author: Learned, P. J.: Matiiam, J.: Landon, J.

text:
    THE PEOPLE OF THE STATE OF NEW YORK, Plaintiff, v. THE NEW YORK, CHICAGO AND ST. LOUIS RAILROAD COMPANY, Defendant.

      Organization tax of corporations ■ — ■ how determined upon a consolidation of a domestic with a foreign corporation — chap. 143, Laws c/1886; chap. 685, Laws «/1881.
    In an action brought by the People of the Stale of New York to recover the tax imposed, by chapter 143, Laws of 1886, as amended by chapter 284, Laws of 1887, on corporations upon their organization, it appeared that, in June, 18S7, a railroad corporation having the same title as the defendant, and running wholly within the State of New York, was duly organized under the laws of New York, and that its organization tax was paid; that, on August 15, 1887, said corporation, under the provisions of chapter 917, Laws of' 1869, as amended by chapter 685, Laws of 1881, consolidated with a foreign railroad corporation, the corporate name of the new corporation remaining the same as that of the original New York corporation, and its capital stock being equal to the sum of the capital stocks of both the prior corporations.
    In September, 1887, this consolidated corporation was, under said act of 1869, consolidated with two .dtlier foreign corporations, the resulting corporation being the defendant, whose capital stock was equal to the sum of the capital stocks of all of said corporations thus consolidated.

      Held, that the State was entitled to recover an organization tax upon the consolidated capital of the first consolidation, and also upon the consolidated capital of the last consolidation.
    That, by filing the consolidation papers of September, 1887, the defendant became a corporation, incorporated under the general laws of the State of New York, and that the effect of such consolidation was to create a new corporation.
    That this result was not changed by the. fact that two of the consolidated corporations were foreign. (Landon, J., dissenting.)
    That if a foreign corporation chose to avail itself of the consolidation act, it, although it might still preserve its existence in the foreign State, was liable to pay the lax which the State of New York exacts for the privilege of its being .a corporation here.
    'Submission of a controversy upon a statement of facts agreed ■upon between tlie plaintiff, the People of the State of New York, and the defendant, the New York, Chicago and St. Louis Railroad Company.

      Charles F. Tabor and T. FI. Mcvyncw'd, for the plaintiff.
    Rogers, Loelce c& MiTburn and Samuel F. Williamson, for the ■defendant.
   Learned, P. J.:

On June 22, 1887, a railroad corporation was formed under tlie general railroad act of this State, called the New York, Chicago and St. Louis Railroad Company, -with a capital of $4,500,000, which, to distinguish it from other corporations of the same name, will be called No. 3. It paid its organization tax.

On August 15, 1887, said New York, Chicago and St. Louis Railroad Company No. 3 entered into a consolidation agreement, under the statutes of New York, with the Erie and State Line Railroad Company, a corporation under the laws of Pennsylvania, by which the two corporations were consolidated into one corporation, known as the New York, Chicago and St. Louis Railroad Company, which, to distinguish it, will be called No. 2. The capital stock of No. 2 was $7,500,000, being a sum equal to the aggregate of the capital stock of the two consolidating companies.

The agreement of consolidation was duly filed that day in the office of the Secretary of State of New York. No organization tax was paid to the State.

On September 27, 1887, the New York, Chicago and St. Louis Railroad Company No. 2 and the Cleveland and State Line Company, a corporation under the laws of Ohio, and the Fort Wayne and Illinois Railroad Company a corporation under the laws of the State of Indiana, under and in pursuance of the statutes of New York, entered into a consolidation agreement by which they were consolidated into a new corporation by the name of the New York, St. Louis and Chicago Railroad Company, which, to distinguish it, will be called No. 1. The capital stock of No. 1 was $30,000,000, a sum equal to the aggregate of the capital stock of the three consolidating companies. No organization tax was paid to the State of New York. The agreement of consolidation was duly filed with the Secretary of the State of New York.

The defendant in this case, which is the corporation above mentioned, formed by the consolidation last named and distinguished as No. 1, is exercising in this State corporate powers and exercising, or assuming to exercise, the corporate franchise of maintaining and operating a railroad from the city of Buffalo, in New York, to a point on the boundary line between Indiana and Illinois.

The plaintiff claims that there was due and payable to the Treasurer of the State of New York from the New York, Chicago and St. Louis Railroad Company No. 2, $9,375, being one-eightli of one per cent on its capital, which is still due, with interest, from August 15,1887, which sum this defendant is liable to pay by virtue of the agreement of consolidation.

The plaintiff claims that there was due and payable to the Treasurer of the State from the defendant the sum of $37,500, being one-eighth of one per cent on the capital stock which is still due with interest from September 27, 1887.

The question arises under the corporation tax law, chapter 143, Laws 1886, and it is presented to this court by a case submitted. Section 1 of that law is as follows: “ Every corporation, joint-stock company or association, incorporated by or under any general or special law of this State, having capital stock divided into shares shall pay to the State Treasurer for the use of the State a tax of one1 eighth of one per centum upon the amount of the capital stock which said corporation, joint-stock company or association is authorized to have.”

And the Secretary of State and any county clerk shall not file any certificate of incorporation * * * until he is satisfied that such tax has been paid to the State Treasurer.”

There is no question that the defendant has capital stock divided into shares. The inquiry must be whether the defendant, when it filed its consolidation papers September 27, 1887, became a corporation incorporated under a general law of this State. To determine this, we must first look at the Railroad Consolidation Act, chapter 917, Laws of 1869, as amended by chapter 685, Laws of 1881. Section 1 authorizes any railroad company “ organized under the laws of this State, or of this State and any other State,” to merge and consolidate its capital stock, franchises and property with the capital stock, franchises and property of any other railroad company or companies organized under the laws of this State, or under the laws of this State and any other State, or under the laws of any other State or States.”

Section 2 provides the mode and speaks of the name of the new corporation “ and of the manner of converting the capital stock * * * into that of the new corporation.” It declares that a copy .of the agreement of consolidation duly certified shall be eviclence of the existence of the new corporation. Section 3 declares that on the making, perfecting and filing of the agreement, the corporations parties thereto “ shall be deemed and taken to be one corporation.”

Section 4 provides that all rights and property shall be vested in the new corporation without further act or deed.

Section 5 preserves all debts and makes the new corporation liable therefor. (Polhemus v. Fitchburg R. R., Co., 123 N. Y., 502, and 50 Hun, 397; reversing Janes v. Fitchburg R. R. Co., 50 Hun, 310.)

The section declares that “ the respective corporations shall be deemed to continue in existence to preserve” the rights of all creditors. This clause should be noticed, inasmuch as it tends to explain and harmonize, with the general scope of the acts, certain decisions of the United States Supreme Court hereafter to-be mentioned. And it shows that, by the intent of the legislature, the formation of one new corporation out of two already existing is not inconsistent with a continuance, to a certain extent, of the constituent corporations.

That suits may be brought against the new corporation is provided in this section. And the very submission in this case shows that the new corporation is an artificial person; for it declares itself, in the statement of facts in the submission, to be “ a domestic railroad corporation.”

Section 6 provides for the taxation of the real property of such new corporation wherever situated, and for the taxation of its stock .and personal property.

It is, therefore, most positively declared by the legislature that ■such consolidation does create a new corporation. In accordance with this, the agreement of consolidation between the constituents repeatedly declares that they form one corporation, and states when ■such consolidated corporation shall go into operation. It is clear, then, that prior to the time of executing and filing this agreement there was no such corporation as the present defendant. There was another corporation which had the same name and which we have designated as No. 2. But the defendant, No. 1, did not exist before that time, and does exist now. Hence it necessarily follows that the defendant is a new corporation with new duties and new powers. And, as it obtained its existence by the authority of this New York consolidating statute, it was evidently incorporated under a general law of this State, and, therefore, it must come under the provisions of the statute imposing an organization tax. This is the plainer seen by the clause of that statute which forbids the filing of the papers by the Secretary of State until the tax is paid. The defendant desired the filing of its papers, and as a condition of such filing it is required to pay a certain tax. Plainly the State is at liberty to impose such terms as it pleases upon the filing of papers in the office of its secretary. This doctrine is distinctly laid down in People ex rel. Schurz v. Cook (110 N. Y., 443; affirming 47 Hun, 467).

That the effect of such a consolidation is to form a new corporation is shown in McMahan v. Morrison (16 Ind., 172); Railroad Company v. Maine (96 U. S., 499); Shields v. Ohio (95 id., 319) and Clearwater v. Meredith (1 Wallace, 25). The same view is taken in People ex rel. New York Phonograph Company v. Rice (57 Hun, 486 ; affirmed by Court of Appeals on opinion below June 16,1891), where it was distinctly held that by the consolidation a new corporation was formed, and, further, that such new corporation was bound to pay the corporation tax now in question. The question is, therefore, settled, unless a distinction can be made from the fact that two of the constituent corporations were foreign, corporations.

It might be said in the outset, that if the foreign corporation chooses to come into this State and take advantage of a statute of this State permitting it to do a certain act, it must do this on the conditions imposed. One of those conditions is that if two corporations do avail themselves of this consolidating statute, they must pay the organization tax. This was decided in the Phonograph Case (ut supra).

It might be said that the foreign corporation has made an agreement, under our statute, purporting to form with the domestic corporation a new corporation; and that whether that old foreign corporation still has some existence in another State, at any rate the new corporation must pay the organization tax. And we might further remark that the consolidation act itself preserves a certain existence of the constituent corporations, so far as their creditors are concerned, yet such existence of the constituent corporations in no way affects the liability of the new corporation to pay the organization tax, as was seen in the Phonograph Case. In that case, notwithstanding the statute preserved to a certain extent the existence of the two domestic constituent corporations, yet the new corporation was held liable to pay the tax. Therefore, whatever might be held in regard to the existence in another State of one of the constituent corporations in this case, still the new corporation must pay for the privilege which it has undoubtedly obtained of being a corporation here. If this State dioses to enact that, on payment of an organization tax, a foreign corporation and a domestic corporation may unite into a domestic corporation here, it cannot matter what may be the rights of that foreign corporation in the State where it was formed. If it accepts the privilege allowed it here, it must pay the tax, on payment of which alone the privilege is granted. But it is urged by the defendant that certain decisions of the United States Supremo Court are fatal to plaintiff’s claim. The case of Nashua and Lowell Railroad Corporation v. Boston and Lowell Railroad Corporation (136 U. S., 356) is cited. In that case the Nashua and Lowell Railroad Corporation was incorporated in New Hampshire, in 1838, by a special act. The Nashua and Lowell Railroad Corporation was incorporated by Massachusetts, in 1836, by a special act.

In 1838 the State of Massachusetts passed a special act declaring that the stockholders of the New Hampshire corporation were thereby constituted stockholders of the Massachusetts corporation, and that the two corporations were thereby united into one. In the same year the State of New Hampshire passed a special act declaring that the two corporations, viz., the Massachusetts and the New Hampshire, were authorized to unite the said corporations, and that the property owned by either should be taken to be the joint property of the stockholders of the two corporations. Subsequently, in 1857, this corporation entered into a contract with the Boston and Lowell Railroad Corporation that their roads should be worked and managed as one road, to be operated and managed by one agent to be chosen by the votes of the directors of each roach The plaintiff was the New Hampshire corporation, or, as called in the opinion, the Nashua corporation. It alleged that it was duly established as a corporation under the laws of New Hampshire. It brought this action in equity in the Circuit Court of the United States for the district of Massachusetts. A plea in abatement was filed alleging that plaintiff was a citizen of Massachusetts. The plea was overruled. The same matter was set up in the answers. ^Replications were filed denying, in effect, the allegations respecting the acceptance of the acts, having for their object the union of the two corporations, and the allegations of such acceptance were entirely unsupported by the evidence or by anything on the record. A majority of the court held that the Circuit Court had jurisdiction, and the court remarked, that however closely two corporations of different States may unite their interest their separate identity is not lost. Now, we have carefully stated the facts of that case that no incorrect conclusions may be drawn from any remarks in the decision. Several things will be seen — first, that the two corporations (bearing the same name) were not shown to have accejDted the acts of Massachusetts and of 'New Hampshire; second, that the act of New Hampshire does not purport to consolidate the two into one, but speaks of them still as two corporations; third, that the act of Massachusetts is to have no effect until the stockholders accept both of the acts. The statutes, therefore, in that case, are entirely different from the consolidation statute of this State, and no evidence was given that the stockholders had accepted these acts of the two legislatures.

The present case is not one where two corporations merely unite their interests and have, the same directors. Here there is the -creation of a new corporation, as was decided in the cases above cited.

And this distinction is very clearly pointed out in Pennsylvania Company v. St. Louis, Alton, etc., Railroad Company (118 U. S., 290), where the head note is: “ When an existing railroad corporation organized under the laws of one State is authorized by the laws of another State to extend its road into the latter, it does not become a citizen of the latter State by exercising this authority, unless tJie statute giving this permission must necessarily loe -construed as creating a new corporation of the State which grants this goermission.” And in the language of the court: “To make such a company a corporation of another State the language used must imply creation or adoption in such form as to confer the power usually exercised over corporations by the State or by the legislature.” “ It does not thereby become such new corporation of another State until it does some act which signifies its acceptance of this legislation and its pxorpose to be governed by it." If the case of the Nashua and Lowell Railroad Company (ut supra) was intended to overrule these views, it is probable that something of that nature would have been said in the opinion. Language could hardly be used more applicable to the present controversy. In the present case the words of the Consolidation Act distinctly express the creation of a new corporation. And the two constituent corporations have expressly accepted the legislation and claimed its benefits.

It is true that in Railway v. Whitton (80 U. S. [13 Wall.], 270), where the Chicago and North Western Railroad Company was incorporated in the State of Wisconsin and also in the State of Illinois, and the plaintiff, a citizen of Illinois, brought an action in the State court ■of Wisconsin against that company for an injury .doné in that State, .and subsequently removed the action to the United States Circuit Court for Wisconsin, it was held that the removal was proper. The ■court said that in Wisconsin the defendant incorporated there was not a corporation or a citizen of any other State. Nor need we hold (because that question is not before us), that in the State of Illinois the Fort Wayne and Illinois Railroad Company may not still be sued in the Federal courts by a person not a citizen of that State.

A natural person, citizen of Illinois, may join with others and may form a corporation under the laws of New York. But he will still be a citizen of Illinois. So, even if it were held by the Federal courts, for the purpose of their jurisdiction, that that railroad was a citizen of that State, it would not follow that a corporation had not been formed in the State of New York. That is a question with which we have nothing to do. All that we have to decide is, whether, in this State, a new corporation was formed, and if so, what are the terms on which it was allowed the privilege of such new incorporation. And it will be observed that the cases principally relied upon by the defendant arose on the question of jurisdiction of the Federal courts ; that is, on the question as to the State which the corporation sued or suing was a so-called citizen.

In Ohio and Mississippi Railroad v. Wheeler (66 U. S. [1 Black], 286) is shown the growth of the doctrine, at first questioned, that a corporation is, so far as tlie jurisdiction of the Federal courts is concerned, a citizen of the State where it is incorporated ; and that doctrine is-placed on the ground that the legal presumption is that its members-are citizens of that State. Of course, it is well known that such presumption is not true in fact. Just as it is well known that a corporation is itself an imaginary existence ; a legal fiction, which can have no real citizenship. The right to be a corporation is really only the right of several natural persons to act as one, so that the acts ■ done through agents shall not be the acts of these several persons, but of the imaginary body composed, of them. This right is conferred by the State. And there seems to be no reason in principle why two States should not confer the same right upon the same body of natural persons ; and why, in such case, the same corporation should not exist under the laws of two States. And it might present an interesting question for the Federal courts if the same persons were incorporated at the same time into an apparently identical corporation in each of two States, in which of those States it would be a citizen. We have not overlooked the language of the court in the case last cited, where, for instance, it is said: The legal entity or person, which exists by force of law, can have no-existence beyond the limits of the State or sovereignty which brings it into life.” Yet, certainly, corporations do act and perform very important acts in States in which they were not incorporated. But,, however that may be, the question which arose in that case was on the jurisdiction of the Federal courts; and the court said that the suit in the corporate name was, in contemplation of law, the suit of the individuals who compose it. That is not so in any respect,, except it be on the question of Federal jurisdiction. This present submission, for instance, is not the submission of the individuals who compose the defendant. But this matter is not important here. The question here is, whether this defendant is a corporation incorporated under a law of this State.

That the doctrine of cases above cited, that consolidation forms a new corporation, is not confined to the consolidation of two corporations incorporated by the same State is evident-from the case of Delaware Railroad Tax (85 U. S. [18 Wall.], 206). There the Delaware and Maryland Company, incorporated under the laws of Maryland, and the Wilmington and Susquehanna Railroad Company, incorporated under the laws of Delaware, were by subsequent acts of those States consolidated, and a tax was imposed on the new corporation. Again, in Philadelphia and Wilmington Railroad v. Maryland (51 U. S. [10 How.], 376), there was a consolidation of corporations of different States, and the court, at page 392, speaks of these companies as being thereby incorporated into one, which one was the plaintiff in error. Of course, as it was a plaintiff, it must have had. the right to sue and be sued, which shows that the consolidated company was itself a corporation.

It is contended by -the defendant that it is absurd that the capital stock of this defendant should be $30,000,000. But we have only to turn to the agreement of the consolidating companies, the fourth article of which says that the capital stock of said consolidated company shall be that amount; and the sixth article of which provides for the issue thereof. And it will be seen by that sixth article that on carrying the agreement into effect there will be no longer any capital stock of any company other than that of the present defendant, the New York, St. Louis and Chicago Railroad, iSlo. 1, which, by the seventh article, owns all the property of the constituent companies. The defendant’s counsel ask by what necromancy has its capital stock been increased from four and one-half million- to thirty millions ? But there has been no increase of the capital of any company. The present defendant is not the same corporation, with the New York, St. Louis, Chicago Railroad, No. 2, though it has the same name.

Some argument is made by defendant based on the assertion that these constituent corporations have also incorporated themselves into one corporation under the laws of other States, viz., Ohio, Pennsylvania and Indiana. The agreement for the consolidation in this State expresses an intention so to do. But we fail to find anything in the submission which shows that this has been done. Ye do not, therefore, know what is the fact. And it is not for us to determine what rights and liabilities may arise in other States, if consolidation has there taken place. The defendant must take the position that it is not a corporation; because by the fifth, sixth and seventh clauses of the submission the defendant is identified and is distinguished from the previous corporations of that same' name. Therefore, the defendant is not the corporation called No. 3, and is-not that called No. 2. What is the defendant, then? Who has made this submission ? It purports to be executed by a corporation under its seal and by the hand of its president. If defendant is not a corporation, then there is no party to the submission on one side, and the submission should be dismissed.

In the view we have taken this defendant is liable to pay the organization tax arising on the agreement of September 27, 1887. Under the Polliemus case above cited it is liable for the tax which the constituent company No. 2 should have paid on the agreement of August 15, 1887, and it is liable for interest on these amounts.

Judgment for plaintiff should be entered accordingly as prayed for in the submission.

Matiiam, J.:

The concurrence of three things in the defendant’s organization is essential to make the defendant liable for this tax.

First. It must be a corporation organized under a general or special law of this State.

Second. It must have capital stock divided into shares.

Third. It must carry on its operations wholly or partly within this State.

If the defendant by its organization embraces all the above requisites, then it comes within the provisions of chapter M3 of the Laws of 18SG, as amended by chapter 281 of the Laws of 1887, which provides that any corporation * * * incorporated by and under any general or special law of this State, having capital stock divided into shares, shall pay a tax of one-eiglith of one per cent on its capital stock into the treasury of the State.

The defendant is a corporation incorporated under the laws of this State pursuant to the provisions of chapter 917 of the'Laws of 1869, as amended by chapter 685 of the Laws of 1881, by making, perfecting and filing agreements of consolidation in the office of the Secretary of State as provided by section 3 of the act of 1869, which declares that by the performance of those acts “ said corporation, parties thereto, shall be deemed and taken to be one corporation,” and by section 1 of that act such consolidated conrpanv is called the “ new corporation.”

It seems conceded that the 'aggregate stock of the old corporation becomes the stock of such new corporation ; it, therefore, has stock divided into shares. It is doing some of its business in this State, and is thus brought within that provision of the statute. It is true that some of its constituent parts are the corporations of other States organized under their laws. But if they by a valid agreement attach themselves to a corporation in this State and accept of a franchise under its laws, and thus by their charter become a corporation under the laws of the State of New York, there seems to be no reason why they should avail themselves of that privilege without being subject to' the conditions under which the grant of that franchise is made. It is doubtless true that the original corporations by the act of consolidation do not thereby absolve their allegiance or obligations to their own State or the State by which they were chartered; but, in so far as they constitute by their consolidation a part of the new corporation under the charter which they have voluntarily assumed in this State, they become a new corporation organized under the laws of this State, and as such new organization must pay the franchise tax imposed as this condition of their charter.

Landon, J.

(dissenting):

The original New York, Chicago and St. Louis Railroad Company, organized in June, 1887, under the general railroad laws of this State, had a capital stock of $1,500,000. Its line of railroad was wholly within this State, extending from Buffalo to the State line between New York and Pennsylvania. Upon its organization it paid the tax of one-eighth of one per centum upon its capital stock, as required by chapter 143, Laws of 1886. That tax is imposed by said act upon every corporation, having capital stock divided into shares, “incorporated by or under any general or special law of this State.” In August, 1877, this New York corporation, pursuant to the provisions of chapter 917, Laws of 1869, consolidated with a Pennsylvania railroad corporation, having a line of railroad extending across the State of Pennsylvania from its New York to its Ohio boundary, and forming a continuous line of railroad with that of the New York company.

The Pennsylvania company had a capital stock of $3,000,000, and the capital of the consolidated company was declared to be $7,500,000. No franchise tax was paid upon tlie capital stock of the consolidated company. This company assumed the name of the New York, Chicago and St. Louis Railroad Company.

In September, 1887, the New York, Chicago and St. Louis Railroad Company, as thus enlarged, pursuant to the provisions of said act of 1869, consolidated with both an Ohio railroad company and an Indiana railroad company, one owning a. line of railroad across the State of Ohio, and the other across the State of Indiana, which formed with the New York and Pennsylvania lines a continuous line of railroad from Buffalo to the State boundary line between Indiana and Illinois. This consolidated company assumed the name of the New York, Chicago and St. Louis Railroad Company, and declared its capital stock to be $30,000,000, which amount was the aggregate of the capital stock of all the constituent companies. No franchise tax was paid upon the capital stock of this consolidated company.

The plaintiff demands judgment in this action for the amount of the tax at the rate of one-eiglith of one per centum upon $7,500,000, the capital stock upon the first consolidation, and at the like rate upon $30,000,000, the amount of the capital stock upion the last consolidation.

The contention of the defendant is, that upon neither consolidation was any company “ incorporated by or under any general or ■special law of this State” within the meaning of chapter 143, Laws of 1886.

It was undoubtedly the purpose of the act of 1869 to form new corporations by the consolidation of constituent companies in the •cases specified in the act, merging the old companies into the new, except so far as the act preserves the old companies in existence in •order to uphold the rights of creditors.

Chapter 917, Laws of 1869, as amended by chapter 685, Laws of 1881, provides :

“ Section 1. It shall and may he lawful for any railroad company or corporation, organized under the laws of this State, or of this State and any other State, and operating a railroad or bridge, either wholly within, or partly within and partly without this State, to merge and consolidate its capital stock, franchises and property with ■.the capital stock, franchises and property'of any other railroad company or companies organized under tlie laws of this State and any other State, or under the laws of any other State or States, whenever the railroads or branches, or any part of the railroad or branches of the companies or corporations so to be consolidated, shall or may form a continuous or connected line of railroad/with each other, or by means of any intervening railroad bridge or ferry.”

The second section of the act prescribes the methods to be pursued to effect such consolidation and merger and characterizes the result as a “new corporation.”

The third section provides that the constituent corporations, when so merged and 'consolidated, “ shall be deemed and taken to be one corporation; ” and the fourth section declares that “ all and singular the rights, privileges, exemptions and franchises of each of said corporations, parties to the same, and all'the property, real, personal and mixed, and all the debts due bn whatever account to either of said corporations, as well as all stock subscriptions and other things in action belonging to either of said corporations, shall be taken and deemed to be transferred to and vested in such new corporation.”

The fifth section makes the “new corporation” liable for the debts of the old, except mortgages, but the old corporations “shall be deemed to continue in existence to preserve “the rights of creditors.”

The sixth section limits the taxation upon the property of the now corporation to such of its real estate as is situate within- this State, and to such proportion of its capital stock and personal property as the number of miles of the whole line of road bears to the number within this State'.

We held, in People ex rel. New York Phonograph Company v. Rice (57 Hun, 486), that a corporation formed under chapter 960, Laws of 1867, by the consolidation of two domestic manufacturing corporations, each of which upon its separate organization had paid the organ- ' ization tax, was required upon such consolidation to pay the tax under chapter 143, Laws of 1886; that a new corporation had been formed and the constituent corporations had ceased to exist. But both constituent companies were domestic corporations and jurisdiction over both was wholly in this State. The cases there cited of Shields v. Ohio (95 U. S., 319); Railroad v. Maine (96 id., 499), and Railroad v. Georgia (98 id., 359), were cases of the consolidation, of domestic corporations.

Suck, also, was the character of the constituent companies in Clearwater v. Meredith (1 Wall., 25), and McMahan v. Morrison (16 Ind., 172). But it is also clear from the authorities that when a consolidation is effected of corporations of different States, under the enabling statutes of the respective States, no new corporation as an entirety is formed, but each constituent remains in severalty just as much the creature and creation of its parent State as it was before the consolidation.

The authorities upon this subject in the Federal and State courts appear to be uniform in the declaration of this result. (Nashua, etc., R. R. v. Boston and Lowell R. R., 136 U. S., 356; Farnum v. Blackstone Canal Co., 1 Sumner, 46; Muller v. Dows, 94 U. S., 444 ; St. Louis, Alton and Terre Haute R. R. Co. v. Indianapolis and St. Louis R. R. Co., 9 Bissel, 144; Penn. R. R. Co. v. St. Louis, etc R. R. Co., 118 U. S., 290; Racine, etc., R. R. Co. v. Farmers’ Loan, and Trust Company, 49 Ill., 331; Ohio and Miss. R. R. v. Wheeler, 1 Black [U. S.], 286 ; Quincy R. R. Bridge Co. v. Adams Co., 88 Ill., 615; Chicago and N. W. R. R. v. Auditor-General, 53 Mich., 91; O. and M. Railway Co. v. People, 123 Ill., 467; State Treasurer v. Auditor- General, 46 Mich., 224.) We are not cited to any authority holding otherwise.

The - conclusion seems to result from well-established principies. Every corporation is the creation of its own State and cannot exist outside of it. It may, by the comity of other States, transact business or acquire p>roq>erty within them, but the entity or being which is created by law cannot tonspmrt its body beyond the State whose law gives it existence and sustains it. (Ohio and Miss. R. R. Co. v. Wheeler, supra; Plimpton v. Bigelow, 93 N. Y., 592.)

No State can, by its legislation or otherwise, change the nature or character of a foreign corporation within the domicile of the latter. Two States have no p>ower to unite in p>assing any legislative act; there can be no joint legislation in the sense that the two States, by uniting or concurring in legislative action, can achieve a single result which either separately could not do. (Nashua R. R. v. Lowell R. R., and the cases supra.) The State of New York may authorize its corporation to consolidate with a Pennsylvania corporation so far as its business interests are concerned, but for it to declare that the union thereupon to result will be a new corporation, formed of the two constituents which shall no longer separately exist, is to attempt to change the nature and dissolve the existence of the Pennsylvania corporation, and replace it with a new corporation. This would be for it to attempt to extend its powers further than they can reach, and would, of course, be futile. Nor could it by its legislation bring the Pennsylvania corporation into the State of New York, or project the New York corporation into Pennsylvania. In the nature of things the concurring legislation of the two States only results in each State acting upon its own corporation and solely within its own territory, and hence there never can be one such power over both corporations as can pour or mingle them together, and thus make a fused or merged new corporation existing as an entirety in both States. It may be that each constituent would, as to third persons, when justice required it, be estopped to deny the creation of the new corporation, but such an estoppel would not impose this tax. The new corporation, to be taxable under the act of 1886, must have been organized under some act of this State, and if no act is competent to effect such an organization, the tax is not imposed. This State probably could authorize non-resident corporations to unite as coi’porators in forming a new corporation within this State, but that would be different from forming a new corporation by consolidation and merger. Consolidation and merger, and therefrom a new creation, imply power over each constituent in its own domicile. To enable each constituent to act in this State is only the exercise of domestic power.

In Nashua, etc., Railroad v. Boston and Lowell Railroad (136 U. S., 356), the Nashua Pailroad Company was incorporated by the State of New Hampshire in 1835, to construct and operate a railroad in that State to its Massachusetts boundary. In 1836 the State of Massachusetts incorporated another company by the same name to construct a continuation in Massachusetts of the New Hampshire railroad. In 1838 both New Hampshire and Massachusetts passed acts to unite said corporations into one corporation. The Massachusetts act expressly made the stockholders of the New Hampshire company stockholders of the Massachusetts company, and the union contemplated by the Massachusetts act was the enlargement of its corporation so as to merge the New Hampshire corporation into it. Thereupon a common stock was issued for the whole line, and one board of directors was provided which managed the entire line of railroad in both States for forty-live years. It was held that the identity of the New Hampshire corporation was neither destroyed nor merged with that of the Massachusetts corporation. The court said, page 313: “ The new corporation created by Massachusetts, though bearing the same name, composed of the same stockholders, and designed to accomplish the same purposes, is not the same corporation with the one in New Hampshire. Identity of name, powers and purposes does not create an identity of origin or existence any more than any other statutes alike in language, passed by different legislative bodies, can properly be said to owe their existence to both. To each statute and to the corporation created by it there can be but one legislative paternity.” Again, page 382: “ Railroad corporations created by two or more States, though joined in their interests in the operation of their roads, in the issue of their stock, and in the division of their profits so as practically to be a single corporation, do not lose their identity; that each one has its existence and its standing in the courts of the country only by virtue of the legislation of the State by which it is created. The union of name, of officers, of business and of property, does not change their distinctive character as separate corporations.” The opinion reviews many of the cases above cited.

While it might be competent for the legislature of this State to impose the organization tax upon the capital stock of its own corporation, upon its participation in a consolidating agreement with foreign corporations, such is not the effect of the act of 1886. The tax is imposed upon the capital stock of a corporation organized under some law of this State, not upon an agreement to merge what is not capable of merger, not upon an agreement to make a new corporation by methods and constituents which no legislative power can make into a new corporation.

We conclude that judgment under the submission must be directed for the defendant, with costs.

Judgment ordered for People on submission.


source: Caselaw Access Project

author: LeaeNed, P. J. :

license: Public Domain

text:
    THE PEOPLE OF THE STATE OF NEW YORK ex rel. THE SOUTHERN COTTON OIL COMPANY, Relator, v. EDWARD WEMPLE, as Comptroller of the State of New York, Defendant.

      Taxes — when a foreign corporation is “ doing business" in this State — chapter 542 Laws of 1880, is not an interference with interstate commerce — is not a tax on property — a license tax and a tax on a franchise, distinguished — certiora/i'i.
    la a proceeding brought to enforce a tax imposed under section 3, chapter 542, Laws of 1880, which provides that every corporation, joint-stock company or association, incorporated under the laws of this State, or incorporated under the laws of any other State, “and doing business in this State,” is subject to tax upon its corporate franchise or business, it appeared that a foreign corporation maintained a sales agency in the city of New York, sold the product of its mills, refined crude oil, maintained a storage depot in that State, and also kept on deposit in New York banks large sums of money for use in its business in that State.

      Held, that it was subject to the tax.
    That said act was not unconstitutional as to foreign corporations upon the ground that it amounted to an interference with interstate commerce.
    That such a tax was not one upon property, but upon the privilege of doing business in the State of New York.
    That there is a clear distinction between a license tax imposed by a State upon the selling agents of a person who is a citizen of another State, sent here to make sales, and a tax laid upon such a citizen who comes into this State, brings his property with him and mingles it with the general mass of commercial capital; that in the latter case the elements of interstate commerce are lacking.
    The question as to whether the conditions imposed by section 17 of chapter 501 of the Laws of 1885 apply to a certiorari issued to review a readjustment and resettlement of a tax by the comptroller, provided for by section 19 of chapter 463 of the Laws of 1889, considered.
    HeaeiNG upon tlie return to a writ of certiorari granted upon the petition of the relator, the Southern Cotton Oil Company, on the 30th day of December, 1890, at the New York Special Term, to review the determination of the defendant Edward Wemple, as comptroller of the State of New York, in assessing a tax upon said relator, a New Jersey corporation, under chapter 542, Laws of 1880, and the acts amendatory thereof. '

      W. W. McFarland, for the relator.

      Charles F. Tabor and T. IL Maynard, for the defendant.
   LeaeNed, P. J. :

In my own opinion this writ should be quashed for reasons wiil briefly state. The revision and readjustment of this tax was made by the comptroller September 2, 1890, and his order thereon was served that day on the relator. The petition for a certiorari was made December twenty-ninth, and was presented to the court December thirtieth, and the writ was issued the thirty-first. No papers or notice had been served on the comptroller, and nearly three months had elapsed since service of the order on the relator. Sections 19 and 20, added to the corporation tax law by chapter 463? Laws of 1889, now form a part of it; and the whole act, including section 17, is to be construed as one enactment.

Section 17, added by chapter 501, Laws of 1885, is not repealed. It prescribed certain conditions only on which a writ of certiorari to review could be granted. No certiorcmi can now be granted to review the original adjustment and settlement of the tax by the comptroller. (People ex rel. Edison Electric Light Co., 11 N. Y. Supp., 246.) But a certiorari may issue to review the readjustment and resettlement provided for by section 19. Therefore, the conditions imposed by section 17, on the issuing of a certiorari in proceedings under this tax law, must now refer to the certiorari under section 19. There is no other certiora/ri to which they can refer; and as they have not been repealed we have no right to disregard them. There is no reason why the legislature should not require the same conditions for a certiorari to review the resettlement which were required for a • certiora/ri to review the original settlement. The relator has had an opportunity to be heard before the comptroller and to state his views. If he is still dissatisfied, it is proper that his certiorari should be taken with the same pi’omptness, and on the same terms as would have been required when he sought to review a decision where he had not been heard. If the legislature thought that those terms were too strict, they could easily have repealed or modified them at the time when they added sections 19 and 20. But there was nothing in those sections which indicated an intention to repeal. It was desirable to specify in section 20 that a certiorari might be issued, because section 1 of the original act had provided for an appeal to State officers. Such right of appeal might be thought to prevent a certiorari. (Code, § 2122.) The limitations of four months in section 2125 of the Code would cause too much delay in the collection of this tax. •

Therefore, I think that this certiorari was too late and was improperly granted. But a majority of the court are of the opinion that a contrary doctrine was held by them in People ex rel. American Construction and Dredging Company v. Wemple, Comptroller (60 Hun, 225). Hence I proceed to examine the merits.

•The first question on the merits is whether the relator is “ doing business in this State ” within the meaning of the corporation tax law, section 3, .chapter 542, Laws of 1880. The relator maintained a sales agency in the city of New York; sold the product of its mills in this State; refined crude oil in this State; maintained a deposit or storage of its products, and kept on deposit in the banks of New York large sums of money for the use of the relator and for carrying on its business. Such are the statements in the return. (People ex rel. Sims v Fire Commissioners, 73 N. Y., 437; People ex rel. Peck v. Commissioners, 106 id., 64; Code, § 2139.) It is suggested by the relator that under section 2139 the court should now permit it to introduce affidavits contradicting these allegations. The return was made in January; and whatever might be our power to hear contradicting affidavits we do not think'that, at so late a time and after argument, we should take the course suggestéd.

Taking, then, this return of the facts, we think that the decision In People v. Horn Silver Mining Company (105 N. Y., 76, at p. 83), .shows that the company was doing business in this State. Such was the. conclusion of Judge Wallace in Southern Cotton Oil Company v. Comptroller (MSS.), wherethis company brought an action in equity to restrain the collection of the taxes, in which action the .relator set forth in affidavits the nature of its business here.

The relator to enforce its view cites the act of 1851, chapter 176, and the act of 1855, chapter 37, and The Parker Mills v. Commissioner of Taxes (23 N. Y., 242), construing the latter act, and also People ex rel. Bank of Montreal v. Commissioner of Taxes (59 N. Y., 40). But those laws and those decisions respect the taxation of property in this State. They do not touch the question now involved. This present law is not a tax on property. (Home Insurance Company v. New York, 134 U. S., 594; S. C., 92 N. Y., 329; People v. Eguitable Trust Company, 96 id., 387.) It is a tax on the privilege of doing business here. (State Railroad Tax Cases, 92 U. S., 575.)

The subject was again considered in People v. American Bell Telephone Company (117 N. Y., 241), and tlie distinction taken in tliat case confirms the views above expressed.

The relator further insists that this law, in its effect on corporations of other States, is unconstitutional as an interference with interstate commerce. (Robbins v. Shelby County Taxing District, 120 U. S., 489; Asher v. Texas, 128 id., 129; Leloup v. Mobile, 127 id., 640.) But this is well answered by Judge WallaCe in the case just referred to. He says that the State could not tax the privilege of soliciting orders here in behalf of sellers doing business in other States. “But a foreign corporation which establishes a business domicile here, and brings its property within this jurisdiction and mingles it with the general mass of commercial capital is taxable' here, and the power of the State is ample to tax its property or to lay a tax on its privilege of doing business.” It seems to us that this is a sound distinction, and that it shows that the present case does not come within the decisions condemning interference, with interstate commerce. (Society for Savings v. Coite. 73 U. S. [6 Wall.], 607.)

There is a clear distinction between the cases in which a citizen of one State sends agents or drummers into another, and the State into which they are sent imposes a license fee on them, and other cases in which a citizen of one State goes into another and carries on business there. In the latter class of cases there seems to be lacking that element of interstate commerce which a majority of the court discovered in the Rollins Case. The argument of the relator seems to go so far that the State could never, under this statute, tax a corporation of another State for any business which it should do in this State, coming here and carrying on such business. And when we consider that it is the privilege of doing business here as a corporation, on which this law imposes a tax, we shall see that the law is not subject to the criticisms añade by the relator.

It may not be easy to draw the line between such laws as do and such laws as do not interfere with the constitutional right, that congress alone shall control interstate commerce. The views of the judges of the highest court of the country vary, and many of the cases: show very able dissenting opinions. But from the best examination which we can give of this case, and of the decisions referred to by the relator’s counsel, we think the action of the comptroller was correct. No argument is presented as to the amount of the tax, in case the relator is taxable.

Decision of the comptroller confirmed, with fifty dollars costs and disbursements.

LaNDON and Mayham, JJ., concurred on the merits.

Decision of comptroller confirmed, with fifty dollars costs and disbursements.


author: LandoN, J. :

text:
    ANNA DAVIS, Respondent, v. FRANCES A. NOYES, Appellant.

      Statute of limitations — a new promise must recognize an existing debt— Code of Giml Procedure, see. 895.
    The acknowledgment or promise contained in a writing', signed by the parly to he charged thereby, which will take a case out of the operation of the statute of limitations, under section 395 of the Code of Civil Procedure, must recognize an existing debt and contain nothing inconsistent with an intention to pay it.
    An acknowledgment by a person in writing that, because she had induced another to engage with her in the purchase of certain stock upon the prediction of a newspaper, she would make good to the other person half her loss, is not an acknowledgment which meets the requirements of said section 895.
    Appeal by the defendant Frances A. Noyes from a judgment, entered in tlie clerk’s office of Montgomery county on the 15th day of January, 1891, in favor of the plaintiff for $919.94, after a trial before a referee.

      Orm Gamlell., for the appellant.

      Mead da Matt, for the respondent.
   LandoN, J. :

The statute of limitations is a bar to the plaintiff’s recovery unless the letters of the defendant contain an acknowledgment of the defendant’s indebtedness, or a promise to pay it. (Code Civil Pro., § 395.) The writing must recognize an existing debt, and contain nothing inconsistent with the intention to pay it. (Manchester v. Braedner, 107 N. Y., 340.)

The parties were intimate friends and were amateurs in stock speculation. On the 25th of July, 1882, the defendant had on deposit $525 with Spencer, Trask & Co., her stock brokers. On that day she called upon the plaintiff with a copy of the Wall Street News. That sheet contained an article predicting a rise in the O., O., C. and I. R. R. Co.’s stock. The paities relying upon the prediction agreed to buy together 100 shares of the stock. The defendant thereupon ordered the stock in her own name, paying $500 margin. The price of the stock kept falling and $1,300 more margin was paid, of which the defendant paid $300 and the plaintiff "handed the defendant $1,000, which the defendant also applied Whether $500 of this sum was a loan to the defendant, or whether the plaintiff contributed the whole $1,000 as margin, was in issue upon the trial and decided in favor of the plaintiff. The transaction was closed October 14, 1882, resulting in a loss of $1,000. The $800 surplus of the margin was received by the defendant, . and used by her in further stock speculations upon the joint account of both parties. These further speculations do not appear to have been profitable; and although the fact is not distinctly found, the $800, and a little more, were probably lost.

The plaintiff grieved over her loss, and the defendant, in 18S6, promised to pay her $500 upon account of it when she should receive her inheritance, the defendant accusing herself of blame in trusting to the misleading prediction of the Wall Street News.

Subsequently the parties engaged as partners in the millinery' business in Amsterdam, N. Y. They lived in the same apartments, and it would appear that the defendant occasionally made small ventures in stock and oil speculations. August 6, 1888, they dissolved their partnership, the defendant selling out to the plaintiff, and upon a full accounting of their partnership affairs the plaintiff gave the defendant a note for $500. The plaintiff remained in Amsterdam and the defendant took up her residence in Lansingburgh. The referee found that this action was commenced more than six years after the cause of action accrued. He also found that, on the 25th of August, 1882, the plaintiff loaned the defendant $500. He did not, in terms, find that the defendant made a subsequent promise to pay or acknowledgment of tbe debt, but be refused.to End that sbe did not.

On May 10, 1889, tbe plaintiff wrote to tbe defendant: “ I wish to speak to you about my note for $500, which will become due in August. You will remember that I drew $1,000 from tbe bank before we came to Amsterdam, and let you take it to buy O. G. O. and I— $500 for yourself and $500 for me. As you know, tbe whole amount was lost, and you always said that when you got your inheritance you would make your part to me good, so that tbe whole loss might not fall upon me, since it was through you that tbe money was used at all. I did not ask you to give me your note for tbe amount, trusting to your honor; * * * I think it would be only fair that you return me tbe note and we call tbe matter square.”

The defendant replied tbe same day: “Your letter has this moment arrived and I am more than surprised at tbe contents, -x- * ■ * Stunned to death as I am, I still say you may indeed count upon my honor; that will never fail, and I should^ comply at once with your request and send you tbe note, only that I am wholly unable to do so at present. * * * I will do justas I said regarding half of the three C’s money, although I hold myself by every method of reason and argument wholly free.”

May 11, 1889, the plaintiff writes: “ I don’t know what method of reasoning you use to argue yourself wholly free about the three •C’s money.”

May 12, 1889, the defendant writes: “As to the three O’s money, you know it was never thought of as a loan, consequently the idea of a note never entered into the arrangement; I was taking the "Wall Street News and we were dealing in stocks. * * * "When I brought the paper down to you wo both felt impressed with it. I grant I made the proposition, * * * and as it'was my proposition, I made the offer of my. own free will, and I never go back on my word, so I am just as determined as ever to carry out my proposed plan and pay one-half of that loss.”

TJnder date of May 16, 1889, defendant writes: “As to the three C’s it is a debt of honor and shall be paid.” And under date June 3,1889, first stating that she had found the broker’s letter and a memorandum of her own, defendant writes: “ Referring again to the three 0’s, * * * I hud it went out on a stop at J5; that when the market continued dropping I püt on 100, then 300 that I borrowed from Judge Parmalee, and after that 200 of store money and then Jet it go. So you see that when I have paid you 500, as-one-half of your 1,000, that my loss will be 1,100 to your 500. Now I am not finding fault, neither do I wish to be excused from paying-you what has been agreed upon.”

The correspondence from which the above extracts are made is-voluminous. Other extracts could be added of the like purport.

The letters speak for themselves. No reference to oral testimony is necessary further than to enable us to understand what is the subject-matter treated upon. The meaning of the letters is not affected by the referee’s finding that the $500 was a loan. We are to construe them in the sense in which the defendant wrote them. They are unmistakably to the effect that the defendant did not 'borrow the $500.' The letters repudiate that claim, but they contain her acknowledgment, that because she had induced the plaintiff to engage with her in the purchase of the stock upon the prediction of the Wall Street News she would make good to her half of her loss; that was what she had said and agreed to, and still meant to do. Such an acknowledgment does not meet the requirements of the statute.

The judgment is reversed, referee discharged, new trial granted, costs to abide the event.

The defendant made a motion for a new trial upon newly discovered evidence. The motion was denied, and the defendant appealed, and that appeal is also before us.

We affirm that order, with costs.

Leae-Ned, P. J., and Mayham, J., concurred.

Order denying motion for new trial on newly discovered evidence affirmed, with costs. Judgment reversed, referee discharged, new" trial granted, costs to abide event.


author:
LEARNED, P. J.:
      LandoN, J.:'

text:
    PATRICK E. WALSH, Respondent, v. THE MUTUAL LIFE INSURANCE COMPANY, Appellant.

      Life insurance policy payable to the wife, or if dead to the children — death of the wife before that of the assured — rights of the children who die before and those who survive their mother —promise to pay upon a contingency — decisions on legacies not applicable to such a ease.

    A life insurance company issued a policy upon tlie life of a husband in favor of bis wife, agreeing- to pay tlie amount named therein to her “for her sole use, if living, in conformity with the statute, and if not living to her children or their guardian for their use.” The wife died before the husband, and one of their three children died before the wife and left issue.
    On the hearing of a demurrer interposed to the complaint, in an action brought 1 for the enforcement of the policy:

      Held, that the personal representatives of the child who died before the mother-were entitled to share in the proceeds, and that the whole amount of the policy did not go to the children who survived the mother.
    That if a construction were adopted that only the survivors took, and no child' survived its mother, there would be no person to whom the insurance company would be legally bound to pay the loss.
    That a promise to pay a sum of money to a person upon a contingency does not abate because the person dies before the contingency happens, but said sum then becomes payable to the representatives of said person.
    That decisions upon questions relative to legacies were not in point.

      United States Trust Company v. Mutual Benefit IAfe Insurance Company (115 N. Y.,. 152) distinguished.
    Appeal by the defendant, tlie Mutual Life Insurance Company . of New York, from a judgment, entered in tlie office of tlie cleric of Albany county on the 27tli day of February, 1891, in favor of tlie plaintiff for $2/79.84, after a trial of issues of law at tlie Albany Special Term, with notice of an intention to bring up for review upon sneb appeal an order and an interlocutory judgment,, entered in said clerk’s office on the 2d day of February, 1891.

      Julien T. Davies, for tlie appellant.

      Franldin M. Danaher, for tlie respondent.
   LEARNED, P. J.:

The defendant issued, March 23, 1864, a policy on the life of Yeis Traub in favor of Rica Traub, bis wife, agreeing to pay tlieamount to lier “for her sole use if living, in conformity with the statute, and if not living, to her children, or their guardian for their use.” There were three children of Veis Traub and Rica Traub, viz., Bessie Gross, Solomon Traub, Carrie Yan Schaick.

Bessie Gross died intestate April, 1886, leaving surviving her husband and two children. Rica Traub died April, 1887. Solomon Traub died intestate June, 1887, leaving his widow Henrietta (now Ileinzel) and two children; and Henrietta (now Heinzel) ,was appointed his administratrix. Yeis Traub died intestate July 2, 1890. Carrie Yan Schaick, his daughter, is living. Henrietta ITeinzel, administratrix as aforesaid, and Carrie Yan Schaick have assigned their claims to plaintiff.

One-third part of the amount payable on the policy has already been paid to Carrie Yan Schaick, and one-third part to Henrietta Ileinzel, administratrix. The plaintiff, as their assignee, now claims the remaining one-third.

The defendant admits on the argument that the two children of Bessie Gross, being grandchildren of Yeis Traub and Rica Traub, are not owners of this third; but contends that either the executor of Bessie Gross, if she made a will, or the administrator, if she died intestate, takes this third as part of the estate of Bessie Gross, deceased.

The question arises on a demurrer to the complaint which states all the facts, and the defendant appeals from the judgment and order overruling the demurrer. It will be seen that the question is, under such a policy what is the interest, if any, of the personal representatives of’ a child who, dies before the mother? Does that part of the proceeds of the policy which would have gone to the child if living, go to the representatives of such child; or do the proceeds go entirely to the children surviving the mother.

In United States Trust Company v. Mutual Benefit life Insurance Company (115 N. Y., 152), a policy was construed which was closely similar in language to this one now in question. The court said that when the wife died before the husband, the only persons interested in the policy were her children then surviving, and the whole policy, as a chose in notion, belonged to them. They held vested interests therein, as they could in any other chose in action payable at a future time. The court said, as the defendant here admits, that the grandchildren could not take. N ow, it is to be noticed that while the court in that case speak of the policy, upon the death of the wife, as belonging to children then living, yet in that instance all the children were living at the death of the wife. There was, therefore, no special meaning in the words “ then living.” It was true in that ease that on the death of the wife the interest passed to the children then living, because there were none who had died. The attention of the court was not directed to the question whether or not the representatives of a deceased child, if any, would have an interest.

The present policy contains a condition in respect to, the wife, that the money is to be paid to her, if living. No such condition is contained therein in respect to the children. It says that if she is not living, the money is to be paid to her children. But it does not add, “ if living.” It, therefore, is a promise to pay to them; on the sole condition that the wife is not living at the death of the father. Suppose, then, that all the children had died before the wife, would it be said that there was no one to whom the money should be paid ?. It has been decided, as above stated, that the money would not in that case, be payable to the grandchildren. But would it not belong to the estates of the children and thus beneficially, in many cases, come to the grandchildren? Or would it be necessary to hold, as must result from the plaintiff’s position, that the insurance company must, in such a case, retain the money for want of a payee ? The decision' that no interest went to the grandchildren was 011 the very ground that the contract was with the children. And the court expressly held that if made with the children alone, it went to their representatives

This is the case of a contract, not of a legacy. The company for a good consideration agrees that when A dies it will pay a certain sum of money to B if living, and if B is not living, then that it will pay the money to C and D and E, designating them not by name, but as the children of B. It is not disputed on either side that C, D and E take separate portions, and do not take jointly. What is there in such an agreement which makes the right of C, D or E dependent on their surviving B ? A promise to pay a sum of money to a person on a certain contingency does not cease to be binding because the person dies before the contingency happens. The debt on the happening of the contingency is payable to his representatives.

The case of Whitehead v. New York Life Insurance Company (102 N. Y., 143) was on a question as to the power of the husband to surrender policies of this kind. The matter of the respective rights of the wife and children was not before the court. But the court, in speaking of the policies, say: “They created a vested interest -in the wife and also one in the children by force of the clause providing for payment to them if the wife should die before the maturity of the policy.” Now,' few things are more unsafe in legal discussions than to take up a sentence in an opinion and consider it as a decision without reference to other parts of the opinion. And we only quote that sentence because a previous sentence in the same opinion has been cited to show that the wife “ had a vested -interest in the policies,” and, therefore, the children could have no intei’est. Again, that opinion says : “ These policies, therefore, at the moment of their execution, vested in the wife cmd children as. the assured.” So that the opinion speaks as freely of the rights of the ' children as -vested as it does of those of the wife. There is nothing, therefore, in the opinion and in the decision in that case which determines the respective rights of the wife and oí the children. Both are called vested ; and as to neither was it necessary to decide what they precisely were.

Some argument has been made from decisions in respect to legacies. But a legacy is a different thing from a contract,-such as this policy is. A legacy is the mere gift of the testator. If ineffectual, or if lapsed, the testator’s property goes to others entitled to take under rules of distribution. The whole question is one of dividing-up the estate of the deceased.

But here we are to construe a contract. The claimants must take by virtue of the contract or not at all. And if, under any construc- . tion, there is no one to take, then the company keeps tire money. The plaintiff insists that no one can take unless he be living at the death of Veis Traub. This construction, as above suggested, results in holding that, if Iiica Traub and the three daughters should have all been dead at the death of Veis Traub, then the company would not be required to pay anyone. A construction which leads to this result is certainly incorrect.

It is true that in tlie opinion in United States Trust Company v. Mutual Benefit Life Insurance Company (ut supra) tlie court, after .giving a construction to the policy, says: “ If, however, we assume that we are wrong in this construction of the policy, then upon the death of Mrs. Finn the policy was payable to her children as a class,” etc. "We do not, however, feel at liberty to assume that the construction given by the court was wrong. Nor do we think that the court intended to assert that the j>olicy was payable only to those children who survived Mrs. Finn. The remark was intended to show that, •even if the plaintiff in that case should urge such a view, still “ in no event could grandchildren be intended in that class.” Such was .the view taken of that decision by Mr. Justice Patterson in Finn v. Mutual Benefit Life Insurance Company (MSS., Nov., 1890).

"We do not think that the court intended to say that even a legacy to a class where there are no words of survivorship, is always payable to those only who are living at the time of payment. Without «discussing that question, we refer to 2 Jarman oil Wills (m. p. 76); Thebold on Wills (383); Everitt v. Everitt (29 N. Y., at 75), where Judge Debió says: “ If futurity is annexed to the substance of the gift, the vesting is suspended; but, if it appear to relate to the time of payment only, the legacy vests instanterP (See Goebel v. Wolf 113 N. Y., 405.)

Now, even if we endeavor to apply that language of Judge DeNio to such a contract as the present, we shall see that futurity is not .annexed to the substance of the contract, but relates to the time of payment only. The contract takes present effect, giving immediate .rights to all the parties beneficially interested. As the court said in the Whitehead case : “ They (i. <?., the wife and the children), had the right, if the husband failed to pay the premiums, to pay them -themselves, and so continue the policy in force.” If a child then had .the right to pay the premiums, it had a present interest in the policy; .•a vested interest, although payment was future and contingent.

The right of the wife to payment, of the amount secured is quite as contingent as that of the children. She certainly gets nothing if she does not survive the husband. Yet the courts speak of her rights as vested before 1ns death. And there is no harm in the word if it be properly understood. Certainly it is not inconsistent with •a contingency as to payment. That is the case also as to the children.

Tlie plaintiff cites the case of Lane v. De Mets (13 N. Y. Supp., 347; 59 Hun, 462). But in that case there was a clause that “ if there be no such children surviving” the money should be paid to the personal representatives of the person whose life was insured. And the decision of the court was on this clause, holding that this indicated that the avails should go only to surviving children and should form a part of the estate of the person whose life was insured, in case neither wife nor children survived. No such clause is in the present policy and that case does not apply here. And from that case we may readily see that if the parties to this contract had desired to make the right of each child dependent on its surviving the father, they would have said in the policy “to her children then surviving” or would have used similar language.

In Hull v. Hull (62 How., 100), the Special Term held that if a child died before the mother, the children of that child would take under such a policy, in case the mother did not survive the father. Such seems to be the doctrine in Connecticut. (Continental life Insurance Company v. Palmer, 42 Conn., 60.) Now, in the case of the United States Trust Company v. Mutual Benefit life Insurance Company above cited, it was held that this was incorrect; and that as the grandchildren were not named in the policy their names could not be put in. But in that case the court explains that the insurance could be made to a child, in which case, upon the death of the father, it would be payable to the personal representatives'of the child, if dead.” And it was also said m that case that on the death of the wife the policy might be construed and is payable precisely as if the children alone were mentioned therein. Therefore, we may now construe this policy as if the children alone were mentioned in it. Hence, as the court said, if this insurance were made to these children, alone, it would be payable to their personal representatives, if they were dead. And if made to these three children, it cannot be held that the death of one before the father would deprive the representatives of that child of its share. To hold that would be to ignore the object of such insurance.

So, too, in that same case the court said that, if for the benefit of the wife alone, it would, if she died before the husband, be payable to her personal representatives. Thus we see that the court recognized the doctrine that the insurance was in all these cases payable to the personal representatives of the parties to the policy if they died before the husband. Turning, then, to the 'Whitehead Gase, we find it distinctly stated that in such a policy the children have a vested interest, and that they and the wife are the assured with whom the contract was made. It follows, then, that the rights which the assured acquired by the policy passed to their personal representatives, and the money would be payable to them unless by express language such payment depended on‘their surviving the party whose life is insured, and that contingency did not occur.

In Anderson v. Goldsmidt (103 N. Y., 617), it was held’that under chapter 248, Laws of 1879, a wife, with the consent of her husband, might assign such a policy as the present. And the plaintiff argues that this shows that the interest of the children is merely contingent. But that decision was only a construction of the statute as it then existed. And the court remarked that the wife, in fact, survived the time when the policy matured, and, therefore, the contingency did not arise on which the money would be payable to the children. But the court recognized that the children would have had rights if the wife had not survived the time when the policy matured.

The case does not decide whether such rights belong to all the children, or to those only who survive the father. That question could not have been before the court. Whether, even under that statute, the wife can, by assignment, take away the rights of the children we need not inquire. It is probably sufficient to say that she may assign her own rights, whatever they may prove to be.

Considering, then, the language of this contract, and also the object of such insurance, we are of opinion that Bessie Gross had, in her lifetime, an interest in the contract to the extent of one-third (subject probably to be diminished in extent by the birth of other children); that such .interest would pass to personal representatives ; that such interest was, of course, subject to be defeated if Rica Traub survived Yeis Traub, and that the plaintiff, as asigneeof Carrie Yan Schaick and Henrietta Heinzel, administratrix, is not the holder of the said one-tliird interest.

Judgment reversed, with costs, and judgment for defendant rendered, with costs.

LandoN, J.:'

I am not without doubt as to the conclusion reached by the presiding justice. The propositions that when the wife died her children were, by the terms of the policy, substituted in her place; that no substitution could precede that event; that no right to substitution attached until the wife died, and, therefore, the dead child could not be substituted, nor her children or representatives, since neither were named in the policy, strike my mind with force.

Nevertheless, all the children might die first, the wife next and the husband last, in which case there would, if the rule of the Special Term prevailed, be no payee; and' because a construction ought to be given the policy which would, in the contingency supposed, avoid such a result, I concur, not without hesitation.

Judgment reversed, and judgment for defendant, with costs.


author: LandoN, J.:

text:
    SARAH BURTIS, and SARAH BURTIS, as Executrix, etc., of ELIZABETH CLEVELAND, Deceased, Respondent, v. FRANCIS CLEVELAND and CAROLINE L. KERR, Appellants, Impleaded with SARAH BURTIS, as Administratix, etc, of JAMES G. CLEVELAND, Deceased, and Others.

      Pleadings —• an action will lie in equity although the plaintiff has, in a representative capacity, an adverse interest — proper statement of the facts in the complaint.

    The complaint, in an action for the foreclosure of a mortgage, stated that one James G. Cleveland executed one mortgage lo secure two bonds, one of which bonds was given to the plaintiff Sarah Burtis, individually, and the other to one 'Elizabeth Cleveland, and that the plaintiff subsequently became the administratrix of James Gr. Cleveland, and the executrix of Elizabeth Cleveland. The ■ plaintiff Sarah Burtis was also made a party defendant in the action in her capacity as administratrix of James G-. Cleveland, and the complaint demanded judgment against her in that capacity for the amount of any deficiency which should result upon a sale of the mortgaged premises.
    A demurrer was interposed to the complaint upon the ground, among others, that the plaintiff could not sue herself, and that there was a defect of parties because there was no defendant qualified to protect the estate of James Gr. Cleveland against the plaintiff.

      Held, that the action could be maintained.

      That the principle that a person cannot sue herself was a common-law rule which equity will not allow to stand in the way of justice.
    That it was unnecessary for the plaintiff to have made herself, as administratrix, a party defendant, as it would have been sufficient for her to have stated all the facts and to have made defendants all parties other than herself having- adverse interests.
    That she would not be permitted, if the power of the court was properly invoked, to do any acts which would prejudice the estates which she- represented in her several capacities.
    Appeal by tbe defendants, Francis Cleveland and Caroline L. Kerr, from an interlocutory judgment, entered in tbe office of tbe clerk of Washington county on tbe 20th day of February, 1891, overruling their demurrers to tbe complaint, with notice of an intension to bring up for review upon said appeal tbe order upon which said judgment was entered.
    The complaint is for tbe foreclosure of one mortgage given by James G-. Cleveland, now deceased, to secure tbe payment of two bonds, one for $1,142.55 to tbe plaintiff Sarah Burtis, tbe other for $1,021.53 to Elizabeth Cleveland, now deceased. Sarah Burtis is the executrix of, etc., of Elizabeth Cleveland, and the administratrix of, etc., of James G-. Cleveland, and she sues as plaintiff in her own right, and as executrix, and names herself, as administratrix of the deceased mortgagor, a party defendant with the other heirs of the mortgagor. She and Elizabeth Cleveland were sisters of the mortgagor, Elizabeth dying before him. The complaint asked, in addition to the decree of foreclosure and sale, judgment against Sarah Burtis as administratrix of the mortgagor for any deficiency. Francis Cleveland and Caroline L. Kerr, a nephew and niece, demurred upon the grounds: That the complaint does not state facts sufficient to constitute a cause of action. That the plaintiff has not the legal capacity to sue herself; that there is a defect of parties, since no defendant is named who is qualified to defend the interest of the estate of the deceased mortgagor against the plaintiff.

      Frcurik, II. Graham, for the appellants.

      Lonson Fraser, for the respondent.
   LandoN, J.:

That a person cannot sue himself is a common-law rule, but in equity this technicality does not stand in the way of justice. (Cole v. Reynolds, 18 N. Y., 74) Neilly v. Neilly (23 Hun, 651) is an authority for such an action as this. Tlie case was reversed in 89 New York, 352, because of a former adjudication. Lyon, as Guardian v. Lyon (67 N. Y., 250) was another such action and the practice was not questioned.

Although the plaintiff sues both in her own right and as executrix, and names herself in her capacity as administratrix, etc., of James G-. Cleveland as defendant, she does not, and probably cannot, really sue herself. There was no need of naming herself as a party defendant. All she needed to do was to recite, as she does in the complaint, the facts showing her several capacities and the facts constituting her causes of action, and then bring before the- court as parties defendant, as she has, all persons having any adverse interest. If any of the defendants shall ultimately be prejudiced, it will be because they neglect to resort to all the methods open to them to-develop the truth. Sarah Burtis cannot confess judgment in her own favor or make any admissions for her own benefit against the estates she represents. She does not, except nominally, represent both sides of this action, and the court will, if any of the defendants properly invoke it, see to it that the accident of her several capacities in no way sacrifices justice. The fact that she has placed her name among those of the defendants injures no defendant. Each one can, and must in this action, as in every other, look out for his own interests. The defendants ask too much; they ask Sarah Burtis to resign one of her trusts in order to obtain justice. "Why should she? Who will take it up ? It may be that all other interests are to be promoted by leaving the estate of James Gr. Cleveland without a representative. But she has her rights and duties in all her capacities, and the law does not require her to renounce any in order to secure justice. The objections taken by the demurrer are apparent rather than real. They are -not substantial, and were properly overruled.

Interlocutory judgment and order affirmed, with costs

LeaRNed, P. J„ and Mayham, J., concurred.

Judgment and order overruling demurrer affirmed, with costs.


author: Learned, P. J.:

text:
    In the Matter of the Probate of a Paper Purporting to be the Last Will and Testament of MATTHEW SMITH, Deceased.

      Will — proof of execution, where the intestate cannot read or write — proof of handwriting where a subscribing witness is dead — a former will must be produced before testimony can be given bearing upon its contents — statements made by a testator to the attorney and the witnesses — when admissible under Code of Civil Procedure, section 835.
    The application of the rule that, where a testator cannot read or write, there must, in addition to the usual proof, he also proof that he understood the contents of his alleged will, must vary somewhat with the circumstances of the case; and where, upon an application for the probate of a will, it is shown that its execution was supervised by an experienced attorney; that it was drawn at the request and at the house of the testator; that the attestation clause was read over by the attorney to the subscribing- witnesses in the presence of the testator, and where the will is simple and just, there is enough to satisfy the judicial mind that the testator knew its contents.
    "YVhere one of the subscribing witnesses has died, the attorney may testify that the testator made his mark to the will, and this testimony, together with that of the living subscribing witness to the same effect, is sufficient proof of the testator’s handwriting within sections 2618 and 2620 of the Code of Civil Procedure.
    In such a case another attorney, called by the contestants, should not be allowed to testify that the deceased subscribing witness had said to him that a former will, drawn by t-lie witness for the testator, was unjust to the testator’s wife, and that lie, said subscribing witness, was going down (to the testator’s house) to have another will drawn, unless the former will is produced.
    The attorney who draws a will may properly be allowed to state what the testator said in the presence of the subscribing witnesses, when the will was about to be executed, in respect to that will and his satisfaction with its provisions.
    'Such statements in regard to the will, made by the client to his attorney, being-addressed equally to said attorney and to the subscribing witness, are not objectionable under section 835 of the Code of Civil Procedure.
    Appeal by Jolm W. Crane, the proponent of, and the executor named in, tbe alleged will of Matthew Smith, deceased, from a decree ■of tbe Surrogate’s Court of tbe county of Saratoga, entered in the office of said court on tbe 20tli day of September, 1890, denying probate to said alleged will.
    ■/. W. Houghton, for tbe proponent, appellant.

      O. H. Sturges, for tbe contestants, respondents.
   Learned, P. J.:

This is an appeal by proponent from the refusal of the surrogate to admit the will to probate. The reasons of the surrogate were,, that the deceased could not read or write and the contents of the will were not made known to him. That he was of unsound mind and memory. And that the will was made under undue influence.. The deceased had accumulated by industry about $600. lie had a. wife with whom he had lived on good terms for thirty years. lie had never had any children. He had kept a hotel, patronized by workingmen, for some twenty-five years, and was himself accustomed to drink. His wife was a hard-working woman. The deceased made this will about a month before his death, and by it-he gave $200 to his nephew, James Smith, and everything else to' his wife; making her executrix and Judge Crane, of Saratoga. Springs, executor. He had three brothers surviving and several nephews and nieces, and he had had also a sister, who was not known to be living. The will was dated September 1Y, 1882. Proceedings for probate were commenced March, 1883; and after some delay the will was admitted to probate March 20, 1889. This probate was afterwards set aside on the ground of want of jurisdiction,, apparently because certain infants had not lawfully appeared. In January, 1890, the present proceedings were commenced by the executor. The will is witnessed by James M. Andrews and Hiram IT. Martin, and is signed by the mark of the testator. Andrews had died before the hearing. His signature was proved.

We are unable to see sufficient evidence to establish undue influence. It was proved (assuming the testimony to be admissible) that he had previously made another will by which he gave his property to his wife for life. But this change of testamentary disposition is not enough evidence of undue influence; and we find little else. Nor do we think that the evidence sustains the finding that the deceased was of unsound mind and memory. It is plain that he was accustomed to drink too much spirituous liquor and that he showed the effects of this habit. But an examination of the1 evidence does not show that unsoundness of mind which disqualifies one from making his will. We do not think it necessary to go over the details of the evidence, since there are some other points which, we must examine.

Tlie contestants urge that as the deceased could not read or write there was not sufficient evidence that he knew the contents of the will. The facts are that the will was drawn by Judge Crane, a lawyer of long practice, who had been for some time judge of the County Court. It was drawn at the request of deceased and at his. house. Mr. Andrews, one of the witnesses, was a lawyer, a man of large bnsiuess, and at the time over sixty years old, evidently acquainted with the deceased, as appears from the conversation stated by Martin. Judge Crane and the deceased were together in the room when the two witnesses came in. Judge Crane read aloud the attestation clause in their presence, but did not in their presence read aloud the will. The decision in Rollwagen v. Rollwagen (63 N. Y., 504) is that when a testator cannot read, write or speak, there must be not only the ordinary proof of subscription and execution, but also proof that the testator understood the contents of the will. The same rule was applied in Matter of Bull (20 N. Y. St. Rep., 522) to the case of a testator who was nearly blind. Now the application of this general rule must vary with the circumstances. For instance, in the Rollwagen case the testator-had been paralyzed and could not utter an intelligible sound, and there were many circumstances which made it doubtful whether the will expressed his wishes.

In the present case although the testator could not read, yet he was in full possession of his faculties. Iiis brother, not mentioned in the will, came for the witnesses. A lawyer of high character, who had held judicial position, drew the will at the request of deceased. It was drawn at the house of deceased. Judge Crane, the lawyer who drew it, was in the room with deceased when the ■ witnesses came and read the attestation clause, in their presence and in the presence of the testator. One of the witnesses, as we have seen, was also a lawyer of experience. Add to these circumstances tlie facts that the will was simple in its terms and eminently just, and there is enough to satisfy the judicial mind that the testator knew the contents of the will. A strong presumption in favor of the,will arises when it has been executed under the supervision of experienced persons, familiar with the law. (Matter of Cottrell, 95 N. Y., 339)

"We have, then, in this case more than the mere fact of the formal execution of the will. We have circumstances from which any one might reasonably infer that the deceased knew the contents, as it was distinctly proved that he knew the nature of the instrument.

The contestants claim that as one of the subscribing witnesses was dead, and as the testator signed by a mark, the will could not be proved. (Code Civil Pro., §§ 2618, 2620.) It is enough to say that Jndge Crank, not a subscribing witness, proved that the testator made his mark. This is sufficient proof of handwriting. But we do not decide, as intimated in some cases, that a subscribing witness may not in such a case prove the handwriting by a mark of the testator. It is not necessary to pass on that question.

Mr. Brackett was called asa witness by contestants. lie testified, under objection, to instructions given him, as counsel, by Smith in respect to drawing a previous will in which he was a wetness. He then testified, under objection, that Mr. Andrews, the deceased subscribing wetness to the will in question, came to his office and said that the will of Mr. Smith (referring to that drawn by Mr. Brackett) was unjust to Mrs. Smith, and that he, Andrews, was going dowei to have another drawn. It is quite doubtful whether this evidence was admissible. It in no way affected the question of the execution of the will in question. Nor was it an impeachment of a witness who liad testified at the tidal. If even we assume that Andrews stood in the same position as if he had been alive and had testified, this evidence did not contradict anything he could he supposed to have said. (Matter of Hesdra, 119 N. Y., 615.)

If Mr. Brackett, being a witness to the former will (Matter of Coleman, 111 N. Y , 221), were competent to testify to statements of deceased, still he conld not properly testify as to the contents of such will until its loss was shown.

Judge Crane was asked: “When this will had been prepared and was about to be executed by the testator, what did Matthew Smith say in the presence of James M. Andrews and H. II. Martin (the witnesses) in respect to that will and his satisfaction with its provisions ? ” This was objected to under section 885, and excluded on the ground that this was a communication in the course of professional employment. There is no doubt that this section applies to counsel employed by a client to draw' a will. (Loder v. Whelpley, 111 N. Y., 239, and the CoJcman Ouse, ut supra). But in the latter case the ■decision referred to conversations with, tlie attorneys at the time of giving instructions to draw tlie will. Tlie case here is entirely different. Judge Crane was asked simply as to a statement made by Smith in the presence of the subscribing witnesses and Judge Crane just before the execution of tlie will. It was held in Matter of McCarthy (55 Hun, J), that such a statement was not within the prohibition. It was a remark addressed equally to tlie subscribing witnesses. It might tend to show tlie knowledge bad by the deceased of tlie contents of the will. It seems to us not to come within either tlie words of tlie section or the evil intended'to be prevented.

The decree of tlie surrogate should be reversed, and issues should be sent to the Saratoga Circuit, costs to abide final event; order and issues to be settled by Learned P. J.,

Landon and Mayham, JJ., concurred.

Decree reversed, issues sent to circuit, costs to abide final event; issues and order to be settled by Learned, P. J. -