author: Mayham, P. J.: Landon, J.:

text:
    The First National Bank of Amsterdam, Respondent, v. Elizabeth N. Shuler, Appellant, Impleaded with Others.

      Creditor* $ action — lien acquired Try the commencement thereof— death of a party to an action before trial — when the application of his executrix after the trial to be made a pa/rty defendant, will be denied. '
    By the commencement of an action in the nature of a creditor’s hill a lien is acquired upon all the choses in action and equitable assets of the judgment debtor, and, also, upon all his tangible assets. As to the intangible assets, since they can only be reached in equity, the first in diligence is first in lien. As to the tangible assets the law affords the creditor a remedy by execution which equity does not supersede or exclude, which, if resorted to before the receiver is appointed, is entitled to the preference.
    An action was brought by a judgment creditor of one Isaac C. Shuler to set aside certain conveyances made by the said Isaac 0. Shuler to Mary A. Booth and Elizabeth N. Shuler, and also to set aside a general assignment for the benefit of creditors made by the said Isaac C. Shuler to Hicks B. Waldron; to which action the said Isaac C. Shuler, Elizabeth N. Shuler, Mary A. Booth and Hicks B. Waldron, as assignee for the benefit of creditors of Isaac C. Shuler, were made parties defendant.
    The defendants, Isaac C. Shuler and Elizabeth N. Shuler, answered in the action. After issue was joined and before the trial of the action, Isaac C. Shuler died, leaving a last will and testament, wherein he named Elizabeth N. Shuler as sole executrix, and made her the sole devisee and legatee of all of his estate.
    After the death of Isaac C. Shuler and the probate of his will, the plaintiff obtained an order from the court, upon notice to all the surviving defendants, granting leave to serve a supplemental complaint. The supplemental complaint, in addition to the allegations of the original complaint, alleged the death of Isaac C. Shuler, the execution and probate of his will, and the appointment and qualification of Elizabeth N. Shuler as sole executrix. No issue was taken by the defendants upon these allegations of the supplemental complaint.

      The cause was tried before a referee, who reported in favor'of the plaintiff, setting aside several of the conveyances and assignments, and the final assignment for the benefit of creditors, as fraudulent and void. Application was made by the plaintiff to the Special Term for confirmation of the referee’s report, and an interlocutory judgment was granted, which appointed a referee to take and state the accounts off the assignee for the benefit of creditors of Isaac 0. Shuler and also of Elizabeth if. Shuler for any property in their or either of their hands belonging to the estate of the deceased, and appointed a receiver of the property and effects of Isaac C. Shuler, deceased.
    On the hearing before the referee appointed by the interlocutory judgment, Elizabeth N. Shuler appeared by counsel, and the referee, after hearing counsel, made his report, and upon the application made by the plaintiff to the Special Term for confirmation thereof, and for final judgment, Elizabeth N. Shulor gave notice of a motion to be made by her, which, among other things, stated that she would move for an order that she, as executrix of the last will and testament of Isaac C. Shuler, deceased, be made a party defendant in the action. This motion was denied and final judgment was ordered to be entered.
    Upon an appeal from the order denying such motion,

      Held, that it was clearly right to deny the application of Elizabeth N. Shuler to-be made a party defendant as such executrix; that she was properly before the court in her representative capacity after the filing of the supplemental complaint; that after the service of the supplemental complaint upon her, if she had so desired, she could have interposed an answer in her representative-capacity without any further leave of the court; that she was, for all beneficial purposes of her defense, before the court as such executrix, and was entitled to-be heard in that capacity in the action;
    That there could be no good reason for allowing her, after the case had been finally disposed of, to present new issues and render the work already accomplished in the case entirely nugatory;
    That the plaintiff, by commercing the action, obtained a lien upon the assets of Isaac C. Shuler which survived his death although the receiver was not appointed until after his death;
    That as Isaac C. Shuler had made a general assignment of his assets, good as. against himself,' though bad as against the plaintiff, they did not pass under his. will to his executrix.
    Appeal by the defendant, Elizabeth N. Shuler, from a judgment of the Supreme Court in favor of the plaintiff, entered in the-office of the clerk of the county of Montgomery on the 22d day of October, 1894, upon the report of a referee, with notice of an intention to bring up for review upon such appeal the interlocutory judgment in this action entered in the office of the clerk of the county of Montgomery on the 18th day of December, 1893.
    Also an appeal by Elizabeth N. Shuler, individually, and as-executrix of the last will and testament of Isaac- 0. Slmler,. deceased,. from an order of the Supreme Court, made at the Montgomery Special Term and entered in the office of the clerk of the county of Montgomery on the 22d day of October, 1894, which denied the motion of the defendant to correct the interlocutory judgment entered herein, and to be made a party defendant as executrix of. Isaac 0. Shuler, deceased.

      Matthew Hale, for the appellant.

      Z. S. Westbrook, for the respondent.
   Mayham, P. J.:

This appeal arises out of the following facts:

The plaintiff in this action, being a judgment creditor of Isaac C. Shuler in his lifetime, commenced a creditor’s action to set aside certain conveyances and assignments made by said Shuler to Mary A. Booth and Elizabeth N. Shuler, and a general assignment for the benefit of creditors made by the judgment debtor to Hicks B. Waldron, all of whom were made defendants in this action.

The defendants, Isaac C. Shuler and Elizabeth N. Shuler, answered in the action, taking issue upon the allegations of the complaint therein. After the issue was joined and before the trial of the action, Isaac 0. Shuler died, leaving a last will and testament wherein he named Elizabeth N. Shuler as sole executrix, and made her the sole devisee and legatee of all of his estate, real and personal; whereupon, the plaintiff obtained an order of the court for leave to file and serve a supplemental complaint. That complaint, in addition to the allegations of the original complaint, alleged the death of Isaac C. Shuler; the execution and probate of his will and the appointment and c]ualification of Elizabeth N. Shuler as sole executrix of that will. That motion was made and the relief granted upon notice to all the surviving defendants in the action. No' issue was taken by the defendants upon these allegations of the supplemental complaint, and the same were, therefore, admitted.

The cause was tried before Hon. Charles R. Ingalls, as sole referee, who, after hearing the case, made his report, wherein, among other things, he found and adjudged several of the conveyances and assignments made by Isaac C. Shuler, and his final assignment for the benefit of creditors, to be fraudulent and void, and directed judgment setting aside such conveyances and assignments, and adjudging them to be void as against the plaintiff as judgment creditor.

To some portions of the findings of fact and conclusions of law in the report of the referee, the defendant Elizabeth N. Shuler, by her counsel, excepted.

Upon this report an interlocutory judgment was entered, which directed a receivership of the estate of Isaac 0. Shuler and appointed Alonzo P. Strong a referee therein, to take and state the accounts ■of the assignee of Isaac 0. Shuler and of the defendant Elizabeth N. Shuler.

On the hearing before the said referee, in taking the account directed by said interlocutory judgment, the appellant, Elizabeth N. Shuler, appeared by counsel, as did the plaintiff, and the referee, after hearing counsel, made his report, wherein he followed the directions of the report of the referee made in the trial, and fixed and adjudged the amount and kind of property found by him in the possession of the assignee for the benefit of creditors, and also of that in the hands of Elizabeth N. Shuler, belonging to the estate of the deceased.

Upon the filing of the report, an application was made by the plaintiff to the Special Term for the confirmation of the same, and for judgment upon the report in favor of the plaintiff. Upon notice of such application, Elizabeth N. Shuler, by her attorneys, gave notice of a motion to correct and modify “the interlocutory judgment herein and the report of the said Charles R. Ingalls, referee,” and also for an order that she, as executrix of the last will and testament of Isaac C. Shuler, be made a defendant in the action.

The motion for confirmation and judgment and the motion made by the defendant Elizabeth N. Shuler to modify and correct the report and to be made a party defendant, were all ordered to be heard before- Mr. Justice LaNdoN, at Special Term, who subsequently heard the applications on behalf of the plaintiff and the defendant Elizabeth N. Shuler, whereupon, he denied the motion of Elizabeth N. Shuler to modify and correct the report and to be made a party, with costs, and granted the motion of the plaintiff for filial judgment.

From the order denying the motion to correct the referee’s report and the interlocutory judgment entered thereon, as well as from the final judgment entered in the action, the defendant Elizabeth N. Shuler appeals to this court, with notice of - an intention to bring up for review the said interlocutory judgment.

We think the learned trial judge at Special Term was clearly right in denying the application of Elizabeth N. Shuler to be brought in as executrix. Within the authorities referred to by him, sjie was properly before the court in her representative capacity after the filing of the supplemental complaint. There can be but little doubt but that if she had so desired she could, after the service of the supplemental complaint upon her, have interposed an answer in her representative capacity, without any further leave of the court to do so. She was, therefore, for all the beneficial purposes of her defense, before the court as executrix, and entitled to be heard in that capacity in this action. That being so, there could be no good reason for allowing her, after the case had been finally disposed of, to present new issues and render the work already accomplished in the case, perhaps entirely nugatory.

The order, so far at least as it refuses her application to be made defendant, should be affirmed, with costs.

We have also carefully examined the various questions raised by the learned counsel for the appellant, in reference to a modification of the interlocutory judgment, as asked for by them, as well as their application on the whole case, for a reversal or modification of the decree entered therein, and are of opinion that the same should be affirmed upon the opinion rendered by the judge at Special Term.

Most, if not all, of the questions raised by the learned counsel on this appeal were clearly and succinctly examined and passed upon in the opinion handed down by the Special Term judge.

W e think the interlocutory and final judgment should be affirmed upon that opinion.

Putnam and Herrick, JJ., concurred.

Judgment and order affirmed, with costs.

The opinion of the Special Term was as follows:

Landon, J.:

The objection that the defendant, Elizabeth N. Shuler, as executrix, was not named as a party defendant in the supplemental complaint, is not a substantial or fatal objection. She was a party defendant in the original action, and after the death of her lmsband, also a defendant in that action, and her qualification as the executrix under his will, an order was made pursuant to which a supplemental complaint was served, reciting such death and her qualification as executrix. The supplemental complaint is ample to charge her as executrix. (Patterson v. Copeland, 52 How. Pr. 460; Beers v. Shannon, 73 N. Y. 292; Stilwell v. Carpenter, 2 Abb. N. C. 238; S. C., 62 N. Y. 639.)

In the original complaint Mrs. Shuler was charged in her individual capacity. The function of the supplemental complaint was to charge her as executrix of her husband as well as individually.

The plaintiff, by commencing this action, obtained a lien upon the assets of the original defendant Isaac C. Shuler, which survived his death, though the receiver was not appointed until after his death. (Brown v. Nichols, 42 N. Y. 26.)

It is urged in behalf of Mrs. Shuler that this lien only applied to intangible and equitable assets not subject to levy upon execution, and that as to tangible assets subject to levy the lien did not attach, and, therefore, upon the death of Mr. Shuler they passed to her as his executrix.

As Mr. Shuler had made a general assignment of his assets, good against himself, though bad against the plaintiff, they did not pass under his will to his executrix. Clearly, if the lien of the plaintiff was good, against Shuler himself, his executrix, who stands in his shoes, has no better right.

The cases cited to support the proposition that the lien acquired by the commencement of an action in the nature of a creditor’s bill,, does not attach to tangible assets, subject to levy, are to the effect that such lien, before the actual appointment of a receiver, does not prejudice the lien of the levy under an execution of another judgment creditor. (Davenport v. Kelly, 42 N. Y. 193.) Something more than a lis pendens is required to prejudice such a levy. (Becker v. Torrance, 31 N. Y. 631.) Albany City Bank v. Schermerhorn (Clarke, 303) was a contest between receiver' and the sheriff who made his levy after the actual appointment of the receiver. .

Kitchen v. Lowery (127 N. Y. 53) was between a judgment creditor who did not commence his action to set aside an unfiled chattel mortgage until after tbe mortgagor bad made a general assignment and tbe mortgagee liad sold tbe chattels and realized bis money upon them. Tbe mortgage was held to be good between mortgagor and mortgagee, though not filed, and the judgment creditor was beaten because the mortgagor had assigned his interest and the mortgagee realized upon bis lien before the judgment creditor attacked it. There are expressions in the opinion that seem to support Mrs. Shuler’s contention. They are probably true as applicable to the facts there presented, but not true if sought to be extended to Mrs. Shuler’s position.

I think the rule is that by the commencement of an action in the nature of a creditor’s bill, a lien is acquired upon all tbe dioses in action and equitable assets of the judgment debtor, and also an inchoate lien upon all his tangible assets; that, as to the intangible assets, since they can only be reached in equity, the first in diligence is first in lien ; and, as to the tangible assets, the law affords the creditor a remedy by execution which the commencement of an action in equity does not supersede or exclude, and which, if resorted to before a receiver is appointed, takes the preference. It is probably true that a chattel mortgage sale, or any other honest transfer of the tangible property, before the commencement of the creditor’s action, will be upheld. The cases are contests between creditors in which an actual lien or title, accompanied with possession of the property or the right to it, is better than the attempt to perfect it by resort to equity.

I notice the remark of Mr. Justice Gilbert in Smith v. Edwards (23 Hun, 229), to the effect that Judge Grover’s remarks in his dissenting opinion in Brown v. Nichols (42 N. Y. 42), have not the force of authority. But Judge Grovee’s opinion consists of two parts, one in which he dissented from the majority, and the other in which he agreed with them, and the remarks referred to are in the second part of his opinion. I think Judge Geoveb in these remarks was right, and I do not see that they did not receive the approval of the majority.

The motion of Mrs. Shuler is denied, and the referee’s report confirmed, except as modified, as to the value of a horse charged to Mrs. Shuler, seventy-five dollars and interest, and final judgment directed for plaintiff.


source: Caselaw Access Project

author: Putnam, P. J.:

license: Public Domain

text:
    The People of the State of New York, Respondent, v. Ashbel P. Fitch, as Comptroller of the City of New York, Appellant.

      Pauper insane — tax for the maintenance of — chop. 565 of 1893 applies to Pew Torlc county — intent of chap. 126 ^1890 — interest upon taxes in arrears.

    Chapter 565 of tlie Laws of 1893, which provides that “there shall he imposed for the fiscal year beginning on the 1st day of October, 1893, on each dollar of taxable real and personal property of this State, for the care, medical treatment, maintenance and transportation of the insane poor to State hospitals, the payment of officers’ salaries, the payment of employees’ wages, and ordinary and incidental repairs in State hospitals, a tax of one-third of a mill, to be assessed, levied and collected by the annual assessment and collection of taxes for that year, andpaid by the several county treasurers into the treasury of this State, to be held by the Treasurer for application to the purposes herein specified,” cannot be construed in such a manner as to exempt the taxable property situated in the city and county of New York from taxation thereunder.
    The language of the act is not obscure, and it plainly imposes a tax on all the property of the State, making no exception in favor of any portion thereof, and does not, by reason of the said act of 1893 being an amendment of chapter 214 of the Laws of 1893, entitled an act to appropriate money for the care, etc., of the insane poor, under the provisions of chapter 126 of the Laws of 1890 (the act of 1890 not being applicable to the city and county of New York), fall within the rule that, in the construction of a statute, acts in pari materia may be referred to to ascertain the intent.

      Semble, that the provisions of chapter 126 of the Laws of 1890 do not indicate an intention on the part of the Legislature that, in raising funds for the care of the pauper and indigent insane, the taxable real and personal property situated in the city and county of New York should be exempt from future taxation.
    Interest should be charged against a county upon the balance of taxes due the State at the expiration of thirty days from the first day of May.
    Appeal by Ashbel P. Fitch, as comptroller of tlie city of New York, from a judgment of the Sirpreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Albany on the 29th day of December, 1894, upon the verdict of a jury rendered by direction of tlie court after a trial at the Albany County Circuit directing that a peremptory writ of mandamus issue ; also from so much of a final order of the Supreme Court, made at the Albany Circuit and entered in the office of the clerk of the county of Albany on the 29th day of December, 1894, as directs that a peremptory writ of mandamus issue.

      Francis M. Scott and James M. Ward, for the appellant.

      Theodore E. Hancock, Attorney-General, G. D. B. Hasbrouck, Deputy Attorney-General, and John W. Hogan, for tbe respondent.
   Putnam, P. J.:

Section 1, chapter 565, Laws of 1893, provides that “ There shall be imposed for the fiscal year beginning on the first day of October, eighteen hundred and ninety-three, on each dolla/r of tamable real and personal property of this State, for the care, medical treatment, maintenance and transportation of the insane poor to State hospitals, the payment of officers’ salaries, the payment of employees’ wages, and ordinary and incidental repairs in State hospitals, a tax of one-third of a mill, to be assessed, levied and collected by the annual assessment and collection of taxes for that year, and paid by the several country treasurers into the treasury of this State, to be held by the treasurer for application to the purposes herein specified.” Under the provisions of said statute the Comptroller of the State called upon the city of New York to .pay the sum of <§608,219.81, its share of the tax levied under the provisions of the act — that sum being about forty-five per cent of the whole amount to be raised.

The authorities of the city declining to pay the tax in question, the Attorney-General obtained a writ of mandamus to be issued, .to which the defendant having duly made a return, the issues thus raised were tried and a verdict rendered in favor of the plaintiff, by direction of the court, for $716,516.12, the amount of the tax and interest. A peremptory mandamus was thereupon ordered to be issued. Defendant appeals to this court.

No question is raised by the learned counsel for appellant as to the power of the Legislature, under the Constitution, to impose the tax in question upon the taxable property in the city and county of New York. Nor does he object to the practice adopted by the Attorney-General, if, in fact, any tax is due and payable under the act of 1893 from the city and county of New York.

Nor does he insist that the language of section 1, chapter 565, Laws of 1893, if read alone, without reference to any other statute, would not imply a tax upon all the tamable property of the State, including that located in the said county of New York.

But it is urged by. defendant that chapter 565 (supra) is an amendment of chapter 214, Laws of 1893, the title of the latter act being as follows: “ An act to appropriate money for the care, medical treatment, clothing, support and transportation to State hospitals of the insane poor, under the provisions of chapter one hundred and twenty-six of the laws of eighteen hundred and ninety.” He, therefore, calls our attention to the principle established in Smith v. The People (47 N. Y. 330, 339) and kindred authorities, that in a case of doubt or of uncertainty as to the construction of a statute, acts “inpari materia, passed before or after, and whether repealed or unrepealed, may be referred to in order to discern the intent of the Legislature in the use of particular terms,” and urges that chapter 565, Laws of 1893, should be read in connection with chapter 126 of the Laws of 1890; that as the last-named act does not apply to the city and county of New York, neither does the act of 1893, enacted to provide means to carry out the provisions of the act of 1890, although, by its terms, apparently providing for a tax upon all the taxable property of the State.

I am of opinion that the position taken by the defendant cannot be sustained. The authorities upon which he relies are only applicable where there is a doubt or uncertainty as to the construction of a statute. They do not apply where the language used by the Legislature is plain and unambiguous and its meaning clear. The act of 1893 provided that “ there shall be imposed for the fiscal year beginning on the first day of October, eighteen hundred and ninety-three, on each dollar of taxable real and personal property of this State * * * a tax of .one-tliird of a mill.” The defendant urges that the act in question should be construed as if after the provision for the tax upon each dollar of taxable real and personal property of the State it contained the words except such real and personal property as is situated m the city cmd comity of New Yot'h. "We are not authorized to interpolate such a provision in the statute for the reason above suggested, that its language is plain, and it provides for a tax upon all the taxable property of the State, making no exception of property situated in the city and county of New York. If it had been the intention of the Legislature to impose the tax in question upon a portion of the counties of the State, and to except another portion containing nearly one-half of tbe taxable property of the State, we may properly assume that it would have so declared in the act. Hence, the meaning of the words contained in the act cannot properly be changed or restricted by its title, or by reference to any other statute. In the language of McCluskey v. Cromwell (11 N. Y. 593), “it is not allowable to interpret what has no need of interpretation.” When the language of a statute is apt and the construction plain, the construction cannot be affected by the title ; that can only be resorted to when the statute itself is doubtful or ambiguous.” (Matter of the Village of Middletown, 82 N. Y. 136.) “ Where the intent is plain nothing is left to construction.” (U. S. v. Fisher, 2 Cranch, *358-*386.)

So, also, it is said in Cooley’s Constitutional Limitations (*p. 55): “ In the case of all written laws it is the intent of the lawgiver that is to be enforced. Put this intent is to be found in the instrument itself. It is to be presumed that language has been employed with sufficient precision to convey it, and unless examination demonstrates that the presumption does not hold good in the particular case, nothing will remain except to enforce it. ‘ Where a law is plain and unambiguous, whether it be expressed in general or limited terms, the Legislature should be intended to mean what they have plainly expressed, and consequently no room is left for construction.’” (See, also, People ex rel. Bockes v. Wemple, 115 N. Y. 302-307, 308, where the same doctrine is laid down in the opinion of Gray, J.)

Under the well-established doctrine enunciated in the above and many other authorities, I am unable to see how section 1, chapter 565, Laws of 1893, can be construed in such a manner as to exempt the taxable property situated in the city and county of New York from taxation thereunder. As suggested, the language of the act is not obscure, and it plainly imposed a tax on all the property of the State, making no exception in favor of any portion thereof.

Defendant assumes that under chapter 126, Laws of 1890, property situated in the city and county of New York was not taxable to raise funds to carry out its provisions, and he says: “ The title of the act of 1893 is: ‘ An act to appropriate money for the care, medical treatment, clothing, support and transportation of the insane poor, under the provisions of chapter 126 of the Laws of 1890.’ ”

“ Thus, by its very title, the Legislature tied together the act of 1890 and the act of 1893. The latter is but the supplement of the other. They cannot be read apart — they must be read together.”

“ ‘ Under the provisions of chapter 126 of the Laws of 1890,’ says the act of 1893. The provisions of this act shall not apply to or include the counties of New York, Kings and Monroe,’ says the act of 1890.”

If the act of 1890 did exempt property in said counties from future taxation; as assumed by defendant, there would be much force in his position. But the act contains no such exemption.

It provides for a State board to take charge of the insane, insane asylums and the enlargement thereof; for a division of the State into asylum districts; sending patients from county to State asylums, and their maintenance therein by the State. It further provides that the cost and expense of buildings and equipments, of the transportation of the insane to the State asylums, of the custody, care, maintenance, treatment and clothing of -such insane patients in said asylums, and other expenses, shall be paid by the Treasurer of the State on the warrant of the Comptroller, out of any moneys appropriated to carry out the provisions of the act. After the provisions for districting the State, enlargement of the hospitals, removal of the indigent insane thereto, the annual report to the Comptroller by the State Commissioners of Lunacy and managers of State asylums, of the probable cost and expense of carrying out the provisions of the act, and the enactment that the State shall bear the expense, section 13 provides that: “ The foregoing provisions of this act shall not apply to or include the counties of New York, Kings or Monroe, nor embrace the State asylum for insane criminals at Auburn, nor the State asylum for insane criminals at Mattea-wan, nor the State asylum for insane emigrants on Ward’s Island in New York city, or any of them, except as provided in the succeeding section of this act, nor shall it be construed to affect those provisions of existing statutes by which the three counties aforesaid are now permitted to send their acute and chronic insane to State asylums.”

The sections of the act preceding section 13 (supra) make no provision as to how the State shall thereafter raise the money necessary for the maintenance of the insane. The act is silent in that regard. It provides that the pauper and indigent insane of the State, except those in the three counties of New York, Kings and Monroe, shall be wards of and supported by the State. But it was left to future. legislation to provide money to pay the expenses that should be incurred by the State for the maintenance of the pauper and indigent insane. I do not think that the language of the act justifies the assumption of defendant that its provisions indicate an intention on the part of the Legislature that in raising funds for the care of the pauper and indigent insane the taxable real and personal property situated in the city and county of New York should be exempt from future taxation. The Legislature did not intend by section 13 (supra) to affect the provisions of the act making indigent insane of the other counties wards of the State of the whole State — under the care and charge of the State, and to be maintained by it. The members of the Legislature from the counties of New York, Kings and Monroe have the same right to-act, to vote on any measure relating to the care.and maintenance of the indigent insane, as legislators from other parts of the State. The pauper and indigent insane to be provided for under the statute as wards of the State are as much wards of that portion thereof included in the said counties as of the other parts thereof. How money should be raised to support these wards of the State was-left open for future action by the Legislature.

It may be that it was unjust to compel the city and county of New York, while taking the whole charge and care of its own insane, to also pay a tax to help support the insane of the other counties of the State. But the statute under consideration is plain and unambiguous, and it is not claimed to be unconstitutional. Our business is to construe it, not to pass upon the justice or injustice or wisdom of its provisions. We are not authorized to change the plain language of the statute in order to make it conform to our ideas of justice and equity. If we possessed legislative pówer we might enact a different act than the one we are called upon to construe. We might deem that the county of New York, having the right under section 13 of the act of 1890 to use the State asylums for its acute and chronic insane, should properly and equitably pay some part of the expenses of keeping up the State insane asylums, but not a tax equal in amount to that imposed on the other counties of the State. But, as we have seen, we are only called upon to interpret the,act, and it makes no provision for exempting the city and county of New York from the payment of a tax equal to that imposed on the other counties of the State.

This view leads to an affirmance of the order and judgment, except that part thereof charging the defendant with interest. I think the position taken by appellant in regard to interest is correct, lie should only have been charged with interest on the balance remaining unpaid at the expiration of thirty days from the first of May. (§ 12, tit. 1, chap. 427, Laws of 1855.)

The judgment should be corrected in this regard, and, as modified, affirmed, without costs to either party.

Herrick, J., concurred; Mayham, P. J., not acting.

Judgment modified, and, as modified, affirmed, without costs.


text:
    William T. Hart and Others, Stockholders, Appellants, v. Ogdensburg and Lake Champlain Railroad Company and Central Vermont Railroad Company, Respondents. William T. Hart and Others, Bondholders, Appellants, v. Ogdensburg and Lake Champlain Railroad Company and Central Vermont Railroad Company, Respondents.
    (No. 1.) (No. 2.)

      ■Contract between two corporations haring common directors cannot be disaffirmed by a minority of the stockholders of either corporation — when the court will not inter-fen'e with the management of a corporation by its directors and a majority of its stockholders — laches — consolidation of railroads, when not set aside — basis for an extra allowance.

    A contract made by a director of a corporation with the corporation, and a contract made by the directors of one corporation with another corporation of which they are also directors, are voidable by the corporation, but a contract entered into between two corporations, voidable because of their having common directors, cannot be disaffirmed by a minority of the stockholders of either corporation.
    Ordinarily the court will not interfere with the control of a corporation by its directors and a majority of its stockholders. It will not interfere, although the directors may have acted unwisely and not for the best interest of the corporation they represent, and to justify the interference of the court with the management of a corporation on the application of a minority of the stockholders, it must he shown, that the action of the governing body complained of has been, so clearly against the interests of the minority of the stockholders as to amount to a wanton and fraudulent destruction of the rights of such minority, and that such action is a clear, substantial and flagrant violation of their rights.
    The complaints in two actions brought one by income bondholders and the other by stockholders of the Ogdensburg and Lake Champlain Railroad Company against the Ogdensburg and Lake Champlain Railroad Company and the Central Yermont Railroad Company, to set aside a lease of the road of the Ogdens-burg and Lake Champlain Railroad Company to the Central Yermont Railroad Company, and for an accounting, and to set aside a proposed agreement of consolidation between the two railroad companies, alleged that when the lease was executed the Central Yermont Railroad Company, through its agents, controlled the Ogdensburg and Lake Champlain Railroad Company, and that the directors, officers and agents of the former company were directors of the latter company, to which complaints the defendants demurred.

      Held, that a cause of action was not stated.
    The lease in question was entered into between the two corporations on June 1, 1886, and the actions to set it aside were commenced over six years thereafter.

      Held, that as owing- to the great lapse of time the Ogdensburg and Lake Champlain Railroad Company itself could not have disaffirmed the lease on the ground that it was entered into by the two corporations having common directors, that the plaintiffs as individual bondholders or stockholders could not maintain such an action which the corporation itself could not maintain.
    The complaints also alleged that the Ogdensburg and Lake Champlain Railroad Company owned three boats under a conditional contract of purchase, on which it had made large payments; that the Central Yermont Railroad Company, after it had obtained control of the former road, -wrongfully allowed a payment on said contract to be omitted, whereby the interest of the Ogdensburg and Lake Champlain Railroad Company therein became forfeited, and that the Central Yermont Railroad Company thereupon organized a corporation, the stock of which it acquired, which corporation purchased the said boats, being allowed by the vendor the amount previously paid by the Ogdensburg and Lake Champlain Railroad Company on said contract.

      Held, that the demurrers did not admit the statement that the omission to make such payment was wrongful and that a cause of action was not stated.
    The complaints also alleged that the proposed agreement of consolidation between the two railroad companies was of no force, because the Central Yermont Railroad Company had elected as directors of the Ogdensburg and Lake Champlain Railroad Company some of its own directors, officers and agents, and because said corporations with common directors could not lawfully contract with each other.

      Held, that the contract was voidable, brrt not void; that it could be ratified by a majority of the stockholders of the Ogdensburg and Lake Champlain Railroad Company, and that if it was so ratified and was otherwise valid and legal it could not be set aside at the suit of minority stockholders.

      The complaints also alleged that the agreement was in every way disadvantageous to the Ogdenshurg and Lake Champlain Railroad Company; that the earnings oí said road had greatly increased during the existence of the lease to the Central Yermont Railroad Company; that the Central Yermont Railroad Company had never paid a dividend, and that its stock had never been dealt with in the market and had no market value; yet that the agreement of consolidation proposed that one share of stock of the new company, to he formed by the consolidation, should he given in return for ten shares of stock of the Ogdens-burg and Lake Champlain Railroad Company, while one share of said new stock should be exchanged for one share of the stock of the Central Yermont Railroad Company.

      jHeld, that sufficient facts were not stated to show that the proposed agreement was so much opposed to the interests of- the Ogdenshurg and Lake Champlain Railroad Company as to sustain an action to set aside such proposed consolidation;
    That the allegations that the receipts of the Ogdenshurg and Lake Champlain Railroad Company had increased and were increasing; that the road was of great value; that the Central Yermont Railroad Company had never paid a dividend; that its stock had no market value, did not enable the court to determine the respective values of the stock of the two roads or the comparative value thereof, and did not state a cause of action.
    The complaints asked for judgment against the Central Yermont Railroad Company in favor of the Ogdenshurg and Lake Champlain Railroad Company for the value of the interest of the latter company in the boats which were forfeited by the action of the former company, and for such an amount as would represent the earnings of the boats since June 1, 1S86; the earnings of the boats since 1887 were shown to have been about §500,000.

      Held, that a sufficient basis was established to justify the granting of an extra .allowance of $1,000.
    Appeal by the plaintiffs, ’William T. Ilart and others, in the first above-entitled action, from two interlocutory judgments of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of St. Lawrence on the 17th day of October, 1894, upon the decision of the court rendered at the Clinton Special Term sustaining the separate demurrers of the defendants to the plaintiffs’ amended complaint, with notice of an intention to bring up for review upon such appeal each of said interlocutory judgments .and the orders sustaining each of the demurrers in this action which were entered in the office of the clerk of the county of St. Lawrence on the 17th day of October, 1894.
    Also an appeal by the, plaintiffs, William T. ITart and others, in the second above-entitled action, from two final judgments of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of St. Lawrence on the 9th day of February, 1895, upon the decision of the court rendered at the Clinton Special Term sustaining the demurrers interposed by the defendants to the plaintiffs’ amended complaint and dismissing the said complaint, with notice of an intention to bring up for review upon such appeal each of said final judgments and each of the interlocutory judgments entered in the office of the clerk of the county of St. Lawrence on the 17th day of October, 1894, and the orders sustaining each of the demurrers which were entered in the office of the clerk of the county of St. Lawrence on the 17th day of October, 1894.
    Also from an order made at the Clinton Special Term, bearing date the 22d day of January, 1895, and entered in the office of the clerk of the county of St. Lawrence, granting the defendants an extra allowance of costs.
    These actions were brought, one by stockholders and the other by income bondholders of the Ogdensburg and Lake Champlain Railroad Company, to set aside a lease of the road of the Ogdensburg and Lake Champlain Railroad Company to the Central Yermont Railroad Company and for an accounting, and to set aside a proposed agreement of consolidation between the two railroad companies.

      Marcus T. Hun, for the appellants.

      Louis Hasbrouck, for the respondents.
   Putnam, P. J.:

The plaintiffs in the first above-entitled action appeal from an interlocutory judgment sustaining the separate demurrers of defendants to the complaint, and, in the second action, to the final judgment in favor of defendants entered upon their like separate demurrers. As the complaints in each action are substantially alike the cases may be considered together.

I think the judgments, as far as they sustain the demurrers to the first cause of action in the complaints, should be affirmed.

The complaints allege the right of the Central Yermont Railroad Company by its charter to contract for the purchase of any railroad or the stock, bonds or property thereof. It, therefore, had the same right as an individual, or individuals, to buy a majority of the stock of tlie Ogdensburg and Lake Champlain Railroad Company and obtain control thereof. I am unable to perceive any legal objection to one or more persons purchasing the majority of the stock of a railroad company with the intent to obtain control thereof. Nor did the Central Yermont Railroad Company, in obtaining a majority of the stock of the Ogdensburg and Lake Champlain Railroad Company, with the intent to obtain a controlling interest in said road, do an unlawful or objectionable act. But if such purchase was made with an intent to mismanage the affairs of such road, and to conduct its business in such a way as to defraud the minority stockholders, or with a view of conducting the affairs of such road in the interest of the Central Yermont railroad, and, if such intent was in fact carried out, the minority stockholders of the Ogdensburg and Lake Champlain Railroad Company have a right to complain, and may obtain relief by an action in a court of equity.

The question then arises whether the complaints allege such a state of facts as authorizes the court, on the application of income bondholders or a minority of the stockholders of the Ogdensburg and Lake Champlain Railroad Company, to grant relief in these actions.

The objection made by plaintiffs to the lease made by the Ogdensburg and Lake Champlain Railroad Company to the Central Vermont Railroad Company, on the ground that it violates the rights of the income bondholders holding bonds of the first-named company to receive in payment of interest on their bonds the net earnings of the said railroad company after defraying the expenses of conducting its business as provided in said bonds and the mortgage by which the same are secured — by authorizing the lessee to use said earnings for the “ development and improvement ” of said road — was passed upon by the Court of Appeals in Day v. Ogdensburgh & Lake Champlain Railroad Company (107 N. Y. 129), and, hence, need not be considered by us. The Court of Appeals, in the case cited, where the same question was raised, held adversely to the claim of plaintiffs. (See, also, Thomas v. N. Y. & G. L. Ry. Co., 139 N. Y. 163.)

The objection is also made to the lease that when executed the Central Yermont Railroad Company, through its agents, controlled the Ogdensburg and Lake Champlain Railroad Company and that directors, officers and agents of the former were directors of the latter.

It is held that a contract made by a director of a corporation with it is voidable by the corporation, and it has also been decided that the same rule applies to a contract by the directors of a corporation with another corporation of which they are also directors. This principle is considered in the very able and exhaustive opinion of Van Brunt, J., in Metropolitan El. R. R. Co. v. Manhattan El. R. R. Co. (11 Daly, 373, 502, 503). The case cited, however,, recognized the doctrine laid down in Wallace v. Long Island R. R. Co. (12 Hun, 400), that a contract entered into between two corporations, voidable because of their having common directors, could not be disaffirmed by a minority of the stockholders; that the rule that persons acting in a fiduciary capacity shall not, directly or indirectly, make any profit by means of such acts, or be interested in contracts made by their principals, undoubtedly applies to' directors of corporations. It is a valuable principle, and ought not to be impaired by any subtle or refined distinctions. Still, the mere fact that the same persons were directors of the corporation which made the lease, and of that which took it, is not of itself sufficient, to avoid the contract at the instance of one or more stockholders, against the will of the corporation. That fact alone might entitle-either corporation to avoid the lease, but I apprehend it does not. give that right to a stockholder.” And Van Brunt, J., remarks in Metropolitan El. R. R. Co. v. Manhattan El. R. R. Co. (supra), referring to the doctrine laid down in Wallace v. Long Island R. R. Co.: “ The principle is here recognized that the majority of the stockholders may ratify a lease made by the directors, and that a-minority cannot disaffirm. That, therefore, it must be the majority of the shareholders acting through the corporation who repudiate, and no shareholder has the power to exercise that right against the will of the majority.”

I concur in the views thus stated. (See, also, Gamble v. Q. C. W. Co., 123 N. Y. 92-98.)

I, therefore, conclude that the objection alleged in the complaints, to the lease on the ground that some of the directors of the Ogdensburg and Lake Champlain Railroad Company were also directors,, agents, officers or attorneys of the Central Vermont Railroad Company was properly overruled by the court below.

I am also of the opinion that the conclusion reached below in regard to the lease was correct, because of the great delay in attempting to repudiate it. The lease was entered into between the two corporations on June 1, 1883. These actions were commenced in 1892, over six years after the making of the contract. Owing to the great lapse of time since the execution of the lease the Ogdensburg and Lake Champlain Railroad Company itself could not have disaffirmed it on the ground that it was entered into by two corporations with common directors. (See United States Rolling Stock Co. v. A. & G. W. R. R. Co., 34 Ohio St. 450; Twin-Lick Oil Co. v. Marbury, 91 U. S. 587-592; Kent v. Quicksilver Mining Co., 78 N. Y. 159.) It will not be claimed that plaintiffs, as individual bondholders or stockholders, can sustain an action to set aside the lease on the ground stated, which the corporation itself could not maintain.

The complaints also allege in the first count that the Central Vermont Railroad Company, since the execution of the said lease, in apportioning the earnings of the two corporations for through business, has taken more than its proper share of the receipts, and ask for an accounting. This is in fact a separate cause of action from that previously set out in the pleading seeking an annullment of the lease, although not separately stated. The first cause of action contained in the first count seeks to vacate the lease. This cause of action is for an alleged wrong done by the Central Yermont Railroad Company to the Ogdensburg and Lake Champlain Railroad Company after the execution of and under the lease.

I concur in the views of the court below that the allegations in regard to the alleged improper division of the earnings of the two corporations by the Central Yermont Railroad Company contain no cause of action. Sufficient facts are not stated to justify interference by a court of equity in the affairs of the two corporations. It does not appear to what extent the Central Yermont Railroad Company has taken earnings that should have gone to the other defendant. It is well settled that ordinarily the court will not interfere with the control of a corporation by its directors and a majority of its stockholders. It will not interfere although the directors may have acted unwisely and not for tlie best interests of the corporation they represent. To justify the interference of the court with the management of a corporation on the application of a minority of the stockholders it must be shown that the action, of the governing body complained of has been so clearly against the interests of the minority of the stockholders as to amount to a wanton and fraudulent destruction of the rights of such minority. It must appear that the action of the majority of the stockholders and directors is a clear, substantial and flagrant violation of the rights of the minority. (Gamble v. Q. C. W. Co., supra.)

The complaints do not show such a state of facts. No allegations are made to the effect that in the division of the receipts for thro ugh business between the two companies the Ogdensburg and Lake Champlain Railroad Company was wronged to an extent that will justify interference by a court of equity. The complaints do not allege such a state of facts as shows a frand on the minority, and is not sufficient under the doctrine laid down in Gamble v. Q. C. W. Co. (supra) and kindred cases.

The complaints allege that the Ogdensburg and Lake Champlain Railroad Company owned three boats under a conditional contract of purchase on which it had made large payments. That the Central Yer-mont Railroad Company, after it had obtained control of the former road, wrongfully allowed a payment on said contract to be omitted, whereby the interest of said Ogdensburg and Lake Champlain Railroad Company therein became forfeited, and that the Central Yermont Railroad Company thereupon organized a corporation known as the Ogdensburg Transit Company, the stock of 'which it bought. Said transit company purchased the said boats, being allowed by the vendor the amount previously paid by the Ogdens-burg and Lake Champlain Railroad Company on said contract.

This alleged cause of action, although stated in the first count of each of the complaints and not separately numbered, is, in fact, also separate and distinct from that alleging the invalidity of the lease. The wrongful act of the Central Yermont Railroad Company in procuring or suffering the transfer of the title to the three boats to the Ogdensburg Transit Company has no relation to its alleged illegal act in obtaining the lease.

The ground of the plaintiffs’ complaint is the omission of the directors of the Ogdensburg and Lake Champlain Railroad Company, controlled by the Central "Vermont Railroad Company, to make a payment on the conditional contract. The demurrers do not admit the statement in the complaints that the act of omitting to make such payment was wrongful. (Thomas v. N. Y. & G. L. Ry. Co., supra.)

That word being omitted from the complaints, all that remains in them is a mere statement that the directors controlled by the Central Vermont Railroad Company omitted to make a payment on the conditional contract. It seems clear, therefore, that the complaints do not state a cause of action. No sufficient facts are alleged. The complaints contain neither a copy nor the substance of the contract. It is not alleged that the directors had money under their control to make the payment. "We are unable to say from the pleadings whether the conditional contract was one that should have been carried out. The demurrers do not admit facts alleged in the complaints sufficient to constitute a cause of action.

I conclude, therefore, that the court below reached the proper conclusion in sustaining the demurrers to the first count or cause of action contained in the complaints.

The second and subsequent causes of action in the complaints to which the demurrers were interposed, relate to the proposed consolidation of the two defendants. The agreement .for such consolidation between the directors of said corporations was made about six years after the execution of the lease.

The position taken by plaintiffs, that the agreement for consolidation made by the directors of the two corporations when the actions were commenced is of no force, because the Central Vermont Railroad Company had elected as directors of the Ogdensburg and Lake Champlain Railroad Company some of its own directors, officers and agents, and because said corporations, with common directors, could not lawfully contract with each other, has already been considered. The contract was voidable but not void; it could be ratified by a majority of the stockholders. If it was so ratified and otherwise valid and legal, it could not be set aside at the suit of the minority stockholders.

Several objections made by plaintiffs to the proposed consolidation of the two defendants, alleged in the second and subsequent causes of action in the complaints, have been considered and passed upon by this court in Hart v. The Ogdensburg & Lake Champlain Railroad Company (69 Hun, 378). A discussion of such objections, therefore, is not now called for. In the case cited plaintiffs claimed, as alleged in the complaints in these actions, that the proposed consolidation, if carried into effect, would impair the obligation of the contract between the income bondholders and the Ogdensburg and Lake Champlain Railroad Company: “ First. By depriving them as bondholders of the right to vote for those persons whose judgment as to the application of earnings is practically decisive of their rights to interest. Second. By depriving them of directors who would have any motive to promote the interests of the plaintiff, and who from their position would be familiar with the facts, and in whose selection they, as bondholders, have a right to participate. Third. That the net earnings of the property of the company belong to the bondholders, and that by the article of consolidation no provision is made for keeping separate accounts, and no accounting is provided for, for the same. Fourth. That the bondholders are deprived of their share in the extension of the business of the company.”

The court, in the case cited, overruled the objections of plaintiffs to the proposed action of’ the two companies, and held that such intended consolidation might be legally made.

The plaintiffs allege that the proposed agreement is in every way disadvantageous to and opposed to the interests of the Ogdensburg and Lake Champlain Railroad Company. That the earnings of said road had greatly increased during the six years of the existence of said lease. That it is a connecting link between the States of New England and the west, and is of great value by reason thereof. That the Central Yermont Railroad Company has never paid a dividend and its stock has never been dealt with in the market and has no market value, yet the agreement of consolidation proposes that one share of stock of the new company to be formed shall be given in return for ten shares of the capital stock of the Ogdensburg and Lake Champlain Railroad Company, while one share of said new stock shall be exchanged for one share of the stock of the Central Yermont Railroad Company.

The cases in which an action by a minority of the stockholders of a corporation, to restrain the proposed action of its directors and a majority of the stockholders can be maintained are considered in the opinion of Peckham, J., in Gamble v. Q. C. W. Co. (supra). The learned judge remarks: “ I think that where the action of the majority is plainly a fraud upon, or, in other words, is really oppressive to the minority shareholders, and the directors or trustees have acted with and formed .part of the majority, an action may be sustained by one of the minority shareholders suing in his own behalf and in that of all others coming in, etc., to enjoin the action contemplated, and in which action the corporation should be made a party defendant. It is not, however, every question of mere administration or of policy in which there is a difference of opinion among the shareholders that enables the minority to claim that the action of the majority is oppressive, and which, justifies 'the minority in coming to a court of equity to obtain relief. Generally, the rule must be that in such cases the will of the majority shall govern. The court would not be justified in interfering even in doubtful cases, where the action of the majority might be susceptible of different constructions. To warrant the interposition of the court in favor of the minority shareholders in a corporation or joint-stock association, as against the contemplated action of the majority, where such action is within the corporate powers, a case must be made out which plainly shows that such action is so far oq>posed to the true interests of the corporation itself as to lead to the clear inference that no one thus acting could have been influenced by any honest desire to secure such interests, but that he must have acted with an intent to subserve some outside purpose, regardless of the consequences to the company and in a manner inconsistent with its interests. Otherwise the court might be called upon to balance probabilities of profitable results to arise from the carrying out of the one or the other of different plans proposed by or on behalf of different shareholders in a corporation, and to decree the adoption of that line of policy which seemed to it to promise the best results, or af least to enjoin the carrying out of the opposite policy.”

Under the doctrine thus laid down sufficient facts are not stated in the complaints to show that the proposed agreement is so much opposed to the interests of the Ogdensburg and Lake Champlain Railroad Company as to sustain an action. The allegation that the agreement is in every way disadvantageous to the ]ast~named corporation and advantageous to the Central "Vermont Railroad Company is merely a statement of a conclusion. The allegation that the Receipts of the Ogdensburg and Lake Champlain Railroad Company have increased and are increasing; that the road is of great value; that the Central "Vermont Railroad Company has never paid a dividend, and that its stock has no market value, do not enable us to determine the respective values of the stock of the two roads. The plaintiffs do not allege the value of the stock of either i-oad or the comparative value 'thereof. If the pleadings had stated that the stock of the Ogdensburg and Lake Champlain Railroad Oom-j>any was equal in value to that of the Central Vermont Railroad Company, or that two shares of the former were worth as much as one share of the latter, or alleged the respective values of the stock of each company, it would have stated facts on which the court could have formed a conclusion. As it is the pleader leaves us to guess from the allegation that the Ogdensburg and Lake Champlain Railroad Company is a valuable road and its business is increasing, and that the Central Vermont Railroad Company has never paid a dividend on its stock, and that such stock has no market value, the respective values of the stock of said roads, and that the proposed agreement is disadvantageous to the former road. Although the plaintiffs allege an increase in the earnings of the' Ogdensburg and Lake Champlain Railroad Company during the existence of the lease there is no averment stating the amount of such earnings or the amount of such increase.

I think, therefore, that the plaintiffs, so far as they have attempted to show that the proposed agreement of consolidation is disadvantageous to the interests of the stockholders and bondholders of the Ogdensburg and Lake Champlain Railroad Company, fail to set forth such a state of facts as authorizes the maintenance of these actions within the doctrine laid down in Gamble v. Q. C. W. Co. (supra).

Other questions are raised in the points of counsel which I do not deem it necessary to consider.

An appeal is also taken by plaintiffs from an order of the court below awarding an extra allowance of $1,000 to the defendants.

The complaints alleged as one of the causes of action a wrongful .act on tlie part of tlie Central Yennont Railroad Company in causing the directors of tlie Ogdensburg and Lake Champlain Railroad Oomjiany to omit making a payment due on the conditional contract theretofore made by the last-named company for the purchase of three boats, and that in consequence of said wrongful act the title of said company to said boats was divested. That the Central Vermont Railroad Company organized a corporation called the Ogdensburg Transit Company, of which it acquired the stock, and procured a transfer 'of said boats to such company, and on such transfer the amount previously paid by the Ogdensburg and Lake Champlain Railroad Company on said conditional contract was allowed as part of the purchase price. That the said boats have earned since 1887 $100,000 per year over all expenses. The complaints asked for judgnaent against the Central Vermont Railroad Company in favor of the Ogdensburg and Lake Champlain Railroad Company for the value of the interest of the latter in said boats, and also for such an amount as would represent the earnings of said boats since June 1, 1886. The earnings of the boats, as stated in the complaints, and the affidavit of Mr. Hasbrouck, since 1887, were about $500,000, which sum the plaintiffs in these actions ¡sought to recover for the Ogdensburg and Lake Champlain Railroad Conxpany. I think, therefore, there was in the complaints a claim to recover of defendants a sum of money on which an extra allowance of $1,000 could be properly made by the court below under the provisions of section 3253, Code of Civil Procedure.

The judgments and order should be affirmed, with costs.

Herrick and Fursman, JJ., concurred.

Judgments and order affirmed, with costs.


author: Follett, J.:

text:
    National Mahaiwe Bank, Appellant, v. Elizabeth T. Hand, as Executrix, etc., of Allen F. Hand, Deceased, Respondent.

      Covenant to insure against fire — measure of damages for its breach.

    In an action brought to recover damages resulting from the alleged breach of a covenant to insure property against loss by fire, it appeared that the plaintiff leased to the defendant’s testator a paper mill by a written lease which contained the following covenant: “The said Hand is to procure at once and keep in force insurance on said property for the benefit of said bank in the sum of ten thousand dollars in such companies as said bank shall approve.”
    The lessee failed to insure the mill against loss or damage by fire, and the mill was destroyed by fire during the term of the lease. Upon the trial the plaintiff’s complaint was dismissed upon the merits.

      Held, that the measure of damages was the sum which it would have cost the plaintiff to have procured a policy for the stipulated amount, and that the trial court erred in not directing a verdict in his favor for the cost of such a policy.
    Appeal by tbe plaintiff, the National ’Mahaiwe Bank, from a judgment of the Supreme Court in favor of the defendant, entered in the' office of the clerk of the county of New York on the 2d day of February, 1895, upon the dismissal of the complaint directed by the court after a trial at the New York Circuit before the court and a jury.

      Jarred F. Harrison, for the appellant.

      George G. Holt, for the respondent.
   Follett, J.:

This action was brought tó recover damages for the breach of a covenant to insure. There is no dispute about'the facts. The sole question involved is as to the amount of damages, if any, that the plaintiff is entitled to recover. The plaintiff is the owner of the Berkshire Paper-Mill, which, March 16., 1889, it leased to Allen F. Hand, the defendant’s testator, for one year from May 1, 1889, for the rent of $1,000 and all taxes assessed on the premises during the year. The lease contained this covenant:

“ The said Hand is to procure at once and keep in force insurance on said property for the benefit of said bank in the sum of ten thousand dollars in such companies as said bank shall approve.”

The lessee entered into possession of the premises and occupied them until August 4, 1889, when the mill was destroyed by fire. The lessee failed to insure the mill against loss or damage by fire, which is conceded to have been worth $10,000 when destroyed. In the pleadings the fire is alleged to have occurred August fourth, but in the case it is stated to have happened August 14, 1889. On the first trial the court directed a verdict for the plaintiff for $10,000, with interest from the date of the fire, and a judgment for that amount was entered, which was reversed by this court on the ground that the value of the property destroyed, not exceeding the amount of the policy, was not the. measure of the plaintiff’s damages, but that the cost of procuring a policy for $10,000 was the true measure of damages. (80 Hun, 584.) There being no evidence on the first trial of the cost of such a policy the judgment, instead of being modified, was reversed. On the second trial (the one under review) it was shown that a policy for $10,000 would have cost $600. At the close of the case the court whs asked to direct a verdict in favor of the plaintiff for $10,000, with interest thereon from the date of the fire, which was refused, and the plaintiff excepted. The court was also asked to direct a verdict for the plaintiff for $600, the premium on a policy for $10,000 for one year, which was refused on the ground that the plaintiff, not having paid that sum, coidd not recover, to which ruling the plaintiff excepted. Thereupon, upon the defendant’s motion the complaint was dismissed on the merits, and the plaintiff excepted. The authorities do hot agree as to the true measure of damages for the breach of a covenant to insure.

Dodd v. Jones (137 Mass. 322) did not arise out of a breacli of an executory covenant, but from the breach of a contract of sale of an insurance policy. In that case the defendant sold a house to the plaintiff, which was covered' by a policy of insurance having some time to run, which the defendant agreed to assign to the plaintiff, but afterwards refused to make the transfer. During the life of the policy the house was damaged by lire, and in an action brought to recover damages for the breach of this contract it was held that the plaintiff was not entitled to recover the damages caused by the fire, but was entitled to recover the value' of the property purchased and paid for by the plaintiff (that is the policy), which the defendant had refused to assign. That case is not very closely allied to the one at bar.

In Douglass v. Murphy (16 U. C. Q. B. 113) it was held that the measure of damages for the breach by a tenant of a contract to insure was the loss sustained by the landlord, not exceeding the amount of the policy which the tenant covenanted to obtain.

In Gray v. Murray (3 Johns. Ch. 167) the defendant, as the agent of Gray, procured a policy on his (Gray’s) life for £3,000 for ten years, and paid the premium for the first year. Subsequently the defendant ordered the policy canceled, and took out a new one for £450 on the life of Gray, who died within the year. In an action brought by Gray’s executrix it was held that the defendant was liable for the amount insured by the original policy, after deducting 'the premium.

In Perkins v. Washington Ins. Co. (4 Cow. 645) an agent neglected his duty to insure the property of his principal, which was destroyed, and it was held that the agent was liable for the loss, not exceeding the amount for which he should have insured. In Soule v. The Union Bank (45 Barb. 111; S. C., 30 How. Pr. 105) the defendant, for a valuable consideration, agreed to procure and beep in force during the life of a third person an insurance for $55,000 on the life of Mott, which insurance was for the benefit of the plaintiff. The defendant obtained a policy and paid the premium for one year, but neglected to pay the subsequent premiums. Mott died within the time during which the defendant agreed to keep the policy alive, and in an action to recover damages for the breach of the agreement it was held :. “ The bank, under these facts, must be considered as insurer, and liable to tlie same extent as tlie insurance company would liave been if the policies had been continued by payment of the premium for the succeeding year.”

In Ainsworth v. Backus (5 Hun, 414) the plaintiff obtained a policy on the life of her husband, and assigned sixty per cent thereof to the defendant, who agreed to keep the policy alive for the benefit of the plaintiff, but failed to perform his engagement, and the jDolicy was forfeited. In an action brought for damages by the wife during the lifetime of her husband, it was held that the refusal to allow the plaintiff to show that the policy was worth $250 was an error, for which a new trial was granted.

In Ela v. French (11 N. H. 356) the plaintiff consigned books for sale on commission to the defendant, who agreed to cause them to be insured. He neglected to procure an insurance, and the books were destroyed while in his possession, and it was held that for the breach of this promise the plaintiff was entitled to recover the value of the books lost.

In, Miner v. Tagert (3 Binney, *204) and in French v. Reed (6 id. *307) it was held that an agent who neglects his duty to insure the property of his principal, which is lost, is liable for its value, not exceeding the amount for which it should have been insured. In Morris v. Summerl (2 Wash. C. C. 202) it was held that a merchant, who is directed to insure the goods of his correspondent and neglects to do so, is liable in case of loss as an insurer. This judgment was affirmed by the Supreme Court of the United States. The same rule was held in DeTaslet & Co. v. Crousellat (1 Wash. C. C. 504; 2 id. 132). In Hawkins v. Coulthurst (5 B. & S. 343) the defendant assigned a policy of insurance on his life for £1,000 to trustees for his creditors, and covenanted that he would do nothing by which the policy should be forfeited. He broke the covenant, and the measure of damages was held to be the value of the policy at the time of the breach. In Ex parte Bateman, In re Routledge, (8 De Gex, M. & G. 263) the owner of a saw mill received timber to be converted into lumber, and agreed to keep it insured from damage by fire and to pay the value of the timber in case it should be burned. In that case it will be observed that there was a promise to pay for the timber in case it was destroyed. It was held that the measure of damages was the value of the timber burned. In Smith v. Price (2 Foster & Fin. 748) the defendants, wlio were commission agents, undertook to effect an insurance on the plaintiff’s goods, but neglected to perform their agreement, and, the goods being lost, it was held that they were liable for their value. In sections 1400 and 1401, Biddle on Insurance, and in section 399b, May on Insurance (3d edition),, many cases are cited, and the result seems to be that the damages recoverable for the breach of an agreement to insure property which is destroyed is the value of the property, not exceeding the amount for which it should have been insured. In Arnold on Marine Insurance (Vol. 1 [6th ed.], 185) the rule is laid down that, in case an agent neglects to insure the property of his principal,, and it is lost, he is liable to the same extent that the underwriter would have been had the insurance been effected. (See, also,, 2 Parsons Marine Ins. 430.)

But whatever the rule may be in other jurisdictions, we- are bound by the judgment of this court on the former appeal, where it was held that the measure of damages was the- sum which it would cost the plaintiff to have procured a policy for the- stipulated amount, and under that decision the trial court erred in not directing a verdict for the cost of such a policy.

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

Van Brunt, P. J., and O’Brien, J., concurred in result.

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


text:
    Stillman R. Walker and Patrick Bresnan, Appellants, v. The Phœnix Insurance Company of Hartford, Conn., Respondent.

      Insurance ‘policy — what does not constitute a waiver of Us provisions.

    In an action 'brought to recover damages caused by fire alleged to be payable under a policy of Are insurance, it appeared that a policy of insurance was issued by the defendant to tbe firm of Saunderson & Starkweather and that the plaintiffs were the owners of two mortgages upon personal property owned by said firm, both of which mortgages contained a covenant to keep the property insured in an amount to be approved by the mortgagees- and to assign said policy to them.

      Tlie policy so issued to Saunderson & Starkweather contained the following provisions:,
    1st. “ This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the interest of the insured be other than unconditional and sole ownership * * or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage.”
    2d. “If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee, or if any person or corporation having an interest in the subjectof insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached or appended hereto. * * * ”
    3d. “This company shall not be held to have waived any provision or condition of this policy or any forfeiture thereof by any requirement, act or proceeding on its part relating to the appraisal or to any examination herein provided for. * * ”
    4th. “ This policy is made and accepted subject to the foregoing-stipulations and conditions, together with such other provisions, agreements or conditions as may be endorsed hereon or added hereto, and no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy, except such as by the terms of this policy may be (he subject of agreement endorsed hereon or added hereto, and as to such provisions and conditions no officer, agent or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if .any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached. * * * ”
    It further appeared that when the contract of insurance was entered into the defendant did not know of the existence of the chattel mortgages, nor did it know that any persons other than the insured were interested in the property covered by the policy,
    'The property was destroyed by Are, and on the next day, after the defendant had learned of the Are, one of the brokers who procured the policy took it to defendant’s office and asked its application clerk to correct a clerical error in spelling the name of Starkweather, and also to attach to the policy a provision making the loss payable to the mortgagees. The application clerk corrected the error in the name, but declined to add the provision making the loss payable to the mortgagees.
    The broker testified' that the clerk said that the absence of the mortgagee provision would make no difference as the loss would be settled with Saunderson & Starkweather, and a check paid to their order. The application clerk denied saying that a check would be given for the loss. Subsequently the defendant’s adjuster visited the scene of the fire and saw one of the firm of Saunderson & Starkweather and directed him to make out an itemized statement of their loss, which was done and delivered to such adjuster. Two or three days thereafter the amount of loss was submitted to the arbitration of two appraisers, one selected by the insured and the other by the insurer. Subsequently Saunder-son & Starkweather assigned all their interest in the right of action on the policy to the plaintiffs, the mortgagees.

      Held, that a verdict directed by the court in favor of the defendant was proper; that the application clerk had no power to waive orally, after the fire, any one of the provisions of the policy;
    That, under the first provision of the policy, the policy never took effect, and that, under the second provision of the policy, in case the mortgagees’ interests were to be protected therein, their interests must have been specified in it in a printed or written provision attached to it;
    That the failure to disclose to the defendant the fact that the insured were not the unconditional and sole owners of the property, and the absence of a provision protecting the interests of the mortgagees, were not waived by the defendant’s having entered upon an appraisal, and having fixed thereby the amount of the damages;
    That the correction, after the fire, of the spelling in the policy of the name “ Starkweather ” by the application clerk, he being at the time informed of the existence of the mortgages, was not a reissue of the policy or a waiver of the first provision thereof.
    Appeal bj the plaintiffs, Stillman R. Walker and another, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 20th day of December, 1893, upon the verdict of a jury rendered by direction of the court after a trial at the New York Circuit.

      George W. Stephens, for the appellants

      John S. Wise, for the respondent.
   Follett, J.:

This action was begun February 24, 1891, to recover damages alleged to be due under a policy of fire insurance issued by the defendant.

The plaintiffs are partners under the firm name of Walker & Bresnan. In November, 1889, William S. Saunderson and Charles G. Adams were partners under the firm name of William S. Saunderson & Co., engaged in business on Water street at the city of New York. November 23, 1889, William S. Saunderson & Co. mortgaged to Walker & Bresnan a quantity of printing materials and machinery to secure the payment of $676.92, and, January 27, 1890, they also mortgaged to Walicer & Bresnan planting materials and machinery to secure the payment of $654.98. Both mortgages contained a covenant by the mortgagors to keep the property insured in an amount to be approved by the mortgagees and to assign the said policy to them. On the 11th of November, 1890, Charles G. Adams sold his interest in the firm of William S. Saunderson & Co. to James A. Starkweather, and thereupon the firm became Saunderson & Starkweather. November 11, 1890, the defendant by its policy of insurance — a New York standard policy — insured Saunderson & Starkweather for one year from November 11, 1890, at noon, to November 11, 1891, at noon, against loss or damage by fire “to an amount not exceeding one thousand dollars.” The policy contained the following provisions :

(1) “ This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void * * * if the interest of the insured he other than unconditional and sole ownership, * * * or if the subject of insurance be personal property and be or become incumbered by a chattel mortgage. * * * ”
(2) “ If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee, or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions here-inbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached or appended hereto. * * * ”
(3) “ This company shall not be held to have waived any provision or condition of this policy or any forfeiture thereof by any requirement, act or proceeding on its part relating to the appraisal or to any examination herein provided for. * * * ”
(4) “ This policy is made and accepted subject to the foregoing-stipulations and conditions, together with such other provisions, agreements or conditions as may be indorsed hereon or added hereto, and no officer, agent or other representative of this company shall have power to waive any provision or condition of this policy, except such as, by the terms of this policy, may be the subject of agreement indorsed hereon or added hereto; and as to such provisions and conditions no officer, agent or representative shall have such power, or be deemed or held to have waived such provisions or conditions, unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached. * * * ”

The witnesses all agreed that when the contract of insurance was entered into the defendant did not know of the existence of the chattel mortgages, nor did it know that any persons, other than the insured, were interested in the property covered by the policy.

November 12, 1890, the property was destroyed by fire, and on the next day, after the defendant had learned of the fire, one of the. brokers who procured the policy took it to defendant’s office "and asked its application clerk to correct a clerical error in spelling file-name of Starkweather, and also to attach to the policy a provision making the loss payable to the mortgagees. The application clerk corrected the error in the name, but declined to add the provision! making the loss payable to the mortgagees. Thus far these witnesses agree. The broker testified that the clerk said: He (the clerk) said it (the absence of the mortgagees’ provision) would make no difference, as the loss would be settled with Saunderson & Stark-weather and a check paid to their order.” The application clerk denied saying that a check would be given for the loss. The broker testified that this interview was on the morning of the thirteenth, but. the clerk testified that it occurred in the evening of that day. This is substantially all the conflict there is in the evidence. On November-thirteenth, defendant’s adjuster visited the scene of the fire, saw one of' the firm of Saunderson & Starkweather and directed him to make out. an itemized statement of their loss, which they did, and on November eighteenth, delivered the statement to defendant’s adjuster. Two or three days thereafter the amount of the loss was submitted to the arbitrament of two appraisers, one selected by the insured and the other by the insurer. The amount of the loss was fixed at $1,505.17, and the portion payable by the defendant, if liable, at $950. During the appraisal the existence of the chattel mortgages became known to defendant’s adjuster, who reported the fact to the general manager of the defendant’s office in New York. The general manager testified that he did not know of the mortgages until' after the appraisal. December 8, 1890, the premium due on the policy was tendered by the broker who procured it, to the defendant, but it was refused.

December 2, 1890, Saunderson. & Starkweather assigned all their interest in and right of action on the policy to the mortgagees, the plaintiffs. It was agreed on the trial that if the plaintiffs were entitled to recover, their damages were $950, with interest from January 28, 1891.

At the close of the evidence the defendant moved that a verdict be directed in its favor, which was granted, and an exception taken. 'The plaintiffs did not request that any issue of fact be submitted to ithe jury, or that a verdict be directed in their favor, but their exception is sufficient to raise the question whether any issue of fact should have been submitted to the jury. (Train v. Holland Purchase Ins. Co., 62 N. Y. 598; Clemence v. City of Auburn, 66 id. 334; Trustees of East Hampton v. Kirk, 68 id. 459.)

There was no conflict in the evidence except in respect to the lour when the conversation occurred between the broker and the ■application clerk, and whether the latter said that the absence of the mortgagees’ provision would make no difference and that the loss would be paid to the insured by check. The hour when the conversation took place is not material, and the application clerk liad no power to waive, orally, after the loss, any one of the provisions of the policy. This is expressly provided for in the provision lastly above quoted from the policy. There was no issue of fact for the jury, and the sole remaining question is, should a verdict have been directed for the plaintiffs ?

Under the provision first above quoted from the policy it is clear that the policy never took effect, and by the provision secondly above quoted it is made plain that, in case a mortgagee’s interest is to be protected under a standard policy, his interest must be specified in it or in a printed or written provision attached to it. There is no such provision, and it is conceded that the defendant had no knowledge of the existence of the mortgagees’ interest until after the fire.

It is urged in behalf of the plaintiffs that the failure to disclose to the defendant the .fact that the insured were not the unconditional and sole owners of the property, and the absence of a provision protecting the interests of the mortgagees, were waived by the defendant having entered upon an appraisal and thereby fixed the amount of damages. The answer to this is that, by the provision thirdly above quoted from the policy, it is expressly provided that the prosecution of an examination in respect to the fire, or entering into an appraisal to ascertain the damages, shall not waive any provision or condition of the policy or any forfeiture thereof.

Kiernan v. The Dutchess County Mutual Ins. Co. (80 Hun, 602; S. C., 61 N. Y. St. Repr. 720; 29 N. Y. Supp. 1126) is cited as an authority for the plaintiffs’ contention, that the defense that the policy was void because of the undisclosed existence of the two chattel mortgages, was waived by the defendant’s inquiry into the circumstances of the fire and thereafter uniting in an appraisal to determine the amount of damages. The case cited is meagerly reported. It does not appear whether the chattel mortgage was given before ©r after the insurance was effected, nor does it appear whether the policy was a New York standard policy, containing a condition that an appraisal of the damages should not be deemed a waiver of any provision or condition of the policy. This case cannot be accepted as of sufficient authority to authorize this court to disregard the plain conditions of this policy. It is urged that the correction, after the fire, of the spelling in the policy of the name of Starkweather by the application clerk, he being at the time apprised of the existence of the mortgages, was in effect a reissue of the policy and a waiver of the provision first above quoted. This contention cannot be sustained. The interview between the broker and the application clerk must be considered as an entirety. The clerk expressly refused to waive the condition by declining to attach a provision in favor of the mortgagees, and, besides, as before stated, he was without power to waive orally, after the fire, any of the conditions of the policy.

The judgment should be affirmed, with costs.

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

Judgment affirmed, with costs.


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    Michael B. Kenney, Appellant, v. The Second Avenue Railroad Company, Respondent.

      Driver of street car — when guilty of contributory negligence in using a defective brake.

    In an action brought to recover damages resulting from an injury to the plaintiff, caused by reason of the alleged negligence of the defendant, it appeared that the plaintiff was employed as a driver on defendant’s street railroad; that the plaintiff left defendant’s depot, above Eighty-sixth street, in the city of New York, to make a down trip; that when Twenty-third street was reached the plaintiff noticed that the brake did not operate properly; as he approached Chatham square an East Broadway car was entering on the track on which the plaintiff’s car was being driven, and be attempted, by application of the brake, to stop his car, but the brake did not work, and, being on a down grade, the car continued to move. In order to prevent a collision, he drew the team sharply to the right and whipped it, so as to derail the car and prevent it from’ colliding with the East Broadway car, and in doing so he "was drawn against the handrail of the dashboard and fractured his hip bone. The plaintiff testified that he had long been a driver, and that he could tell by the working of the brake whether it was in good order without looking at it.

      Held, upon appeal from a judgment dismissing the complaint directed by the court, that in the crowded avenues of the city of New York it is essential to the safety of passengers and persons using the streets that the brakes on street cars should be in perfect order, and that a driver who, knowing that a brake is out of order, fails to seek a remedy, is guilty, of contributory negligence.
    Appeal by the plaintiff, Michael B. Kenney, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the cleric of the county of New York on the 15th day of October, 1894, upon the dismissal of the complaint directed by the court after a trial at the New York Circuit before the court and a jury.

      Thomas P. Wickes, for the appellant.

      Payson Merrill, for the respondent.
   Follett, J.:

This action was begun October 11, 1889, to recover damages for an injury caused, it is alleged, by the negligence of the defendant and its employees. The plaintiff was employed as a driver on defendant’s road. He was first employed in 1869, and again he entered its service March 17, 1886, and continued therein until the accident. March 20,1888, the plaintiff left defendant’s depot above Eighty-sixth street, at one-forty p. M., to make a down trip, driving car No. 71. When Twenty-third street was reached the plaintiff noticed that the brake did not operate properly. As he approached Chatham square an East Broadway car was entering on the’track on which the plaintiff’s car was being driven, and he attempted, by application of the brakes, to stop his car, but the brake did not work, and, being on a down grade, it continued to move, and in order to prevent a collision he drew the team sharply to the right and whipped it s.o as to derail the car and prevent it from colliding with the East Broadway car. In doing this lie was drawn againt the handrail of the dashboard, fracturing his hip bone. The failure of the brake to work was caused by a bolt being displaced which united the cross lever with the brake rod. The cross lever, by. means of which the brakes are set, is connected with the brake rod by an iron bolt passing down through rod and lever, and is held in place by an iron key. In some way the key got out of the bolt, which worked up out of the cross beam and remained in the brake rod, but not so as to unite the two, thus making it impossible for the driver to apply the brake effectually to the forward wheels of the car. This car, No. 71, was taken from the repair shop on the very day of the accident, the trip on which it occurred being the first one of that car since it came from the shop. There is no evidence that any of the defendant’s mechanics or inspectors were incompetent or negligent. The mere fact that the key was not found in place after the accident is not sufficient to authorize the .jury to find that the defendant failed to exercise due diligence to furnish a proper car. As between the defendant and its driver the happening of the accident is not sufficient to authorize the inference of negligence. It is frequently found that such keys and pins are displaced by the motion of the moving cars.

Again, the plaintiff testified that he had long been a driver, and that he could tell by the working of the brake whether it -was in good order without looking at it. When lie left the depot at the beginning of his trip he thought the brake was in good order, but when he reached Twenty-third street, and attempted to apply it, he found that it was not in order, but he did not search for the cause of the difficulty, and made no attempt to remedy it, as it was his plain duty to do. In tlie crowded avenues of this city it is essential to the safety of passengers and persons using the streets that the brakes on street cars should be in perfect order, and a driver who, knowing that a brake is out of order, fails to apply a remedy, cannot be held to be free from negligence. We think the plaintiff was rightly nonsuited, because he failed to establish that the defendant was guilty of negligence, and because he, by his own negligence, contributed to the injury.

The judgment should be affirmed, with costs.

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

Judgment affirmed, with costs.