that this inventory had been made about October second, nearly six weeks before the purchase. Jackson noticing this, asked the defendant’s treasurer, Perine, about the quantity of moldings that was still in the rooms as compared with the inventory, and also at what price they were inventoried. Perine replied that while they had sold some moldings since the inventory was made, the additions from now stock manufactured by the defendant would, in his opinion, offset the sales, and that the quantity then in the molding rooms was fully equal to that stated in the inventory, and his foreman, when questioned on the subject at Perine’s instance, made the same statement. Then the question was presented, what would result if the quantity delivered fell short or was in excess of that stated in the inventory. Jackson’s testimony was that Perine agreed that if it fell short the shortage was to be made good, and that for any excess the plaintiffs were to pay. This statement as to shortage and excess was flatly contradicted by Perine, who testified that the only proposition that he entertained and the only contract that he made was for a sale in bulk. That there was a discussion about what was to result in the event of a shortage or excess, between Jackson, Stone and Harris, while engaged in examining the moldings in the rooms, or while in the outside office, is evident. But it is by no means so clear that any of this conversation was in the presence of the defendant’s agents, other than what has already been referred to relative to a statement by Perine that since the making of the inventory some moldings had been sold, and that in his opinion the new moldings manufactured and placed in the rooms would replace what had been sold and removed.

If we construe so much of the contract as is written in the light of some of the surrounding circumstances and some of the acts of the parties, it militates against the view that this was a sale according to a guaranteed inventory. Thus we have the fact that the insolvency of the defendant was anticipated, it being problematical in such an event, if the sale had been made by inventory and a shortage resulted, whether the defendant would have been able to make it good. In addition we have the further fact that after the agreement, whatever it was, between the parties, Stone immediately surrendered to the defendant its obligations, and thereafter, and before the delivery of any of the moldings, the plaintiffs paid to Stone the amount of the agreed price.- As against the force and weight to be attached to these circumstances, supported by the evidence of the defendant’s treasurer and the man in charge of the molding rooms, we have the positive statements of Stone, Harris and Jackson, that the contract between the parties was a sale, by the terms of which the plaintiffs were to receive the full inventory quantity. Their testimony had a controlling influence on the mind of the referee, and if incompetent as against the defendant it cannot be regarded as harmless.

This brings us to a consideration of the objection made by the defendant which we regard as fatal to this judgment. Under objection .and exception these three witnesses were allowed to testify as to their understanding of the words as of to-day.” It is not claimed that the conversations in which such understanding was reached were joined in .by the defendant’s treasurer, though an attempt was made to show that the latter was sitting at his desk in an inside office and cordd have heard the conversation. These three witnesses were in constant communication during the whole day, examining the moldings, discussing between themselves the kind of memorandum that should be drawn, and there was no duty on the part of the defendant’s treasurer to obtrude himself into or listen to such conversations when not addressed to him; and it would be going very far to hold, because they were thus engaged in conversation during the greater portion of a day, that the defendant is bound because its treasurer was sitting at a desk in a position where, if he desired, he might possibly have heard the conversations. "We think that the admission of evidence of such conversations, in the absence of any proof that the defendant took part in, heard or assented to them, was error and entitles the defendant to a new trial.

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

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

Judgment reversed, new trial ordered, with costs to appellant to abide event.


author: O’Brien, J.:

text:
    William F. Cochran, Respondent, v. Lorenz Reich, Appellant.

      Pleading — when payment and non-payment alleged in a pleading must be proved— effect of a general denial — a judgment for a gross sum, recovered upon two causes of action, cannot be affirmed as to one and, reversed as to the other.

    Wliere a general denial is interposed to a complaint, the plaintiff must prove every allegation essential to his cause of action, and where it is necessary, as in an action to recover rent reserved under a lease, to allege a demand of the rent and non-payment thereof, proof must be given by the plaintiff in support of such allegation.
    In actions where such allegations of a demand and non-payment are not essential to the plaintiff’s cause of action, payment becomes an affirmative defense and must be specially pleaded, and proof thereof is not competent under a general denial.
    The distinction between the two cases lies in the fact that in the former case the plaintiff must allege and prove non-payment as a part of his cause of action, while in the latter case the defendant confesses the cause of action but seeks to avoid it by pleading and proving payment, which is new matter.
    Where the complaint in an action at law, for the recovery of money only, sets up two causes of action and the plaintiff recovers j udgment for a gross sum, the General Term of the Supreme Court has no power to affirm the judgment as to one cause of action and reverse it and grant a new trial as to the other.

      Appeal by the defendant, Lorenz Reich, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the cleric of the county of New York on the 2d day of February, 1895, upon the verdict of a jury rendered by direction of the court after a trial at the New York Circuit, and also from an order entered in said clerk’s office on the 20th day of February, 1895, denying the defendant’s motion for a new trial made upon the minutes.

      Delos McCurdy, for the appellant.

      Treadwell Clevelcmd and Henry W. Hardon, for the respondent.
   O’Brien, J.:

The questions presented upon this appeal relate to pleadings and proof. The first cause of action is for breach of a covenant to pay rent reserved in a lease. The breach alleged is the refusal to pay rent after demand made therefor; that the said several sums (of rent), and each of them, now remain wholly due and unpaid, although payment thereof has been duly demanded.” The answer contains a general denial. No evidence was offered by plaintiff showing, or tending to show, that the rent alleged to be “ wholly due and unpaid ” was unpaid in whole or in part. In the absence of such proof, and against the contention of the defendant that the burden of showing non-payment was upon the plaintiff, the court directed a verdict in plaintiff’s favor.

Upon this cause of action the precise question presented on this appeal is as to whether, in a case where non-payment of rent is alleged in the complaint as a material and necessary part of the plaintiff’s cause of action, a general denial of the allegations of the complaint puts in issue the fact of non-payment. It is conceded that it was necessary in the complaint to allege non-payment, because such non-payment constituted a breach of the lease or contract sued upon. As said in Lent v. The N. Y. & M. R. Co. (130 N. Y. 504, 510): It does not admit of controversy that upon an ordinary contract for the payment of money, non-payment is a fact which constitutes the breach of the contract and is of the essence of the cause of action, and being such within the rule of the Code, it should be alleged in the complaint. It is said, however, that payment is always an affirmative defense which must be pleaded to be available, and hence non payment need not be alleged, as it is not a fact pnt in issue by a general denial.”

In that case a demurrer was interposed to the complaint which omitted to allege non-payment in an action upon an indebtedness ; and it was therein directly held that such an allegation was essential, and that for failure to allege it the complaint was demurrable. In disposing of this question, however, we find some remarks obiter which would seem to support the course pursued by the plaintiff upon the trial, of not offering any proof upon the question of nonpayment. Thus (p. 513), it is stated : It cannot be said that where tiie breach consists in non-payment of an agreed sum that it is not an issuable fact because payment cannot be proven under a general denial. The most that can be said is that that form of denial does not put that fact in issue, and to that extent the rule that payment must be pleaded must be deemed to modify the rule of pleading under the Code in reference to a general denial.” The second sentence of this quotation is open to the construction that although it is necessary to plead the fact of non-payment in actions of this character, such fact is not put in issue by a general denial, and, therefore, that it requires no proof because it is to be taken as admitted. The learned judge, writing the opinion in that case, quotes with approval from. McKyring v. Bull (16 N. Y. 297, 309). There the complaint alleged that the plaintiff did labor and service for and at the request of the defendant which was worth $650, and concluded with an averment that there was due the plaintiff on account of such service, over and above all payments and set-offs, $134, and demanded judgment for that sum with interest. The answer consisted only of a general denial of all the allegations of the complaint. Held, that evidence of p>ayment as a defense to the action, or a partial payment in mitigation, was inadmissible on the trial because neither was pleaded. That is a most instructive case, because we therein find a very learned review of the history of the rule at common law under the old form of pleading. The precise question, however, there presented was as to what could be proven by the defendant under a general denial, and Selden, J., in closing the opinion of the court, says: “ My conclusion, therefore, is that section 149 (old Code) should be so construed as to require the defendants, in all cases, to plead any new matter constituting an entire or partial defense, and to prohibit them from giving such new matter in evidence upon the assessment of damages when not set up in the answer.”

Although in both of the cases above cited expressions may be found in the opinions favoring the position taken by the plaintiff upon the trial, neither of them was called upon to decide, nor do they decide, the precise question here presented, which is, was the plaintiff, as part of his first cause of action, obligéd to prove his necessary allegation of non-payment ? If it was material to allege the breach, such being denied, it would logically seem necessary to prove it if we are to be governed by the fundamental rule that the judgment in every case shall be sectmdum allegata et probata.

It is insisted, however, that whatever the general or logical force of pleadings, and though the result which has been reached in this case may be deemed an anomaly under the Code pleadings, the rule has been settled in the Court of Appeals by the case of Lent v. The N. Y. & M. R. Co. (supra). Although this case, as we have seen from the quotation made, does bring some comfort to the respondent, it is not entirely barren of argument to support the appellant’s position. Thus, in a paragraph of the opinion following the one already quoted, it is said: “ But no reason is apparent how it can justify the omission from the complaint of a fact material to the plaintiff’s cause of action, and essential to be proved, to entitle the plaintiff to a judgment. Such facts, under the Code, must be pleaded. No presumption can be indulged in that a defendant has failed in his duty or omitted to perforin his contract obligation.”

As neither of these cases, therefore, is á decisive authority on the question involved we must look further. In Quin v. Lloyd (41 N. Y. 349) the complaint alleged an amount of indebtedness for services performed without stating the value of such services dr their extent, but claimed that the indebtedness was for the balance remaining due after sundry payments made by the defendant,” and the answer was merely a denial of the allegations of the complaint. Held, that on the trial the defendant was, under these pleadings, entitled to prove the payment to the plaintiff on account of the services alleged. We therein find that the case of McKyring v. Bull (supra), upon which that of Lent v. The N. Y. & M. R. Co. was based, was commented upon and distinguished.

The case of Locklin v. Moore (57 N. Y. 360, 362) might, at first blush, be regarded as an authority in respondent’s favor. That was an action brought to recover the purchase price of' goods sold. The answer, among other things, set up that it was expressly agreed that they should be paid for at defendant’s store; that he had always been ready and willing to pay for them at his store, but that plaintiff had never demanded payment thereof; that such was the agreement the referee found as a fact, but as a conclusion of law he found that a demand at defendant’s store by plaintiff before the commencement of the action was unnecessary, and that the commencement of the suit was a sufficient demand. In supporting this ruling of the referee the court say : “ It is the settled law of this State, announced in many decisions, that when a specific sum of money is made payable by the agreement of the parties, upon demand, or at a specified time, at a particular place, as against the original debtor, no demand at .the time or place, prior to the commencement of the suit, is necessary. The commencement of a suit is itself a sufficient demand. ■ * - * * The only benefit the defendant could get from the specification of payment at a particular place is, that if he was ready there to pay, and kept ready, he could set that fact up in his answer and then pay the money into court, and allege such payment in his answer, and thus shield himself from all liability for interest and costs.”

Contrasting the case last cited with that of Lent v. N. Y. & M. R. Co. (supra), it will be found that the Lent case is authority for the proposition that in an action upon an alleged indebtedness an allegation in the complaint of non-payment is essential, while the Loohlim, case is authority for the proposition that when a specific sum of money is made payable by the agreement of the parties upon demand, or at a specified time, at a particular place, as against the original debtor, no demand at the time or place prior to the commencement of the suit is necessary. The commencement of the suit is itself a sufficient demand.” This latter case we do not regard as controlling, because we think there is a plain distinction between an allegation of demand and one of non-payment. Thus, though it may not be necessary, as held in the Loohlin case, to allege a demand, it lias been held in the Lent case necessary to allege non-payment. These two, demand and non-payment, seem to us separable, and while Locklin v. Moore is controlling in a like case upon the question of demand, it still follows logically that where non-payment is an essential allegation of plaintiffs cause of action, it should be proved.

In Knapp v. Roche (94 N. Y. 329, 333) it was held that where a complaint contains an allegation of non-payment as a necessary and material fact to constitute the cause of action, proof of payment is admissible under a general denial in the answer, and the rule is thus stated in the opinion : "While it is generally true that a defense of payment is inadmissible under a general denial, this is not so when the fact of non-payment is alleged in the complaint as a necessary and material fact to constitute a cause of action (citing cases). It is always competent to prove, under a general denial, any facts tending to controvert the material affirmative allegations of a complaint.”

These cases do not meet the precise question under discussion, being authorities only upon the point as to what defenses must be pleaded to be available; and the rule deducible from them is correctly stated in Bailies’ Code Pleadings and Forms (p. 235), as follows : “ A defense which confesses and avoids a cause of action cannot be given in evidence under an answer containing simply a general denial of the allegations of the complaint. Such defenses must be ]4eaded to authorize evidence thereof to be given on the trial. * * * The cases are uniform that under a general denial the defendant cannot prove a defense founded upon new matter. A defendant who relies upon payment as a defense must plead it, even though the complaint alleges non-payment, unless such allegation is necessary and material to the statement of a cause of action.” And in Bliss on Code Pleading (§ 35Y), referring to the plea of payment, it is said: “ The plea of payment is new matter. The claim is plausible that inasmuch as no cause of action can arise upon a contract without its breach, inasmuch as the breach — as nonpayment— must be alleged, it becomes part of the plaintiffs case, and is involved in a general denial. But whether, in an agreement as to pay money, it is incumbent upon the defendant to plead the fact of payment as new matter, should, upon principle, depend upon the necessity of showing the fact of non-payment as part of the plaintiff’s’ case. If he is bound to prove, in the first instance, that the promissory note has not been satisfied, or that the price for, or value of, the work and labor, or the property sold, has not been paid, then the default should be so affirmatively stated that the issue may be taken upon it, and the fact of payment does not become new matter. If, on the other hand, it is sufficient for him, in making his prima faoie case, to establish the agreement, or the work or sale, with the price or its value, and if the obligation thereby created has been discharged — as by payment — it becomes the duty of the defendant- to prove that fact, then such fact is new matter, to be specially pleaded.”

The general rule of pleading under the Code is that a defendant, by a general denial, puts in issue every fact which it is necessary and material for the plaintiff to allege to constitute his cause of action. Here it is conceded that non-payment of the rent was a necessary and material fact to be alleged in the complaint to constitute plaintiff’s cause of action, and it should logically follow that a general denial of such allegation puts in issue the fact of non-payment. Upon an issue thus raised the burden is on the plaintiff to prove the facts necessary and material to his cause of action.

To summarize, then, the logical rule of pleading should require, where a general denial is interposed, proof by the plaintiff of every allegation essential to his cause of action. Therefore, where it is necessary to allege demand and non-payment, proof must be given of such allegations. In actions, however, where allegations such as demand and non-payment are not essential to the plaintiff’s cause of action, then payment is an affirmative defense, and, to be proved, must be specially pleaded, a general denial not being sufficient to admit of such proof. The distinction between the two lies in the fact that in the former plaintiff has to allege and prove non-payment as part of his cause of action, while in the latter the defendant confesses the cause of action, but seeks to avoid it by pleading and proving payment, which is new-matter. In the case at bar the plaintiff concluded that no proof of non-payment was needed, and none was offered; and, in this condition of the record, the court directed the verdict against the defendant. As we have endeavored to point out, this seems illogical and contrary to the rule that the judgment must be secundum allegata et probata ¡ and for this error, as to this cause of action, there must be a new trial.

The second cause of action is for the value of the use and occupation of the premises. It is insisted by the appellant that there is no evidence in the case that the reasonable value of the use and occupation was the amount claimed, or that sucli amount “now remains wholly due and unpaid.” We do not deem it necessary to decide whether this contention is sound, for, in view of the conclusion we have reached upon the first point, there must be a new trial as to both causes of action. (Goodsell v. W. U. Tel. Co., 109 N. Y. 147.) That case decides that where, in an action at law to recover money only, the complaint sets up two causes of action, and a judgment for a gross sum has been rendered in favor of the plaintiff, the General Term lias not authority to affirm the judgment as to one cause of action and reverse it and grant a new trial as to the other. (See, also, Pollett v. Long, 56 N. Y. 201; Story v. N. Y. & H. R. R. Co., 6 id. 85.)

The judgment is, therefore, reversed and a new trial ordered, with costs to appellant to abide the event.

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

Judgment reversed, new trial ordered, costs to appellant to abide event.


author: O’Brien, J. : Follett, J.

text:
    New Britain National Bank, Appellant, v. A. B. Cleveland Company (Limited) and Others, Respondents.

      Corporation — alienation of property in fraud of creditors — mortgage to trustees, not void on its face —personal property cannot be mortgaged to pay debts ■ — • transfer of property in contemplation of insolvency — effect of an overissue of bonds under chap. 894 of 1888 — equitable estoppel —mortgage not given to terminate the business of a corporation.

    Where third parties acting in good faith have relied upon the existence of corporate authority to do an act and have acquired rights in the premises, stockholders of the corporation, who have acquiesced in the act and have neglected promptly to condemn it and seek judicial redress, will be equitably estopped from thereafter claiming that the act was illegal or prohibited.
    In an action brought by a judgment creditor of a corporation to set aside an alienation of all its property, it appeared that on April 17, 1889, the A, B. Cleveland Company (Limited), being in financial difficulties, although believed to be solvent by its creditors and the officers of the corporation, and its president having disappeared leaving the company threatened with numerous litigations, issued bonds to the amount of §425,000 to secure the payment of its debts and at the same time conveyed all its property, both real and personal, to three trustees by a mortgage which authorized the trustees upon default in payment of the principal and interest due on the mortgage to sell the property and pay over the proceeds to the bondholders, the plaintiff and all the other creditors except one, assenting to this arrangement, in pursuance of which plan the trustees entered upon the execution of their duties; among the creditors presenting claims was the plaintiff, which apparently did not receive any bonds although they were tendered to it.
    jn February 28, 1890, the trustees sold the entire property for the sum of §100,000 to two persons who intended to transfer it to the Cleveland Seed Company of New Jersey, about which time the trustees sent a letter to the creditors giving their reasons for the sale, and stating that liens to the amount of §115,000 upon seed in their hands were about to bo foreclosed; that in order to realize the largest amount from the stock they had made such sale, and that the creditors would receive a dividend of twenty-five cents on the dollar.
    It further appeared that the plaintiff commenced two actions on promissory notes held by it, recovering a judgment in the first action on August 7, 1889, and in the second action on October 5, 1894.
    The present action was commenced on the 9th day of December, 1892, for the purpose of having the mortgage declared fraudulent and void, the plaintiff contending (1) that the mortgage was void upon its face; (2) that it was void because executed in violation of the provisions of chapter 394 of the Laws of 1888, which prevents a corporation from issuing bonds or mortgaging its real estate for any other than the legitimate purposes of its business; (3) that it was void within the meaning of the Revised Statutes (1 R. S. 608), in that it was made by the A. B. Cleveland Company (Limited) in contemplation and with knowledge of its insolvency; (4) that such transfer, being in fact a termination of the regular business of the corporation, and so accepted by the transferees, was illegal as against the creditors of the corporation.

      Held, that the mortgage was not void on its face;
    That it was not void as having been executed in violation of chapter 394 of the Laws of 1888, since it was not foreign to the lawful business and objects of a corporation to secure payment of its debts by mortgaging its property;
    That while it appeared that by the terms of the mortgage not only the real estate but the persona] property — which constituted the bulk of the assets of the corporation —was transferred to the trustees as collateral security for the payment of the bonds, and such transfer of the personal property was unauthorized and rendered the mortgage voidable, yet, inasmuch as the plaintiff was cognizant of all the facts at the time of its execution, the mortgage might be regarded as confirmed by it, either by assent at the time or by subsequent ratification; that such ratification might be presumed from the fact that the plaintiff had slept on its rights for at least three years since the mortgage was made;

      That the transfer of property forbidden, by the Revised Statutes (1 R. S. 603) must have been made because of existing or anticipated insolvency;
    That it was not enough that insolvency and the act co-existed; and that as there was no evidence that the mortgage was made in contemplation of insolvency it could not be declared illegal on that ground;
    That the fact that the bonds issued exceeded the amount which the corporation could lawfully issue did not render the mortgage void;
    That the statute, chapter 394 of the Laws of 1888, did not expressly make an overissue of bonds void, but in such case rendered the director voting for the issue thereof personally liable to the holder of such bonds or mortgage;
    That while it might be possible that a creditor or stockholder of the corporation could prevent an overissue or have such an overissue set aside, the court would not interfere where it appeared that the bonds and mortgage were issued with the assent of all the stockholders and all of the creditors, except one. and that the property covered by the mortgage had been sold to another corporation;
    That under the evidence offered in the case the mortgage was not executed with a view to terminating the regular business of the corporation, but, on the contrary, for the, purpose of continuing the business and realizing for its creditors the full amount of their claims.
    Follett, J., dissenting;
    Appeal by tlie plaintiff, the New .Britain National IBank, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 21st day of March, 1895, upon the decison of the court rendered after a trial at the New York Special Term dismissing the plaintiff’s complaint.

      C. Bainbridge Smith, for the appellant.

      Hamilton Wallis, for A. B. Cleveland Company (Limited) and others, respondents.

      Charles JB. MaoLecm, forC. N. Jordan, respondent.

      H. Arlington, for H. K. Thurber, respondent.
   O’Brien, J. :

The court having rendered a decision which does not state separately the facts found, we are required to review all questions of fact and of law and award to either party such judgment as such party may be entitled to. (Code Civ. Proc. § 1022.)

This action was brought by a judgment creditor, after the return of executions unsatisfied, to set aside, pursuant to sections 1781 and 1782 of the Code of Civil Procedure, an alienation of all the property of the A. B. Cleveland Company (Limited) to three trustees, and by tlie latter through an intermediary to the Cleveland Seed Company On the 17th of April, 1889, the A. B. Cleveland Company (Limited) made and issued 125 $1,000 bonds in order to secure certain debts and obligations it had incurred in and about its business. Contemporaneously therewith it conveyed and transferred all of its property of every nature and kind to three trustees. The mortgage contained the usual clause that in default of payment of principal and interest, the trustees were to take possession of the lands and property and sell and dispose of the same, and, after defraying expenses, to pay over the proceeds to and amongst the parties holding the bonds.

That this or some other action by the company was necessary is evident from its condition at that time. A few days prior to the execution of the mortgage the president had disappeared, leaving the company’s affairs in confusion. Thereafter suits were commenced on the company’s obligations, and in addition it was threatened with other suits involving damages to a large amount, which were based on alleged fraudulent practices of the president for which the persons injured claimed that the company was liable. Notwithstanding tlie fact that these latter claims were never enforced, the stockholders were alarmed and steps were taken to place the company’s property in such a position as to afford security for the legitimate creditors. With this end in view, it was proposed that all the legitimate creditors should pool their claims, including expenses of litigation, and should be paid pro rata out of the proceeds of the company’s property which should be set aside for this purpose. To carry out this plau, the mortgage assailed was made, and an agreement, signed by all the creditors save one, was entered into, under which the property was to be turned over to the three persons named as trustees under the conditions already referred to. With others, the signature of the plaintiff was made by its president subject to the approval of the boai-d of directors.” Under this arrangement, the property was turned over to the trustees, who entered upon their duties; and among the creditors presenting claims was the plaintiff, which does not appear to have received the bonds, though they were tendered, and many of the other creditors holding claims to a large amount did receive them. Although the substance of the agreement was known to the board of directors of the plaintiff and talked over, no action was taken, but it was kept informed from time to time through communications from the trustees of what was being done and the necessity for changes being made in the original plan.

An examination of the books of the company prior to the making of the agreement exhibited the company as solvent, its affairs showing assets all told of about $557,000, and liabilities of $425,000, leaving a surplus of $132,000; and that all the parties from such examination believed the company solvent, we think, is evident, although it appears that at that time at least $31,000 of its paper had gone to protest. Subsequent to the execution of the mortgage an effort was made to realize on the assets, and a further examination was made into the affairs of the company by the trustees, and there then developed a situation entirely different from what had been expected or shown at the time the mortgage was made. Many of the hills receivable which were included in the statement of the assets were found to be uncollectible, and, according to one of the witnesses, the losses which the company sustained in an attempt to realize on the assets amounted to about $200,000. This, in addition to the inability of the trustees or officers to carry on the business profitably, necessitated a change in the original plan, and a new one was proposed by a circular letter of November 1, 1889, which, as it was not accepted by the creditors or acted upon, need not be further referred to.

Thereafter, and on February 28, 1890, the trustees sold to two persons the entire plant, property and business of the company for the sum of $100,000, for the purpose of transferring and conveying the same to the Cleveland Seed Company of New Jersey, which prior to that time had been organized. The trustees, in their letter to the creditors under date of February 15, 1890, giving the reasons that induced the sale, after stating that the liens on the seed in their hands, which were about to be foreclosed, amounted to $115,000, and referring to the necessity of prompt action in order that the largest amount might be realized from the stock, say: “ To this end we have sold the assets of the company for $100,000 (the purchasers to arrange for the payment of the advances), out of which sum, after, paying part of the expenses incurred by the trustees, there will remain in our hands a dividend of twenty-five cents on the dollar for the principal of your claims, which dividend will be paid the creditors on proof of claims.”

The only other facts necessary to be referred to are that the plaintiff commenced two actions on promissory notes held by it, one on or about the 18th day of April, 1889, in which judgment was rendered on August 7, 1889, and in the second action it recovered a judgment in the Supreme Court on the 5th of October, 1894; the summons in this action now before the court'bearing date December 9, 1892, and having been tried in November, 1894.

The validity of the mortgage made to the trustees and of the sale by them to the Cleveland Seed Company is assailed upon the ground of fraud and illegality, the plaintiff contending (1) that the mortgage is void on its face; (2) that it is void because executed in violation of chapter 394 of the Laws of 1888, which prevents a corporation from issuing bonds or mortgaging its real estate for any other than the legitimate purposes of its business; (3) that it is void within the meaning of the Revised Statutes (1 R. S., part 1, tit. 4, chap. 18, § 4, p. 603), in that it was made by the A. B. Cleveland Company (Limited) in contemplation and with knowledge of its insolvency; (4) that such transfer, being in fact a termination of the regular business of the corporation, and so accepted by the transferees, is illegal as against the creditors of the corporation.

With respect to the first ground, that the mortgage is void on its face, most of the vices assigned to the mortgage are disposed of by the case of Brackett v. Harvey (91 N. Y. 214), wherein will be found a discussion and disposition favorable to the defendants of the questionable provisions in the present mortgage, except one which we will discuss in connection with the second ground of illegality assigned — that the mortgage is one made with a purpose foreign to the lawful business and objects of the corporation.

The mortgage itself recites, and it is so made to appear, that the issuing of the bonds as originally intended, and the making of the mortgage to secure them, were acts done in order to secure certain debts and obligations incurred in and about conducting and operating the business of the company. That it is not foreign to the lawful business and objects of a corporation to secure payment of its debts by way of mortgaging its property, has been determined in the case of Carpenter v. Black Hawk Mining Co. (65 N. Y. 43). It was therein said: u Corporations, unless restrained by their charters, have the power to mortgage their property to secure borrowed money or their debts. But in this connection attention is called to chapter 40 of the Laws of 1848, which is the gefleral act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes, and the second section of which provides that while such a company shall be capable in law of purchasing, holding and conveying any real and personal estate whatever which may be necessary to enable it to carry on its operations, it shall not mortgage the same, or give a lien thereon.” As therein shown, this clause was modified so as to enable a corporation to mortgage all or any part of its real estate to secure the payment of any debt upon the assent of at least two-thirds of the stockholders. As therein further said: “ This provision removes the restraint as to mortgaging real estate, leaving the restraint as to mortgaging personal property still in force.” By chapter 394 of the Laws of 1888 it is provided that corporations such as the defendant here may “ borrow money for the legitimate purposes of such corporation, and for such purpose to issue bonds * * * or to mortgage any real estate’which it may have or possess, * * * but the amount of such bonds and such mortgages outstanding at any one time, shall not exceed one-half of the value of the corporate property of such corporation.” Then follows a provision that any issue of bonds beyond the amount specified shall render every director voting the same personally liable to any holder of such bonds or such mortgages for any damage caused by such overissue to such holder.” While, therefore, the power of corporations to mortgage their real estate has in some respects been enlarged, the restraint as to mortgaging personal property is still in force.

It will be noticed that by the terms of the mortgage here involved not only the real estate but the personal property — which constituted the great bulk of the assets of this corporation — was transferred to the trustees as collateral security for the payment of the bonds. Eor this we can find no warrant or authority in law; and unless, .by assenting to the plan by which such personal property was transferred to the trustees the plaintiff is estopped from raising the question, we must conclude that the attempt to mortgage the personal property was void. "Whether the plaintiff was estopped either by participating or assenting, or by failing to protest until the rights of other creditors had intervened, thus being guilty of laches, will be considered after we have disposed of the other grounds of invalidity assigned by the plaintiff, which in the order would bring us to the third, that it is void because made in contemplation of insolvency.

Upon this ground we think the plaintiff should fail, it appearing by fair preponderance of the evidence (if we might not be justified in saying it was uncontradicted) that at the time the mortgage was executed the officers and trustees and creditors, who participated in the plan, all believed that the company was solvent and able to pay its debts. The fact that subsequently, upon the attempt to realize upon the assets, and by a further examination, this belief was shown to be erroneous, does not color with illegality an act which, when done, was perfectly legal. It is true that certain notes of the company had gone to protest and “ the refusal of a corporation to pay its debts, notes or obligations at maturity is generally a suggestion of insolvency; but whether such refusal results from the disability of the corporation to meet its obligations, or is based on other reasons, will ordinarily be best known to the officers and stockholders.” (Throop v. The H. L. Co., 125 N. Y. 530.) Here there was sufficient to justify all those in interest in believing that the failure to meet the company’s obligations at maturity Was not clue to lack of assets, but to the bad management and. misconduct of the president, who, after getting possession of certain of its moneys, had absconded, leaving the affairs of the company in utter confusion. The mere fact, therefore, that obligations were due and unpaid is not conclusive upon the question of insolvency or the question as to whether or not the mortgage, when made in that condition of the company, was one executed in contemplation of insolvency. “ The statute makes the question depend upon what was passing in the minds of the officers of the company when the mortgage was executed.” (Paulding v. The Chrome Steel Co., 91 N. Y. 334, 341.) The act must be in anticipation or in view of that condition. In other words, the act must have been done because of existing or anticipated insolvency, or else it is not prohibited. It is not enough that insolvency and the act co-exist. (Id. 339.) “ ‘ Contemplation of insolvency’ must also mean something more than mere expectation of its occurrence; it must include provision against its results, so far as the transferee is concerned, and that can only be applicable where he is already a creditor and the object is to take his debt out of the equal ratable distribution of the assets of the company when insolvent.” (Heroy v. Kerr, 8 Bosw. 200.) We do not think the evidence would warrant the inference that this mortgage was made' in contemplation of insolvency. When made it was with the consent of all the creditors except one, and though there are some variations between the agreement as entered into by the creditors and the terms of the mortgage itself, these are -not material in view of the fact that after execution it was approved by the creditors.

It is true that the plaintiff’s assent was, to some extent qualified, because, although signed by its president, there was a statement that it was subject to the approval of the board of directors. It is’ not claimed that the board of directors ever repudiated the action of the president, and although the matter, as already stated, was discussed, the board, as such, remained passive, and there is no question but that the bank and its officers had knowledge respecting tlm making of the mortgage and that the president had assented thereto. Knowing full well that other creditors were likewise interested, and it appearing that others subsequently signed the agreement to which the plaintiff’s name was attached, it seems to us it was plaintiff’s duty, if it intended to repudiate the agreement, to have done so promptly and before the rights of others had intervened. Although it be conceded that this mortgage is voidable, we think it was capable of confirmation either by assent at the time or by subsequent ratification, and it is difficult to predicate fraud of acts which are done with the assent and full knowledge of the person who subsequently assails ’them. (Bump on Fraudulent Conveyances, 464; Phillips v. Wooster, 46 N. Y. 415.) Here the plaintiff has slept on its rights for at least three years subsequent to the making of the mortgage, and during all that period, with full knowledge of what was going on, it stood by while the trustees, whose good faith in endeavoring to realize on the assets of the company for the creditors is not brought in question, were doing the best they could, and when the result of their efforts did not realize the exjiectation of the plaintiff and the other creditors, the plaintiff brings this suit in equity for the purpose of undoing all that has been done, regardless of the rights of the other creditors, who, with the trustees, have in the meantime gone on relying, as they had a right to do, upon the supposition that the plaintiff had assented to the acts now complained of. We think, apart from any other questions in the case, that the length of time which the plaintiff allowed to elapse and its active participation in the plans 'which were tried to realize on the assets of this company for the benefit of creditors, should prevent the plaintiff from obtaining any relief in this action.

With regard to the claim that this mortgage was in contravention of chapter 394 of the Laws of 1888, all that need be said is that even though the amount of bonds issued was more than the corporation could lawfully issue, this would not render the instrument void, but, a’s shown from the wording of the statute, would render the directors liable for such overissue at the instance of any holder of the bonds, and in this action the plaintiff is not suing as a bondholder.

It may be that, in addition to an action by a bondholder, any creditor or stockholder could jirovent the issue of an amount of bonds in excess of that allowed by statute, and if such amount were issued could set the transaction aside, provided he had not assented to the same or was not estopped in some other way. The language of the statute is : “ But the amount of such bonds and such mortgages outstanding at any one time shall not exceed one-lialf of the value of the corporate property of such corporation. Any issue -:<• -x- -x- beyond the amount * " * shall render every director voting the same personally liable to any holder of such bonds or such mortgages for any damage caused by such overissue to such holder.” The fact of an overissue of bonds would not, in the light of decisions, render such action absolutely void, so that at no time and under no circumstances could it he recognized, but under the authorities we think it would be voidable in favor of those who, as we have shown, could question the corporate action.

In Kent v. Quicksilver Mining Co. (78 N. Y. 159, 185)it is said: In the application of the doctrine of ultra vires it is to be borne iti mind that it lias two phases, one where the public is concerned; one where the question is between the corporate body and the stockholders in it, or between it and its stockholders, and third parties dealing with it and through it with them. "When the public is concerned to restrain a corporation within the limit of the power given to it by its charter, an assent by the stockholders to the use of unauthorized power by the corporate body will be of no avail. "When it .is a question of the right of a stockholder to restrain the corporate body within its express or incidental powers,1 the stockholder may in many cases he denied, on the ground of his express assent or his intelligent though tacit consent to the corporate action. If there be a departure from statutory direction, which is to be considered merely a breach of trust to he restrained by a stockholder, it is pertinent to consider what has been his conduct in regard thereto. A corporation may do acts which affect the public to its harm, inasmuch as they arey><?r se illegal or are malu,m prohibitum. Then no assent of stockholders can validate them. It may do acts not thus illegal, though there is want of power to do them, which affect only the interest of the stockholders. They may be made good by the assent of the stockholders, so that strangers to the stockholders dealing in good faith with the' corporation will be protected in a reliance upon those acts. The instance putin Bissell v. Mich. So., etc., R. R. Co. (22 N. Y. 269), is illustrative. A bank has no authority from the State to engage in benevolent enterprises; and a subscription, though formally made, for a charitable object would be out of its powers ; but it would not be otherwise an illegal act; yet if every stockholder did expressly assent to such an application of the corporate funds, though it would still be in one sense ultra vires, no wrong would be done, no public interest harmed; and no stockholder conld object, or claim that there was an infringement of his rights, and have redress or protection. Such an act, though beyond the power given by the charter, unless expressly prohibited,if confirmed by the stockholders could not be avoided by any of them to the harm of third persons. This arises from the. principle that the trust for stockholders is not of a public nature.”

So with respect to the issue of bonds here ; there was no express prohibition in the statute making on overissue of bond's void, the language being susceptible of the construction that a corporation such as the defendant should not have the power to issue in excess of a certain amount of bonds, and this is coupled, with a remedy afforded to any one aggrieved as against those who should engage in the unauthorized act.

The case from which we have quoted (Kent v. Q. M. Co.) has been approved in many'" subsequent cases. Thus, Martin v. N. F. P. Mfg. Co. (122 N. Y. 165) is authority for the proposition that “ if the officers or trustees of a manufacturing corporation do an unauthorized act, or incur indebtedness, which would not create a corporate liability, the stockholders may subsequently ratify, and so, validate the transaction.” In that case the question was as to the validity of a mortgage given to secure notes which it was claimed were issued without authority, and which were subsequently ratified by the stockholders. It was therein said: “ The stockholders are the equitable owners of the corporate property, and if the officers or trustees do an unauthorized act or incur indebtedness which would not create a corporate liability, the stockholders may subsequently ratify the acts and validate, the originally unauthorized transaction.” (Id. 172.) In Skinner v. Smith (134 N. Y. 240, 241), which was an action by a trustee of a manufacturing corporation to set aside certain transfers of its property alleged to have been made or authorized by the trustees as such to themselves individually, Mr. Justice Eollett, quoting with approval the case of Kent v. Quicksilver Mining Co. (supra;), says: A contract entered into by a corporation by the authority or direction of its trustees, with themselves, and for their benefit, or a transfer of its property by the authority of the trustees to themselves, may be set aside, in case it injures any public interest, or the private interest of any sharehelder or creditor, even though the contract or transfer was executed in good faith by the trustees. But this rule is not broad enough to condemn as void on the ground of public policy all contracts and transfers executed by a purely private business corporation, with or to its trustees, in good faith, in case no public or private interest is harmed thereby. Such contracts are not void, but voidable, at the election of those who are affected by the fraud.” And Morawetz in his work on Private Corporations, in speaking of the effect of general statutory prohibitions against the unauthorized exercise of corporate powers, says (p. 626): “ Statutes have frequently been passed, expressly prohibiting corporations from exercising any powers except those conferred by their charters. Sometimes these prohibitions are enacted in the form of general laws applicable to all corporations, and sometimes they are incorporated in special charters applicable to particular corporations only. Prohibitions of this description are merely declaratory of the general 6ommon-law prohibition against any exercise of corporate powers which has not been authorized by the Legislature; and there is no reason for supposing that the Legislature, in enacting such a prohibition, intends to give it any greater force or effect than the common-law rule. There are very strong reasons why such a prohibition should not be construed as rendering absolutely null and uuenforcible corporate acts and contracts which are in excess of the company’s chartered powers. A statutory prohibition against every unauthorized exercise of corporate power would apply with equal force to every act and contract made by a corporation without proper authority; and if it wrere construed to render any particular act or contract absolutely void, in legal contemplation, the same rule would be applicable in every ease. Such a result would be productive of great injustice, as well ns inconvenience. The slightest informality would become fatal to the validity of a corporate transaction, and it would be almost impossible to deal with a corporation with any degree of safety.” And the same author, in speaking of the validity of corporate acts (p. 619), says: “It does not follow that, because the exercise of corporate powers is prohibited by the common law, any corporate acts performed in violation of this prohibition will not be recognized by the law as corporate acts. An illegal or prohibited transaction may or may not be recognized at law; it may subject the parties to a penalty, and, nevertheless, be recognized by the courts, and be given effect after it has been consummated.”

With respect to the transaction here complained of, it was made, not only with the assent of all the stockholders, but with the assent of all the creditors save one; and as those who participated were the persons entitled to all the corporate property, and as the purpose sought to be effected was to secure this to them, no right of any third person was invaded or affected; nor should the court, after the transaction has gone through various stages so that the mortgage has been foreclosed and the property sold to another corporation, •adjudge the corporate action void at the instance of one who, in ■view of his conduct, must be regarded as having tacitly assented to it. And we cannot, in this connection, refrain from again quoting from Kent v. Quicksilver Mining Co.: “ Where third parties have dealt witli the company, relying in good faith upon the existence of ■corporate authority to do an act, there is not needed that there be an express assent thereto on the part of stockholders to work an equitable estoppel upon them. Their conduct may have been such, though negative in character, as to be taken for an acquiescence in the act; and when harm would come to such third parties if the act were held invalid, the stockholders are estopped from questioning it. We suppose acquiescence or tacit assent to mean the neglect to promptly and actively condemn the unauthorized act, and to seek judicial redress, after knowledge of the committal of it, whereby innocent third parties have been led to put themselves in a position from which they cannot be taken without loss. It is the doctrine of equitable estoppel, which applies to members of corporate or associated bodies as well as to persons acting in a natural capacity.” (P. 187.)

Eor these reasons we tnink that the issue of an amount of bonds in excess of that allowed by statute should not be declared void at the instance of this plaintiff.

As to the remaining ground, that the mortgage was a transfer by the corporation of all its property and assets, thus virtually effecting a termination of its regular business, and, for this reason, illegal, it is only necessary to say that this was not the intention of any of the parties. The whole plan, as shown by the agreement and the provisions of the mortgage, was to continue tlie business of the corporation, which it was thought could be profitably done, and realize for the creditors the full amount of their claims. There was no intention of preventing it from carrying on the business for which it was incorporated. On the contrary, the intention was just the opposite, and the fact that in this all were disappointed is no reason for nullifying the mortgage.

Notwithstanding the claim, therefore, made by plaintiff that a great wrong has been perpetrated upon it by the defendants, we think, as already stated, that, having remained silent, knowing of each, step taken, and waiting until the rights of other persons had intervened, it should not be accorded relief which will injure other bona fide creditors whose rights have been acquired since the execution of the instrument assailed, and who would suffer loss because of an honest effort to protect all the creditors of the corporation alike. ”

The judgment should be affirmed, with costs.

Van Brunt, P. J., concurred in result.

Follett, J.

(dissenting) :

January 26, 1885, the A. B. Cleveland Company (Limited) was incorporated under chapter 611 of the Laws of 1875 (the Business Corporation Act) with a capital of $65,000, divided into shares of $100 each. The stock was all issued for realty and personalty, no cash being paid in. By chapter 394 of the Laws of 1888, section 13 of the act of 1S75 was amended so as to read as follows:

“Sec. 13. It shall be lawful for all such corporations to borrow money for the legitimate purposes of such corporation, and for such purpose to issue bonds with or without coupons attached thereto, or to mortgage any real estate which it may have or possess and bearing interest not exceeding six per centum per annum ; but the amount of such bonds and such mortgages outstanding at any one time shall not exceed one-lialf of the value of the corporate property of such corporation. Any issue of such bonds and such mortgages beyond the amount herein specified shall render every director voting the same personally liable to any holder of such bonds or such mortgages for any damage caused by such overissue to such holder. No such mortgage or mortgages shall be issued however without first having obtained the written assent of its stockholders owning more than two-thirds of the stock of said corporation.”

By this section a business corporation is authorized to mortgage its “ real estate ” for an amount not exceeding one-half of the value of its corporate property. April 17, 1889, the president and treasurer of the corporation assumed to execute a mortgage to Conrad N. Jordan, Horace K. Tlmrber and Peter W. Gallaudet upon all of the property of the corporation, real and personal, to secure the payment of $425,000, represented by 425 bonds of $1,000 each, and thereafter it immediately discontinued its business. Twelve days later the trustees took possession of all of tlie property of the cor. poration under said conveyance. In November, 1889, the trustees reported that the value of the entire assets of the corporation was $327,621.81. The value of its real estate included in the above was $15,530. December 1,1890, the value of its assets had been reduced to $298,999.25, which included $15,000 of real estate. It is conceded that when this mortgage was executed the corporation was hopelessly insolvent, but it is asserted that it was not known to be so by its directors and officei’s. This assertion does not seem to me to be sustained by the record. I think the mortgage should be declared void on two grounds : (1) That it was given in contemplation of insolvency; (2) that it covered all of the personal property •of the corporation, and that it was given for more than twice the value of the corporate property of the mortgagor. In the prevailing opinion it is conceded that the corporation had no power to mortgage its personalty, but it sustains the judgment dismissing the complaint on die ground that the plaintiff was estopped. I am unable to find any evidence in the record upon which an estoppel can be based. I cannot assent to the proposition contained in the opinion that the power of a corporation to issue bonds is not limited by the ■section above quoted, nor can I concur in the position that the. only remedy for an overissue is an action by a bondholder against the ■directors for his damages. This section was designed for the protection of shareholders and creditors of such corporations, and they may resist the validity of a mortgage given in violation of its provisions. Any creditor or shareholder of a corporation has the right to maintain an action to set aside any securities given or conveyances made in violation of the statute, and if the corporation is insolvent any shareholder or creditor has the right to have it wound up in accordance with the provisions of the statute, even though ■every other creditor and shareholder think a better way than the statutory one has been devised.

I think the judgment should be reversed and a new trial granted, with'costs to the appellant to abide'the event.

Judgment affirmed, with costs.


author: Follett, J .:

text:
    The Reynolds Card Manufacturing Company, Respondent, v. New York Bank Note Company, Appellant.

      Contract — mmance between the .complaint and the evidence — measure of damages.

    In an action brought to recover the price of paper sold and damages for the breach of an executory contract to purchase paper, it appeared that the damages were claimed under an executory contract, alleged to have been made about September 1, 1887, by which the plaintiff agreed to sell 1,000 tons of paper, to be delivered at the rate of twenty tons per month, at the price of eighty-five dollars per ton, which was to be used by the defendant in manufacturing tickets for the elevated railroads of New York city The complaint alleged that the defendant agreed to return to the plaintiff the canceled tickets which had been manufactured from the paper, and that for these the plaintiff agreed to pay fifteen dollars per ton.
    The defendant denied the execution of the contract, and set up a counterclaim for canceled tickets alleged to have been purchased by the plaintiff and not paid for. A verdict was rendered for the amount claimed by the plaintiff less the amount due the defendant for canceled tickets, and from the judgment entered thereon the defendant appealed.

      Held, that as the verdict was supported by the evidence it would not be disturbed;
    That a variance between the complaint and the evidence, in that the complaint alleged that the contract was made on or about the 1st of September, 1887, and the evidence showed that it was entered into in February, 1888, was not material, as it did not appear that the defendant was misled thereby;
    That the measure of damages, as to the paper which the defendant refused to take, was ihe difference between the contract price and its actual value;
    That tile measure of damages as to the canceled tickets was .the difference between their contract price and their actual value.
    Appeal by tlie defendant, the New York Bank Note Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 22d day of November, 1894, upon the verdict of a jury rendered after a trial at the New York Circuit, and also from an order entered in said clerk’s office on the 3d day of December, 1894, denying the defendant’s motion for a new trial made upon the minutes.

      Gharles A. JB. Pratt and Edward P.Lyon, for the appellant.

      lorem Zeller, for the respondent.
   Follett, J .:

This action was begun December 24, 1892, to recover the price of paper sold and damages for the breach of an executory contract to purchase paper. As a first cause of action it is alleged that between April 4 and July 19, 1892, the plaintiff sold and delivered to the defendant paper of the value and at the agreed price of $415.29.

As a second cause of action it is alleged that by an executory contract, made September 1, 1887, the plaintiff agreed to sell and deliver, and the defendant to purchase, 1,000 tons of paper, to be delivered at the rate of twenty tons per month, for which the defendant agreed to pay eighty-five dollars per ton, which was to be manufactured by the defendant into tickets for the elevated railroads. It is further alleged that the defendant agreed to return to the plaintiff the used tickets manufactured from such paper, for which the plaintiff agreed to pay fifteen dollars per ton.

' As a breach of this contract it is alleged that after receiving 226 tons of paper the defendant refused to receive the remainder, 774 tons. It is also alleged that the plaintiff’s damage is the difference between the contract price, $85 per ton, and the market value, $55 per ton, or $30 per ton on 774 tons, which equals $23,220, and also the difference between the contract price of used tickets at $15 per ton and the actual value of used tickets at $21 per ton, being $6 per ton on 774 tons, which equals $4,644, making the alleged total damages sustained $27,864. In the complaint it is alleged that 224 tons were delivered, and in the bill of particulars that 226 tons were delivered. We assume that the number of tons stated in the bill of particulars is correct, as it corresponds with the amount of damages claimed.

The defendant admits in its answer that it purchased paper of the quantity, value and agreed price as alleged in the first cause of action, and that it has not paid therefor.

The defendant, in its answer, denied that it contracted to purchase 1,000 tons of paper, but admitted that it received from the plaintiff 226 tons of paper, but not pursuant to the contract alleged in the complaint.

By -way of counterclaim it is alleged that the plaintiff purchased and received used tickets of the value of $470.61, but that it had refused to receive and pay for a large amount of canceled tickets, to the defendant’s damage of $1,000, which added to the $470.61, make $1,470.61 damages set up as a counterclaim, and for which an affirmative judgment is demanded.

The plaintiff in its reply admitted that it had received used tickets, as alleged in the answer, but denied that it had contracted to purchase any used tickets except those manufactured from paper furnished by the plaintiff, and that defendant having refused to receive plaintiff’s paper, it was under no obligation to purchase and pay.for canceled tickets manufactured from other paper.

The issues thus joined were tried before a jury which rendered a verdict for $27,000. From this judgment the defendant appealed. When the plaintiff rested, and again at the close of the case, the defendant moved that the complaint be dismissed as to the second cause of action, on the ground that sufficient facts had not been proved to constitute a cause of action, and also upon nineteen other grounds which it does not seem necessary here to repeat. At the close of the evidence the defendant also asked the court to direct a verdict in its favor, which was denied, and an exception taken.

The defendant produced and read in evidence the following among other correspondence which passed between the litigants:

“New York Bank Note Oo. : . Feby. 8, 1888.

“ Gentlemen.— We will make you 1,000 tons of paper, same as elevated paper at same price, to be delivered over a period of five years from date. This proposition is made on the express condition that you will take from us twenty-five tons at any time on sixty days’ notice, which we will carry in stock for you, which is the limit of your liability.

“REYNOLDS CARD MANUFACTURING CO.

“ Geo. B. Schinzel, Pres.”

“February 8th, 1888.

“ George P. Schinzel, President:

“My Dear Sir.— We hereby order of you 1,000 tons of Manhattan Elevated Ticket Paper, subject to the following conditions:

“ Paper to be web, width as required, color and quality subject to my approval, weight 80 pounds to 500 sheets of 22x28 inches, price four and one-quarter cents a pound, cash 10 days, deliveries for five years 20 tons a month or less, as the Bank Note Co. may require ; thereafter what they may require, unless Manhattan contract renewed, in which event same as before end of five years.

“You to buy all Manhattan waste at 15.00 per ton, and to carry always in stock 60-days’ supply of paper, namely, 25 to 40 tons, which you can deliver any time on 60 days’ notice and cancel balance of this order, and we can as limit of our liability take your stock on hand on 60 days’ notice.

“ It is understood that Manhattan requires less than 10 tons a month.

“ This letter is given you to copy out into formal shape of even date herewith, and in accordance with your written acceptance of to-day. Yours truly,

“THE NEW YORK BANK NOTE CO.

“ George II. Kendall,

Treasurer.”

The plaintiff testified that, pursuant to the last clause of the letter signed by the defendant, a written contract was prepared and signed by both parties, by ■which the defendant agreed to purchase 1,000 tons of paper at eighty-five dollars per ton, and agreed to sell to the plaintiff the canceled tickets manufactured from such paper for fifteen dollars per ton. It is conceded that in 1888 the defendant issued a portfolio for circulation among its customers, on the cover of which the following was printed:

“ [Yignette.]

“ M’ss’rs New York Bank Note Co.:

“Your order for- 1,000 tons Ticket Paper at hand. This being’ the second time you have favored us with the largest order of its kind ever given in the history of the world, it is doubly prized and will receive our best attention.

“REYNOLDS CARD MEG.

CO., New York.”

“New York Bank Note Co.: “ The prompt and satisfactory delivery by you of our first One Hundred Millions of Tickets convinces us that you have unparalleled facilities for this work, and that you will succeed as well in the execution of the balance of our total order of One Billion.

“ MANHATTAN E LE- • YATED R. R. CO.,

“ O. P. MoFadden,

“ G. T. A.”

The defendant insists that this is not evidence of a contract] because at that time the plaintiff’s president signed the following statement:

“ The filling in of the above signature is authorized by me, and in accordance with my request to have this letter used as an advertisement, and said letter is of that significance only. There is no contract.

“ (Signed.) GEO. P. SCHINZEL,

Pres.”

The plaintiff’s president denies that he ever signed such a paper, and characterizes it as a forgery. It seems rather unnatural that at this time, when the president of the plaintiff and the officers of the defendant were friends, and having large transactions, a statement in writing of this kind should have been taken. It was testified in behalf of the plaintiff that the written contract alleged to have been signed was returned to the defendant for the purpose of having added thereto a clause providing that the plaintiff should not sell the same kind of paper to others, and that the contract was never returned.

The plaintiff’s officers swore that there was such a contract and the defendant’s officers swore there never was such a contract, and in support of the testimony given in behalf of the defendant, an unexecuted draft of a contract was produced. In opposition to this very many written orders, signed by the defendant and addressed to the plaintiff, extending through the years 1888 to 1892 inclusive, calling for the delivery of paper, were introduced in evidence, and in not one of them is there any reference to the price at which the paper was to be delivered. Many letters signed by the defendant and addressed to the plaintiff, complaining of tardiness in delivery and about the quality of the paper, were read in evidence. We think it is quite significant that these orders contained no reference to price, and that so many letters, complaining of tardiness in deliveries and of poor quality, should have been written, unless there was a contract.

This question of fact was fairly submitted to the jury by the learned trial judge, was determined in favor of the plaintiff, and we think rightly, as the voluminous correspondence between the litigants and their transactions extending over four years tend to support the evidence given in behalf of the plaintiff. There is little dispute in the case about the willingness and ability of the plaintiff to perform the contract. The plaintiff testified that August 1, 1892, he tendered to the defendant 774 tons of paper and that Mr. Kendall, the defendant’s treasurer, accepted his offer provided he would deliver it all on that day. The plaintiff’s president replied that he was willing to deliver it in accordance with the contract, and that it was unreasonable to require a delivery of that amount in a single day. It is now urged that the plaintiff, having refused to deliver the paper under this offer, failed to perform its contract, and the court was requested soto charge. There is no foundation for this contention. The testimony of the plaintiff’s president was to the effect that he offered to deliver the 774 tons of paper in accordance with the terms of the contract, twenty tons per month, and plaintiff could not be put in default by the defendant’s offer to receive all of it on a single day. This is the only exception to the charge that is argued, and no exception to the rulings upon the admission or exclusion of evidence are urged as a ground for a reversal of the judgment.

The case turns upon questions of fact, all of which were sharply litigated on the trial, were found in favor of the plaintiff, and the verdict cannot be set aside as contrary to the weight of evidence.

It is urged that there is a fatal variance between the complaint and the evidence. It is' alleged in the complaint that the contract was entered into about the 1st of September, 1887. The evidence shows that it was entered into in the following February. The 'only variance between the allegations in the complaint and the evidence is in respect to the time when the contract was made. The date of the contract was not a material question. The material issue was whether there was a contract for the sale and purchase of 1,000 tons of paper. The defendant was in nowise misled by the variance, and, under the circumstances of this case, it was not a fatal one.

There was no conflict in the testimony over the amount of damages sustained by the plaintiff. Evidence was given showing that the difference between the contract price and the cost of the paper was thirty dollars per ton, and that the difference between the contract price for canceled tickets and their actual value was six dollars per ton. This was not disputed, and the court instructed the jury that if they found for the plaintiff it was entitled to recover these differences, together with the sum conceded to be due for paper delivered. The verdict returned shows how they reached their result:

First cause of action................................ $415

Second cause of action.............................. 27,160

$27,575

Due defendant for canceled tickets................... 575

Yerdict rendered for............................ $27,000

In the complaint the plaintiff demanded a judgment for $25,415.29, with interest from July 19, 1892. It is now insisted that the verdict rendered is in excess of the amount claimed in the complaint, and that the judgment should be reversed or reduced. The verdict was rendered November 20, 1894, and the jury were instructed that they might, in their discretion, allow interest on the damages awarded. The damages claimed in the complaint, with interest thereon to the date of the verdict, exceed the sum awarded by the jury, and it cannot be successfully contended that the damages rendered exceed the amount demanded.

The damages awarded seem large, but the contract was a large one, and the defendant did not contest the amount of the damages. After a careful reading of this record we are unable to find that any ( error was committed which requires or would justify the reversal of the judgment.

The judgment and order should be affirmed, with costs.

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

Judgment and order affirmed, with costs.