author: Bosworth, Ch. J. Robertson, J.

text:
    Robert and William Blakely, Plaintiffs and Respondents, v. Frederick Jacobson et al., survivors of Joseph W. Corlies, deceased, Defendants and Appellants.
    1. The defendants, del creciere factors, on being applied to by their principals for advances, rendered an account of sales, showing sales at various dates, and specifying an average date at which the total balance would become due, and gave their acceptances for the amount, payable at that date; but before the acceptances matured they gave their principals notice that they could not pay them. Held, that the giving of the acceptances was no bar to an action by the principals against the factors, upon their liability as such, and that in such action the defendants were liable for interest from the day specified, without any further demand.
    2. In such an action, an answer by the defendants, alleging that they gave such acceptances for the amount, which the plaintiffs had never surrendered, was struck out upon motion as sham, and judgment entered for the amount claimed, with interest from the date specified as the average maturity of the credits.

      Held, on appeal, that as this was the amount which the plaintiffs were entitled to jje paid, and was the precise sum which would have been recovered on the acceptances, the judgment was right and must be affirmed.
    3. A del credere factor, who by the default of purchasers has become liable to pay the price to his principal, is chargeable with interest, without demand. Per Robertson, J.
    (Before Bosworth, Ch. J., Hoffman and Robertson, J. J.)
    Heard, December 11, 1861;
    decided, December 28, 1861.
    This appeal,¡although nominally from the judgment, was, in fact, from an order striking out the answer of the defendants as sham. The action was commenced on the 14th of August, 1861, by Bobert and William Blakely against Frederick Jacobson and Joseph W. Corlies, Junior, survivors of Joseph W. Corlies, deceased; and the following matters are set out in the complaint, viz.:
    Prior and up to the 25th of October, 1860, the plaintiffs were partners, under the name of Bobert Blakely & Son, and the defendants, and one Joseph W. Corlies, now deceased, were also partners, under the name of Joseph W. Corlies & Co. The former firm consigned to the latter, at various times before and after the 2d of July, 1860, and prior to such 25th of October, merchandise, set out in a schedule annexed to the complaint, to be sold by them for a del credere commission of five per cent to be allowed them. The firm of Codies & Co., for such commission, agreed with the plaintiffs to sell such merchandise and be responsible to them for the prices thereof, and sold such merchandise at various times in August, September and October, 1860, during the life-time of Joseph W. Corlies, on the credit, at the times and for the prices mentioned in such schedule, leaving a net aggregate sum of $6,289 due, after deducting such commission; such sum was payable to the plaintiffs on the 12th of May, 1861; that certain credits due to Corlies & Co., and interest, reduce such indebtedness to $3,430r0¿0, which sum became due on the 12th day of May, 1861, and the defendants promised to pay the same; the plaintiffs demanded but did not receive payment of such amount.
    The schedule annexed to the complaint is headed “ Sales by Jos. W. Oorlies & Co., for account R. Blakely & Son,” contains a list of merchandise sold at various dates from July 2d to October 23d, 1861, inclusive, and their prices and the credit on which they were sold; which prices amount to $6,718 rifo: from that are deducted therein certain sums for defective measurement, and- other charges, and the commission, leaving a balance of $6,289 nf, due: opposite to which balance are the words, “Proc. due May 9, 12,1861.” The schedule is signed with the names of the defendants’ firm, and dated December 26th, 1860.
    The answer admits the partnership of the plaintiffs, but avers them to be residents of the State of Vermont. It admits the consignment to the firm of Joseph W. Corlies & Co. of the merchandise mentioned in the schedule annexed to the complaint, and that such firm agreed to sell such merchandise, and “ to guaranty the payment of the “prices of such sales at the matur ity thereof ” to the plaintiffs for the consideration mentioned in the complaint. It also admits the sales for the times, prices and credit mentioned in the schedule annexed thereto. It denies, however, that by the terms of the original contract the proceeds of the sales became due to the plaintiffs on the 12th of May, 1861, but alleges that they became payable on demand, at and after the expiration of the credit given on each sale. It further avers that after such sales, and before the maturity of the credit of any of them, the defendants, at the plaintiffs’ instance, and for their benefit, advanced thereon their acceptances for the entire amount for which the firm of Corlies & Co. could be liable. Those acceptances matured on the 12th of May, 1861, and were delivered to the plaintiffs and accepted by them in full extinguishment of the liability of that firm, amounting to the sum of $3,430r<fo, on account of the before mentioned consignment and guaranty. The answer also admits a demand before suit, but avers that such acceptances were “not returned or surrendered tip,” and never have been.
    The motion to strike out such answer was made upon an affidavit of the plaintiff, Bobert Blakely, and one William B. Lynes, and was opposed upon an affidavit of Frederick Jacobson, one of the defendants. The plaintiff’s affidavit alleges the following facts: “ The schedule “ annexed to the complaint is a copy of an account made “ and rendered by the firm of Corlies & Co. to the plain“tiff’s firm,-” the credit upon all the sales mentioned in the complaint had expired before the beginning of this action; the acceptances mentioned in the answer were not delivered to or accepted by the plaintiffs in full, or any discharge of the liability of the firm of Corlies & Co., or the defendants as survivors, and are ready to be delivered up to them; the plaintiffs wrote about the 24th of December, 1860, to the defendants, requesting payment of what was due to them, or some part thereof, or at any rate some money, and about the 29th of December, 1860, received a reply from the defendants dated on the 27th, in which the latter say: “We have yours of the 24th inst., “ and now inclose your accounts. We cannot send you “ money, for it cannot be got. The best thing we can do “ for you is to give you the inclosed acceptances, and “ yoiir hanle must do them for you. In such times they “ must help you, for you give them paper in easy times, “ when they want it.” In such letter the plaintiffs received the inclosed acceptances and said statement of accounts. The plaintiffs procured one of such acceptances to be cashed, but had to pay it before due, because they were informed the defendants could not pay it. The affidavit of Lynes is to the effect that he tendered back the acceptances and demanded payment of the sum due'the plaintiffs, which was refused. The affidavit of the defendant Jacobson merely states that the acceptances iú question were not given as advances on the consignment in question, but for balances of sales and to close the account. There is no other evidence in the record of any other mode of making any agreement respecting such acceptances than the letters before mentioned, the transmission of such acceptances and the use of one of them by the plaintiffs.The motion to strike out the. answer was granted at a Special Term held by Mr. Justice Woodruff on the 8th of October, 1861; and the plaintiffs thereupon entered judgment against the defendants for the sum claimed, with interest, as if upon failure to answer. From this judgment the defendants took the present appeal, stating in their notice of appeal that they would review the order striking out the answer.

      William B. Leeds, for defendants, (appellants.)
    After reviewing the allegations of the pleadings and affidavits, and insisting on the sufficiency of the answer, at least for the purposes of a trial, argued the following points :
    I. The true engagement of a factor del credere is merely to pay the debt, if it is not punctually discharged by the buyer; hence it is well established that he is not liable until there has been a default of the buyer. (Story on Agency, p. 254, § 215; Thompson v. Perkins, 3 Mason R., 232; Wolff v. Koppel, 5 Hill, 458; Couturier v. Hastie, 8 Exch., [Wels. G. & G.,] 40.)

      II. A factor del credere is not liable to an action for goods sold until demand by the principal or instruction to remit. (Leverick v. Meigs, 1 Cow., 646; Walden v. Crafts, 2 Abb. Pr. R., 301; Cooley v. Betts, 24 Wend., 203; Heubach v. Mollmann, 2 Duer, 252.
    III. In Heubach v. Mollmann, (2 Duer, 259,) the learned Court says : “ We exceedingly doubt whether a del credere agent may, in his discretion, charge, himself immediately with the price of goods sold upon credit.” In this case the agent averaged the maturity of the sales and discounted the average at 6 per cent per annum, and immediately remitted to his principals net proceeds by bill, which bill was subsequently dishonored.
    The judgment should be set aside and the order of the Special Term reversed.

      Augustus F. Smith, for plaintiffs, , (respondents.)
    1. The design of the answer seems to be to make two defenses: 1. That the acceptances extinguished the original obligation, and that an action can be maintained only upon them.
    The answer to this is: A. That by the law, as established in this State, the promise of one or all of several debtors is no consideration for a promise (if made out) to discharge one or all of the debtors; the original debt remains. (Cole v. Sackett, 1 Hill, 516; Hill v. Beebe, 3 Kern., 562.) B. The affidavit of the plaintiff shows how the acceptances were given, and that-it was at the instance of the defendant, and that no promise whatever was made.
    2. That the acceptances were not delivered up at the time of the demand.
    To this the answer is:

      A. That it was sufficient to produce and cancel the acceptances at the trial, as was done here upon the motion. (Nellis v. Bradley, 1 Sandf. S. C. R., 560; Thurston v. Blanchard, 22 Pick., 18; Nichols v. Michael, 23 N. Y. R., 264.)

      B. The answer does not aver that the acceptances were not tendered. In fact they were.
   Bosworth, Ch. J.

The contract between the parties, as stated in the complaint, was, that Joseph W. Corlies & Co. " undertook and agreed with the plaintiffs to sell said goods, and to be responsible for the prices of the said goods.”

The answer states that said firm “ agreed to sell said goods, and to guaranty the payment of the prices of said sales, at the maturity thereof, to the plaintiffs.” It is undisputed that the sales, by average, matured May 9th, 12th, 1861, and that the balance due plaintiffs is the precise principal sum for which judgment .is entered.' The judgment is for said principal sum of $3,430r<f0, and interest thereon from said May 12th.

The present defendants rendered an account, as early as December 27th, 1860, in which they made themselves debtors as of May 12th, 1861, and sent their acceptances to the plaintiffs for the correct balance maturing that day. By that operation they secured the use of the amount of all sales maturing before May 12th, up to that date.

The giving of the acceptances shows a clear purpose in the defendants to make themselves liable, unconditionally, and for interest subsequent to May 12th if payment was not made on that day, as well .as for the principal itself. And this is but mere equity, they having had the proceeds of the sales to their own use.

Before the acceptances matured they notified the plaintiffs of their inability to pay them.

"The defendants' having in writing agreed, by their acceptances, to pay on the 12th of May the precise principal sum for which judgment is taken, and thus having obtained till that time the use of the amount of all sales maturing prior to that day, and before that day arrived having notified the plaintiffs that they could not pay, any subsequent or other demand became unnecessary, and they ought, in equity and .good conscience, to pay interest from May 12th.

A suit on the acceptances would necessarily have resulted in a judgment for the precise amount of the one entered. And the giving and taking of the acceptances is no bar to an action on the original cause of action. Joseph W. Corlies having died October 26th,. 1860, before the acceptances were given, the persons liable as such acceptors, and on the original contract, (as contracting parties,) are the same.

If, as stated in the appellants’ points, “the legal effect of the acceptances was to certify to the plaintiffs, that on the 12th of May, 1861, the acceptors would have on hand funds of the plaintiffs to the amount of the acceptances, which they would pay to the owners and holders of the acceptances,” then, inasmuch as before the 12th of May, 1861, they notified the plaintiffs they could not pay, or, in other words, would not pay; the plaintiffs, as holders of the acceptances and consignors of the goods, have a strict right to be paid the amount of the acceptances, and interest thereon from their maturity. For that sum the judgment is given. The answer presented no question of substance to be tried, in respect to which the parties do not agree.

The judgment should be affirmed.

Hoetmaet, J., concurred in this opinion,

Robertson, J.

The only prejudice to the defendants arising from the striking out of the answer, and thus depriving them of any defense to any part of the claim of the plaintiffs which it sets up, of which they complain, relates to interest, being for the time between the average date of the sales of merchandise by the defendants and the demand of payment. The interest actually allowed is, of course, the same, whether calculated on the whole amount from such average date, or on the proceeds of each sale from the time the credits on them respectively expired. Interest is always payable on a contract to pay a specified sum of money on a fixed day, or on a special contract. (Van Rensselaer v. Jewett, 2 Comst., 135; Williams v. Sherman, 7 Wend., 109; Feeter v. Heath, 11 Id., 477; Still v. Hall, 20 Id., 51.) If, therefore, the contract of the defendants with the plaintiffs, in consideration of the commission, was that the latter should be paid, either by the purchaser or himself, the proceeds of each sale, on the day the credit given thereon expired, without any demand by the plaintiffs from either, or any other step to be taken to make the-defendants liable, they were chargeable with interest, from the expiration of such credit. What the liability of the defendants was, depends upon the effect given by law to the payment of what is termed a del credere commission; whether it raises a mere guaranty of the solvency of purchasers from the factor on sales by him of the merchandise of the principal, requiring some steps by the latter, to ascertain the readiness of the purchaser to pay, by action, or at least demand, and some notice to the factor that such purchaser has not paid, and he is looked to by means of a demand, or whether it is an absolute undertaking by the factor that the purchaser will pay, on the expiration of the credit, and that if he does not, he, the factor will, without any demand or notice.

The Italian words used to express the nature of such a contract have been employed in almost every legal decision upon the subject, and certainly in every elementary work, are tacitly admitted thereby to embody its essence. Their proper original meaning ought, therefore, to throw some light upon its nature. Mr. Bell, in his Commentaries, states it to mean a liability like that upon a loan of money by the principal to the factor. This meaning is substantially adopted in all elementary works, (5 Com. Dig., [E.,] 55; 1 Com. on Cont., 253; 2 Kent Com., 487, [1st ed.;] Paley on Agency, 41; 3 Chit. Com. L., 194, 220, 221; 1 Livermore, 409;.) and in all decisions in England down to that of Mom's v. Cleasby, (4 Maule & Sel., 566, 574, 575.) In Grove v. Dubois, (1 D. & E., 115,) Lord Mass-field stated it to be an absolute engagement to the principal from the broker; that it made him liable in the first instance,.and that there was no occasion for the principal to communicate with the parties contracting with the .¿broker in the first place, though he might resort to them .as collateral security; and Justice Bulles, remarked that he had never heard the inquiry made if there had been a demand. Justice Cowes, in Wolff v. Koppel, (5 Hill, 459,) understood Lord Mansfield, in such case, as considering the factor to be the principal debtor and the purchasers as mere accessorial. Lord Ellenborough, in Wienholt v. Roberts, (2 Camp., 587,) considered the del credere broker as the owner of the policy. Chambre, J., held the same doctrine in Houghton v. Matthews, (3 Bos. & Pul., 489.) Chitty, in his Commercial Law, (194, 220, 3d vol.,) states that the factor may be sued for goods sold as purchaser, and such seems to be the view of Parker, J., in Swan v. Nesmith, (7 Pick., 220.) In this State, in the case of Leverick v. Meigs, (1 Cow., 663,) Justice Woodworth substantially recognizes the same doctrine when • he declares the factor to be bound to pay the price at all events, although he seems to have been perplexed to reconcile it with that laid down in Morris v. Cleasby, (ubi sup.,) and some subsequent English cases. In the case of Wolff v. Koppel, (5 Hill, 459; S.. C., 2 Den., 371,) where the question seems to have fairly arisen in this State, out of the effect of the statute of frauds on such a contract, it has been set at rest. The proposition is fairly met, both in the prevailing and dissenting opinions in that case, in the Court of Errors; that if the contract of the factor was merely as surety for the payment by another of his debt, it must be in writing; and it was held that it need not be so, because it was an original undertaking. Justice Co wen, in his opinion in the Supreme Court, in the same case, states that “in substance the factor prefers, instead of paying cash, to “contract a debt, or duty, which obliges him to see the “money paid; the debt or duty is his own for an adequate ■“consideration, contingent on failing to secure it from '“ another.” Senator Porter, in the prevailing opinion of the Court of Appeals, declares “the understanding of the commercial community to be universal that the agree- ment between the principal and factor is original and “absolute, to pay the price of the sales, deducting commis- ‘ sions, at the time the credit expired; a contrary rule would “require the principal to exhaust his remedy against the “purchaser, to determine Ms insolvency, before he could “charge the security.” The strong vote in the Court of Errors for affirmance of the judgment in the Court below, shows the universality of the belief in such understanding, the Senator delivering the dissenting opinion having only secured one additional dissentient. In that case, the case of Morris v. Cleasby, (ubi sup.,) and subsequent English cases of Hornby v. Lacy, (6 Maule & Sel., 166,) Peele v. Northcote, (1 B. Moore, 178; S. C., 7. Taunt., 478,) and Gall v. Comber, (1 B. Moore, 279,) are commented on, and, so far as they are antagonistical to the conclusions arrived at, are rejected as authority. The principle may, therefore, be considered as settled in this State at least.

The case of Halden v. Crafts, (4 E. D. Smith, 490,) in a Court of coordinate jurisdiction, decided by Justice Woodruff, now a member of this Court, has been cited as adverse to the conclusions already arrived at, but I think, on examination, the conflict will be found only apparent. It will be found that in that case, although the defendant was to receive a del credere commission, and it was material to determine whether his liability accrued-without a demand, no step was had on the part of the commission, and the whole case turned upon the defendant’s liability as a foreign factor,, and not as principal in an undertaking. The reporter in that case evidently so-understood it, for no mention is made in the head-note of the existence of the del crediere contract. The learned Judge, in his opinion, cites the- cases of Ferris v. Paris, (10 J. R., 285,) Cooley v. Betts,. (24 Wend., 203,) Lillie v. Hoyt, (5 Hill, 395,) Hays v. Stone, (7 Hill, 128,) Baird v. Walker, (12 Barb., 300,) as authorities for the principle laid down by Mm, in none of which was the commission del credere. He also takes notice of the case of Leverick v. Meigs, (1 Cow., 646,) not cited by either counsel in the case before Mm, and quotes the words of it, that the del credere factor, “ is held to an unqualified undertaking that “ the purchaser of the goods shall pay for the goods according to the terms of sale,” the sole question in that case bemg whether the factor was responsible for bills remitted by Mm as proceeds of negotiable paper taken by him on the sales. The ease of Heubach v. Mollmann, (2 Duer, 252,) was also referred to as showing a factor’s duty in reference to proceeds received by him. Ho allusion is Made to the fact that a del credere factor becomes a principal in case the purchasers do not pay, nor is it contended that by any fiction of law the money due from him as a debtor is to be considered as if it were actually paid by the purchasers into his hands. Besides this, the case of Wolff v. Koppel, although decided by the highest Court in the State, was not cited or referred to by either the counsel or the Court, either to impugn its authority or disprove its applicability to the case in hand; that case clearly makes the liability of the factor an undertaking to pay, absolutely, in case the purchaser did not, and not merely a promise to remit, according to instructions, or pay on demand. Unless the liability of the defendant in Halden v. Crafts was, therefore, solely as factor, Wolff v. Koppel would have been conclusive authority in his favor. It will be found, however, that it does not appear, by the statement of facts in the former case, whether the defendant had or had not been paid by the purchasers, such omission being a condition precedent to Ms personal responsibility, the onus of proving which probably lay on the plaintiff, if he sought to recover without a demand. It may have been conceded that the defendant had received such proceeds, or the question may not have been raised as to the different form of his liability in case he had not; the question was discussed as though the liability was as factor having funds in Ms hands, not as an original promisor for not having received them. I apprehend, therefore, that unless the case of Salden v. ■Crafts is to be considered as intended to overrule Wolff v. Koppel, it is no authority against any of the propositions hereinbefore laid down.

The responsibility of ordinary factors for funds received by them may be limited to a liability only after demand or instructions to remit; this, however, will not affect the liability of one who undertakes to pay a debt if another does not. A del credere factor may, as agent, receive the money from the purchasers, and such receipt as agent will discharge his own liability on paying the amount himself. But in an action by him, against purchasers for the price of the goods, he could collect interest on such amount when due, which ought to belong to his principal; his contract for the commission allowed him is to see that his principal receives the price due him, without diminution; in fact, to indemnify him against loss by the sales; and if so, there is no reason why the factor should not pay that interest, for which the purchaser is liable, to the same extent and in the same manner as the latter, which is without any demand.

Upon these principles, if the answer alleges as a fact the contract to have been to pay on demand, the defendants were liable, upon the state of facts appearing in the pleadings and affidavits, to pay interest upon the amount of the sales made by them, from the time when the credit on them expired. The complaint does not, in fact, state the time when the defendants undertook to pay the proceeds of the sales; although it alleges that they became due to the plaintiffs at the specified date which is the average of the credits, and that the defendants owed them at that time. Of course the liability of the defendants was solely founded upon their agreement, which may have been either in terms special, or subject to a custom as to the time of payment, and the latter allegations may be considered as only conclusions of law. Even the answer itself is somewhat ambiguous as to the terms of the contract, which it does not set out, although it alleges that by them the proceeds of the sales did not become due at the average date, but on demand, after the expiration of their credit, which also becomes rather an allegation of their legal interpretation than their lánguage.

Enough, however, appears on this record to authorize this Court to consider the complaint as amended, if necessary, so as to conform to the allegations of the answer, if true, or the proof by affidavits, if not, even without any notice of motion to amend, (Bate v. Graham, 1 Kern., 237; Clark v. Dales, 20 Barb., 42,) as the appeal is from the judgment; and the fact that it is by default cannot make any difference. But, in fact, the variance between the contract set out in the complaint and that appearing by the evidence, is one that might be disregarded, as it could not prejudice the defendants, (Code, § 169,) and there is no proof that they were misled. (Catlin v. Gunter, 1 Kern., 368.) The variances overlooked in Carter v. Hope, in the Supreme Court, (10 Barb., 180,) Trowbridge v. Didier, (4 Duer, 448,) Newstadt v. Adams, (5 Duer, 43,) Hart v. Hudson, (6 Duer, 294,) Punchase v. Mattison, (6 Id., 587,) and Rogers v. Verona, (1 Bosw., 4Í7,) in this Court, and McComber v. Granite Ins. Co., (15 N. Y, R., 495,) in the Court of Appeals, were all greater than that in this case. Mistakes of persons, periods and places, and the substitution of a joint for a several, and a conditional for an absolute contract, or an excuse for the omission of an act instead of the act itself, and vice versa, were held immaterial in those cases. A variance in the mere absolute time of payment of money, where no demand is necessary, may be considered so immaterial as to have entitled the Court to have directed the fact to be found according to the proof. (Code, § 170.) The same test is, of course,- to be applied to a sham answer, where the only question is' whether there is anything to be tried if the case should be allowed to go to a Jury. (The People v. McCumber, 15 How., 186.)

It is a serious question in this case, however, whether the order complained of, could be reviewed on this appeal not made directly from it ;■ that is, whether it involves the merits, as well as affects the judgment. (Code, § 329.) In Whitney v. Waterman, (4 How., 313,) and Otis v. Ross, (8 Id., 195,) it was conceded that if the parts of an answer stricken out by an order, did not affect the defendant’s rights, no appeal lay from, it directly. If the variance between the contract set out in the complaint and that established was not material, and the plaintiffs had a right to the same judgment for the same sum in both cases, to allow the answer to stand, merely to try the question of the precise form of the contract, would be a mockery of justice. But the evidence, assuming the allegations of both the complaint and answer, as to the form of the contract, to be as claimed by the defendants, establishes one not essentially varying from that set out in the complaint. It does not clearly appear by the evidence that the account annexed to that pleading was that one which was rendered when the acceptances were sent, although it does appear that it came from the defendant; in that it is admitted that the proceeds of the sales therein set out were payable on the 9th to the 12th of March, and there is no attempt to explain away such admission. If that account were the one so inclosed, it does not appear by the letter sent that it was only admitted upon condition, as claimed by the defendants, that the glaintiffs took the accompanying acceptances in payment. The plaintiffs’ letter asked for money before it was due, and of course, as a favor; the reply to it first speaks of inclosing the accounts, probably to show that no money was due, and then offers the acceptances as the best thing they could do, adding that the plaintiffs’ bank must discount them for them, thereby treating them rather as a means of assisting the plaintiffs to get what they desired, than as a mode of discharging their own obligation. The burden of the proof of establishing clearly the acceptance of a negotiable instrument in such case, as payment, lay with the defendants, (Noel v. Murray, 3 Kern., 168,) and they did not succeed in that. The adoption of the accounts and the receipt of the acceptances in payment, if intended to be, were not so inseparably connected by such reply as to make the rejection or acceptance of either dependent on the other, and there is no other evidence of the terms of giving such acceptances.

Moreover, the defendants were liable upon such acceptances in any event; the representatives of their deceased partner were alone interested in determining whether they were accepted in payment of any prior undertaking. Ho judgment in this case could affect or avail such representatives in any way, unless by way of election by the plaintiffs. I do not see why, as regarded the defendants, the plaintiffs could not proceed upon the original contract, surrendering the acceptances to be canceled on the trial. (Nellis v. Bradley, 1 Sandf. S. C. R., 560; Thurston v. Blanchard, 22 Pick., 18; Nichols v. Michael, 23 N. Y., 264.)

The judgment, therefore, must be affirmed with costs.


source: Caselaw Access Project

author: Bosworth, Ch. J.

license: Public Domain

text:
    Mary Kane, Plaintiff, v. John T. Johnston, Defendant.
    1. In computing the damages to be awarded to the plaintiff for an injury to his tenement and business by the deSn'dant, a loss of anticipated profits arising from an illegal business cannot be included.
    2. If it appears that the plaintiff was selling liquors, the burden is upon him to show that he had a license, if he would recover for such loss of profits in that business.
    3. Where the plaintiff was a tenant having an unexpired term of only one month, and it appeared that she had no license; Held, that there was no presumption that she would have obtained a license before the expiration of the term.
    4. In such case it is error for the Judge to refuse the defendant’s request to charge the Jury that the plaintiff is not entitled to recover for loss of profits from sale of liquor.
    (Before Bosworth, Oh. J., Monorief, White and Barbour, J. J.)
    Heard, January 18, 1862;
    decided, March 15, 1862.
    The exceptions taken at the trial of this cause, and the defendant’s motion for a new trial, were directed to be heard, in the first instance, at General Term.
    The action was brought by the plaintiff, a widow, who occupied a building in Pearl street, in the City of Hew York, as a boarding house and grocery, to recover damages sustained by her by the fall of a warehouse near by, which it was alleged was owned and built by the defendant, and the fall of which was alleged to have been caused by negligence in its construction and use.
    The cause was tried on the 4th of November, 1861, before Mr. Justice Robertsok and a Jury; and the plaintiff recovered a verdict for $75. The material parts of the charge, and the exceptions, appear in the opinion of the Court.

      Hamilton Odell, for the defendant,
    insisted that a motion for a nonsuit, which had been made at the trial, should have been granted, and that there was no evidence to sustain the verdict; and also reviewed the charge, and refusals of requests to charge, and argued that for error in these the verdict should be set aside.

      Solomon B. Noble, for plaintiff.
    I. The defendant cannot review, under the 265th section of the Code, pure questions of fact.
    If the evidence is sought to be reviewed, and the finding of facts considered, either with or without the questions of law, a case and motion for a new trial at Special Term are the proper proceedings. (Morgan v. Bruce, 1 Code R., [N. S.,] 365; Ogden v. Coddington, 2 E. D. Smith, 317; Gilbert v. Beach, 16 N. Y. R., 606; Cobb v. Cornish, 16 N. Y.„R., 602; Thurber v. Townsend, 22 N. Y. R., 517; Morange v. Morris, 12 Abb. Pr. R., 164.)
    II. The Court was right in denying the motion to dismiss the complaint.
    III. The exceptions taken to the charge of the Judge cannot be sustained.
   Bosworth, Ch. J.

The Judge, in his charge upon the question of damages, speaking of the plaintiff’s business which had been interrupted or broken up, used this language, viz.: “It appears she was in the habit of keeping boarders, selling liquors, groceries and vegetables, which were left in a condition to be destroyed; the liquor she sold there, by which she made money, it is said, she sold against the law, and that you cannot take into calculation • an illegal traffic; upon that point the defendant is bound to make out that she was selling liquor without a license, in order to deprive her; whether she was or not, it is for you to say from the testimony.”

The defendant asked the Judge to charge, that the plaintiff is not entitled to recover for loss of profits from sale of liquor. The Judge declined and the defendant excepted.

The only evidence in respect to her having a license is her own testimony in these words, viz: “I had a license to sell liquor; that is, my husband had.” The plaintiff was a widow. ♦

If the rule be, as the Judge seems to have stated it, that -if the plaintiff was selling liquor without a license, she could not recover for a loss of profits in that business, then it follows that the defendant was entitled to the instruction which he asked the Judge to give. It appeared by her own testimony that she had no license.

But the burden of proof is on the plaintiff; to show that she had a license. (Ehel v. Smith, 3 Caines R., 187; Griffith v. Wells, 3 Denio, 226.)

Failing to show that, the presumption is, that her traffic in liquors was illegal, and for the loss of profits caused by interrupting a business of that character, she could not recover. •

The actual value of the leasehold interest, if entirely destroyed, or the amount of the loss, if the injury was partial, should have been allowed: But it is one thing to allow the value of premises, whether that value consists, in part, of the advantages of its location, or of its adaptation to a particular branch of business, and quite another to allow for a loss of anticipated profits resulting from the interruption of a business in itself illegal.

The Judge charged that she was only entitled to be compensated for injury to her business “ for the time she was actually entitled to remain in the house, and it appears that her contract or legal right was for a month.’’

There can be no presumption that she would have obtained a license for a month, or for a year, and have paid the necessary license fee, in order to carry on, legally, for a month, a business which theretofore had been conducted contrary to law. And for the profits lost, between the time of the injury and some day when it may be conjectured she could and would have procured a license, it is quite clear there can be no recovery.

Even if it can be assumed or found that the premises had something of value attached to them, which may be called good will, it may be conceded that she may be allowed the value of her premises, including as a part of it the worth of this good will; and yet it does not follow that she may recover for the loss of profits which she might have made from transacting an illegal business.

An “ exception is taken to the refusal of the Judge to charge, that the plaintiff is not entitled to recover for loss of profits from, sale of liquor.”

The defendant was entitled to this instruction, as it appeared from the testimony of the plaintiff herself, that she was selling without a license. She could not have recovered the value of anything sold in the course of this business, from those who dealt with her, nor can she recover from a third person for a loss of profits anticipated from it, caused by the negligence of such third person.

The recovery is for so small a sum that I should be disposed to refuse a new trial, were it not, that in my view of the law, the verdict cannot be sustained, by reason of the refusal of the Judge to charge as requested.

The other Justices who heard the argument concurring, except Baeboub, J., who dissented, the verdict was set aside, and a new trial ordered, with costs to abide the event.


author: Bosworth, Ch. J. Robbertson, J.

text:
    Stephen C. Clarke, Receiver, &c., of the New York Gas Regulator Company, Plaintiff and Respondent, v. Ann Acosta and James V. Graham, Executrix and Executor, &c., of John Acosta, deceased, Defendants and Appellants.
    1. Where the receiver of a dissolved corporation brought an action against the executors of the deceased president and treasurer, to recover from hia estate the amount of moneys- of the corporation which he had loaned to stockholders, without authority and contrary to the statute, the defense interposed was that the trustees of the corporation had ratified the act. The Referee before whom the cause was tried reported substantially the facts alleged in the complaint, and, as a conclusion of law, found that the plaintiff was entitled to recover, but did not expressly negative the alleged ratification. The only evidence of any ratification was that in an annual report of the company, a part of the sum was mentioned as loaned to certain stockholders.

      JBeldt that the judgment for the plaintiff was correct.
    2. A finding of the Referee contained in the case, as settled, that the deceased, after malting the loan, informed the trustees and stockholders that he had made it, there being no other evidence of his giving such information than the annual report above mentioned, does not conflict with the presumption arising from his reporting in favor of plaintiff, that he found against the defendants on the question- of ratification.
    (Before Bosworth, Ch. J., Moncrief and Robertson, J. J.)
    Heard, February 8, 1862;
    decided, March 15, 1862.
    This was an appeal from a judgment in favor of the plaintiff, entered on the 11th of December, 1861, upon the report of Henry Hicoll, Esq., Referee, to whom the cause was referred for trial.
    The action was brought by the plaintiff as Receiver of the Hew York Gas Regulator Company, a corporation of this State, he having been appointed, upon its dissolution, by the Supreme Court. The complaint alleged, in substance, that on the 18th of April, 1856, the copartnership of Eoster & Hickerson, being stockholders in that corporation, and the defendants’ testator, John Acosta, being trustee, president and treasurer of the corporation, the latter loaned $2,000 of the corporate fund's to the former, knowing them to be stockholders, and that the loan had never been% repaid; and sought judgment for the amount, with interest, against defendants, as his personal representatives.
    The answer, besides denying certain allegations, alleged that the delivery of said money by said Acosta to Foster and Fickerson was ratified by the officers of the company to which said money belonged.
    The report of the Beferee found the above facts to be as alleged by the plaintiff and directed judgment for him, from which judgment defendants appealed.

      A. W. Clason, for defendants, (appellants.)
    The act of Acosta in lending the money was not improper, for it was on interest reserved to the corporation ; it was not illegal, for the statute does not prohibit such loans, but its effect is merely to declare that if made, the officers assenting shall be liable to the corporation creditors. The allegations of fraud in- the complaint are not supported; and the loan was sanctioned by the other trustees.

      Henry A. Cram, for plaintiff (respondent.)
    I. Acosta, the treasurer, in making the loan in question, acted without authority.
    II. The loan was, therefore, illegal, a breach of trust and official duty, and an illegal conversion.
    III. If Acosta had been simply a trustee under a private trust, he would have been personally liable for lending their money without taking any security. The same rule should apply to a trustee for stockholders.
    IV. The loan was unauthorized and illegal, because Foster & Fickerson were stockholders, and therefore the loan was prohibited by $ 14 of the general manufacturing companies law, under which the company was organized. (2 R. S., 5th ed., p. 661, § 37; Griffith v. Wells, 3 Denio, 226; Livingston v. Van Ingen, 9 Johns., 507; Wheaton v. Hibbard, 20 Id., 290; Seidmore v. Smith, 13 Id., 322.)

      V. It is no answer to this last point, that the only consequence of the illegal act is that provided for by the statute, viz., liability to creditors of the dbmpany.
    The injury to the company for an unauthorized conversion' of its money is one for which the common law gives a remedy, and this remedy is not taken away by the provision giving a recovery for a penalty to creditors. (Livingston v. Van Ingen, 9 Johns., 507; Seidmore v. Smith, 13 Id., 322; Wheaton v. Hibbard, 20 Id., 290.)
    VI. As a matter of law, the trustees could not ratify the illegal act of the treasurer. The board had not the power to do the act, and, of course, they could not ratify it.
    VII. As a matter of fact there was no ratification. To make out a ratification, as a matter of fact, there must be clear evidence of knowledge of the exact act and its illegal character, and a deliberative affirmative act of ratification.
    The silence, upon full knowledge, that would bind the company as to strangers, will not be held a ratification as between the company and its treasurer, of an illegal act of the latter, which the company itself-had not the power to do.
   Bosworth, Ch. J.

The company, of which the plaintiff is Receiver, was forbidden by statute to loan any of its money to any stockholder of the company. (2 'R. S., 5th ed., 661, § 37, [sec. 14].) The loan in question was not made by the company or in its name, but was made by John Acosta, then being trustee, president and treasurer. In. making the loan, he did an act which the company was forbidden to do, and one which makes every officer of the company, “who shall assent thereto,” liable to the extent of such loan, for all the debts of the company, contracted before the repayment of the sum so loaned. (2 R. S., supra.)

To exonerate John Acosta from liability to the company, for this unauthorized use of its moneys, it should at least be established, that the officers of the company authorized to bind it by acts done in its name, had, in behalf of the company, ratified the act.

The Referee has not found, as a fact, that it was ratified by the company. The Referee’s report, dated December 3d, 1861, contains no statement or finding in regard to this defense. The case, in its statement of the facts found by the Referee, specifies that “ Acosta afterwards informed the trustees and stockholders that he had loaned said money to Foster & Mckerson.” When he so informed them, or whether, at the time the information was given, the trustees were together in that capacity, or what either of them said when so informed, or whether either of them then, or at any time, said anything on the subject, is not found or stated as a fact.

The loan was made on the 18th of April, 1856. The minutes of the proceedings of the trustees, at the meetings held by them as such, during the year 1856, make no mention of any such loan. This was admitted at the trial. There was no attempt to prove that the minutes of the proceedings of any subsequent meeting of the trustees, mention it.

The only evidence in the case, that Acosta informed the trustees he had made this loan, consists of a statement, in the annual report of the company for the .year ending January 31, 1857, in these words, viz.:

Cash in bank 1st Feb’y, 1857,, $1,302 41 do drawn « “ . 22 18 $1,334 59 do in hands of Foster & Mckerson, entered to present date, including, also, the additional loan of $1,500,................. 3,289 37”

The witness, Foster, says the loan of $2,000 is mentioned in this report. The above extract contains the only mention made of it. The report spoke of “ do,” or cash “ in hands ” of Foster & Mckerson, and by those words, no more declares that the money they held had been loaned to them, than it declares the money “ in bank” had been loaned to it. The only words intimating the fact of a loan are, “ including, also, the additional loan of $1,500.” It is found as a fact, that no part of the loan of $2,000, was repaid, and there is no evidence that any part of the loan of $1,500 was repaid. Taking $1,500 from $3,289.37, leaves $1,789.37, which is less than the principal of the loan of $2,000.

It does not appear by the case, that the defendants requested or required the Eeferee to make a formal finding, upon the allegation in the answer, that the loan was rath tied. The only exceptions to the decision are, first, to the conclusion of law that the loan was illegal, and second, .to the general conclusion that the plaintiff is entitled to recover. «

Even if it be admitted that a ratification by the company, of Acosta’s act in loaning the $2,000, would exonerate him from liability to the company, and leave him under no liability by reason of it, except for debts of the company, still it is essential to his defense, that a ratification should be found or proved.

It has not been found as a fact, that it was ratified, and there is nothing in the Eeferee’s report in conflict with the presumption, arising from his reporting in favor of the plaintiff, that he found that fact against the defendants. (Grant v. Morse, 22 N. Y. R., 323 ; In Re The Dulce of Beaufort, 8 Com. Bench, N. S., 146.)

A finding that “Acosta afterwards informed the trustees and stockholders that he had loaned said money to Foster & Nickerson,” without finding more, should not be held to establish, as matter of law, that they ratified an act which the statute prohibits the company from doing, or to establish as a matter of fact, a ratification of this misconduct.

I think the judgment is correct on the facts found, and that the case does not show that the Eeferee has committed any error, on the trial or in his decision, and that the judgment should be affirmed.

Moncrief, J., concurred in this opinion;

Robbertson, J.

Disembarrassed of all questions of statutory liability, this seems to me a plain case of the misappropriation of the funds of a company by the treasurer of the company, in which he was knowingly assisted by a director, who reaped the benefit of it. The authority of the defendant’s testator was confined to the care and custody of the money of the company. Under pretense of a loan, that is, a promise to repay it, he delivered this money to Foster Ss Hickerson, who knew the extent of his authority ; and subsequently confessed, in a written statement to the officers, that he had placed it in the hands of that firm. Hothing was ever done by the officers, on such confession. If such an admission, without any subsequent act, could constitute a ratification, any confession of embezzlement, on which no steps were taken, would equally condone the offense. The Referee has not found the ratification set up in the answer, and therefore, if there be any room for doubt that it was proved, he must be held to have found that it was not. (Grant v. Morse, 22 N. Y. R., 323.)

I am not prepared to say that this came within the statute (2 R. S., 661, § 37, 5th ed.,) as a loan, or that the plaintiff, as Receiver, can recover the money, when the statute only gives it to creditors while the loan is running; if he could, I do not see how a ratification by other officers would help the original delinquent. But for the reasons I have given I think the judgment should be affirmed with costs.

Judgment affirmed.