text:
    GEORGE B. BOOMER, Appellant, v. JOHN H. FLAGLER, Respondent.

      Conversion of stock by wrongful detention—subsequent delivery and acceqttance.—Measure of damages.

    Defendant, being bound to deliver certain shares of stock to plaintiff, refused to deliver the same on demand duly made, on September 24, 1881, and persisted in said refusal until December 17, 1881, when the same were delivered by defendant and accepted by plaintiff. In the meantime, the value of the stock had decreased. The court below refused the offer of plaintiff to prove such decrease, as the measure of damages, and charged the jury that the measure of damages was the interest on the value of the shares from the day of the refusal to deliver to the day of actual delivery.

      Held, erroneous; that if the case is considered as a breach of contract, the measure of damages would be the difference between the value of the shares at the time of refusal and the value at the time of actual delivery, to be computed by the jury ; if considered as a conversion, it was a constructive and not an actual conversion, and the defendant, notwithstanding his refusal, could afterwards deliver the shares, which delivery might be considered in mitigation of damages.

      Decided January 5, 1885.
    Before Sedgwick, Ch. J., and Yak Vorst, JJ.
    Appeal by plaintiff from a judgment rendered in his favor, on account of the inadequacy of the verdict.
    On March 19, 1881, the defendant signed an agreement with one Ferris and others, by which Ferris transferred to defendant 23,000 shares of the Barcelona Mining Company, in certificates of various amounts, among which were two of 5,000 shares each, which shares defendant agreed to hold for six months, and then to transfer them to the holder of the several certificates (unless the trustee took them up sooner, which he did not do), payment being first made of all outlays. On August 18, one Fish bought 5,000 shares of said stock of said Ferris, and received a certificate therefor from defendant. On September 24, the certificate was duly presented to the defendant, and the delivery of said stock duly demanded, as found by the jury, and the said defendant unlawfully refused to deliver the same, and persisted in said refusal until December 17, when the same was delivered. On July 5, 1882, Fish assigned all claim against the defendant to plaintiff, who immediately brought this action.
    The market value of said stock on the day when the same should have been delivered (September 24) was $1.10 a share, or $5,500 for the 5,000 shares. The trial judge instructed the jury that, if they found on the question of fact for the plaintiff, their verdict should be $88.68, the interest on said market value of said stock from the time of demand until the time of delivery, and he refused to permit the plaintiff to give evidence of the market value at the time of the delivery, viz., December 17, 1881, the difference between which amounts plaintiff contended was the true measure of damage. To the rulings of the judge on the measure of damages the plaintiff excepted.
    The jury found for the plaintiff, and the plaintiff brought this appeal.

      James M. Fish and William H. Arnoux, for appellant.
    —I. The unlawful refusal of defendant to deliver the stock in question upon demand, constituted, in law, a conversion, and thereby a cause of action accrued to plaintiff, which was not waived by the subsequent acceptance of the stock itself (Abridgment of the Common Law by D’Anvers [1 D'Anvers, 21], Countess of Rutland’s case, decided in 38 Eliz.; McKnight v. Dunlop, 5 N. Y. 537 ; Willoughby v. Backhouse, 4 Dowl. & Ryl. 539 ; 2 Barn. & Cress. 821; Allaire v. Whitney, 1 Hill, 488 ; Barber v. Rose, 5 Ib. 76). The subsequent acceptance was in mitigation of the damages only, and not a waiver of the tort.
    II. The rule for determining plaintiff’s damages as laid down by the trial judge, namely, that plaintiff was entitled to recover the amount of the interest on the market value of the stock on the day of the demand, and that his recovery was limited thereto, was erroneous.
    There is no such rule in any form of action for the improper withholding of real property or of merchandise, where the claim does not embrace the principal sum. When the plaintiff recovers the specific property claimed in ejectment, the measure of damages is the value of the use and occupation. The same rule applies where a tenant is unlawfully prevented from entering upon leased premises. It is the value of the use, deducting the amount agreed to be paid (Henderson v. N. Y. Central R. R., 78 N. Y. 423).
    The rule applicable to real estate is also the rule as to personal property (Allen v. Fox, 51 N. Y. 562; Clapp v. Walter, 2 Texas, 130 ; Darbey v. Cassoway, 2 Harris & J. 413 ; Butler v. Nehring, 15 Ill. 488 ; McGarrik v. Chamberlain, 20 Ib. 219).
    The trial judge undoubtedly had in mind, in making the ruling in question, cases of conversion where there had been no restitution. As to that, while the general rule was correctly stated, yet even in such cases that rule has no application to stocks. In Biddle’s Low of Stock Brokers, 416, it is stated as a general proposition that stocks are an exception to ordinary commodities (See Romaine v. Allen, 26 N. Y. 307; Markham v. Jourdan, 41 Ib. 231; Bk. Montgomery v. Reese, 26 Pa. St. 143; Kent v. Glinter, 23 Ind. 1; Bates v. Wild, 1 Hardy [Ohio] 532). One of the exceptions is stated in the Baltimore Railway Company v. Sewell (35 Md. 238, 6 Am. 402), where the court held that the plaintiff in conversion was entitled to the value of the stock claimed, together with the amount of all dividends thereon. Another exception is, that instead of the price at the time of demand and interest, where the stock has been paid for, the claimant can recover the highest price for which the stock has been sold between the day of demand and the time of trial (Markham v. Jourdan, 41 N. Y. 235). And a further exception is made where the stock has not been fully paid, that is, has been bought upon a margin; then the jury are to determine the price within a reasonable time after demand, in which the claimant might have sold the stock if it had not been illegally converted (Baker v. Drake, 53 N. Y. 211).
    The unreasonableness of the rule is further manifest by considering the remarkable fluctuations that have frequently taken place in the price of stocks in panics and corners, or by reason of extra stock dividends, and the temptation to which the trustee would often be subjected in such cases.
    The only case where interest is allowed as the measure of damage, where it does not follow as an incident, is where the demand is a contract for the payment of money. This is because the value of its use is determined by statute. The fair presmnption is that such would not be the rule if the law treated money as a commodity.
    ITT. The true measure of damages in an action for the unlawful detention of personal property where such property has a commercial value and has depreciated in value, while so detained, is the difference between the market-value at the time of demand and at the time of delivery.
    In Masterton v. Mayor of Brooklyn (7 Hill, 62), it is said: “The market price on the day of the breach is to govern in the assessment of damages and in this Bronson, J., concurred, upon the ground that this is the most plain and simple rule ; it will best preserve the analogies of the law, and will be as likely as any other to do substantial justice to both parties. The rule in such case is stated in Dey v. Dox (9 Wend. 129). “ Where the vendor is in default for not delivering goods or chattels in pursuance of the contract of sale, and no money has been advanced by the vendee, the true measure of damages is the difference between the contract price and the value at the time the article should have been delivered. And the reason for the rule is conclusive, to wit: that such damages, added to the contract price, which the vendee has not parted with, will enable him to buy the article in the market.” But in the case at bar we have executed our contract, have parted with our money, and have not the ability to buy. The finding of the jury establishes that plaintiff is the innocent sufferer and the defendant the perpetrator of that wrong done. The general principle applicable to such a case is the doctrine of reparation (Ward v. N. Y. Central R. R., 47 N. Y. 29; Griffin v. Colver, 16 Ib. 489 ; Baker v. Drake 53 Ib. 211; U. S. v. Behan, 110 U. S. 438 ; 4 S. C. R. 81; Phil., W. & B. R. R. v. Howard, 13 How. U. S. 307; Gruman v. Smith, 81 N. Y. 25 ; Griffin v. Colver, 16 Ib. 489).
    In Baylis v. Usher (4 Moore & Payne, 790), a landlord made a wrongful distress, but never removed the property ; the plaintiff had free use of the chattel and it was finally restored to him before suit brought. The owner thereupon brought trespass ; it was held that the action would fie. Applying this principle of reparation in Shipwick v. Blanchard (6 Term, 289) where plaintiff paid 40s. to relieve property from unlawful distress—held, to be a conversion, although the property was not removed, and the defendant liable for the amount. In Baldwin v. Cole (6 Mod. 212), plaintiff, a workman, demanded his tools of defendant, surveyor of work in the Queen’s yard, which was refused, but subsequently tendered. Held, “ if the plaintiff had received them upon the tender, action, notwithstanding, would have lain upon the former conversion, and the having of the goods after would go only in mitigation of the damages.” And in Keene v. Dilke (4 Exch. 388), a sheriff unlawfully levied upon, but did not remove, plaintiff’s property ; another trespasser took the goods— held, that the sheriff was hable for the amount necessarily paid to the second wrongdoer in order to get back the goods.

      Sedgwick Meas. Dam. 360, 410, 4th ed., lays down the rule that acceptance of the goods does not bar the action. Nothing but a release, or satisfaction, constitutes such a bar. But acceptance may be given in mitigation of damages so as to limit the recovery to the actual loss sustained by the owner. This is said as to common carriers, but the cases show that the rule is not limited to them, being a rule of general application (Scoville v. Griffiths, 12 N. Y. 509 ; Laurent v. Vaughan, 30 Vt. [Shaw] 90 ; Waite v. Gilbert, 10 Cush. 177 ; Kent v. H. R. R., 22 Barb. 274 ; Sisson v. Cleveland T. R. R., 14 Mich. 489). ,
    “ Where a carrier from plain violation of duty omits to transport merchandise beyond a reasonable time, and its market value falls in the meantime, the true rule of damages, both upon principle and authority, is the difference in its value at the time and place it ought to have been delivered, and the time of its actual delivery (Ward v. N. Y. Central R. R., 47 N. Y. 29).
    Acceptance after default is not a waiver of the claim (Barber v. Rose, 5 Hill, 76 ; Ruff v. Rinaldo, 55 N. Y. 664; Bowman v. Teall, 23 Wend. 306).
    Beparation in this case is the depreciation in value of the stock (Hunter v. Wetzell, 84 N. Y. 549 ; 38 Am. 544 ; Allen v. Fox, 51 N. Y. 562 ; Bristol v. Burt, 7 John. 254 ; Barrow v. Arnaud, 8 Q. B. 595 ; 10 Jur. 319 ; Williams v. Archer, 5 C. B. 518; Mayne Damages, § 525 ; see also Reynolds v. Shuler, 5 Cow. 325).

      The rale of damages applicable to this case is this : To the market price on day of demand add the interest to the day of delivery ; from that deduct the value of stock delivered on the day of delivery, and the amount, with interest to date, is the proper verdict which the jury should give.

      Sullivan & Cromwell, for appellant.
    I. The action was not for unlawful conversion, but expressly for alleged loss of value between the date of alleged demand, and admitted delivery and acceptance of the stock. There is no pretense of special damages, as, for instance, a contract to sell the certificate in question of which defendant had knowledge.
    II. Plaintiff having once been refused, and afterwards requesting the stock and accepting it, unconditionally, as far as the case shows, waived all claim for damages except loss of interest on the value.
    III. Even if this action were for conversion and the conversion were not waived by after-acceptance, the rule of damages would not warrant the admission of the testimony offered. If plaintiff wanted the stock and intended to treat defendant’s first alleged refusal to deliver, as a notice of conversion, he must have replaced the stock by purchase elsewhere, “within a reasonable time,” in order to make a, claim for general damages (Baker v. Drake, 53 N. Y. 271). What is a reasonable time differs according to circumstances. It is not “reasonable ” to wait almost three months, from September 24 to December 17. In Colt v. Owens (13 Week. Dig. 40), held, that thirty days within which plaintiff might have regained the stock in the market without loss was the reasonable time. In Burbridge v. Anthony (Daily Reg. May 4,1880), held, that ten days was the reasonable time. There was no offer to prove, in the present case, that at any time after Flagler’s alleged refusal to deliver the stock, the plaintiff could not have purchased the same amount of stock in the market at a lower price than the alleged market price on September 24, 1881.
   Per Curiam.

This case seems to have been regarded upon the trial, as one of conversion, founded upon the refusal of the defendant, upon demand, to deliver the shares of stock.

The learned judge speaks of it, as a “wrongful refusal.” The complaint simply states the facts, out of which the defendant’s obligation' to deliver the shares arose, and alleges that without just cause, the defendant, although the shares were demanded, refused to deliver. The conversion, if any, arose, therefore, upon the demand and refusal, and was constructive and not actual. The defendant, however, afterward and before suit brought, changed his mind, and tendered the shares, and they were received.

The plaintiff offered to prove on the trial, that subsequent to his demand for the shares, and before their delivery, they had fallen in price. This offer was refused, and an exception was taken.

The judge in the end charged the jury, that the measure of damages was the interest on the value of the shares, from the day of the refusal to deliver, when requested, up to the day of the actual delivery, and fixed the amount.

These rulings give rise to the only question involved in the plaintiff’s appeal. We think that the exclusion of the evidence offered, and the rule of damages laid down by the judge was erroneous, in any light in which the action may be viewed, whether it be considered as one on contract, or for a conversion.

As one upon contract, the amount of the damages, was not one of law, but of fact, and included the loss which the plaintiff had sustained by the breach. That would be the difference between the value of the stock on the day of the demand and refusal, and the value at the time the same was actually delivered, to be computed by the jury.

It is suggested that the plaintiff, after the refusal, could have purchased or sold, in the meantime. That is speculative. He was not bound to buy other shares, and he had none to sell, owing to the defendant’s refusal.

Regarded as an action for a conversion, the defendant, notwithstanding his refusal at first, could afterwards, as he did, deliver the shares, and such subsequent delivery, under the cases to which our attention was called upon the argument, might be taken in mitigation of damages.

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


source: Caselaw Access Project

author: Freedman, J.

license: Public Domain

text:
    HENRY McCABE, Appellant, v. J. FRANK EMMONS and FREDERICK N. LAWRENCE, as Pres’t, &c., Respondents.
    W. 7. Stock Exchange—membership therein as property—assignment in bankruptcy.—Injunction.

    A seat or membership in the N. Y. Stock Exchange is property of a peculiar nature, and whether it is property which can be reached by the judgment of a court, must be determined on the facts of each particular case, in connection with an appeal to the provisions of the constitution and by-laws of the Exchange, by which the rights and duties of each member arc controlled.
    All the property of an owner of such a scat passes to the assignee in bankruptcy proceedings, by his general assignment, and the subsequent sale by such assignee to another person, vests m that person all the property of the member, as fully as it had been theretofore possessed by the member, and the latter cannot by any assignment or transfer, subsequent to the assignment in bankruptcy, vest any right or interest in said scat in any other person.
    The purchaser from the trustee in then in a position to apply to the Exchange, to have his rights recognized, under its constitution and bylaws,—e. g.t he may offer himself, or he may procure a purchaser of the seat, and nominate him to the Exchange or its proper committee, and ask to have him elected and recognized as a member of the Exchange. The recognition of another person by the Exchange, as a member entitled to the scat through transfer made by the member after Ms assignment in bankruptc)r, is no obstacle to such an application, nor would it be an obstacle to an action to he brought founded upon a wrongful refusal of the Exchange to recognize the applicant’s rights, it being conceded that the membership is not limited by the constitution or by-laws.

      Decided January 5, 1885.
    Until such action and proceedings for recognition by the Exchange have been taken by the purchaser from the assignee in bankruptcy, he is not entitled to obtain from the court, relief by way of a judgment that he is entitled to the seat or membership and that the other claimant is not, nor is he entitled to injunctive relief in an action brought against the Stock Exchange and the claimant recognized by it.
    Before Sedgwick, Ch. J., Van Vorst and Freedman, JJ.
    Appeal by plaintiff from judgment dismissing complaint entered upon the decision of the court at special term.
    The facts in the case appear fully in the opinion of the court.

      Horatio F. Averill and George F. Betts, for appellant.
    —I. The membership of Erastus F. Mead in the Stock Exchange is property, and the title to the same is vested in and held by the plaintiff (Platt v. Jones, 96 N. Y. 24 ; Powell v. Waldron, 89 Ib. 328 ; Hyde v. Woods, 94 U. S. 523 ; In re Ketchum, 1 Fed. Rep. 840 ; In re Warder, 10 Ib. 275 ; Grocers’ Bank v. Murphy, 60 How. Pr. 426; Ritterband v. Baggett, 42 Super. Ct. 556 ; Elliott v. Mer. Bank of St. Louis, 28 Alb. Law J. 512). The constitution of the Stock Exchange mentions “ membership ” as property, and provides for its sale (Art. 13, § 2, fol. 140 ; Art. 14, § 2, fol. 147; § 3, fol. 149).
    II. One of the valuable rights and privileges to which, as transferee of said membership, the plaintiff is entitled, is to have his name submitted to the committee on admissions of said Stock Exchange for the approval of said committee for admission to membership to said Stock Exchange, or to transfer said membership to some other person, and to have the name of such transferee submitted to the committee on admissions for the approval of said committee for admission to membership of said Stock Exchange (Art. 13, § 1, fol. 140 ; Art. 4, § 3, fol. 120). The circumstance that the approval of the committee on admissions is required before the transfer can be perfected, only diminishes the value of the right to transfer. It does not annihilate it.
    TTT- The plaintiff is obstructed and hindered in applying, as transferee of the membership of Head, to the committee on admissions of the Stock Exchange, by the acts of the defendants. 1. By the act of the defendant Emmons, in obtaining a transfer of the membership of Mead in 1879. 2. By Emmons obtaining the approval of the committee on admissions to that transfer, and by the committee approving the transfer. 3. By electing Emmons a member of the Exchange on the basis of that transfer when the title was in the plaintiff. 4. By announcing to the Exchange that Emmons had been admitted to membership therein, the transfer from Mead being the basis of that announcement. 5. By inscribing the name of Emmons on the roll of said Exchange, the transfer from Mead being the basis for such inscription (Art. 9, Const, fol. 132). (>. By entering in the ledger containing the names of all the members of the Exchange the name of J. Frank Emmons as holding a membership by transfer from Erastus F. Mead. The constitution (Art. 8, fol. 131) provides expressly for such a ledger, making it one of the official documents of the association. 1. By recognizing, from that time until now, Emmons as a member, upon the basis of that transfer from Mead, and Emmons using the privileges of that transferred membership. 8. By taking the position which is set forth in their answers, that Emmons is in fact the transferee of Mead’s membership, and that said transfer was duly made, and that Emmons became a member of the Exchange by virtue of that transfer in connection with other acts. 9. By accepting $500 from Emmons as his initiation fee, and thus putting it out of the power of the Exchange to admit the plaintiff for less than $20,000 initiation fee.

      IV. Under the constitution of the Exchange, the committee on admissions could not approve another transfer of Mead’s membership, when that membership has already been transferred to Emmons, and that transfer approved and the transferee admitted to the Exchange (Art. 13, § 1, fol. 140 ; Art. 4, § 3, fol. 120 ; Art. 8, fol. 131). Membership in the Exchange as “ transferee of Mead ” is a recognized status under the constitution. And Emmons has wrongfully intruded into that, with the co-operation of the Exchange, and is wrongfully sustained by the Exchange in that intrusion. The provisions of the constitution are binding on the committee on admissions and on the Stock Exchange, and regulate their powers and mode of procedure (Imperial Hydropathic Hotel Co. v. Hampson, 31 Week. Rep. 330 [Eng. C. of Appeal] ; People ex rel. Elliott v. N. Y. Cotton Exchange, 8 Hun, 216).
    V. The plaintiff has the right to call upon the court to interpose and compel action on the part of the defendants for the purpose of removing any obstruction or obstacle that may stand in the way of a complete realization by the plaintiff of the value of the property transferred to him (Platt v. Jones, 96 N.Y. 24; Cohen v. N. Y. Mut. Ins. Co., 50 Ib. 610; Meyer v. Knickerbocker Ins. Co., 13 Ib. 524; Hayner v. Am. Pop. Ins. Co., 36 Super. Ct. 214; S. C., affirmed, 62 N. Y. 620 ; Phelps v. McDonald, 99 U. S. 298).
    VI. The Stock Exchange are trustees for McCabe to act in protection and preservation of his rights. McCabe has rights in this voluntary association—in some respects less than those of full membership—but none the less rights. The Stock Exchange have violated these rights, and still continue to violate them. They have been active cooperators with Emmons in wrongfully transferring the membership, which is the plaintiff’s property. This court as a court of equity, should compel the trustee to redress this wrong (Willard’s Equity, 405 ; Davis v. Mayor, 1 Duer, 498; Milhau v. Sharp, 15 Barb. 193; Hascall v.
      Madison University, 8 Barb. 174 : Johnson v. Brooks, 93 N. Y. 343).
    VII. By their acts the defendants have created, and still keep, a cloud on the plaintiff’s title to this membership, and the plaintiff is entitled to the assistance of this court to remove that cloud (Costello v. Costello, 14 Fed. Rep. 207; Remington Paper Co. v. O’Dougherty, 81 N. Y. 474; Powell v. Haslett, 5 Lans. 380 ; Bruce v. Gallagher, 5 Blatchf. 481). It is evident that while the defendant Emmons holds his seat as the transferee of Mead, and the Exchange sustain him in it, and their ledger shows him to hold that seat by that title, the plaintiff could not sell this property to any advantage, or for its full value.
    VIII. The court should have granted an injunction to restrain the defendants from continuing to do the acts which are injurious to the plaintiff’s rights (Phelps v. McDonald, 99 U. S. 298 ; High on Injunctions, §§ 1230 and 1330 ; Erpstein v. Berg, 13 How. Pr. 91; First Ref. Pres. Ch. v. Bowden, 10 Abb. N. C. 1; Zillendorf v. Calkins, 23 Hun, 156; Lacustrine F. Co. v. L. S. & F. Co., 82 N. Y. 476 ; Amer. Guano Co. v. U. S. Guano Co., 44 Barb. 3; Daly v. Smith, 38 Super. Ct. 158 ; Woodruff v. Bloomfield Co., 18 Fed. Rep. 806 ; West Point Iron Co. v. Reymert, 45 N. Y. 703 ; Trevor v. Jackson, 15 Abb. Pr. N. S. 115 ; Gold & S. Tel. Co. v. Todd, 17 Hun, 548).

      Lester W. Ciarle, for respondent Emmons ; Scudder & Carter, attorneys, and James C. Carter, and Lewis Cass Ledyard, of counsel, for respondent Lawrence.
   By the Court.

Freedman, J.

There seems to be no dispute as to the facts found by the learned judge below. The most material ones are as follows :

In 1873 one Erastus F. Mead, then a regular member of the N. Y. Stock Exchange, in involuntary proceedings in bankruptcy in the district court of the United States for the southern district of New York, was duly adjudged a bankrupt, and he assigned, by deed duly executed, all Ms property and effects to Samuel H. Vandewater as trustee for the benefit of his creditors.

Notwithstandmg such assignment, Mead continued to enjoy his seat or membership in the Exchange and to pay the dues payable thereon, according to the constitution and by-laws of the Exchange until March, 1879, when the defendant Emmons—having obtained, in accordance with the constitution and the by-laws of the Exchange, the approval of two-thirds of the committee on admissions—procured a transfer to himself from Mead of the seat or membership of the latter, and was thereupon recognized as a member of the Exchange, and thereafter acted as such and paid the dues and assessments on his seat.

In December, 1882, Vandewater, as trustee, sold at public sale the right, title and interest of Mead in his seat or membership, to the plaintiff McCabe, for the sum of one dollar, and the plaintiff became the purchaser thereof.

McCabe never took any step, other than the bringing of this action, to assert any right which he claimed to have acquired by his purchase, His business is not, and never was, that of a broker or dealer in stocks or kindred securities. He did not in any manner offer himself to the Exchange or the committee on admissions, for approval as a member of the Exchange, nor did he ever seek from the Exchange or said committee the approval of any person whom he supposed to be suitable as a member and to whom he proposed to transfer his rights. He seeks by this action, in substance, to accomplish three things, viz.: CL.) To have this court declare that he is the transferee of the seat or membership of Erastus F. Mead, and entitled to all the rights and privileges of a transferee of such membership; (2.) To have this court declare that Emmons is not the transferee of the seat or membership of Mead, nor entitled to any of the rights and privileges of a transferee ; and, (3.) To have Emmons and the defendant Lawrence, as- president of the N. T. Stock Exchange, enjoined—Emmons from acting as a member, and the defendant Lawrence from recognizing Emmons as a member, of the Exchange.

A mere declaration by this court of the respective rights of McCabe and Emmons would answer no useful purpose. Courts are not instituted or appointed to inform suitors what their rights are. As a general rule, suitors should be left to seek such information from their counsel. The real question presented by the appeal is whether the plaintiff has made out a cause of action for injunctive relief.

A seat or membership in the H. Y. Stock Exchange undoubtedly is property for certain purposes, but even then it is property of a peculiar nature. It is not a tangible thing, and whether in a given case it is a chose in. action, depends upon whether the party entitled to it has rights under it which a purchaser from him or a transferee by operation of law, can enforce. The question, whether it is property which can be reached by the judgment of a court, must therefore be determined upon the-facts of each particular case in connection with an appeal to the provisions of the constitution and the by-laws of the Exchange by which the rights and duties of each, member are defined and controlled (Hyde v. Woods, 91 U. S. Supreme Ct. 523; Powell v. Waldron, 89 N. Y. 328 ; Platt v. Jones, 96 Ib. 21). The question as to the' character of the property involved in such a seat or membership is so fully discussed in these authorities, that further discussion here is unnecessary.

The property in the seat or membership of Mead,, whatever it was, as between the plaintiff and the defendants, as well as between Mead and Vandewater, passed by the assignment in bankruptcy from Mead to Vandewater, and vested in Vandewater as fully as it was before possessed by Mead. By that assignment Mead was as fully and completely divested of his property in the seat or membership as he could be by any paper or instrument which he could execute. He could do nothing more to> vest a complete and perfect title as against himself, in Vandewater (Platt v. Jones, 96 N. Y. 24). Whatever property Vandewater thus acquired, passed, upon the sale by him to McCabe, to the latter, and the plaintiff consequently stands before the court in the shoes of the assignee in bankruptcy.

This being so, and the plaintiff having all the rights which an assignee in bankruptcy could claim, he is in a position to apply to the Exchange to have his rights recognized ; that is to say, he may procure a purchaser of the seat and nominate him to the Exchange or the appropriate committee thereof, and ask to have him elected a member of the Exchange as provided by its constitution and by-laws.

The plaintiff having failed to do any of these things, and it appearing that neither the Exchange nor any committee thereof has refused or threatened to refuse to consider an application to be made by the plaintiff for the purposes referred to, this court cannot assume that the Exchange, or the appropriate committee thereof, will, upon a proper application by the plaintiff, refuse to do what in equity and justice it ought to do. Upon this point, the principle laid down by the court of appeals in Platt v. Jones (supra) is conclusive against plaintiff’s prayer for injunctive relief at this stage of the proceedings.

The recognition of Emmons by the Exchange, although it may hereafter lead to a controversy between him and the Exchange, is no obstacle to a proper application on the part of the plaintiff, nor would it be an obstacle to an action to be brought by the plaintiff, founded upon a wrongful refusal of the Exchange to recognize plaintiff’s rights, for it is conceded that the number of members is not limited by the constitution or the by-laws of the Exchange.

In every aspect, therefore, that can be taken of the present situation, no cause of action for injunctive relief has been made out.

The views already expressed render it unnecessary to consider the further question whether, and if so how far, after the lapse of nine years of silence and inaction on the part of the plaintiff and of those whom he represents, a court of equity will assist the plaintiff to reap the fruits of other men’s disbursements by which the seat was preserved.

The judgment should be affirmed, with costs.

Sedgwick, Oh. J., and Van Vorst, J., concurred.


author: Truax, J.

text:
    THEODORE ROOSEVELT, OSCAR S. STRAUS, HENRY A. OAKLEY, and GEORGE HAVEN PUTNAM v. FRANKLIN EDSON, Mayor of the City of New York, WILLIAM P. KIRK, individually and as President of Board of Aldermen, and others as MEMBERS OF SAID BOARD, OTHERWISE CALLED THE COMMON Council of the City of New York.

      Municipal corporation and officers of-—injunction as to—powers of court of equity over—appointment, etc., of officers—when complaint necessary on granting injunction—sufficiency of affidavits on injunction—broadness of injunction, ground for vacation.

    Municipal corporations are regarded as trustees of a public trust as to the property and franchises held by them; and a court of equity exercises jurisdiction over them upon substantially the same principles as those which govern its interference in cases of trusts; and consequently it has the power to, and will, interfere by injunction to prevent abuse, injustice, oppression, or the consummation of fraud, in the exercise by them, though the medium of any of their officers, of any of their powers, franchises or privileges.
    It follows that in an action brought by the proper party, in which action sufficient facts are properly alleged, an injunction restraining an illegal or corrupt appointment to a public office of said corporation, may be issued.
    An action brought by taxpayers to restrain a municipal corporation or it.s officers, is one in which the injunction depends on the nature of the action. An injunction granted in such an action without a complaint, must for that reason he vacated. Section 628 of the Code of Civil Procedure, construed with section 603, does not dispense with the necessity of a complaint.

      Decided January 26, 1885.
    Averments contained in the affidavits, which are indefinite and uncertain,— such as are made on information and belief, without giving the sources of the information and grounds of belief,—and such as may be regarded as mere conclusions, are insufficient to authorize the injunction.

    Where, as in the case at bar, the case presented by the affidavits warranted an injunction restraining only the appointment and confirmation of a particular person to a particular office,—Held, that an injunction restraining the making of any appointment whatever, must be vacated.
    Before Truax J., At Special Term.
    Motion to continue an ad interim injunction (contained in an order to show cause) restraining “the defendant Franklin Edson, as mayor, and the defendant, William P. Kirk, individually, and as president of the board of aldermen, and as a member of said board, and in every other capacity, and each and every other defendant as a member of said board of aldermen, and in every other ■capacity, from appointing, nominating or confirming the nomination of any person to the office of commissioner of public works, the office of counsel to the corporation of and for the.city of New York, until the entry and service of an order herein, changing or modifying the force of this order.”
    The facts appear in the opinion.

      Charles P. Miller, of counsel for plaintiffs, for the motion.

      David Dudley Field and Robert Sewall, for the mayor; George Bliss, W. Bourke Cochran, and David J. Dean, for the aldermen; all appearing for purposes of motion only, and in opposition thereto.

       As to the eflect on jurisdiction, see next opinion.

   Truax, J.

Among the privileges or franchises granted to the corporation of the city of New York by the state is the privilege of having certain officers, named in the charter, and among these officers are the commissioner of public works and the counsel to the corporation.. The privilege of appointing is conferred by the charter upon the mayor of the city, while the right to confirm or reject the appointment is vested in the board of aldermen.' This power of appointing and confirming is a trust conferred upon the mayor and the board of aldermen, and the method of using this trust is subject to the control of the courts. This trust is to be used for the benefit of the people of the city, each one of whom is a cestui que trust. Section 101 of chapter 410, Laws 1882 (Consolidation act) declares that the common council and the several members thereof are trustees of the property, funds and effects of the said city, and makes such trustees subject to all the duties and responsibilities imposed by law on trustees.

It is to the prejudice of the citizens and of each citizen, if an appointment to office be made through bribery, corruption or other unlawful means, for the law presumes that he who buys an office will make his purchase good, to the manifest detriment of the public (2 Blackstone’s Com. 36, 37).

It is well settled that public bodies and public officers may be restrained from proceeding in violation of law to the prejudice of the public or to the injury of individual rights. A usurpation of power may be prevented, and an alienation or renunciation of a public franchise be forbidden and restrained. To the extent that public officers and public bodies are trustees either of franchises or property for the benefit of the public, they are amenable to the jurisdiction of courts of equity (People v. Canal Board, 55 N. Y. 390). In the exercise of this jurisdiction the court proceeds upon substantially the same principles as those which govern its interference in cases of trust; a municipal corporation being regarded in equity as charged with and made the depositary of a public trust, and thus amenable to the jurisdiction of equity for a breach of that trust (Christopher v. Mayor, &c., 13 Barb. 567 ; Milhau v. Sharp, 15 Ib. 193 ; Stuyvesant v. Pearsall, Ib. 244; Dudley v. Trustees, &c., 12 B. Mon. 615).

It was suggested on the argument that the appointment and confirmation were legal, and that it was the taking of bribes that was illegal, and that therefore, only the bribe-taking should be enjoined. It seems to me that this distinction is not a just one, but that the appointing and confirming an officer through bribery and corruption are the illegal acts which may be enjoined. As long ago as Fermor’s case (in the year 1662), it was said that the law doth so abhor fraud and covin, that all acts, as well judicial as others, and which of themselves are just and lawful, yet, being mixed with fraud and deceit, are in judgment of law, wrongful and unlawful. The appointment and confirmation of an officer by bribery is made a felony (and therefore illegal) by section 58 of chapter 410, Laws 1882, which provides that every member of the common council, or every person who shall promise, offer or give, or cause, or aid or abet in causing to be promised, offered or given ... to any member of the common council, or any officer of the corporation, . . . any money, goods, right in action or other property, or any thing of value, or any pecuniary advantage, present or prospective, with intent to influence his vote, opinion, judgment or action on any question . . . which may then be pending before him in his official capacity, shall be deemed guilty of a felony ; and every officer who shall accept any such gift or promise .. . shall be deemed guilty of a felony, and shall upon conviction be disqualified from holding any public office, . . . and shall be punished by imprisonment or by a fine, or both.

It was contended on the argument that the act enjoined was a legislative act and discretionary, and therefore that the court had no jurisdiction to prohibit it. This court held in Davis v. Mayor, &c., of New York (1 Duer, 451), that this contention is not true when applied to a subordinate municipal body, which although clothed to some extent with legislative and even political powers, is yet, in the exercise of all its powers, just as subject to the authority and control of courts of justice, to legal process, legal restraint and legal correction, as any other body or person, natural or artificial. The supposition that there exists an important distinction, or any distinction whatever, between a municipal corporation and any other corporation aggregate, in respect to the power of the courts of justice over its proceedings, has no foundation, and is as destitute of reason as it is of authority. The conclusion from these remarks is, continues Judge Duer in the case above cited, that a court of equity will not interfere to control the exercise of a discretionary power, when the discretion is legally and honestly exercised, but will interfere whenever it has grounds for believing that its interference if necessary to prevent abuse, injustice or oppression, in the violation of a trust, or the consummation of a fraud. It will interfere and it is bound to interfere, whenever it has reason to believe that those in whom the discretion is vested are prepared illegally, wantonly or corruptly to trample upon rights and sacrifice interests which they are specially bound to watch over and protect 1 Duer, 498); and the same ruling was made by Judge Gilbert, in Negus v. City of Brooklyn (62 How. 291). ,

Judge Duer then proceeded to consider whether the act of the common council in granting the right to lay a railroad track in the streets of this city was or was not a legislative act, and the conclusion that he arrived at is that it is not a legislative act. This is also the conclusion to which Judge Bosworth came in the same case (see 1 Duer, 508), and is the conclusion arrived at by the court of appeals in the People ex rel. Davis v. Sturtevant (9 N. Y. 263) and in Milhau v. Sharp (21 N. Y. 611).

Now, if granting a franchise to a railroad company is not a legislative act, even though it takes the form of a resolution of the common council (9 N. Y. 213), how can it be said that confirming the mayor’s appointment is a legislative act ? The power of confirming is not given to them by chapter 4 of the Consolidation act above referred to, which is the chapter that defines their legislative powers, but is given to them by chapter 5 of that act, which chapter defines the powers of the mayor of the city. The ordinances or resolutions of the board of aldermen (their legislative acts) must be approved by the mayor before they take effect (section 75 of chapter 410, Laws 1882), while such approval of the act of the board of aldermen in confirming or rejecting the mayor’s appointments is not required. All that the board of aldermen is required to do is to give its consent, or refuse so to do. The act says that the mayor shall nominate, and, by and with the consent of the board of aldermen, appoint the heads of departments (§ 106).

But, at any rate, the act of the mayor in nominating is not a legislative act, and if the act complained of is corrupt and fraudulent and an abuse of trust, it may be restrained by injunction (90 N. Y. 410), or set aside when made (Excise case, 1 Lancaster Law Rev. 318).

I am of the opinion, that in an action brought by the proper party, in which action sufficient facts are properly alleged, an injunction restraining an illegal or corrupt appointment to a public office may be issued.

The action is brought by Theodore Roosevelt and others, but it is impossible to say on what grounds or under what statute it is brought, because the complaint is not before the court.

The counsel for the plaintiffs said on the argument that the action was brought under chapter 531, Laws 1881, and the bond given on obtaining the injunction is the bond required by that act; but there is nothing in the papers before me to compel the plaintiffs to allege the facts required by that act to maintain an action, or to prevent them from alleging any facts that they see fit to allege.

The right to an injunction in an action brought pursuant to this act must come under section 603 of the Code of Civil Procedure, which is, in substance, the same as the first clause of section 219 of the Code of Procedure. It has frequently been held that if such right was sought under the first clause of section 219, such right must appear upon the face of the complaint itself by necessary and proper averments ; and it must likewise appear thereon that the plaintiff is entitled to a final injunction, and such injunction must be prayed for in due form (Thompson on Prov. Rem. 206). This construction seems to have been applied to the present Code by the court of appeals in McHenry v. Jewett (90 N. Y. 61, 62), where it is said that a temporary injunction is unauthorized when it does not appear from the face of the complaint that the plaintiff is entitled to the final relief for which the action is brought. Such fact cannot be said to appear on the complaint when there is no complaint. For this reason I cannot say that the action is brought under the act of 1881, nor can I look to the affidavits for facts to supply the deficiency of the .complaint.

On the argument of the motion, the counsel for the plaintiffs contended that section 628 of Code of Civil Procedure gave the court power to issue an injunction before the service of the complaint, and this construction was conceded to be right by one of the counsel for the defendants, though another of the counsel for the defendants denied it. Section 603 provides that where it appears from the complaint that the plaintiff demands and is entitled to a judgment against the defendant restraining the commission or continuance of an act, the commission or continuance of which, during the pendency of the action, would produce injury to the plaintiff, an injunction order may be granted to restrain it. In the action at bar, the right to an injunction depends upon the nature of the action. The nature of the action can only be ascertained from the complaint, and the provisions of section 628, that the granting or denial of an application to vacate an injunction does not prejudice a subsequent application founded upon the failure of a complaint which had not been made at the time of the former application, to set forth a cause of action sufficient to entitle the plaintiff to the injunction order upon one or more grounds recited therein, means, if it means anything, that when an injunction has been granted, as provided by section 603, i. e., on a complaint, and an amended complaint is served after granting or denying a motion to vacate it, such vacation of the injunction, or refusal to vacate, shall not prejudice another application for an injunction, or to vacate an injunction if the amended complaint sets forth, or does not set forth a cause of action sufficient to entitle the plaintiff to the injunction order.

I am of the opinion that an injunction should not be granted on affidavits alone, and without a complaint, and for this reason the injunction herein should be vacated.

It is alleged in the affidavits on which the injunction was granted that the mayor of the city of New York is about to make certain nominations for certain offices, and that such nominations are about to be confirmed through a corrupt combination with the board of aldermen. These allegations are denied by some of the members of the board of aldermen. The mayor, however, has not denied them, and for this reason, whatever allegations against the mayor are contained in the moving papers are admitted. So far as he is concerned, the only question is, are these allegations competent evidence ? If they are not, he is not bound to deny them.

John O’Brien swears that he is acquainted with Franklin Edson, the mayor of the city of New York; that he was one of the bidders upon the work recently let by the aqueduct commissioners in this city for the building of a new aqueduct; that after he had put in his bid for the said work, and after the several bids had been opened and the lowest bidder ascertained, Mr. Edson, who is and was one of the aqueduct commissioners, sent a messenger requesting him to come to his (the mayor’s) office; that he went there and saw him; that he said that he (the mayor) had sent out two or three messengers to find him and he was very anxious to see him ; that they went into the mayor’s private office, and that the mayor then said to the affiant: “ Why cannot you arrange with Brown, Howard & Oo. for each to take half the work ?” that Mr. O’Brien said : “No ; I am entitled to the whole of the work, and ought to have it,” and that Mr. Edson then said if he would get Mm (Edson) two aldermen to confirm Ms nomination of commissioner of public works—Fitz J ohn Porter—lie (Edson) would, as a member of the aqueduct commission, vote to give him the whole of the work. This affidavit shows that the mayor was endeavoring by corrupt means to secure aldermen to vote for the confirmation of Fitz John Porter; it does not show that the mayor has attempted to secure the confirmation of any other person. The facts stated in this affidavit do not warrant the court in restraming the mayor from making any nomination. They only warrant an injunction restraming the nomination (and perhaps confirmation) of one particular individual.

It therefore becomes necessary to examine the other affidavits. They appear on the first reading to state facts, but a careful exammation shows that they state conclusions and not facts.

The affidavits of James A. Lyons and Patrick Handibode relate only to the confirmation of Fitz John Porter, and in that respect are to be classed with Mr. O’Brien’s affidavit. But they prove notMng; they are hearsay and are not admissible m evidence agamst any of the defendants. The affidavit of James H. Londergan was for the same reason stricken out on the argument, and the only other affidavit that purports to state any facts is that of Mr. Johnson. He swears, among other tilings, that he is “informed and believes that it is the purpose of certarn persons by connivance and corrupt combination, unlawfully and corruptly to secure the appointment to important offices in this city of certain persons by means of bribes and gross corruption.”- The officers referred to are the counsel to the corporation and the commissioner of public works. He further alleges, on mformation and belief, and charges “that there has been formed" and is about to be carried out a corrupt bargain and conspiracy by wMch it is and will be attempted to secure the appointment of persons to said offices, on condition that when appointed such heads of departments will appomt certain other persons to certain other subordinate offices or positions,” and that certain aldermen “ have corruptly agreed to vote in favor of the confirmation of certain persons to be appointed by the mayor to said offices, on condition that either they or certain of their friends be appointed to fill the said subordinate office.”

These allegations are too indefinite and uncertain to sustain an injunction. The affiant does not give the source of his information or the grounds of his belief. He does not state who the persons are that are to be corruptly appointed and confirmed, but refers to them by the vague appellation of “certain persons.” The mere allegation that there is a corrupt bargain and conspiracy, unless sustained by other facts, amounts to nothing, and is only a conclusion (Rosenberg v. Block, 49 Super. Ct. 488; Putnam v. Hubbell, 42 N. Y. 107). “ Mere information and belief without any reasons for it is not proof or evidence in any legal sense ” (Roderigas v. East River Savings Institution, 76 N. Y. 323). In this case the court of appeals held that a petition that alleged the death of a person upon the best of the knowledge, information and belief of the petitioner, was not due proof of the death, such as would give the surrogate jurisdiction to issue letters of administration (76 N. Y. 316). And it has been held that an affidavit stating upon information and belief that a bank is insolvent, is not sufficient evidence to authorize the granting of an injunction, although the bank has suspended specie payments (Livingston v. Bank of New York, 26 Barb. 304-307). And where facts are stated on information and belief, the sources of information and grounds of belief should be given (People v. Mayor, &c., 9 Abb. 253). The rule is well stated in High on Injunctions, sections 28 and 35, as follows : “When fraud is relied upon as the foundation for an injunction, the allegations of the bill must be of specific and definite acts of fraud, and not mere general averments; and in the absence of such specific allegations a court of equity will not interfere, although irreparable injury is alleged ” . ... “ An injunction, being a harsh remedy, "will not be granted in the first instance, except upon a clear prima facie case and upon positive averments of the equities on which the application for the relief is based. Nor will merely argumentative allegations or inferences from the facts stated suffice to meet the requirements of this rule.”

It is also to be borne in mind that the allegations of fraud and conspiracy in the moving papers are denied by seven of the aldermen.

For the reasons above stated the injunction is vacated, with costs.

The questions involved on this motion are novel and of the greatest importance. I have examined carefully the reports of this state, of the other states, and of Great Britain, and the text books on corporations, injunctions and equity, and I have not been able to find a case like this. I have found cases in which courts of equity have restrained municipal corporations from corruptly granting a franchise. Of this nature are the cases of Davis v. Mayor, &c. (1 Duer, 451); Christopher v. Mayor (13 Barb, 567); Milhau v. Sharp (15 Id. 193). I have found eases in which other corporations have been restrained from illegal action where such action would be to the detriment of their stockholders, and in the Excise cases (1 Lancaster Law Review), the corrupt action of a board of excise in granting a license to sell liquors through bribery, was set aside. I cannot see why courts cannot restrain the doing of an illegal act if they have the power to set aside that act when done. To hold otherwise would be to allow a person who has corruptly secured his appointment to an office to hold that office until his appointment was set aside. It seems to me that I have not extended too far the doctrine of such cases as Davis v. Mayor ; People v. Sturtevant ; People v. Dwyer ; People v. Canal Board, in holding that a court of equity can restrain public bodies and public officers from making a corrupt appointment to an office to the prejudice of the public. So to do is not controlling the discretion of a legislative body.