text:
    Harvey F. Drake and Others, Appellants, v. Severin Siebold, Respondent.

      Conspiracy 'within the meaning of section 168 of the Penal Code — future prices, how regulated — contract for the sale of coal — when void — when not enforced though the invalidity is not pleaded — power of a referee to allow an amendment of an cmswer.

    Where there exists in a city an association of retail coal dealers, the object of which is to fix a uniform price for coal sold in the city in order to prevent competition among the retail dealers in coal, such agreement, followed by overt acts on their part, constitutes a conspiracy within the meaning of section 168 of the Penal Code, and the members of such association are guilty of a misdemeanor.
    Ordinarily persons in their dealings may adopt such method as they please to regulate the measure of compensation or prices in the future, through the ■ period of the operation of their contracts, but they cannot effectually do so to accomplish an unlawful purpose.
    As the business of buying and selling coal is in itself legitimate, the fact that the prices adopted between the vendor and the vendee are in furtherance of a scheme of an association to regulate the price thereof would not deny to the seller all remedy for non-payment of the price of the coal delivered by him under such contract; but the contract, so far as the prices therein provided for are founded or dependent upon the prices fixed by such association, is ineffectual and void.
    When it appears that a contract which is the subject of an action is void as against public policy, the court will decline to enforce it by judgment, although such infirmity is not pleaded, if the invalidity of the contract appears on the presentation thereof by the plaintiff upon the trial, but if the contract as alleged and proved by the plaintiff is valid on its face, the defense that it is in fact against public policy and illegal is not available unless specially pleaded.
    A referee has no power upon the trial of an action before him to allow the answer of a defendant to be amended where the allegations of the amendment constitute a new defense to the action.
    The defendant, by his answer to the complaint in an action brought to recover damages for the alleged breach of a contract made between the parties, admitted that he signed the instrument set forth in the complaint and denied each and every other allegation of the complaint. He did not allege that the contract was invalid for any cause. At the close of the evidence the defendant moved to amend his answer by inserting an allegation to the effect that the contract was based in part upon a criminal conspiracy to injure trade and commerce, and that it was against public policy and void.

      Belcl, that the allegations of the amendment constituted a new defense to the action.
    Appeal by the plaintiffs, Harvey F. Drake and others, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Monroe on the 28th day of May, 1894, upon the report of a referee dismissing the plaintiff’s complaint upon the' merits, and also from an order made by the referee- allowing the defendant to amend his answer.
    The action was brought to recover damages resulting from the alleged breach of a contract made between the parties iy April, 1888, whereby the plaintiffs agreed to sell and deliver to the defendant, who agreed to receive, at the plaintiffs’ coal yard in the city of Rochester, from 2,000 to 3,000 net tons of anthracite coal on or before May 1, 1889, upon these terms: “ For all coal delivered during the months of May, June, July and August, 1888, the price shall be as follows: For grate and egg, $3.65 per ton of 2,000 lbs.; for stove and nut, $3.88 per ton of 2,000 lbs.; for pea, $2.88 per ton of 2,000 lbs.
    “ For all coal delivered during each of the succeeding months after August 31, 1888, and prior to May 1, 1889, the prices shall be the prices as quoted above, with the regular retail circular advances as may be made from time to time after May 1, 1888, in the Rochester market added thereto ; that is, if the Rochester retail price should advance 25c. per ton June 1, over the present price, then such advance of 25c. per ton shall be added to the prices named in this contract for all coal delivered after August 31, 1888; likewise each succeeding advance in the Rochester retail price shall be added to prices named herein on all coal delivered after August 31, 1888.”
    The defendant agreed to receive the coal upon those terms, and to pay on the fifteenth day of each month for all coal received the preceding month, and to pay on or before August 1,1888, $1,500 or $2,000, to be applied to his credit for coal to be delivered to him after August 31, 1888.
    The contract also provided that it was subject to the usual conditions'on the back of coal circular thereto attached, amongst which was this condition: “ 2. Price of coal will be the rates as fixed by circulars from time to time, and will be charged at circular prices at time of shipment, regardless of date of orders.”
    The plaintiffs alleged that they delivered to the defendant, and he received, nineteen and one-half tons of coal, and that the defendant refused to further perform the contract on his part. The defendant alleged, by way of counterclaim, a breach of the contract by the plaintiff.

      Albert H. Hcurris, for the appellants.

      II Q. Pierce, for the respondent.
   Bradley, J.:

The referee found the facts in support of the plaintiffs’ alleged claim for breach of the contract by the defendant, but determined that the contract was illegal by reason of the fact as found by him, that during the year commencing May 1, 1888, there existed a combination of all the coal dealers in Rochester (except a few small dealers who sold by the bushel), including the parties to the action; that the combination was known as the Rochester Coal Exchange; that at meetings held monthly the retail price of coal was fixed; that it was agreed among the members of the association that coal should not be sold in the city of Rochester by them for prices less than those fixed by it; that a disregard of the action of the association in that respect subjected the member violating it to some fine or penalty, and that the object of the association was to fix a uniform price for coal in the city, and to prevent competition among the members of the Coal Exchange who dealt in coal, which was during that time an article of prime necessity to the public. And the referee further found that the retail price of coal, as determined by the association, entered into and formed a part of the consideration for the contract mentioned in the complaint.

The evidence warrants the conclusion that such an association existed in Rochester for the purposes so found, and that substantially all the dealers in coal there, including the parties to this action, were members. And as the object of it was to destroy and prevent competition in the sale of an article of prime necessity, the combination between the dealers, followed by overt acts, was a conspiracy within the meaning of the statute, which provides that when two or more persons conspire “to commit any act injurious * * * to trade or commerce,” they are guilty of a misdemeanor. (Penal Code, § 168, subd. 6; People v. Sheldon, 139 N. Y. 251.)

It is urged, on the part of the plaintiffs, that the contract in question was not tainted by any relation to the association ; that it was independent of it, and that reference to the circular was incidentally made to designate as between the parties the standard prices during the time their contract was to run. It is true that persons in their dealings may ordinarily adopt such method as they please to regulate the measure of compensation or prices in the future through the period of the operation of their contracts. This they cannot effectually do to accomplish any unlawful purpose. The only object of the association, known as the Rochester Coal Exchange, was to govern the price of coal within the • city, and make the retail price of that article there uniform. The primary purpose was to prevent competition in the trade. The parties to this action being members of it, sought, by their contract, to accomplish, so far as related to their dealing as represented by it, the purpose for which the Coal Exchange was organized and existed. One of the considerations of the sale and purchase seems to have been the prices fixed from time to time by the association for the purposes before mentioned. It, therefore, cannot be said, in view of the facts which the referee was permitted to and did find, that the contract was made independently of any relation to the association, or that it was free from any consideration in support of its purpose.

In Armstrong v. Toler (11 Wheat. 258), cited by the plaintiffs’ counsel, Mr. Chief Justice Marshall discussed the subject of the validity of contracts having relation to illegal acts and tainted by them. And it was there held that if a promise be unconnected with the illegal act, and is founded upon a new consideration, it is not tainted by the act, although it wns known to the person to whom the promise was made and he was the contriver and conductor of the illegal act.

If, therefore, a person knowing all the circumstances had lent to the defendant in the present case the money to pay for the ..coal, pursuant to the contract in question, or had paid the plaintiffs for the coal for the defendant, upon the promise of the latter to repay him, the promise would, within the doctrine of that case, be effectual to support an action, because, as there held, the lending of the money, or making the payment, would have constituted a new consideration and the foundation of anew' contract, which could not be vitiated by a knowledge of the purpose for which the money was so loaned or paid.

By taking the relation which the parties had to the association as its members, it would seem that they intended to observe in their dealing in coal the prices fixed by it and to adopt them in making their contract. They did so by the contract in question, and to that extent they effectuated the purposes of the illegal combination by the means contemplated by it. And,' so far as related to the price, the contract must be infected by the unlawful object of the association, and be subject to the consequences of it.

In Central Shade Roller Co. v. Cushman (143 Mass. 353) one of the features distinguishing the principle of that case from that of the present one, is that the agreement in question there did not refer to an article of prime necessity, nor to a staple of commerce, or to merchandise to be bought and sold by the parties in the market, but'to certain fixtures manufactured by them.

The other cases cited by the learned counsel for the plaintiffs do not seem to have any necessary application in support of his contention on the subject.

As the business of selling and buying coal is in itself legitimate, the fact that the price adopted is in furtherance of the scheme of the association would not deny to the seller all remedy for nonpayment of the coal delivered upon such contract.

The view taken of the contract in question is that so far as the prices are founded or dependent upon the circular before mentioned q£ the Rochester Coal Exchange, it is ineffectual and void.

There is a further question of pleading presented. The defendant by his answer admitted the partnership of the plaintiffs, and that he signed the instrument set forth in the complaint, and denied each and every other allegation of the complaint. lie did not allege that such instrument (which is the contract in question) was invalid for any cause. At the close of the evidence the defendant moved to amend his answer by inserting an allegation to the effect that the contract was based in part upon a criminal conspiracy to injure trade and commerce, and is against public policy, and void. The amendment was allowed by the referee against the objection and exception of the plaintiffs. The question arising upon the exception is here for consideration. (Quimby v. Claflin, 77 N. Y. 270.)

The allegations of the amendment constituted a new defense. And if it was essential to the support of the conclusion of the referee dismissing the complaint, the exception was well and effectually taken, for the reason that it was not within the power of the referee to allow the answer to be so amended. (Code Civ. Proc. §§ 723, 1018; Shaw v. Bryant, 65 Hun, 57.)

It has been held that when it appears that a contract which is the subject of an action is void as against public policy, the court will declina to enforce it by judgment, although such infirmity is not pleaded. (Oscanyan v. Arms Co., 103 U. S. 261; Russell v. Burton, 66 Barb. 539.) But in those cases the invalidity of the contracts there in question appeared by the presentation of them by the plaintiff at the trials. In that respect they were distinguished from Milbank v. Jones (127 N. Y. 370) where it was held that when the contract as alleged and proved by the plaintiff is valid .on its face, the defense that it is in fact against public policy and illegal is not available unless specially pleaded.

The rule seems to be that a plaintiff must, to support his action, allege and prove a contract valid on its face. If he fails to do so his complaint may be dismissed although the invalidity of the contract is not pleaded as a defense. But otherwise to enable the defendant'to raise the question upon his evidence it must be alleged in the answer.

The contract as set forth in the complaint was not invalid on its face. The evidence on the part of the plaintiffs does not appear in the record, but the referee finds upon it facts which entitled the plaintiffs to recover.

The evidence on the part of the defendant upon which arises the charge of the illegality of the contract was not objectionable, as it related to the source of the circular of retail prices into which the defendant had the right to inquire, and for that reason the plaintiffs are not prejudiced upon this question by not taking objection to the evidence. (Honegger v. Wettstein, 94 N. Y. 252.)

These views lead to the conclusion that the referee erred in allowing the amendment, which substantially changed the defense alleged in the answer.

And for that reason the judgment should be reversed and a new trial granted, costs to abide the event.

Dwight, P. J., Lewis and Haight, «JJ., concurred.

Judgment appealed from reversed and a new trial ordered, with costs to abide the event.


source: Caselaw Access Project

author: Bradley, J.:

license: Public Domain

text:
    The Empire State Savings Bank of Buffalo, Respondent, v. Daniel C. Beard and Others, Appellants.

      The liabilities imposed by chapter 409 of 1882 unimpaired by its repeal — duties and liabilities of trustees of an incorporated sewings bank — equitable action by a stockholder — relations between a corporation, its directors and stockholders — pm'ties to equity actions — the representatives of a deceased pa/i'ty may be brought in —■ misnomer of a corporation by itself in a summons and complaint — the remedy is not by demurrer, but by a motion for correction.

    The repeal of chapter 409 of the Laws of 1882 by chapter 689 of the Laws of 1892 did not impair any liability existing under the repealed act prior to and at the time the act of 1892 took effect.
    When the management of the business of an incorporated savings bank is placed under the control of a board of trustees, the trustees, although their duties are not specifically defined by the statute, under which the business of the bank is operated, are bound to exercise such care as the nature of the supervision fairly requires, and are negligent if they fail to do so.
    To entitle a party to equitable relief his complaint must state facts, by way of a cause of action, which permit the granting of such relief; actions against trustees as such are of equitable cognizance.
    The directors of a corporation are vested with no title to the corporate property; they have legal privity with the corporation only; and for the consequences of their malfeasance or want of due care their liability is to it, and it is only on the refusal of a corporation to sue that a stockholder thereof, by virtue of his equitable interest, may do so on behalf of the corporation for the ultimate benefit of himself and other stockholders, mailing the corporation a party defendant; and then the action must necessarily be in equity.
    While the directors of a corporation may be treated as the agents thereof, they may, upon authority, be deemed to have in some sense the relation of trustees.
    'The right of action of a corporation, against its directors, in equity, is recognized, for the loss of the corporate property occasioned by the breach of their fiduciary obligations, whether arising from their malfeasance or from their culpable want of care, and for the purpose of an equitable remedy no distinction is observed between the relation of the corporation and that of its corporators to the directors.
    As between the directors and stockholders, a trust relation exists, and the position of the latter is that of cestui que trust, and it may be that the corporation is, for the purposes of such remedy, to be treated in like manner, by reason of its fiduciary relation to the stockholders or depositors, and in view of their equitable interests in the subject-matter of, and the relief sought in, such cases.
    An action brought by an incorporated savings bank against its directors, to recover for the benefit of its depositors and creditors the corporate funds alleged to have been lost through the negligence of the defendants, is a proper one for equitable cognizance, if brought to avoid a multiplicity of suits and to apportion between the defendants, as their respective liabilities may appear, the burden of such reimbursement as the plaintiff may be entitled to.
    It is the general rule in equity actions that all persons within the jurisdiction of the court, whose presence is necessary to the determination of the interests involved in the matters alleged in the complaint, must be made parties, so that a complete judgment in that respect may be the result, and this includes the representatives of such of the persons as are dead.
    The omission to include as a party a person who should be one is not necessarily a cause for the dismissal of the complaint; the plaintiff will be permitted to bring him in, and if he fails to do so the court in its discretion may dismiss the complaint.
    In an action brought by an incorporated savings bank against its directors, one of its directors, who was originally made a party defendant, thereafter died, and his name for that reason was omitted from the amended complaint.

      Held, that, where it did not appear that he had any personal representatives, the case came within the provision of the statute (Oode Civ. Proc. § 758) to the effect that if one of two or more parties to an action died it may proceed in favor of or against the survivors, and that the court might make an order to bring in the representatives of the deceased party.
    The fact that.a corporation, the plaintiff in an action, has misnamed itself in the summons and complaint, is no effectual ground of demurrer to the complaint; the error is merely formal and amendable, and the remedy for correction is by motion.

      Appeal by the defendants, Daniel O. Beard and others, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 29th day of November, 1893, upon the decision of the court rendered after a trial at the Erie Special Term overruling, the defendants’ demurrer to the amended complaint, and also from an order made at the Erie Special Term and entered in said clerk’s office on the 29th day of November, 1893, directing the entry of the said interlocutory judgment.
    The plaintiff by the complaint alleges that the National Savings Bank of Buffalo was incorporated by chapter 777 of the Laws of 1867, as amended by chapter 644 of Laws of 1868; that its name was afterwards, in 1892, changed to that of the plaintiff; that the defendants Beard and Ferris have been trustees of the corporation since 1867; that the other defendants became such trustees as follows: Enos in 1876, Goemblé in 1877, John Wilkeson, Trott and French in 1878, Burrows in 1882, Berrick in 1884, Harvey in 1887, Pratt in 1888, Potter, Otis and Gowans in 1891.
    That Edward S. Dann became trustee in 1889, and that he and all of said defendants remained trustees of the corporation until the 12th day of July, 1892; that Dann was its secretary and treasurer from January 1, 1878, to July 12, 1892.
    That during the period of fourteen years, from in 1878 to in 1892, the said secretary and treasurer, Dann, the teller and bookkeeper, "William M. McCredie, and the bookkeeper, Charles J. Armstrong, abstracted and appropriated to their own use moneys of the corporation amounting to $435,000.
    That those persons while in the employment of the corporation were permitted to so abstract and appropriate its money and avoid discovery of their peculations by means of inattention and negligence of the defendants as such trustees, and that for the want of care on their part such embezzlement of its money was unknown to the plaintiff until in July, 1892, when it was discovered by the examiners, who, under the direction of the State Superintendent of Banks, examined the books, vouchers. and .papers of the corporation. Further facts are alleged in the complaint.
    The relief demanded is that the plaintiff have judgment against tbe defendants for the loss of money so abstracted, and that the= amount of such loss be equitably apportioned among them.
    The said Edward S. Dann was originally a party to this action, and was served with the summons. He thereafter died, and it did not', appear that he had any persona] representatives.
    The appellants demurred to the complaint upon the grounds: (1) That the,complaint,does not state facts sufficient to constitute a. cause of action. (2) That the court has no jurisdiction of the subject of the action. (3) That there is a defect of parties defendant. (4) That the plaintiff has no legal capacity to sue. (5) That causes-of action have been improperly united.

      John G. Milburn and F. O. Sprague, for appellants Trott andBerriek and the executors of "Wilkeson.

      Frank Bnmdage, for appellants Beard, Otis and Potter.

      Frank O. Ferguson, for appellant Ferris.

      Oha/rles Daniels, for the respondent.
   Bradley, J.:

The act of 1867, by which the National Savings Bank of Buffalo-was created, provided that the persons there named as trustees and their successors were constituted a body corporate and politic by that name; that its business should be managed by a board of trustees, fifteen of whom, including the president or one of the vice-presidents, should constitute a legal meeting for the transaction of business, and that the general business and object of the corporation should be to receive on deposit and invest such sums of money as. might be offered therefor. By the general act of 1875 (Chap. 371)' relating to savings banks it was provided that the number of trustees should not be less than thirteen. This act was superseded by chapter 409 of Laws of 1882, which was “An act to revise the' statutes of this State relating to Banks, Banking and Trust Com- . panies.” This act so far as relates to savings banks is substantially the same as that of 1875, and it provided that the business of the-corporation should be managed and directed by a board of trustees-of not less than thirteen (§ 250); that the board of trustees should. have power from time to time to make such by-laws, rules and regulations as they should think proper for the election of officers, prescribing their powers and duties and the manner of discharging the same; for the appointment of committees for certain purposes, and generally for transacting, managing and directing the affairs of the corporation (§ 251); that regular meetings of the board of trustees should be held as often as once in each month for the purpose of receiving reports of its officers and committees and for the transaction of other business, and a quorum to consist of not less than seven trustees (§ 252); that the corporation should on or before the first day of February and August in each year make a report to the Superintendent of the Bank Department, stating fully and sjDecifically the situation, condition, affairs and transactions of the corporation particularly mentioned in the statute (§§ 270, 271, 272), and verified by the oath of the two principal officers (§ 273); that it should be the duty of the trustees by a committee of not less than three of such trustees on or before the first day of January and July in each year to thoroughly examine the books, vouchers and assets of the institution and its affairs generally, and that the statement or schedule of assets and liabilities reported to the Superintendent of the Banking Department for the first of January and July in each year should be based upon such examination,-and be verified by the oath of a majority of the trustees making such examination, and that it should be the duty of the trustees as often •as once in each six months to cause an accurate balance to be taken of their depositors, ledgers, etc. (§ 279).

The provisions of this act, as had that of 1875, prescribed the rule for the existence of savings banks and the exercise of their powers. (Van Dyke v. McQuade, 86 N. Y. 38.) And although repealed by Laws of 1892 (Chap. 689, § 215) such repeal did not impair any liability existing prior to and at the time the latter act took effect. (Laws of 1892, chap. 677, § 31.)

It is, therefore,'seen that the provisions of the act of 1882, during most of the time in question, prescribed a system for the management of the affairs and business of the corporation, and imposed upon the trustees certain duties to accomplish the purposes in view.

It is, however, urged on the part of the defendants that the complaint contains no allegations of fact to charge them with liability for embezzlement of the funds of the institution.

There is no charge of malfeasance against them. The theory of the action is that the trustees, by the failure to perform the duties which they by their relation to the bank assumed or undertook to exercise, were chargeable with negligence and its consequences. "When the statute placed the management and direction of the business of the bank under the control of the board of trustees it imposed upon them some duties in respect to it. All of those duties are not specifically defined by the statute. They are such as the nature of the supervision fairly requires. Negligence is dependent upon failure to exercise the care which persons are by their relation called upon to exercise, and that is more or less dependent upon circumstances.

In Briggs v. Spaulding (141 U. S. 132), which was an action against the directors of a National bank, it was held that they were required to exercise ordinary care and prudence, and if they did that they were not chargeable with negligence. And Mr. Chief Justice Fullee, in the prevailing opinion said substantially that the degree of care which the defendants were bound to exercise is that which ordinarily diligent and prudent men would exercise under similar circumstances. “ What may be negligence in one case may not be want of ordinary care in another, and the question of negligence is, therefore, ultimately a question of fact to be determined under all the circumstances.”

In Hun v. Cary (82 N. Y. 65), in considering the subject of the measure of diligence required of trustees of a savings bank, Judge Eael, speaking for the court, said that they are not bound to exercise the highest degree of diligence nor is their duty discharged by slight care, but that they are to “ exercise ordinary care and prudence in the trusts committed to them, the same degree of care and prudence that men prompted by self-interest generally exercise in their own affairs.” (Pom. Eq. Juris. § 1070; Brinckerhoff v. Bostwick, 88 N. Y. 52.)

It is unnecessary for the purposes of the present case to extend the discussion of the subject of the degree of diligence required of •trustees in such cases. The inquiry here is whether the complaint charges the defendants with negligence in the matters to which tbeir duties as trustees of tbe bank pertained, and if it contains tbe ■ elements essential to a cause of action it will not be necessary on ■tliis review to proceed to consider tbe nature of tbe proof required to establish tbe liability of tbe trustees, or tbe difficulties tbe plaintiff may encounter in that respect.

A careful examination of tbe complaint leads us to tbe conclusion that facts constituting negligence on tbe part of tbe defendants ■are alleged as such in the complaint, and are sufficiently specific in. ■view of tbe consequences charged to sustain tbe jsleading in that .respect,.

It is urged on the part of tbe defendants that no duty is imposed upon tbe trustees individually, but as a board only, and as no charge is made against tbe board as such there is not necessarily any allegation of tbeir failure to perform any duty devolved upon them. And •in support of tbe proposition are cited Franklin Fire Ins. Co. v. Jenkins (3 Wend. 130) and Gaffney v. Covill (6 Hill, 567). In the former four of the sixteen directors of tbe company were charged with malfeasance in tbeir office as directors in loaning its moneys on inadequate security. And upon demurrer tbe declaration was held bad because less than a majority of tbe directors acting as a board were incapable of performing any corporate act. There was no •allegation that tbe defendants' with others constituting a majority participated in making the alleged loan.

The. Gaffney case was an action under tbe statute by a stockholder against a single director of a bank for damages resulting from tbe depreciation in value of bis stock by making a dividend from tbe capital instead of from tbe surplus profits. Tbe defend.ant’s demurrer was held well taken to some of tbe counts of tbe declaration, because a single director could not make a dividend, and the plaintiff did not allege that tbe board of directors participated in the act complained of. 'In both of those cases it was held •that tbe directors would be severally liable for like acts of tbe board of directors accomplished by tbeir aid or participation.

In tbe present case tbe alleged negligence in office is charged against all tbe defendants as trustees of tbe bank, and it is founded upon tbeir failure or omission to exercise tbe care which by tbe relation to it they assumed and were required to exercise in tbe management and conduct of its affairs. Tbeir failure to properly act and discharge their duties as a board, as well as their supineness as trustees, is one of the alleged causes of complaint against them. No discrimination is made by allegation between them. If they are entitled to any that question can be disposed of upon the evidence in case the defendants, by answer, tender issues of fact for trial.

The objection by the demurrer that the court has no jurisdiction of the subject of the action, is made upon the ground that the remedy for damages or losses occasioned by negligence is by action at law. The distinction between causes of action legal and equitable and their appropriate remedies is still to be observed. (Peters v. Delaplaine, 49 N. Y. 362, 371; Stevens v. Mayor, 84 id. 296.) It follows that to entitle a party to equitable relief his. complaint must state facts, by way of the cause of action, which permit it. Actions against trustees, as such, are of equitable cognizance. But it is said that as between the directors of a corporation and them their relation is not that of trustees, but is that of agents. It is true that they are vested with no title to the corporate property. In Pomeroy’s Equity Jurisprudence (§ 1089) it is said: “In fact, directors are clothed at the same time with a double character, that of qtoasi trustees and that of agents.” In Hun v. Cary (82 N. Y. 65), which was an action by the receiver of a savings bank against its trustees for damages occasioned by their improvidence in the management of its affairs, the court, treating the defendants as agents of tjie bank, held that the action was properly tried as one at law by jury.

In Ex parte Chippendale (4 De G., M. & G. 52) Lord Justice Turner said that “ although directors undoubtedly stand in the position of agents, and cannot bind their companies beyond the limits of their authority, they also stand in some degree in the position of trustees. * * * There is no inconsistency in this double view of the position of directors.” The views of judicial writers and courts have differed upon the subject whether the relation of the managers or directors of their corporations has the character of trustees in the sense applicable to that term, or is that of agents merely. It is quite evident that they have legal privity with the corporation only, and that for the consequences of their malfeasance or want of due care their liability is to it, and it is only on the refusal of the corporation to sue that a stockholder, by virtue of his equitable interest, may do so in behalf of the corporation, and thus for the ultimate benefit of himself and other stockholders, making the corporation a party defendant, and not otherwise. And then the action must necessarily be in equity. (Davenport v. Dows, 18 Wall. 626; Greaves v. Gouge, 69 N. Y. 154; Robinson v. Smith, 3 Paige, 222; Smith v. Hurd, 12 Metc. 371, 384; Craig v. Gregg, 83 Penn. St. 19.)

While the directors may be treated as agents of the corporation they may, upon authority, be deemed to have in some sense the relation of trustees.

In Poole, Jackson & Whyte's Case (9 Ch. Div. 322; 26 Moak, 142) Jessel, M. R., said: “It has always been held that the directors are trustees for the shareholders; that is, for the company. They are the managing partners of the company, and if they abuse their powers, which they hold in trust for the company, to the damage of the company for their own benefit, they are liable to make good the breach of trust to their cestui gue tnost like any other trustees.” And in Peabody v. Flimt (6 Allen, 52) it was said: “ As between che corporation itself and its officers it was long since hel<jl that they were trustees, and that a court of equity would hold them responsible for every breach of trust.”

It is in that view that a right of action by a corporation against its directors in equity has been recognized for loss of corporate property, occasioned by breach of their fiduciary obligations, whether arising from malfeasance or culpable want of care. And for the purpose of such equitable remedy no distinction seems to be observed between the relation of the corporation and its corporators to the directors. As between the directors and stockholders a trust relation exists, and that of the latter is deemed the relation of cestyui gue Dust.

And it may be that the corporation is for the purposes of such remedy treated likewise by reason of its fiduciary relation to the stockholders or depositors and in view of their equitable interests in the subject-matter and relief sought in such cases. (Pom. Eq. Juris. §§ 1091, 1094; 1 Perry on Trusts [3d ed.], § 207; Charitable Corporation v. Sutton, 2 Atk. 405; 9 Mod. 349; Joint Stock Discount Co. v. Brown, L. R. [8 Eq.] 381; Bank v. Hill, 56 Maine, 385; 96 Am. Dec. 470; Williams v. McKay, 40 N. J. Eq. [13 Stew.] 189; Brinckerhoff v. Bostwick, 88 N. Y. 58; 99 id. 193; 105 id. 561.)

It was held in Overend, Gurney & Co. v. Gurney (L. R. [4 Ch. App. Gas.] 701) that for a loss sustained by a corporation beyond the loss of its capital, in the absence of fraud, the only remedy, if any, was by action at law for negligence. In Spering’s Appeal (71 Penn. St. 11) the form of remedy was not considered.

But the view taken of the present case renders it unnecessary to determine the question whether for the purposes of an action against directors for loss of corporate property occasioned by their negligence they may be treated as its trustees in the sense requisite to equitable cognizance upon that ground alone.

The plaintiff in the complaint alleges that on account of the different periods of time during which the defendants were trustees of the corporation, no adequate recovery of damages without a multiplicity of suits can be had to reimburse the losses of the corporation occasioned by reason of the matters charged against them; that such losses can only be properly apportioned by an accounting,, and that the object of the action is to apportion such losses justly and equitably among the defendants for the benefit of the depositors and creditors of the plaintiff.

The purpose of the action is to reimburse the plaintiff for losses suffered by it during the period of about fourteen years and occasioned by the alleged negligence of the defendants. Some only of them were trustees during the whole time; others of them became such from time to time during that period. The cause of action arises out of the same relation of all the defendants to the plaintiff;. their alleged liability is of the same character, but the extent of it in amount may as between them be different, and it seems to be necessarily so. And the nature of their duties as trustees was such that to charge any one of them, the participation or implication of others of them may be necessary. It seems clear that the case as presented by the complaint is a proper one for equitable cognizance to avoid multiplicity of suits, and to apportion between the defendants, as their liabilities respectively may appear, the burden of such reimbursement as the plaintiff may be entitled to for the causes alleged. (Brinckerhoff v. Brown, 6 Johns. Ch. 139: Brinckerhoff v. Bostwick, 105 N. Y. 567, 571; New York & N. H. R. R. Co. v. Schuyler, 17 id. 592.)

It is insisted that there is a defect of parties because the personal representatives of Edward S. Dann, deceased, are not made parties defendant. He was a trustee and secretary and treasurer of the plaintiff. It is the general rule in equity that all persons within the jurisdiction of the court whose presence is necessary to the determination of the interests involved in the matters alleged, must be made parties so that a complete judgment in that resjiect may be the result, and this includes the representatives of such of the persons as are dead. (2 Perry on Trusts, §§ 875, 878, 883; Munch v. Cockerell, 8 Sim. 219; Green v. Milbank, 3 Abb. N. C. 138.) The omission to include a person as a party who should be one is not necessarily a cause for dismissal of the complaint. The plaintiff will be permitted to bring him in. If he fails to do so, the court in its discretion may dismiss the complaint. (Sherman v. Parish, 53 N. Y. 483.)

There is no support for the demurrer on the ground of defect of parties. Dann was originally made a party defendant. He has since died and his name for that reason is omitted from the amended complaint. It does not appear that he has any personal representatives. The case comes within the provision of the statute to the effect that if one of two or more parties to an action dies it may proceed in favor of or against the survivors, and the court may make an order to bring in the representatives of the decedent. (Code Civ. Proc. § 758.)

Upon the question of the legal capacity of the plaintiff to sue, raised by the demurrer, it is said that there was, at the time the change of the name of the corporation from that of the National Savings Bank of Buffalo to that of the plaintiff is alleged to have been made, no power in the court to make the change. The provision of chapter 518 of Laws of 1887, authorizing the court to change the name of any bank, etc., was repealed by Laws of 1892 (Chap. 689, § 215), and our attention is called to no statute thereafter existing which permitted such change by the court.

While it may be that the plaintiff has misnamed itself, that is no effectual ground of demurrer.

The error is merely formal and amendable. The remedy for correction is by motion. (Bank of Havana v. Magee, 20 N. Y. 355.)

Tbe views already indicated are to tbe effect that there is no misjoinder of causes of action, and the conclusion follows that the judgment should be affirmed.

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

Interlocutory judgment appealed from affirmed, with costs, with leave to the defendant to withdraw demurrer and answer over within twenty days on payment of the costs of the demurrer and of this appeal.


text:
    Frederick Dieboldt, an Infant, by Margaret Dieboldt, his Guardian ad Litem, Respondent, v. United States Baking Company, Appellant.

      Safeguards about elevators — chapter 409 of the Laws of 1886, as amended by chapter 463 of the Laws of 1887, is a public statute.

    Chapter 409 of the Laws of 1886, as amended by chapter 463 of the Laws of 1887, isa public statute, of which judicial notice will be taken, and is properly presented and considered as evidence upon the trial of an action, although not specifically set forth in the complaint.
    It is not the absolute duty of the owner, agent or lessee of a manufacturing establishment to provide the safeguards directed by the statute to be furnished in regard to elevators running in such establishments, but the omission to provide such safeguards is evidence for the jury on the question of negligence, upon the trial of an action brought to recover damages caused by personal injuries alleged to have been sustained by reason of an accident resulting from the failure to provide better safeguards in or about such an elevator.
    Appeal by the defendant, the United States 'Baking Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Erie on the 1st ■day of March, 1894, upon the verdict of a jury rendered after a trial at the Erie Circuit, and also from an order entered in said clerk’s office on the 1st day of March, 1894, denying the defendant’s motion for a new trial made upon the minutes.

      O. S. Grosser, for the appellant.

      Wallace Thayer, for the respondent.
   Bradley, J.:

The.action was brought to recover damages for personal injuries of the plaintiff, alleged to have been occasioned by the negligence of the defendant. The plaintiff had for some months been in the service of the defendant at the time of his injury, which occurred on June 11, 1892. He was then seventeen years of age. At the commencement of the week ending with that day he had been put into the service of operating the elevator, which then was run between the basement and the fifth floor of the building, with directions not to leave it.

On that day, on coming down on the elevator from above, the plaintiff, at about five-thirty o’clock p. m., stopped at the fourth floor, left it to get his lunch basket, which was in the front room there, and on his return to take the elevator, supposing it remained there, he stepped into the shaft and fell thirty-three feet on to the elevator as it was proceeding down, and received the injury complained of. In his absence from it, and without Ms knowledge, the defendant’s engineer had taken the elevator and was on his way down with it when the plaintiff stepped into the shaft. The alleged negligence of the defendant is founded upon the statute which provides that: “ It shall be the duty of the owner, agent or lessee of any manufacturing establishment where hoisting shafts or well holes are used, to cause the same to be properly and substantially inclosed or secured, if in the opinion of the inspector it is necessary to protect the life or limbs of those employed in such establishments. It shall also be the duty of the owner, agent or lessee to provide or cause to be provided such proper trap or automatic doors, so fastened in or at all elevator ways as to form a substantial surface when closed, and so constructed as to open and close by action of the elevator in its passage, either ascending or descending.” (Laws 1886, chap. 409, § 8, as amended by Laws 1887, chap. 462, § 2.) At the fourth floor there were folding or double doors into the .shaft on the north and south sides of it, which could be pushed open from the inside and pulled together and shut on entering it. This constituted the method provided for inclosing the shaft at this and the other floors. It does not appear that the attention of the Factory Inspector had been called to this elevator shaft, although the establishment had been in operation a long time, and its employees exceeded 100 in number. There would ordinarily be no.danger from the outside if the doors in the shaft were kept closed. But the protection contemplated by the statute was not provided by the defendant, and if automatic doors there referred to had been furnished the accident in question would have been prevented.

This is not held to be an absolute duty. But when the case was here for review on a former trial it was held that the omission to provide better protection against danger and accident was evidence of negligence on the part of the defendant for the consideration of the jury. (Dieboldt v. U. S. Baking Co., 72 Hun, 403.) The statute is a public one, of which judicial notice will be taken, and, therefore, it is properly presented and considered as evidence although not specifically alleged in the complaint. The main question, therefore, for consideration is whether the fact that the plaintiff was free from contributory negligence was fairly established by the evidence. He was well informed of the situation. He knew that any person getting on the elevator could operate it.

When he opened the doors of the shaft and went after his lunch basket the plaintiff intended to return and proceed down on the elevator. He says that his basket was only about ten feet away from the shaft, and that the time he occupied in getting his basket and returning to the shaft was only one minute. In this he was contradicted by the testimony of other witnesses to the effect that he remained on the floor five or ten minutes. But upon his evidence it is assumed that the jury were permitted to find that he went directly to his lunch basket and in about the time mentioned by him returned with it to take the elevator. The engineer who *'had taken it says he entered the front door of the shaft. The evidence on the part of the plaintiff tends to prove that he did not do so. There was another door on the other or south side where he could have entered.

The plaintiff on this review is entitled to the benefit of the fact which the evidence on his part tended to prove, that the engineer entered the south door of the shaft. He evidently did not see the engineer enter the shaft, and when he went to take the elevator he supposed it remained where he had left it, and by that belief was governed his action which resulted in his fall. He says that when near the shaft he looked to see if the elevator was there and saw nothing there. He certainly could not see the elevator. It had been taken away. He testified that he came within a foot and a half of the elevator well with his face towards it, looked into it, but could see nothing; that then he turned around, said good night to Sophia Luce, backed in, took hold of the doors to shut them and fell down the shaft. He adds that the room was light, but that the light did not shine so that he could see into the shaft. His testimony that there were then no windows open in the shaft above the fifth floor, although contradicted by that of several witnesses, will be here treated as the fact. But his evidence to the effect that it could not be seen whether the elevator was at the fourth floor with the doors open at the time he entered there to take it and fell, is decidedly against the weight of the evidence. That was a front room. It had to furnish light fifteen windows on the north, east and west sides. It also had two skylights of surface dimensions of sixteen by twenty-one feet each. The corner of one of the skylights was about seven feet from the elevator, and that of the other about twelve feet from it. The elevator was at the south side of the room, and the doors of the shaft on the north side of it were five and a half feet wide and seven and a half feet high. The day at the time in question was clear and bright. There was no obstruction over the front room of the fourth floor to obscure the effect of the skylights. In view of thé situation it would seem that, at the time in question, the light entering the room was such, with the front doors of the shaft open, as to enable one to see whether or not the elevator, about eight feet square, was at that floor. And such is the effect of the evidence of all the several witnesses who testified on the subject other than the plaintiff. He says the doors when he • approached the shaft were open only one foot and six inches. While that opening admitted less light than would have been received through a wider opening of the doors, the evidence on the part of the defendant is that it was light inside the shaft there with the doors open only eighteen inches, and this was somewhat shown by photographic illustrations with light entering the shaft only from this front room of the fourth floor. The plaintiff says when he came down to the fourth floor on the occasion, and before he left the elevator, he looked at his watch and saw that it lacked seven minutes to five-thirty p. m.

The conclusion is fairly required by the weight of the evidence that, if the plaintiff had taken reasonable observation before he entered the shaft, he would have seen that the elevator was not there. But, supposing that it was where he had left it shortly before, he assumed that it remained there. He had some reason to think so as he had seen no one go into the shaft. The question, therefore, is whether the plaintiff, under the circumstances, without any imputation of negligence on his part, was permitted to rely solely upon his belief that the elevator then remained at the fourth floor. It was then after quitting time for the employees operating the machinery, and it appears that the engineer had on some other occasions after such time taken the elevator from the upper floors where it had been left during the week while the plaintiff had been running it. The fact that the movement of the elevator from where he left it was not necessarily dependent upon him, furnished a reason for him to use some care to ascertain if he could safely step into the shaft before he did so. By swinging open the doors and looking he would have' seen that the elevator was gone. If his approach or entrance at the doors, only partially open, so obscured the light in the shaft as to render it difficult to see the situation there, that was a reason for opening them wider if he desired to see whether it was safe to proceed. This he did not .do, although he says he looked in to see whether the elevator was there or not, and without seeing whether or not it remained there, he backed into the shaft as before mentioned.

This was not reasonably precautious for his own protection. He was familiar with the situation and well advised of the danger to result from stepping into the shaft without having the support of the elevator.

The situation in the present case is distinguishable from that of McRickard v. Flint (114 N. Y. 222) in the fact that there the plaintiff had no knowledge of the hatchway which was within one step of the threshold of the open door which he entered.

In the case at bar the opportunity for some one else to take away, the elevator was some reason for the plaintiff to see that it had not been done before he entered the shaft.

We tliink the verdict was against the weight of evidence. And for that reason the ■ judgment and order should be reversed and a new trial granted, costs to abide the event.

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

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


author: Lewis, J. :

text:
    The Commercial Bank of Rochester, Respondent, v. Burton H. Davy, as Sheriff of Monroe County, Appellant.

      Chattel mortgage, not reflect — valid as betioeen the parties thereto — chattel mortgagee in possession — security for a note stands as security for renewal notes — chapter 279 of 1883, as cmnended by chapter 418 of 1879.
    The purpose oí chapter 279 of the Laws of 1833, as amended by chapter 418 of the Laws of 1879, is to protect the creditors of a chattel mortgagor and subsequent purchasers or mortgagees in good faith of the mortgaged chattels; and the failure to rofile a chattel mortgage in no manner affects its validity as between the parties thereto.
    Wliere-a chattel mortgagee takes possession of the mortgaged property prior to the entry of a money judgment against the mortgagor, and the making of a levy upon the mortgaged property under an execution issued thereon, the mortgage is valid as to such creditor notwithstanding the failure to refilo it.

      A chattel mortgage given as collateral security for the payment of a note remains as security for the notes given in renewal of the original note.
    Appeal by the defendant, Burton. H. Davy, as sheriff of Monroe county, from a judgment of the County Court of Monroe county in favor of tbe plaintiff, entered in the office of the clerk of the county of Monroe on the 28th day of December, 1893, upon tlie decision of tbat court.

      James 8. G-arlooh, for the appellant.

      John II. IIojilcwis, for the respondent.
   Lewis, J. :

This action was originally brought in the Municipal Court of the eity of Rochester for the conversion of personal property. A judgment having been rendered in that court in favor of the plaintiff, an appeal was taken to the County Court, where the action was again tried and resulted in a judgment in favor of the plaintiff, from which this appeal was taken.

One William E. Weeks being indebted to the Commercial National Bank of Rochester in the sum of $521.91 for money theretofore loaned to him by the bank, for the purpose of obtaining an extension of the time of payment of said indebtedness, gave to said bank his promissory note, dated February 17, 1890, for said sum, payable November 18, 1890, and on the same day gave to the bank his chattel mortgage upon the property in question as collateral security for the payment of said note. The note was paid only in part, and Weeks gave his note for $348.58, that being the balance unpaid. This latter note was renewed from time to time until the 11th day of September, 1892, when Weeks gave to the bank his note for $380; $350.50 of this sum was part of the original indebtedness to the bank, which was secured by the note and chattel mortgage. The mortgage was duly filed on the 20th day of February, 1890. It was refiled on the 17tli day of February, 1891. It was never thereafter refiled.

The plaintiff succeeded to all the property rights of the said Commercial Bank, becoming thereby the owner of said promissory note and the chattel mortgage, and on the 16th day of January, 1893, the note and mortgage being due and wholly unpaid, plaintiff took possession of the mortgaged property by virtue of the terms and conditions of the mortgage. On the 25th day of January, 1893, Mrs. Elizabeth Eiawes recovered a judgment in the Supreme Court of the State of New York against Jennie M. Weeks for the sum of $2,516.13, and on the same day she caused to be issued to the defendant, as sheriff of Monroe county, an execution thereon, and the defendant, on the following day, but kt a time subsequent to the time the plaintiff took possession of the said mortgaged property under its mortgage, levied upon and took the property from the plaintiff’s possession, and sold the same at auction as the property of Mrs. Weeks.

It is the contention of the defendant that the property at the time of the levy belonged to the judgment debtor, Mrs. Weeks; that the bank mortgage being given to secure the payment of the original note of $521, it was not a continuing security for the notes given in renewal thereof; and further that the bank mortgage ceased to be a lien on the property as against the judgment, because of the failure to refile the same. It is provided by chapter 279 of the Laws of 1833, as amended by chapter 418 of the Laws of 1879, that every mortgage of goods and chattels “ filed in pursuance of this act shall cease to be valid as against the creditors of the person making the same, or against subsequent purchasers or mortgagees in good faith, after the expiration of one year from the filing thereof, unless within thirty days next preceding the expiration o f each and every term, and one year after the filing of such mortgage, a true copy of such mortgage, together with a statement exhibiting the interest of the mortgagee in the property thereby claimed by him by virtue thereof, shall be again filed in the office of the clerk.” The statute was passed for the protection of the creditors of the mortgagor and subsequent purchasers or mortgagees of the property in good faith. The failure to refile in no manner affects the validity of a mortgage as between the parties thereto. Mrs. Iiawes was neither a creditor of the mortgagor nor was she a subsequent mortgagee of the property. The defendant attempted to establish upon the trial that the mortgagor, William E. Weeks, had sold and transferred the property in question to his wife, Jennie M. Weeks, the judgment debtor, and that at the time of the levy and sale Mrs. Weeks owned the property, and that Mrs. Hawes, as her judgment creditor, became a purchaser of the property in good faith, within the meaning of the statute referred to; There are several sufficient reasons why the defense failed. It was established by undisputed evidence, and the trial court so found, that the plaintiff took possession of the property under its mortgage before said levy was made. It seems to be well established by authority that in such a case the mortgage is valid notwithstanding the failure to refile. We so held in the case of Stephens v. Perrine (69 Hun, 578; 24 N. Y. Supp. 21). The opinion of the court was by Haight, J., who elaborately reviewed the authorities holding that doctrine.

Again, the judgment creditor was aware of the giving of the mortgage held by the plaintiff. At the time of its execution she was the owner of a prior chattel mortgage covering the same property, and by a proper indorsement upon the plaintiff’s mortgage she consented that it should take precedence of her mortgage.

Again, the defendant failed to show that the judgment debtor, Mrs. Weeks, ever had title to the property in question. An effort was made upon the trial to prove that at some time, either in the , year 1889 or 1890 — the time was left uncertain — Mr. Weeks, the mortgagor, gave a written bill of sale of the property in question to his wife for the consideration of $800. Without rehearsing the evidence, it is sufficient to say that it utterly failed to establish that any such sale was ever in fact made. The evidence by which it was sought to prove such sale was so contradictory, inconsistent and manifestly untrue that it failed to satisfy the mind of the trial court; and the court consequently found that Mrs. Weeks was never the owner of the property, but that it was the property of the estate of the mortgagor, Weeks, at the time it was taken by the plaintiff under the mortgage (the mortgagor, Weeks, died after the giving of the mortgage, and prior to the trial). The findings of the trial court are fully sustained by the evidence. The mortgage, we think, remained as security for the notes which were given in renewal of the original note.

It follows that the judgment appealed from should be affirmed.

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

Judgment of the County Court of Monroe county appealed from, affirmed. •


author: Lewis, J.:

text:
    Charles W. Etz and Another, Respondents, v. Almira M. Place, Appellant.

      Q-ua/i'anty of a promissory note — ■the consideration stated in the note is sufficient — subsequent insertion in a note of the place of payment — effect of a default in an agreement between the maker and guarantor that the former would obtain an additional signature.

    A consideration contained in a written instrument executed contemporaneously with a guaranty thereof, and forming a part of the same transaction, satisfies the requirements of the Statute of Frauds.
    Where a guaranty was indorsed upon a note before it was delivered by the makers to the payee, who required the guaranty of the makers’ note by a responsible person, as a condition of accepting the same in part payment for property transferred by him to the makers, and afterwards parted with his property upon the strength of the guaranty (the guarantor being aware, when she signed the guaranty, of-the use which was to be made of the note), the guaranty became a part of the principal contract, and the consideration stated in the note, although none was stated in the guaranty, became the consideration of the guaranty and the guarantor became the original debtor of the payee, and not simply the guarantor of another’s indebtedness.
    The insertion in a promissory note of the place of its payment, after a guaranty of the payment thereof has been indorsed thereon, is not a material alteration in the note, although the same was added without the knowledge or consent of the guarantor, if the place named in such note as the place of the payment thereof is a- bank located in the village where the makers of the note and the guarantor thereof resided at the time, within a very short distance of their respective residences.
    The fact that the maker of a promissory note agrees with the guarantor thereof that before using the note he will procure.the signature of another person as one of the makers thereof, does not relieve the guarantor from liability thereon, although the maker fails to procure such additional signature, where it does not appear that the payee had knowledge or information of such agreement.
    Appeal by the defendant, Almira If. Place, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Steuben on the 14th day of September, 1893, upon the verdict of a jury rendered by direction of the court after a trial at the Steuben Circuit, and also from an order entered in said clerk’s office on the 5th day of February, 1894, denying the defendant’s motion for a new trial made upon the minutes, with notice of an intention to bring up for review upon such appeal said order.

      J. H. & O. W. Stevens, for the appellant,

      Milo M. Acker, for the respondents.
   Lewis, J.:

The complaint states that E. J. Wright and A. K. Ryno made then certain promissory note, in writing, of which the following is a copy, to wit:

“ $200.00. Alfred Center, N. Y., Nov. 16, 1891.
“ Eight months after date we promise to pay Frank Hall or order two hundred and 00-100 dollars, value received, with interest, payable at University Bank, Alfred Center.” (Signed by the makers.)

And that the defendant then and there, for a good and valuable consideration, duly guaranteed the payment of said note, which was then delivered to the said payee, Frank Hall, who then became the owner and holder thereof for value received, and that thereafter, and before the note became due and payable, the payee, for value received, sold, transferred and delivered the same to the plaintiffs. The note was not paid at maturity, and judgment was demanded against the defendant for the sum of $200, and interest. The answer of the defendant, among other defenses, pleaded the Statute of Frauds as a defense to the action. It was shown upon the trial that the makers of the note, Wright and By no, wishing to purchase a bakery from Hall, the payee of the note, upon credit in part, agreed that they would give the note mentioned in the complaint and procure a responsible person to guarantee the payment thereof. They thereupon fully explained to the defendant the terms of their agreement with Hall, and she consented to guarantee the payment of the note. They made the said note and the defendant, at their request, guaranteed its payment by writing upon the back thereof as follows : I guarantee the payment of the within note,” with her signature thereto. The makers thereafter delivered the note with the said guaranty to Hall in part payment for the said bakery. The note was thereafter transferred to the plaintiffs, and, not being paid at maturity, this action was brought against the defendant. It came on to trial, and upon proof of the facts above stated a verdict was directed against the defendant for the amount of the note, with interest.

It is the contention of the appellant that the plaintiffs failed to make a case against the defendant; that the defendant’s undertaking was to answer for the debt, default or miscarriage of the makers of the note, and it not appearing upon the face of the guaranty that it was made for a valuable consideration, it was void under the Statute of Frauds, and that it was not competent to prove by parol evidence the real consideration for the undertaking of the defendant. There would be much force in the appellant’s, position if the guaranty had been a contract collateral to the pote. If it had been given to secure the payment of a note which had theretofore had an inception, for a past due debt, in such case the undertaking of the defendant would have been void.

The undisputed facts are that the guaranty was made upon the note before it was delivered by the makers to the promisee. The payee required as a condition of accepting the makers’ note in part payment for his bakery that the payment thereof would be guaranteed by a responsible person, and when the note was delivered to him in part payment for his property the defendant’s undertaking was indorsed upon it, and he parted with his property upon the strength of her undertaking. The defendant was aware when she signed the guaranty of the use which was to be made of the note. The guaranty thus became a part of the principal contract, and the consideration stated in the note, though none was stated in the guaranty, became the consideration for the guaranty. The defendant, under the circumstances of the case, became the original debtor to the payee of the note and not simply the guarantor of another’s indebtedness. "Where the consideration is contained in a written instrument contemporaneously executed with the guaranty and forming a part of the transaction it will satisfy the requirements of the statute. (Evansville Nat. Bank v. Kaufmamn, 93 N. Y. 278.)

We have examined the authorities to which our attention was called in the appellant’s brief and think they can be distinguished from the case at bar. It would require very much time and be a fruitless task to undertake a review of the very many authorities to be found in the books discussing similar questions arising under our Statute of Frauds. The current of them, we think, will be found to sustain the views we have taken of the questions here presented. The following are some of the cases bearing upon the question before us : Bickford v. Gibbs (8 Cush. 154); Benthall v. Judkins (13 Metc. 265); Gates v. McKee (13 N. Y. 232); Union Bank v. Coster's Executors (3 Comst. 212); Erie Co. Sav. Bank v. Coit (104 N. Y. 537).

No place of payment was inserted in the note when defendant executed the guaranty, but thereafter, and before the delivery of the note to the payee, the words “ payable at the University Bank ” were written in the note without the knowledge or consent of the defendant. This bank was located in the village where the defendant and both makers of the note resided at the time, and was within a very short distance of their residence. We do not think the alteration was a material one. (Troy City Bank v. Lauman, 19 N. Y. 477.)

The defendant offered to show that when she signed the guaranty the makers agreed that before using the note they would procure the signature of a Mr. Shaw as one of the makers of the note and that they failed so to do. As it is not claimed that the payee ever had any knowledge or information of such agreement he cannot be affected thereby.

The judgment and order appealed from should be affirmed.

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

Judgment and order appealed from affirmed.


text:
    James J. Quinn, Plaintiff, v. The Royal Insurance Company of Liverpool, Defendant.

      jWire insurance policy — limitation of the time of beginning an action thereon, imposed by it — ■section 399 of the Code of Civil Procedure not applicable to such a case — service of the summons on a clerk in the insurance depa/rtment.

    Upon the trial of an action brought upon a standard fire insurance policy, it appeared that the policy contained a clause as follows: “No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity * * * unless commenced within twelve months next after the fire.”
    The fire in question occurred January 16, 1892. The summons in the action was sent by mail to the sheriff of Albany county on January 14, 1893, with directions from the plaintiff’s attorney to serve the summons personally on the Superintendent of Insurance. The Superintendent of Insurance was not in Albany at the time, and the sheriff, being in doubt as to the validity of a service thereof upon the deputy superintendent, waited until the return of the Superintendent, which was on January 17,1893, and on that day served the summons personally upon him.

      Held, that the action could not be maintained, as it was commenced more than twelve months after the fire.
    The Insurance Law of the State requires the Superintendent of Insurance to appoint a deputy, upon whom, in his absence, the powers and duties of the office devolve.

      Held, that the service of a summons and complaint, in an action against a fire insurance company, required by law to designate the person upon whom process could be served, upon the deputy at the office of the Superintendent of Insurance would be good, although it be not shown that the Superintendent had specifically designated any person upon whom such service could be made.

      Section 899 oí the Code oí Civil Procedure applies only to the provisions oí the . Code of Civil Procedure fixing the time within which actions may he commenced, and it does not apply to a case where the limitation is not one specifically provided for by that Code.
    Motion by the plaintiff, James J. Quinn, for a new trial on a case containing exceptions, ordered to be heard at the General Term in the first instance, upon the dismissal of the complaint, directed by the court after a trial before the court and a jury at the Monroe Circuit on the 3d day of January, 1894.

      II. G. Pierce, for the plaintiff.

      William F. Cogswell, for the defendant.
   Lewis, J.:

This action was brought upon a fire insurance policy known as the standard fire insurance policy of the State of New York. It contained the following clause: No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity * * * unless commenced within twelve months next after the fire.”

The fire occurred on the 16th day of January, 1892. The summons in the action was sent by mail to the sheriff of Albany county on the 14th day of January, 1893, with- directions from the plaintiff’s attorney to serve. the same personally on the Superintendent of Insurance.

This official was not' in Albany at the time, and the sheriff, being in doubt as to the validity of a service on the deputy superintendent, waited until the return of the Superintendent, which was on the seventeenth of said month, and on that day he served the summons personally on the Superintendent. This was the only service of the summons in the action.

The defendant interposed the defense that the action was not commenced within the year limit provided for in the policy. The complaint was dismissed at the trial upon that ground, with direction that the case be heard at the General Term in the first instance.

The principal question presented is, can the action be deemed as having been commenced within the jear limit ? The answer to this question depends upon whether the plaintiff is entitled to the benefit of the provision of section 399 of the Code of Civil Procedure, which is as follows: An attempt to commence an action in a court of' record is equivalent to the commencement thereof against each defendant within the meaning of each provision of this act which limits the time for commencing an action, when the summons is delivered, with the intent that it shall be actually served, to the sheriff,” etc.

If this section applies to a case where the limitation is one not specifically provided for by the Code the plaintiff is right in his contention. If the words of section 399 be taken literally and strictly they are restricted,to the provisions of the Code fixing the time within which actions may be commenced.

There is nothing, however, in the Code expressly providing that a limitation fixed by agreement of parties shall not have the benefit of the section referred to.

It is argued by the defendant’s counsel that Wilkinson v. First Nat. Fire Ins. Co. (72 N. Y. 499) is an authority for this contention. That was an action upon a fire jiolicy containing a like limitation clause. The action was commenced two years and nine months after the fire. The plaintiff relied upon an order of the court which restrained him from receiving and the insurance company from paying the loss and damage as staying the running of the statute.

The court held that the order did not restrain the commencement of the action; that it simply restrained the plaintiff from receiving and the company from paying the money; that notwithstanding the order he was at liberty at any time to commence his action. In commenting on the provisions of the statute saving the rights of parties in cases where they are stayed by injunction Judge Andrews says: “ The Revised Statutes contained a provision saving the rights of parties stayed by injunction (2 R. S. 299, § 36) which is now section 105 of the Code (406 of the Code of Civil Procedure). This provision does not aid the plaintiff. The exception has no application where a limitation is prescribed by the contract of parties, but only applies to cases governed by the limitation in the general law.

This is sufficiently clear from a' reading of the section, but the question has been adjudicated in a case arising under a contract similar to the one in question. (Riddlesbarger v. Hartford Ins. Co., 7 Wall. 386.) ”

While, as claimed by the plaintiff, this precise question was not involved in the case in 72 N. Y. (supra), it was involved in the case referred to with approval by Judge Andrews in Wallace.

Proska v. McCormick (56 Iowa, 318) is an authority supporting the defendant’s contention. Unless this case can be distinguished from the cases referred to the question must be deemed as settled against the plaintiff’s contention.

The limitation provided in this policy, with some propriety, may be claimed not to be a matter of contract alone.

The limitation was one prescribed by the Legislature, or rather prescribed under and in pursuance of legislative authority, and it was not within the power of the defendant company to fix a shorter limitation and bind the insurer thereby. Such a limitation would not only be a nullity, but would subject the company or its officers and agents to -punishment as for a misdemeanor.

Chapter 488 of the Laws of 1886, as amended by chapter 690 of the Laws of 1892, section 121, provides for a uniform contract or policy of fire insurance to be made and issued in this State by all insurance companies taking fire risks on property within this State. The form of this policy was one adopted pursuant to law. It may be found in Eichards on Insurance, pages 584-588.

The clause in question was, therefore, inserted here in obedience to the direction of an act of the Legislature; a shorter period for commencing the action, as stated, could not have been lawfully inserted. It cannot, therefore, with propriety, be claimed that the limitation was a matter of contract alone.

Hill v. Supervisors (119 N. Y. 344, affg. 53 Hun, 194) is an authority against the plaintiff’s contention. That was an action to recover compensation for property destroyed in consequence of a mob or riot.

By the 5th section of the act (Chap. 428, Laws of 1855) it is provided that no action shall be maintained under the provisions of this act unless the same shall be brought within three months after the loss or injury. The action was originally brought in the County Court within tbe three months’ limit, hut the complaint was dismissed in that court for want of jurisdiction, the amount claimed exceeding $1,000.

Thereafter an action was commenced in the Supreme Court, but after the lapse of the statutory period.

It was held that the action was not maintainable; that as it was brought under a special law and maintainable solely by its authority the limitation was so incorporated with the remedy given as to make it an integral part of it and was a condition precedent to the maintenance of the action at all, and that the provisions of the Code of Civil Procedure (§ 405), providing that when an action is commenced within the time limited and is terminated in any other manner than by a voluntary discontinuance, dismissal for neglect to proceed, or a final judgment on the merits, the plaintiff may commence a new action for the same c'ause within one year after such termination, do not apply.

Judge Grat in his opinion says :• “ Section 405 was enacted with reference to the enforcement of the civil remedies prescribed by the Code, and its application is to actions generally and which the Code of Civil Procedure was enacted to regulate. But this special law of 1855 gave a civil, remedy, which is independent of the Code remedies, and in enacting section 414 the Legislature obviously had in view to except those particular or special remedies by action which they had the power to allow, and to leave themselves free to attach such conditions as to limitation of time as they saw fit.”

Our attention is called by the plaintiffs counsel to the language of LearNed, P. J., in Hammond v. Shephard (50 Hun, 323).

The question in that case arose under the Mechanics’ Lien Law (Chap. 342, Laws of 1885), which ..provides that a lien shall not bind longer than a year after the filing of the notice unless within that time an action is commenced to enforce the same. Section 8 of the act provides that the manner and form of instituting and prosecuting such an action shall be the same as in actions for the foreclosure of mortgages upon real estate. Judge Learned, in commenting-upon the clause providing that the action shall be instituted and prosecuted tlie same as in foreclosure of mortgages, says: The time of limitation is different, but the mode of commencing in respect to the limitation is the same in these actions as in those.

“ It would, I think, be unreasonable to bold that the general miles which govern all other actions do not govern these.

Unless positively forbidden we ought to apply the same uniform t system to all actions, these included. There is no reason for any distinction and I think none was intended.”

The case in 119 N. Y. (supra) would seem to be decisive of the question against the plaintiff.

If the plaintiff is not entitled to the benefit of the provisions of section 399, is the defendant company estopped from claiming that the summons was not served within the year, because of the absence of the Superintendent from the city of Albany, his official residence, at the time the summons was received by the sheriff for service ? The Insurance Law required the defendant to designate the Superintendent of Insurance as a person upon whom process could be served. Section 5 of the Insuran.ee Law provides that the Superintendent of Insurance shall appoint one or more clerks to discharge such duties as he shall prescribe, and that he shall appoint one or more of such clerks to be deputies, and that in case of the absence of the Superintendent, or his inability from any cause to discharge the powers and duties of his office, the powers and duties of his office shall devolve upon his first deputy.

It was held in the case of The South Publishing Co. v. Fire Ins. Assn. of Philadelphia (51 N. Y. St. Repr. 29; 67 Hun 41), which was affirmed by the Court of Appeals, that the Superintendent of Insurance, when designated, is as a public officer and not as an individual ; that service of a summons on a clerk in the Superintendent’s office, who had been designated for that purpose, was equivalent to service on the Superintendent personally.

It does not appear from the record in this case that the Superintendent had specifically designated any such person at the time this summons was received for service, but as the law required that he should appoint a deputy, upon whom, in his absence, the powers and duties of the office should devolve, the service of the summons in this case upon such deputy would, we think, have been good, and if so, we are not at liberty to hold that the defendant was at fault in not having a person in Albany upon whom a service could be made.

~We see no means of escape from the conclusion, in view of the ' authorities referred to, that the trial court was right in dismissing the plaintiff’s complaint.

The motion for a new trial should be denied and judgment for the defendant ordered dismissing plaintiff’s complaint.

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

Plaintiff’s motion for a new trial denied, with costs, and judgment directed for the defendant on the nonsuit.


text:
    In the Matter of the Probate of the Last Will and Testament of Richard D. Lewis, Deceased.

      Evidence of testamenta/ry ca/paeity.

    If it be shown, in contested proceedings for the probate of an instrument alleged to be the last will and testament of a testator, that the testator, at the time of the execution of the will, was possessed of sufficient intelligence to comprehend the condition of his property, his relations to those who were the objects of his bounty, and the scope and meaning of the provisions of his will, and that the making thereof was his free act, the will should be admitted to probate.
    Appeal by Emma Bunn Adamson, the executrix named in the last will and testament of Richard D. Lewis, deceased, and also by certain legatees therein named, from so much of a decree of the Surrogate’s Court of the county of Monroe, entered in the Monroe County Surrogate’s Court on the 31st day of July, 1893, as denies the probate of the said instrument as and for the last will and testament of the decedent.

      James 8. Garlock for the appellant, and special guardian for infants.

      G. D. Kiehel, for the respondents.
   Lewis, J.:

The deceased died on the 16th day of September, 1892, at Rochester, N. Y., leaving personal property within the county, and real estate in Kansas City, Mo. He was, at the time of his death, seventy-eight years of age.

A will purporting to have been executed by him on the 14th day of August, 1891, was offered for probate to the Surrogate’s Court of Monroe county by the executrix named therein. >

Probate thereof was contested by Mary E. Langslow, Henrietta Thompson and Anna Thompson, granddaughters of the deceased and legatees mentioned in the will, upon the ground of incompetency on the part of the testator to make the will, and upon the further ground that it was not his free and voluntary act, but was procured by fraud and coercion exercised upon him by the executrix or some other person or persons unknown to the contestants.

The surrogate refuged probate of the will on the ground of incompetency, and from the decree entered upon such decision this appeal was taken.

The question mainly litigated upon the trial was as to the competency of the testator. There was very little, if any, evidence tending to show any undue influence. The vital questions are, was the testator, at the time he executed the will, possessed of sufficient intelligence to comprehend the condition of his property, his relations to those who were the objects of his bounty and the scope and meaning of the provisions of his will; and was it his free act. If so the will should have been admitted to probate. (Horn v. Pullman, 72 N. Y. 269.)

We have carefully examined the evidence given before the surrogate and are not satisfied with the .conclusions of fact reached by him.

The evidence of the witnesses to the will, one of them being the attorney who drew it, tended to show quite clearly that the testator came to the office of the attorney from his home in Rochester on the day before the will was executed unattended by any one, and gave to the attorney in an intelligible mariner specific directions as to how the will should be drawn. He was not able to inform the attorney of the full name of the person whom he wished to act as his executrix. He was, therefore, directed by the attorney to ascertain the name and return the following day to the office.

The next day, being the day that the will was executed, he came , to the office attended by Mrs. Adamson. The will was drawn according to the directions which he gave the day previous and was duly executed. There were many witnesses called upon the part of the contestants, whose testimony tended to show that for some months prior to the date of the will the testator was afflicted with a disease which rendered him incompetent to transact business,‘and that he continued to fail in health and in ability to transact business until the time of his death.

Expert witnesses,^called by the contestants, testified that from- the nature of testator’s disease, in their opinion, there would not be such lucid intervals as that the testator could transact business, but that it was not impossible that he might have had such intervals.

A large number of witnesses were called by the proponents, who gave evidence controverting the evidence of the contestants, and tending to show that while the" deceased was old and feeble his mind was clear and that he was able to comprehend and understand about his property and business affairs. And a physician who attended him during the month that the will was executed and thereafter until his death, gave evidence tending to show that his mind was clear and that he was competent to transact business.

But having arrived at the conclusion that the questions of fact mentioned, should be tried before a jury, it is unnecessary that any extended comments should be made upon the.force and effect of the evidence, as all the facts bearing upon- the questions at issue can be presented upon a* trial to be had.

The decree of the surrogate of Monroe county appealed from should be reversed, with costs of the appeal to abide the event, and a new trial ordered before a jury in the Circuit Court in Monroe county of the questions:

First, was the deceased at the time of the execution of his will on August 14, 1891, possessed of testamentary capacity?

'Second, was the instrument obtained and executed by circumvention and undue influence practiced upon the deceased ?

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

So ordered.