author: Bradley, J.:

text:
    David A. Lamming, Appellant, v. Norman H. Galusha and Others, Respondents.

      Directors of a railroad corporation — not chargeable as such with having negligently operated the road — corporations defacto and de jure — when the validity of their creation cannot be attacked by third persons — consent of a property owner to the construction of a raib'oad — chapter 606 of the La/ws of 1875.
    The directors of a railroad corporation are not as such chargeable with having negligently or willfully operated the railroad so as to unnecessarily injure or prejudice the rights of a property owner along the line of the same, and if in the operation of the railroad the proprietary rights of such property owner are violated, the responsibility is that of the company, whether it be a corporation defacto or de jure, and his remedy must be sought against it,
    A substantial performance of. the statutory conditions precedent to the creation, of a railroad corporation, sought to be organized under chapter 606 of the Laws of 1875, is essential, but although such conditions have not been fully or substantially complied with, in an attempt to create and organize a company under the act in question, and the company does not, therefore, become a corporation dejure, yet if there has been a colorable compliance with the requirements of the statute under which the company might have been lawfully incorporated, and the defect is in the omission to comply with the provision of the statute in respect to giving the public an opportunity to be advised what the plan of construction of the proposed corporation was, and there has been many years user by the company of the corporate rights and franchises which it claimed to have acquired, and which it assumed to exercise, such company becomes and is a corporation defacto.

      The validity of an incorporation cannot be impeached by third parties by showing, aliunde the articles of association, that certain prerequisites of the statute have not been complied with.
    There is a distinction between corporations receiving their charters directly from legislative enactment and those created pursuant to general laws, inasmuch as a failure of the former to perform certain conditions imposed, to enable them to take the benefit of the charter, will not subject their corporate character to attack' by third persons, while it is otherwise in respeet'to corporations sought to be created under general laws when there is a failure to comply fully with the conditions precedent to their creation.
    If by proceedings taken for the purpose of incorporating a company there has been an attempt to comply with the general statute under which it is sought to be created, and articles of association have been filed, from which the formation of the corporation may be presumed, the corporation, hy user, as such, becomes a corporation defacto, with all the rights as to third persons which that imports, although its articles filed are in some particulars defective.
    It then stands on the same footing as does a corporation defacto whose charter has come directly from legislative enactment, and hy -which certain conditions made requisite to its creation or organization have not been performed.
    User, as well as colorable creation, is essential to a corporation de facto.

    When a company becomes a corporation de facto a relation exists between it and its officers which will he recognized as effectual to. enable them through such relation to justify the exercise of their functions in the control, management and operation of the business of the de facto corporation which they represent, and for that purpose it is as to third persons no less effectual than a corporation dejure.

    The written consent of a property owner for the construction and operation of a railway to be incorporated under chapter 606 of the Laws of 1875, on the route determined hy certain commissioners, as such construction should be authorized by the proper authorities, if effectually given, is something more than a mere license.
    Appeal by the plaintiff, David A. Lamming, from a judgment of tbe Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Monroe on the 1st day of March, 1894, upon the decision of the court, rendered after a trial at the Monroe Special Term, dismissing the plaintiff’s complaint upon the merits.
    This action was brought to restrain the defendants from maintaining and operating a railroad known as the Bochester and Lake Ontario railway, within the limits of North avenue and the Bidge road, from the intersection of Bay street with North avenue to the intersection of the east line of plaintiff’s premises with the Bidge road, and to recover damages.

      Henry W. Oonkli/n, for the appellant.

      Gharries J. Bissell, for the respondent.
    Present — Dwight, P.-J., Lewis and Haight, JJ.
    Judgment appealed from affirmed, with costs, on the opinion of Bradley, J., at Special Term;
    Bradley, J., not sitting.
   The opinioniof the Special Term was.as follows:

Bradley, J.:

The plaintiff alleges that the defendants have for some years wrongfully and unlawfully maintained and operated the railroad in ■question within and along North avenue, from Bay street in the city ■of Bochester to the intersection of the avenue with the Bidge road,, .and along that - road ppon and across his premises in the town of Irondequoit in the county of Monroe, to his annoyance and damage specifically mentioned. If the facts as alleged are supported by the evidence the plaintiff is entitled to relief. ■ ,

It appears that on May 29, 1879, articles of association were filed in the office of the clerk of Monroe county, and in the office of the ■Secretary of State, on June 3, 1879, purporting to incorporate the Bochester and Lake Ontario Bailway Company, pursuant to the provisions of chapter 606 of the Laws of 1875, commonly, known as the “ Bapid Transit Act.” The railway was constructed in the summer of 1879, and ever since then it has been operated. Directors have from time to time been elected, reports have been made- by the company in the manner provided by law, it has been assessed for and paid taxes upon the railüoad and property, and in fact it has .assumed to be and has been recognized as being a corporation having the corporate name before mentioned.

The defendants having been elected as directors of the company were acting as such at the time of the commencement of this action in February, 1891, and they assumed to have no other relation to the railroad and its operation than as such directors, nor were they .as such chargeable in that capacity with negligently or willfully ■operating the railroad so as to unnecessarily injure the plaintiff or prejudice his rights.

The leading proposition upon which the plaintiff relies to support the action is that the company did not become legally incorporated under the Bapid Transit Act; and that, therefore, the persons so elected as directors, and who controlled the operation of the road by reason of such relation, are chargeable as individuals for the consequences injurious to him. As represented by the articles of association, it appears that the five commissioners were duly appointed; that they duly qualified and organized themselves into a board, and did all that was essential to enable them to prepare articles of association for the company, and made and delivered to the directors the requisite certificate, duly verified, as provided by section 9 of the act, which, with the articles of association, was filed, as before mentioned. It is provided by section 7 of the Bapid Transit Act that the commissioners shall prepare appropriate articles of association for the company, in which “ shall be set forth and embodied as component parts thereof the several conditions, requirements and particulars by said commissioners determined pursuant to sections 4, 5 and 6 of this act.” By section 4 it is provided that they fix and determine the route and locate it; by section 5 that they, by public notice, invite the submission of plans for the construction and operation of the railway, and on the day named in the notice meet and decide upon the plans for its construction, “with the necessary supports, turn-outs, switches, sidings, connections, landing places, stations, buildings, platforms, stairways, elevators, telegraph and signal devices, or other requisite appliances upon the route or routes, and in the locations determined by them,” and by section & that they, within the period named, shall determine the time within which such railway shall be constructed and ready for operation, together with the maximum rates to be paid for transportation and conveyance over it, and the hours during which special cars shall run at reduced fares; 'that they shall fix and determine the amount of the capital stock of the company, the number of shares into which it shall be divided, and the percentage of it to be paid in cash by the subscribers at the time of subscription. As before remarked, it appears by the articles of association that the commissioners had done and determined substantially all things made by the act requisite to the incorporation of the company for the construction of a surface railway. The conditions, requirements and particulars determined pursuant to the provisions of sections 4, 5- and 6 are sufficiently set forth in the articles of association. In respect to the matters mentioned in section 5, the articles represent that the commissioners, by public notice, invited the submission of plans for the construction and operation of the railway, and that at the time and place in the notice named “ they determined upon the plans for the construction and operation of said railway with the necessary supports, turn-outs, switches, sidings, landing places, stations, buildings, platforms, stairways, and other requisite appliances submitted in the plans and profile of George M. Rafter.” It will be observed that the commissioners set forth in the articles in the respect last mentioned what they had determined, and not the-result of them determination; and that if they were required by the statute to do more they failed to comply with it, unless the reference-made to the plans submitted by George M. Rafter was sufficient for the purpose. Those plans were not filed in either of the offices where the articles were filed. The evidence tends to prove that they were kept in the office where the commissioners met to transact business-until their duties were performed, then were -handed over to the directors. One, and the main, purpose of the plans which the commissioners had adopted by their determination was to have the railway constructed in accordance with them. This is within the requirements of the act, and to accomplish it, reference could be made to them as effectually as if a definite description of them were-in the articles. There was evidently also within the contemplation of the statute the further purpose of enabling the public to have the opportunity, which would be afforded by the public records, to be advised what the plans were which the directors were required to observe and follow in the construction of the railway. The reference made to the unfiled plans was not a compliance with the legislative purpose and requirement before mentioned, and, therefore, the articles of association in that respect were defective. Complete plans, were not produced at the trial, and it is contended on the part of the plaintiff that none were perfected. There was, however, evidence tending to prove that plans for the -construction of the railway were submitted by George M. Rafter, that portions of them had disappeared and could not be found, and that those brought into-court at the trial were a part only of the plans submitted to the commissioners and upon which their determination was made. It may. upon the evidence, be assumed that plans were submitted to and adopted by them. Whatever effect such omission might have in an action or proceeding in behalf of the People of the State to terminate the corporate existence which' the railway company has or assumes to have, it is not, in the view here taken, available to the plaintiff in support of the present action. The plaintiff, by his action, proceeds upon the theory that the Rochester and Lake Ontario Railway Company is not a corporation, and founds the charge of liability of the defendants upon their relation as directors of the company, and upon the fact that by such relation they may be supposed to have the control and direction and management of the rail-way. While the attack upon the corporate character of the company is collaterally made by seeking to charge the defendants, the' question of its power to confer upon them the authority which they assumed to exercise as directors is directly presented for consideration. It is true that the substantial performance of the statutory condition precedent is essential to the creation of a railway corporation sought to be organized under the act before mentioned. And it may be assumed that those conditions were not fully or substantially complied with in the attempt to create and organize the company in question, and, therefore, that that company did not thereby become a corporation de jure. But there was a colorable compliance with the requirements of the statute under which the company might lawfully have been incorporated, and the defect was in the omission to comply in the particular before suggested. And there has been for many years user by the company of the corporate rights and franchises which it is claimed was conferred upon it, and which it assumed to exercise. By reason of such organization with color of law and such exercise of corporate franchises, the company became and was a corporation de fcoeto. This proposition may not be questioned, and yet it is insisted on the part of the plaintiff that' the denial of the right to successfully attack in such case the corporate existence of the company is dependent upon a relation in respect to the subject-matter of an action which is not applicable to the-remedy sought by him.

It has been held in many cases that the subscribers to the stock of a corporation prior to the completion of its creation are not estopped from asserting its non-existence as such when sued to recover the amount so subscribed. (First Baptist Society v. Rapalee, 16 Wend. 605.) The question arose in Buffalo & A. R. R. Co. v. Cary (26 N. Y. 75), where it appeared that the affidavit indorsed upon and filed with the articles of association of that company was not in compliance with the provisions of the General Railroad Act of 1850. The recovery was sustained. No opinion of the majority of the court was put in writing, but in that of the court below it was said that “ if the papers filed by which the corporation is sought to be created, are colorable, but so defective that in a proceeding on the part of the State against it, it would for that reason be dissolved, yet by acts of user under such an organization it becomes a corporation de facto, and no advantage can be taken of such defect in its constitution, collaterally, by any person.”

In Eaton v. Aspinwall (19 N. Y. 119), in referring to the Mexican Ocean Mail and Inland Company which its promoters had sought to incorporate pursuant to Laws of 1852 (Chap. 228), the court held that, by reason of non-compliance with the ’ statute, the company was not a corporation de jure, but in view of its user, it was one defacto, and added : “ Thus it will be seen that this corporation, though not a valid corporation in point of law, may carry on its enterprises, have its day in court, and divide its revenue among the holders of the shares of its capital until the State shall interpose and ask that it be dissolved; and that the only real necessity of complying with the statute in relation to the payment of the ten per cent was to prevent proceedings in behalf of the people to put an end to its corporate functions.” In that case the certificate required by the statute was made and filed. The statute also provided that when that shall have been filed and ten per cent of the capital named paid in, the persons who shall have signed and acknowledged the same, etc., shall be a body politic and corporate. It may be that, in respect to the corporate existence of the company, the failure to pay in the ten per cent may not have had the same effect as the omission to make and file the requisite certificate. But no such distinction seems to have been observed by the judge who delivered the opinion. The company was treated by him as a corporation de facto only. The performance of a condition like that last mentioned was held essential to the incorporation in Farnham v. Benedict (107 N. Y. 159).

It was said by the court in Snider’s Sons’ Company v. Troy (91 Ala. 224; 24 Am. St. Rep. 887) that corporations de facto are under the protection of the same law and governed by the same legal principles as those de jure “ so long as the State acquiesces in their existence and exercise of corporate functions.” The same principle was declared in Lehman v. Warner (61 Ala. 455), and the case of The People v. Montecito Water Company (97 Cal. 276; 33 Am. St. Rep. 172) was a proceeding by quo warranto to dissolve the defendant or terminate its exercise of corporate franchises because of non-compliance with the statute in its attempted creation, and the complaint alleged such facts and that it was ’ only -a corporation de faeto. Upon demurrer by the defendant, which was sustained below, it was urged that if the defendant had failed to become a corporation it could not be properly made a party, .and that, by making it such, its corporate character was admitted. The court on review, in overruling this demurrer, held that the ■corporation being one de facto was a proper and necessary party, and said, in quoting from a previous case in the same court, that “ a •corporation defacto may legally do and perform every act and thing which the same entity could do or perform were it a dejtore corporation. As to all the world except the paramount authority under which it acts, and from which it receives its charter, it occupies the ;same position as though in all respects valid; and even as against the State, except in direct proceedings to arrest its usurpation of 'power, it is submitted, its acts are to be treated as efficacious.” A remark to the same effect was made by the justice delivering the ■opinion of the court in Doyle v. Peerless P. Co. (44 Barb. 239). And it has been held, and such, I think, is the well-established rule, that the validity of a coi-poration cannot be impeached by third parties by showing aliunde the articles of association that certain prerequisites of the statute have not been complied with. (Laflin, etc., Co. v. Sinsheimer, 46 Md. 315; 24 Am. Rep. 522; Jones v. Dana, 24 Barb. 395.) And in People v. Selfridge (52 Cal. 331) it was held that the assumed corporate character of the defendant could take no benefit for its support from the fact that a requisite condition omitted in the articles was actually performed, but that the insertion of it in the articles was as essential as its performance for the defense of an action by the State to terminate the exercise of corporate franchises. The plaintiff’s counsel has called attention to Mokelumne Hill Canal & Mining Company v. Woodbury (14 Cal. 424; 73 Am. Dec. 658), where it was said that “ there is a broad and obvious distinction between such acts as are declared to be necessary steps in the process of incorporation and such as are required of the individuals seeking to become incorporated, but which aro not made prerequisites to the assumption of corporate powers. In respect to the former, any material omission will be fatal to the existence of the corporation, and may be taken advantage of collaterally in any form in which the fact of incorporation can properly he called in question.” The same proposition is stated in Beach on Corporations, section 16. This question did not necessarily arise in that case, as the court held that such defense was not available to defendant in that action. Nor do the views there so expressed seem supported by those of the court in the later case in the same State of People v. Montecito Water Company (supra).

A distinction between corporations having their charter directly from legislative enactment and those created pursuant to general law;s is observed by the courts in some cases, where it is held that failure of the former to perform certain conditions imposed to enable them to take the benefit of the charter will not subject their corporate character to attack by third persons, while it is otherwise in respect to corporations sought to he created under general laws when there is a failure to comply fully with the conditions precedent to their creation. That distinction may be well founded so far as relates to the organization of them, as in the one case they are created by the statute and in the other their creation is authorized by it. But when, by proceedings taken for the purpose, there has been an attempt to comply with the statute., under which it is sought to incorporate the company, and articles of association have been filed, it, by usér as such, becomes a corporation cle facto, with all the rights as to third persons which that imports, although its articles filed are in some particular defective. I see no reason why it does not then stand on the same footing as does a corporation de facto whose charter has come directly from legislative enactment, and by which certain conditions made requisite to its creation or organization have not been performed. The plaintiff in Brooklyn Steam Transit Company v. City of Brooklyn (78 N. Y. 524) had been duly incorporated, but had failed to perform conditions subsequent. By the statute which granted the charter it was provided that on failure to comply with such conditions the act by which the plaintiff was incorporated and the powers, rights and franchises granted by it, should be deemed forfeited and terminated; thus providing for self-executing forfeiture, and, therefore, the plaintiff there had no existence at the time the action was commenced. As has been said later by the court, that was a border case, and such effect will not be given to default in performance of conditions subsequent unless such legislative purpose is plainly manifested. (In re Brooklyn Elevated R. R. Co., 125 N. Y. 434.) The statute under which the corporation in the latter case was organized provided that for the default with which it was charged it should forfeit the rights acquired by ” it under the statute. And it was held that, although the State could take away its corporate life, until then a private individual could not effectually assert the forfeiture or in any way challenge its corporate existence:

In Farnham v. Benedict (107 N. Y. 1591 the defendant wab charged with fraud in procuring the issue of town bonds which he had taken and transferred to bona fide holders. They purported to have been issued in aid of the construction of a railroad as provided by the statute, pursuant to which it was represented to have been incorporated. It appeared that a requisite affidavit in the articles of association, and which was made by the- defendant, was false; that the company was not only not a corporation de jure, but was a sham corporation, and that the defendant was a promoter of the scheme. Nothing was done by way of construction, although the time prescribed therefor by the statute by which the incorporation of the company was authorized had expired. That case doés not seem to have any necessary application to the questions in the present case.

The attention of the court is called to The N. Y. Cable Co. v. Mayor, etc. (104 N. Y. 1), and it is forcibly urged by the plaintiff’s counsel that the doctrine of that case supports his alleged cause of action against the defendants. It was the determination on review of an order of the General Term denying a motion of the cable company made to confirm the report of commissioners, etc.; and the question was whether or not the company could, in the exercise of the right of eminent domain, take property for the purposes of its contemplated railroads in the streets of the city of New York. The court held that it could not unless it was validly organized pursuant to the Hapid Transit Act; and that as the act prescribed the proceedings by which such rights could be acquired, substantial compliance with the material requirements was a condition precedent and essential to the legal incorporation of the company, and to enable it to acquire corporate rights under the act. The articles of association filed were in some respects defective in that-they failed to provide for the release and forfeiture to the supervisors of the county of all rights and franchises acquired by such corporation in case the railways should not be completed within the. time therein provided, and it appeared by the articles that the commissioners failed to substantially comply with the requirements of section 5 of the act to determine the plans for the construction of the railway, etc. This non-compliance witli the provisions of the act denied to the company corporate existence, and, therefore, it, as was held, had no right to take or appropriate to its use the property of others for the purpose of constructing the railway which it had in view. This was a direct proceeding by the company to acquire, by the exercise of the alleged right of eminent domain, that which was essential to its purposes, and the right or power to do that was dependent upon its creation and organization as a corporation. This it had not accomplished, and consequently had assumed no relations to the public which enabled it through the action of the court to have or exercise such attribute of political sovereignty. The principles upon which that case was determined against the company do not seem to have any controlling application to the present action against the defendants. As has already been observed, user as well as colorable creation is essential to a corporation defaeto. (Buffalo & A. R. R. v. Cary, 26 N. Y. 75.) And when it becomes such there is a relation between it and its officers which will be recognized as effectual to enable them through such relation to justify the exercise of their functions in the control, management and operation of the business of the corporation defacto, which they represent. For that purpose it is as to third persons no less effectual than a corporation de jure. The former is the corporate character of the Hochester and Lake Ontario Railway Company and suck is the relation of the defendants as its directors to it.

It is claimed on the part of the plaintiff that his property is invaded by the operation of the railway, and for that reason the defendants are liable. His premises are situated on the northerly side of Ridge road, a public highway. The southerly line of his land is the center of the highway. The line of the route of the railroad as appears by the articles of association to have been fixed by the commissioners was in that highway, and the railway was constructed within and on the northerly side of it. Prior to and at the time of the construction of the railway those premises were owned by James Schooley, and he signed a written consent for the construction and operation of the railway on the route so determined by the commissioners in North avenue and Ridge road as such construction should be authorized by the local and proper authorities of the town, and including him, the owners of more than one-half in value of the property bounded upon the streets and highways of such route signed a like consent, and the local authorities having control of them also consented thereto. The plaintiff became the owner of the premises before referred to by purchase from Schooley in 1883, nearly four years after the railway was constructed and put in operation. If this consent of Schooley was effectually given, it was in view of the statute something more than a mere license. (White v. Manhattan Ry. Co., 54 N. Y. St. Repr. 409.) Rut what, if any, effect the insufficiency of the articles of association may have upon the force of such consent, it is now deemed unnecessary to consider. The property of the plaintiff was not invaded by the act of construction of the railway, and since his purchase the railroad has been in the possession of the company and operated by it through its constituted officers,- against whom no charge is sustained that they have done more than to exercise the functions of that relation to the company, and, .therefore, the continued operation of the railroad in the place where it was located and constructed is the act of the company and it only. • In the case of Fanning v. Osborne (34 Hun, 121; 102 N. Y. 441) the railroad there referred to was used exclusively for the private business purposes of D. M. Osborne & Co., and it was held that as the company had no right under the statute to appropriate a street for the operation of a railroad for other than the public purpose of transportation of persons or property, or both, it was a nuisance. The railway in question here is appropriated to the public purposes contemplated by the Rapid Transit Act. And if, in its operation, the proprietary rights of the plaintiff are violated, the responsibility is that of the company, and the remedy is to be sought against it. The view taken is that although the omission before mentioned ’ in the articles of association may have been a failure in that respect to comply with the statutory provisions for the creation of a corporation under the Rapid Transit Act of 1875, the Rochester and Lake Ontario Railway Company, by the filing of the articles in question, in connection with the user which followed, became a corporation de facto, and as such effectually supports the relation to it of the defendants as its directors, and that in the performance of their functions they are sheltered from personal liability by that relation to the company as such corporation.

The effect upon the status of the company as a corporation, whatever it may have been, of chapter 311 of Laws of 18S0, which purports to ratify the location of the route upon which the railroad was constructed, etc., is not considered because the disposition of that question is deemed unnecessary for the purposes of this action.

The conclusion follows that the complaint should be dismissed.


source: Caselaw Access Project

author: Haight, J.:

license: Public Domain

text:
    Helen M. Campbell, Appellant, v. George Ellwanger and Others, Respondents.

      Mortgagee in possession— dower interest of-the wife of a moi'tgagor not made a pa/i'tg to the mortgage foreclosure — right of the wife of the mortgagor to redeem — time within which redemption must be made —must be claimed through the husband.

    The wife of a mortgagor is not cut off from her inchoate right of dower in real estate by the foreclosure of a purchase-money mortgage given by her husband thereon, ’if she is not made a party to the foreclosure action, and if the premises.are bought in upon the foreclosure sale by the mortgagee, the mort- . gagee, as to the wife of the mortgagor, becomes a mortgagee in possession, .arid as such has the right to. retain the possession of the premises until his mortgage debt is paid, and until such payment ejectment cannot be maintained against him by the wife.
    The wife of a mortgagor having an inchoate right of dower in certain real estate formerly owned by her husband, and of which a mortgagee is in possession, has the right, even during the life of her husband, to redeem such premises by paying the mortgage debt.
    Prior to the Code of Procedure a person entitled to redeem real estate, as against a mortgagee in possession, had to bring his action within twenty years; under section 97 of that Code, the action had to be commenced within ten years, but under section 379 of the Code of Civil Procedure, the time to redeem was again extended to twenty years.
    The right of dower arises by reason of marriage and by operation of law, and it attaches to lands when the seizin and marriage relations are concurrent, but the dower right of the wife is dependent upon the seizin of her husband, and she consequently must claim “ under him,” within tile meaning of section 379 of the Code of Civil Procedure.
    Appeal by the plaintiff, Helen M. Campbell, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Monroe on the 10th .day of April, 1894, upon the decision of the court, rendered after a trial at the Monroe Special Term, dismissing the plaintiff’s complaint upon the merits.

      Frederick W. Smith, for the appellant.

      Joseph S. Hurm, for respondents Ellwanger and others.

      Hema/n W. Morris, for respondent Massey.
   Haight, J.:

This action was brought to redeem the premises described in the complaint from the mortgage executed by Cyrus M. Campbell to James H. Gregory, and for an accounting of the rents and profits and for dower.

On the 1st day of September, 1856, Campbell purchased of Gregory the premises in question, and on the same day he executed and delivered to Gregory a purchase-money mortgage for $32,000. On the 3d day of December, 185J, and after default in the payment of the money due upon the mortgage, Gregory commenced an action for the foreclosure thereof, which action proceeded to judgment, and the premises were sold thereunder on the 1st day of September, 1858, to Gregory, the mortgagee, who thereupon re-entered into possession thereof. The defendants are in possession, claiming title under conveyances made by Gregory since the foreclosure of the mortgage. The plaintiff was the wife of Campbell and was not made a party in tbe foreclosure action. Campbell died December 4, 1888, and this •action was brought in April, 1893.

The trial court has found that the plaintiff had an inchoate right of dower in the property which was not affected by the foreclosure suit, to which she was hot made a party, but that her right to redeem the real estate from the mortgage was barred by the Statute of Limitations. The answers interposed set up both the ten-year and the twenty-year statutes, and the only question presented for our determination is as to whether the plaintiff is brought within the provisions of either. As we have seen, Gregory was the mortgagee. He purchased the premises upon the foreclosure sale and entered into possession thereof. The plaintiff was not cut off from her inchoate right of dower by the foreclosure, because she was not made a party thereto. As to her, Gregory became a mortgagee in possession. As mortgagee in possession, Gregory had a right to retain the possession of the premises until his mortgage debt was paid, and until such payment ejectment could not be maintained against him either by the mortgagor or his widow. (Phyfe v. Riley, 15 Wend. 248-254; Cooper v. Whitney, 3 Hill, 95-102.) But the mortgagor, or one claiming under him, as against the mortgagee in possession, had the right to redeem by paying the mortgage debt. (Winslow v. Clark, 47 N. Y. 261.)

Could the plaintiff redeem during the life of her husband whilst her right was inchoate? We think the question must be answered in the affirmative. It was so held in Taggart v. Rogers (49 Hun, 265).

In Simar v. Canaday (53 N. Y. 298-303) FolgeR, J., in delivering the opinion of the court, says: “ A wife who executes a mortgage jointly with her husband, is nevertheless entitled to dower in the equity of redemption of which her husband is seized, notwithstanding the mortgage, which right is-not affected in equity unless she is made a party to the foreclosure. If omitted, she can come in at any time and redeem, notwithstanding a decree and sale in the foreclosure suit.”

In Mills v. Van Voorhies (20 N. Y. 412) it was held that the existence of an inchoate right of dower in the equity of redemption of mortgaged premises was a good objection to title by a vendee in an action against him for specific performance of his contract. Selden, J., in delivering tbe opinion, says: “ The inchoate rights of the wife are as much entitled to protection as the vested rights of the widow.” (2 Washb. on Real Prop. [4th ed.] 173; Davis v. Wetherell, 13 Allen, 63; Newhall v. Savings Bank, 101 Mass. 431.)

Formerly a person entitled to redeem as against a mortgagee in possession had to bring his action within twenty years. (Moore v. Cable, 1 Johns. Ch. 385; Slee v. The Manhattan Co., 1 Paige Ch. 48.) But under section 97 of the Code of Procedure it was held that the action must be commenced within ten years. (Miner v. Beekman, 50 N. Y. 337; Hubbell v. Sibley, Id. 468.) The Code of Civil Procedure (§ 379) provides as follows : An action to redeem real property from a mortgage, with t or without an account of rents and profits, may be maintained by the mortgagor, or those claiming under him, against the mortgagee in possession, or those claiming under him, unless he or they have continuously maintained an adverse possession of the mortgaged premises for twenty years after the breach of a condition of the mortgage, or the non-fulfillment of a covenant therein contained.” Under this provision it has been held that the time to redeem has again been extended to twenty years. (Shriver v. Shriver, 86 N. Y. 575-580.)

It is claimed, however, that section 379 of our present Code has no application, for the reason that the plaintiff, as the wife of the mortgagor, does not claim under him. The right of dower arises by l’eason of marriage, and by operation of law. It attaches to lands-when the seizin- and marriage relations are concurrent. (Kursheedt v. U. D. S. Inst., 118 N. Y. 358.) But the dower right of the wife is dependent upon the seizin of the husband, and she consequently must claim through him.

In Brackett v. Baum (50 N. Y. 8-12) Rapallo, J., says: “ The widow, though not deriving title from her husband, yet claims under him. * * * Her title is wholly dependent upon that which he acquired. It is only by virtue of his seizin that she can claim, and her title is subject, to any claim to which the title he acquired was subject.”

Gregory, as we have shown, entered into possession' in-1858. Since'that time he and the defendants claiming under him have occupied the premises. .Plaintiff’s remedy was by an action to redeem. This she has delayed bringing for thirty-five years. It is our opinion that her claim is barred botli under the ten-year statute of tbe old Code and tbe twenty-year statute of our present Code. Tbe judgment appealed from should be affirmed, with costs.

Dwight, P. J., and Lewis, J., concurred; Bradley, J., not voting.

Judgment appealed from affirmed, with costs.


text:
    Catherine B. Martineau, as Administratrix, etc., of Irene Martineau, Deceased, Respondent, v. Rochester Railway Company, Appellant.

      Death caused by negligence —permitting a child to cross the street is not contributory negligence as a matter of law — ordinance of the city of Rochester governing the rate of speed of street cars. ,

    Upon the trial of an action brought to recover damages resulting from the death of the plaintiff’s intestate by reason of the alleged negligence of the defendant, it was shown that the deceased, a child of two and one-half years old, while under the care of her mother, was permitted by her to cross the street, attended by her sister, a child of five years of age; that before giving her consent to their crossing the street, the mother looked and saw that ho car was approaching, and that there was nothing in the street to harm the children, who had asked to go to meet their father who was on the other side of the street. The children crossed the street in safety, hut in attempting to recross the street, in following their father, who had crossed the street without seeing them, the younger child was run over by an electric car on a surface railroad and killed.-

      Meld, that the mother was not, as a matter of law, guilty, of contributory negligence;
    That the portion of the ordinance of the common council of the city of Rochester passed March 9, 1877, which provided that cars to be used on a surface railroad “ shall be drawn by horses or mules only, at a speed, not exceeding the rate of seven miles per hour,” was not, so far as the provision in relation to the rate of speed of such cars was concerned, repealed by the passing by such common council, subsequently, of an ordinance giving the surface railroad company the right to construct, maintain and operate an overhead trolley electric system of motive power in the operation of its cars on all the streets, avenues and public places in the city of Rochester, under which the company constructed and was maintaining and operating at the time of the accident its street surface railroad.
    Appeal by tbe defendant, tbe Rochester Railway Company, from a judgment of tbe Supreme Court in favor of tbe plaintiff, entered in tbe office of tbe clerk of the county of Monroe on the 18th day of December, 1893, upon the verdict of a jury rendered after a trial at the Monroe Circuit, and also from an order entered in said clerk’s office on the 18th day of December, 1893, denying the defendant’s motion for a new trial made upon the minutes.

      Charles J. Bissell, for the appellant.

      Thomas. Raines, for the respondent.
   Haight, J.:

This action was brought to recover damages for the alleged negligent killing of the plaintiff’s intestate. The deceased was an infant about two and a half years of age. She had a sister May of the age of five years. On the day of the accident the mother had been out with the children, and had returned to her residence on North avenue in the city of Rochester. Whilst still upon the walk the children saw their father coming home upon the same side of the street. May screamed out: Papa is coming,” and asked if she could take Irene, and go and meet him. The mother gave her consent. In the meantime the father had crossed the street to a meat market, and the children, hand in hand, started to cross after him. They crossed to the opposite sidewalk, and started along the walk towards the meat market. The father purchased some meat, came out, and started to recross the street without-seeing the children. The children, evidently seeing their father crossing the street, started to return, and in doing so Irene was run over and killed by one of defendant’s electric cars. Some evidence was given tending to show that the car was running at a very high rate of speed, from twelve to fifteen miles per hour, and that the motorman did not sound the gong until the moment of the accident, from which it is contended that the motorman was not properly discharging his duty in the operation of the car by keeping it under control and looking out for persons approaching. Our examination of the evidence leads to the conclusion that the question of the defendant’s negligence was for the jury.

As to the mother’s contributory negligence there may be more doubt. The deceased was non sui ¡juris, and was under the care of her mother. She was permitted to cross the street attended by her .sister only, who was a child of but five years of age ; but the mother tells us that she looted before giving her consent, and «aw no car .approaching. There was nothing else in the street to harm the •children. They were going to meet their father, with whom they would have been safe. Although the facts may present a case upon ■ the border line, we are inclined to the view that the trial court properly refused to hold that the mother was guilty of contributory negligence as a matter of law, and correctly submitted the question to the jury.

Upon the trial the plaintiff introduced in evidence an ordinance •of tha common council of the city of Rochester passed March 9, 1887. Section 4 provides as follows : The cars to be used on any such railroad shall be drawn by horses or mules only, at a speed not •exceeding the. rate of seven miles per hour, and shall run as often as •once in every fifteen minutes between the hours of six o’clock in the morning and twelve o’clock midnight,” etc. The ordinance contains numerous other provisions in reference to the operating of the' street surface railroads in the city which are not necessary to be here considered. An exception was taken by the appellant to the reception of this evidence. It is contended on the part of the respondent that this ordinance is still in force so far as the provision relating to .speed is concerned; whilst on behalf of the appellant it is claimed to have been repealed by implication, or superseded. It appears from the proceedings of the common council for the years 1889 and 1890 that an ordinance was passed giving the defendant the right to ■establish, construct, maintain, operate and use the overhead trolley ■electric system of motive power in the operation of its cars in and on all of the streets, avenues and public places in the city of Rochester, along, through and upon which the company has constructed and is maintaining and- operating a street surface railroad. The ■ordinance contains numerous provisions pertaining to the operation of the system, among which we find the following: It is further resolved, that before this grant and consent shall become operative, the said company shall deliver to and leave with said committee a written agreement to the city to accept, and in each and every thing .and particular comply with, each and all the provisions contained in these resolutions, and to well and truly, at any and all times hereafter, to indemnify and protect the city of Rochester in the particulars and manner specified in these resolutions, and to well and truly, at all times, comply with all ordinances and resolutions of the common council of said city not in conflict herewith, which have been at any time heretofore, or may at any. time hereafter, be passed, relating-to the rate of speedy manner of running -cars, general government or use of tracks, removal of ice, snow or dirt, and the general repairs of the street within, and for two feet outside of and adjoining, said company’s track or tracks.” In our examination of' the new ordinance we find nothing that is in conflict with the provisions of the'earlier ordinance relating to the speed at which cars should be run; and we think it is not intended that the new ordinance should affect the provision of the old ordinance in this-regard, for here in the provision to which we have referred, we find certain things enumerated, such as the rate of speed, the manner of’ running cars, general government or use of tracks, the removal of ice, snow or dirt, etc.,- which the company is required to agree with the city that it will at all times comply with the ordinances in reference thereto, “ which- have been at any time heretofore or may at any time hereafter be passed.” "We are aware that the earlier ordinance provides th'at the cars shall be drawn by horses or mules at a speed not exceeding the rate of seven miles per hour. And it is claimed on behalf of the appellant that the new ordinance, permitting them to substitute the trolley motive power in place of horses and mules, supersedes this provision of the old ordinance, including the rate of speed, but we do not so construe the provisions. The trolley motive power was permitted to be substituted in place of the horses or mules; the speed, at "which the cars were to be moved was not changed or affected.

We have examined the other exceptions appearing in the case, but we find none which we think requires a new trial.

The judgment and order appealed from should be affirmed.

Dwight, P. J., and Lewis, J., concurred; Bradley, J., not sitting.'

Judgment and order appealed from, affirmed..


author: Adams, J. :

text:
    Hiram L. Brown, Respondent, v. Charles N. Clark, Appellant. Same Respondent v. John Melvin, Appellant. Same Respondent v. Edwin D. Mead, Appellant.

      Corporation — personal liability of trustees for a failure to file an annual report — when a trustee cannot enfoi'ce it — the practical dissolution of a corporation excuses the filing .of the report.

    Where a person continues to act as the trustee of a corporation until a default is made hy it in respect to its duty of filing a report as to its condition, as'. required by statute, neither he nor his assignee can maintain an action against other trustees of the corporation to enforce a personal liability against them, because of their failure to file the annual report of the corporation required by chapter 2 of the Laws of 1892, but where it appears that the assignor of the plaintiff, in an action brought for that purpose against the trustees of a corporation, had ceased to be a trustee before its failure to file the annual report, the action is maintainable upon proof of sufficient facts, and the mere fact that the plaintiff and his assignor are stockholders of the corporation, and that they were present at and participated in a meeting of the corporation, and were then made thoroughly acquainted with the financial condition of the company, does not constitute any defense to the action.
    Where a corporation has been practically dissolved and abandoned, the statutory requirement as to filing a report is no longer in force. If the condition of the company is such that the end and object for which it was formed are destroyed, and there is neither ability nor intention on its part at any time to further prosecute its business, it is no longer subject to the statutory requirement, but although a corporation is doing business at a loss, and is consequently in a state of insolvency, it cannot be said that the end and object for which it was formed are destroyed, and it is in such case required to file a report.
    Appeal by the defendant, diaries M. dark, from an interlocutory judgment of the Supreme Court in favor of tlie plaintiff, entered, in the office of the clerk of the county of Ontario on the 27th day of February, 1894, upon the decision of the court rendered after a trial at the Ontario Special Term, sustaining the plaintiff’s demurrer to the second defense contained in the answer.
    The three above-entitled actions were brought to enforce a personal liability against the defendants, as trustees of the Shortsville Cart Company, because of a failure to file the annual report required by chapter 2 of the Laws of 1892.
    The facts alleged in the pleading demurred ,to, together with some additional ones set forth in the complaint and not denied in the answer, were as follows:

      The Shortsville Cart Company is a manufacturing corporation, organized under the laws of this State, and at the time of the commencement of these actions it was insolvent and wholly unable to pay its debts.
    Its place of business was at Shortsville, Ontario county, and for a long time prior to the default upon which these actions are based, it was indebted to one Edgar D. Mather, a banker doing business at that place, for moneys loaned by him to the corporation, and by it expended in the prosecution of its business. Such indebtedness was evidenced by certain promissory notes made by the defendant to the order of, and indorsed by, one Calvin P. Brown. These notes were renewed from time to time, and the last renewals were in existence, but not yet due, in January, 1893. .
    The plaintiff, the said Edgar D. Mather, and the said Calvin P. Brown, are all stockholders of such corporation, and up to the 13th of December, 1892, Mather was its treasurer and one of its trustees. Upon the day last mentioned the annual meeting of the stockholders of the company was held at the banking office of Mather, which was attended by Mather and both of the Browns, all of them being active participants in the proceedings thereof. At this meeting the financial affairs of the company were discussed, and it was then made to appear that its business had been carried on at a loss; that for this reason it had discharged its employees, and, for a period of some four months prior thereto, it had wholly ceased the manufacture of the articles it had been organized to manufacture, and that, for the same period of time, it had transacted little or no business except to dispose of such products as had been theretofore manufactured. In view of this situation of affairs, it was determined at this meeting to discontinue and abandon the business for which the company was incorporated, and to dispose of its property and effects at the earliest possible date. To this end trustees were elected, of whom the defendant in each action was one, and they were directed to sell the shop, stock and machinery, and terminate the business as soon as possible. The trustees thus elected entered at once upon the discharge of their duties in the manner directed by the meeting. They did no further manufacturing; they purchased no additional stock, neither did they incur any new obligations, but as rapidly as possible they converted the stock on hand into money.

      Thereafter, and in the month of May, 1893, proceedings for the legal dissolution of the corporation were duly instituted, and a temporary receiver of its property was appointed by the court.
    The newly elected trustees never filed any report of the condition of the company.
    Upon the maturity of the last renewals of the notes in question,, Mather instituted proceedings for their collection, and when he had obtained judgment thereon, he assigned the same, together with the notes, to the plaintiff, who is now the owner and holder thereof.

      Thomas H. Bennett and Walter H. Hncvpp, for the appellant.

      Edwin Hides and F. L. Brown, for the respondent.
    Present — Dwight, P. J., Lewis, Haight and Bradley, JJ.
    Interlocutory judgment appealed from in each case affirmed, with costs, with leave to amend answer within twenty days as to the issue in question, upon payment of the costs of this appeal, on opinion of Adams, J., at Special Term.
   The opinion of the Special Term is as follows:

Adams, J. :

If this were an action in which the court felt itself authorized to determine the issue upon principles of equity, it would not be a matter fraught with much difficulty to hold that the pleading demurred to contained a good defense. For it is easy to see that the plaintiff is taking advantage, of a condition of things for which he is, in a measure, responsible, to enforce the payment of a debt by parties, who, while technically guilty of an omission of their statutory duty, have not, by such omission, prejudiced the plaintiff or his assignor in the slightest degree. But the action is a strictly legal one; and, moreover, it is brought to enforce a statutory liability, which, although highly penal in its character, is one which is also beneficial so far as the general public is concerned, and, therefore, while the courts have not been anxious to extend by construction the liability of a trustee for a violation of the. duty imposed by the statute, they have nevertheless manifested a disposition to apply the remedy which it is designed to afford, with considerable rigor.

The portion of the answer demurred to was undoubtedly drawn by the pleader with the sole idea of setting up by way of justification a state of facts which might be regarded as tantamount to an •abandonment, by the corporation, of the business for which it was organized, as well as a practical termination of its. corporate functions. It is true that in the last paragraph there is. an allegation to the effect that the plaintiff, his assignor, and Calvin P. Brown, each had due knowledge of all the facts which, as has been shown, stand admitted, and, upon the argument, it was contended that for this reason the plaintiff should not be permitted to recover. But if it may be held that such a defense is sufficiently pleaded, of which there is serious doubt, it would be difficult in view of repeated adjudications to make it available upon the facts of this case. Had Mather continued to act as a trustee until the default complained of •occurred, unquestionably neither he nor his assignee, within well-settled principles, could maintain this action. (Briggs v. Easterly, 62 Barb. 51; Bronson v. Dimock, 4 Hun, 614.) But, as said by Yan Brunt, J., in the latter of these cases, the reasoning therein ■does not apply where it appears that the assignor, as in this case, had ceased to be a trustee before the failure to file the annual report, and it necessarily follows that the mere fact that the plaintiff :and his assignor are stockholders; that as such they were present at, ■and participated in, the meeting of December thirteenth, and were made thoroughly acquainted with the financial condition of the company, does not constitute any defense, and so it was expressly held in Sanborn v. Lefferts (58 N. Y. 179).

It remains, therefore, to determine whether the averments set forth in the second defense do establish such an abandonment, by the •corporation, of its business as would justify its trustees in omitting ■to file the annual report' required by the statute.

It has been repeatedly held that where a corporation has been practically dissolved and abandoned, the requirement as to filing a ■report is no longer in force (Huguenot Bank v. Studwell, 74 N. Y. 621; Losee v. Bullard, 79 id. 407; Bruce v. Platt, 80 id. 879; Van Amburgh v. Baker, 81 id. 46), and in reviewing these authorities, Judge Danforth, in Kirkland v. Kille (99 N. Y. 390, 395), takes occasion to formulate the result of his investigation as follows, -viz.: “ That when the condition of the company is such that the end and object for wbicli it was formed are destroyed and there is neither an ability nor intention on its part at any time to farther prosecute its business, it is no longer required to make the report.” Now, although in the case of the Shortsville Cart Company it was made to appear in December that it had been doing business at a loss, and was consequently in a state of insolvency, it can hardly be said that the end and object for which it was formed were destroyed, for its failure to succeed may have been attributable to some mismanagement or to some other cause, which, wlien removed, would put an entirely different aspect upon its affairs. Neither can it be said that the ability to continue its business did not exist. That there was a bona fide intention on the part of its trustees to discontinue the business of manufacturing, and to wind up its affairs, is not to be questioned ; but, if upon maturer deliberation, or the happening of some unexpected event, the opportunity for resuming active operations had presented itself, there was nothing to prevent them from embracing it, and in that case, if the defendant’s contention is tenable, all statutory liability might be easily evaded for at least such obligations as were incurred prior to actual resumption. It is true that the answer alleges that the business was abandoned, and that nothing was done by the trustees subsequent to the meeting of December thirteenth, save what was necessary in order to close up the affairs of the company. This, however, is really no more than the statement of a conclusion, but it matters not what was actually done, so Ions: as the trustees and the stockholders still had the right and the power to rescind former action and continue the business. In this connection it is worth noting that there is a somewhat significant absence of any allegation that no meetings of the trustees were held subsequent to the one of December thirteenth.

I am unable to discover any material-.difference -between the facts of this case and those upon which theffecision in Sanborn v. Lefferts (supra) was made to rest. In that case it is. said that in the absence' of any legal dissolution of the company, the extra, judicial proceedings, like.those-which characterize the case under consideration,- did not affect the statutory liability of .trustees to creditors. Possibly this proposition- has been somewhat modified by later decisions, but practically it has been pretty well adhered to, and the fundamental principle of that case has been reiterated very recently by the Court of Appeals. (First N. Bank v. Lamon, 130 N. Y. 366.) Upon well-sustained and oft-repeated authority, it would seem that this court has no alternative in the matter, and the demurrer is, therefore, sustained, with leave to the defendant in each case to amend his answer within twenty days upon payment of the costs of this issue, but in case the defendant does not elect to amend his answer the costs of this issue may abide the event of the issue of fact.


author: Yeoman, J.:

text:
    Porter M. French, as Receiver of James Vick, seedsman, Appellant, v. Ezra R. Andrews, Respondent.

      Preferences by an insolvent corporation within section 48 of chapter 564 of the Laws of 1890 — when operative — construction thereof — what is not prohibited thereby.

    In order to make section 48 of chapter 564 of the Laws of 1890 operative, there must be a transfer or assignment of property by a corporation, and this must be done in contemplation of insolvency.
    The statute is meant t.o apply to cases in which it is apparent, to those assigning or transferring its property, that the corporation is in a condition of insolvency; the word insolvency, as used in the statute, means a general inability to pay obligations as they become due in the regular course of business.
    In the State of New York an insolvent corporation may, if not restrained by its charter or by statute, apply its assets to the payment of its creditors so as to prefer some to others, and equitable considerations based upon the principle of equality among creditors cannot be invoked to supplement the provisions of section 48 of chapter 564 of the Laws of 1890, which must operate according to its provisions when construed in the light of the legislative intent.
    The legislative intent of such statute was not to prohibit every act on the part of the officers of corporations which might enable or tend to enable a creditor to obtain a preference, but the act prohibited is one which would itself accomplish or at least enter into the actual transfer or assignment of the property of the corporation.
    Upon the 10th day of September, 1891, one Andrews held notes of a corporation amounting to $7,000, which were not yet due. The corporation was also owing him §3,967.19, which was due. Upon that day the treasurer of the corporation sent for Andrews and informed him that the assets of the corporation were largely in excess of the liabilities, but that the corporation had no money and would be unable to get money to meet its obligations, and would be compelled to go out of business. Both the treasurer and Andrews believed these statements to be true. The assets of the corporation were then, in fact, less than its liabilities.
    The treasurer then proposed that Andrews should advance §500 to pay laborers, and surrender the unmatured notes and receive in place thereof notes of the corporation payable on demand. To this Andrews assented, paid tbe $500, gave up tbe notes and received ten notes of $1,000 each, and one note of $967.19, each payable on demand. He then immediately proceeded to put them into eleven judgments in the Municipal Court .of the city of Rochester, the maximum jurisdiction of which in such cases was $1,000. The practical result of this transaction was that Andrews sued all his claims immediately in a court in which judgment could be rendered in six days.

      Held, that the act of the treasurer of the corporation was not prohibited by section 48 of chapter 564 of the Laws of 1888, and that the judgments recovered by Andrews were valid.
    Appeal by tbe plaintiff, Porter NX. French, as receiver of James Yick, seedsman, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Monroe on the 16th day of April, 1894, upon the decision of the court rendered after a trial at the Monroe Special Term.

      Joseph 8. Himn, for the appellant.

      William B. Hale, for the respondent.
    Present — Dwight, P. J., Lewis, Haight and Bradley, JJ.
    Judgment appealed from affirmed, with costs, on the opinion of Yeoman, J., at Special Term. '
   The opinion of the Special Term is as follows:

Yeoman, J.:

Upon September 17, 1891, this defendant recovered judgments against James Yick, seedsman, a business corporation of this State, located at Rochester; the same day the sheriff levied, under executions issued upon these judgments, upon the personal property of the- corporation. Upon the next day this plaintiff was' appointed receiver for the corporation. This action is brought to set aside these judgments. The plaintiff claims that they are made void by section 48 of the Stock Corporation Law (Laws 1890, chap. 564). The portion of this section upon which the plaintiff relies then read as follows: “No officer, director or stockholder thereof (of such corporation) shall make any transfer or assignment of its property or of any stock therein to any person in contemplation of its insolvency, and every such transfer or assignment to such office!’, director or other person, or in trust for them or for their benefit, shall be void.”

The following facts are claimed to bring this case within this statute: Upon the 10th day of September, 1891, this defendant held notes of the corporation amounting to $7,000, which were not yet due. The corporation was also owing him $3,967.19, which was due. Upon that day the treasurer of the corporation sent for the defendant and informed him that the assets of the corporation were largely in excess of its liabilities, but that the corporation had no money and would be unable to get money to meet its obligations, and would be compelled to go out of business. Both the treasurer and this defendant believed these statements to be true. The assets of the corporation were, in fact, then less than its liabilities. The treasurer then proposed that the defendant should advance $500 to pay laborers, and surrender these immature notes and receive notes of the corporation payable on demand. To this defendant assented, paid the $500, gave up the notes and received ten notes of $1,000 each and one note of $976.19, each payable on demand. He then immediately proceeded to put them in eleven judgments in the Municipal Court of the city of Rochester, the maximum jurisdiction of which in such cases was $1,000. These are the judgments in question. The practical result of this transaction was that the defendant sued all his claims immediately in a court in which judgment could be rendered in six days.

This statute is substantially the same as the one for which it was substituted. (1 R. S. 603, § 4.) There are two things essential in order to make it operative; there must be a transfer or assignment of property, and this must be done in contemplation of the insolvency of the corporation. Insolvency has been differently defined in different courts. By some it is said to be a condition in which the value of the assets is less than the amount of liabilities. By others it is said to be a general inability to pay obligations as they become due in the regular course, of business. Many a business is at times insolvent, according to the first of these uses of the word, although it is prosperous and no one thinks for a moment that any necessity will arise for applying its property to the payment of its liabilities by process of law. There is no necessity for the law to interpose in behalf of its creditors so long as the corporation is able to meet its obligations promptly. The use of this word, in the statute under consideration, is the latter use. (Brouwer v. Harbeck, 9 N. Y. 589; People v. Excelsior Gas Light Co., 3 How. Pr. [N. S.] 137.) The' statute is meant to apply when it becomes apparent to those assigning or transferring its property, that the corporation is in the condition described in the latter of these definitions, so that the question confronts them: How are the assets of the corporation to be used, not in carrying on its business, but in meeting its obligations ? ; That, the corporation was insolvent, according to this use of the word, was known to both the treasurer and the defendant at the time the notes were given.

It follows, therefore,. that if what was done was a transfer or assignment of the property of the corporation these judgments are void. The doctrine that the assets of an insolvent corporation are a trust fund for creditors, and that all should share ratably therein, is not the law of this State. In this State an insolvent corporation may,'if not restrained by its charter or by statute, apply its assets to the payment of its creditors, so as to prefer some to others. (Coats v. Donnell, 94 N. Y. 168.) Equitable considerations based upon the principle of equality among creditors in such a case cannot, therefore, be invoked to supplement the statute under consideration. The statute must operate according to its provisions when construed in the light of the legislative intent. The act prohibited is “ any transfer or assignment” of the corporate property, and to make these judgments void the acts of the treasurer must be a transfer or assignment of the property. Creditors of such corporations are not discouraged by the courts from obtaining such preferences as they may by diligence; their right to do so and the propriety of their doing so is fully recognized. The attempt by this statute was to limit the aid which the officers of the corporation might give to the same end. It is plain that this provision of the law was not intended to prohibit every act on the part of officers of such corporations which might enable or tend to enable a creditor to obtain a preference. The words are not apt words for such a purpose ; they are quite limited in their application. Moneyed corporations were not subject (1 R. S. 605, § 11) to this provision of law to which business corporations were subjected. But other concurrent statutes (1 R. S. 591, §§ 8, 9) provide a similar restriction as to them, and in addition thereto, that in a like case “ any payment made, judgment suffered, lien created or security given ” with intent to give a prefer-. ence to a creditor should be void. This must have been intended to restrict and control the action of such corporations to a greater extent, where preferences came in question, than business corporations were restrained or controlled under like circumstances. It is, however, equally plain that the restriction which was placed upon business corporations was, so far as it went, intended to restrict the giving of preferences by insolvent corporations. The question is, what is a transfer or assignment within the meaning of the act ? In Kingsley v. The First National Bank of Bath (31 Hun, 329) it was held where judgments were obtained against an insolvent corporation upon offers of judgment made by it to enable the creditor to obtain a preference, that the judgments and executions issued upon them were void. In this case the lien was acquired by the execution. There was no real estate upon which the judgment became a lien. The opinion of the court evidently regards, the judgment and execution as together effecting a transfer of the property, and thus the corporation, by its offer of judgment, was a party to the transfer itself, and within the statute. In Varnum v. Hart (119 N. Y. 101) Judge Earl makes a suggestion (p. 107) that the judgment is only a higher form of obligation and does not, where there is no real estate, operate to transfer any property; that it is the execution that does that, as to personal property, and that where the officers of a corporation have nothing to do with the execution, they do not act within the prohibition of the statute. When he made this suggestion he was not ignorant of the decision in the Kimgsley case, for he refers to it in the same opinion. The Kingsley case is not a controlling authority in the case at bar, for in this case the treasurer of the corporation took no part in any of the acts which in themselves were a transfer of the property of the corporation. It is perfectly plain that what the treasurer did was for the purpose of putting the defendant where he could sue at once and thus obtain a preference. It is one thing to make a transfer of property, and quite another thing to aid some other person to get into a position where he may, at a more remote stage of the proceedings, compel a transfer of corporate property himself. If the debt had been due, a suggestion by the officer of the corporation as to the true state of affairs would have resulted in a judgment and a preference. The giving of several small notes for a debt due, so that actions can be brought in a court of limited jurisdiction and judgments obtained, sooner than otherwise, might aid a creditor in obtaining a preference. Many other ways might be suggested whereby officers of a corporation might be instrumental in a creditor’s obtaining a preference and yet not participate at all in the actual transfer or assignment of any of the property of the corporation. If their acts are to be held to he within the provision of the statute, then the statute means that no act shall be done on the part of the corporation enabling or tending to enable the creditor to obtain a preference. It needs no argument to show the falsity of such a result. There is no meaning of the word transfer which carries the idea of an act of extinction; or any other idea than that of the bearing over of a right or title or property in a thing from one to another.” (Sands v. Hill, 55 N. Y. 22.) Where, then, is the line to which the statute reaches, hut beyond which it does not go ? The only one that it is practicable to establish is the one that the terms of the statute provide. The prohibited act must itself accomplish or at least enter into the actual transfer or assignment of the property. This view is sustained in the Varnum case. In that case a creditor was enabled to obtain a preference by judgment and execution. This was accomplished by the officer of the corporation upon whom the execution was served keeping, by agreement with the plaintiff, the fact of the pendency of the action from the knowledge of all others, including the other officers of the corporation. If this had not been done the preference would have been prevented. In that case the preference was secured by the co-operation of the officer of the corporation as much as it was in the action at bar. In the one case the time in which to procure the judgment was shortened by the officer of the corporation. In the other the interference of others interested to defeat the preference was prevented by the officer of the corporation. It follows that the judgments are valid.


author: Rumsey, J.:

text:
    Charles H. Ketchum, Appellant, v. Romane Depew, Respondent.

      .Restraining the commission of a trespass — an equitable action must be maintained upon equitable grounds or fail — when the objection, that the plaintiff has a sufficient remedy at law, is waived.

    The complaint in an action alleged that the defendant entered upon'certain premises, with his servant and reaper, and cut, and was still cutting, twenty acres of wheat growing thereon, and that he daily, and several times a day, committed trespasses on said lands and perfects a cause of action against the defendant, and that unless an injunction issue the plaintiff would suffer irreparable injury which could not he compensated for in damages, and that to protect his rights he would he obliged to prosecute a multiplicity of suits. Sold, that a good cause of action was stated for equitable relief, and the action must be tried on the equity side of the court, as under such facts the plaintiff had no adequate remedy at law;
    That if, however, the facts proven upon the trial of such action showed that the defendant had but once entered upon such premises and cut the wheat, and said he had been advised to do it, and there was no pretense that he again contemplated entering upon the premises, or that he asserted any right except to take away that single crop of wheat, the plaintiff could not secure relief in an action in equity, and that his action for such relief must be tried as an action at law.
    Where the plaintiff in an action might have sued at law and obtained some sort of a remedy, or might have brought his action in the equity courts and have obtained more complete relief, if the defendant allows him to proceed to a hearing in the equity action, without pleading that he had a sufficient remedy at law, he waives the objection, but this doctrine is applicable only to cases where the jurisdiction of equity and law is concurrent.
    Jf a party brings an equitable action, even though the same court administer both systems of law and equity, the party must maintain his equitable action upon equitable grounds or fail, even though he may prove a good cause of action at law on the trial.
    Appeal by tbe plaintiff, Charles H. Ketehum, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Tates on the 28th day of September, 1893, upon tbe decision of the court, rendered after a trial ¡at tbe Tates Special Term, dismissing the plaintiff’s complaint.
    This action was brought to restrain the commission of a trespass.

      WilKmi T. Morris, for the appellant.

      Ohmies W. Kimball, for the respondent.

      Present — Dwight, P. J., Lewis, Haight and Bradley, J J.
    Judgment appealed from affirmed, with costs, on opinion of Rumsey, J., at Special Term.
   The opinion of the Special Term was as follows:

Rumsey, J.:

The plaintiff, in his complaint, alleged that the defendant enter.ed upon the said premises, with his servant and reaper, and cut, and was still cutting, twenty acres of wheat growing thereon. It further alleged that the defendant daily, and several times a day, committed trespasses on said lands and perfects a cause of action against said defendant, and that unless an injunction issue the plaintiff would suffer irreparable injury which could not be compensated for in damages, and that to protect his rights he would be obliged to prosecute a multiplicity of suits. It needs no citation of authority to prove that if the facts thus stated were true, the plaintiff would have a good cause of action for equitable relief, and that this action must be tried upon the equity side of the court. Such being the case, there was, undoubtedly, no adequate remedy at law upon the allegations contained in the plaintiff’s complaint. But the state of facts shown upon the trial was entirely different from that alleged in the complaint. All that appeared upon the trial was that the defendant entered upon the premises and cut the wheat and said he had been advised to do it. This was one single trespass. There was no pretense that the defendant contemplated entering upon the premises again, nor that he asserted any rights except to take away that single crop of wheat. If the plaintiff brought an action at law for that trespass, he would be entitled, upon making a proper case, to recover the value of the wheat and damages for the entry upon his land, and such a recovery would be a complete and adequate compensation for all that he had suffered.

Nobody can claim that such relief can besought in an action in equity, and it is very clear that an action brought for such relief' must be tried as an action at law.

The case is precisely within that of Bradley v. Aldrich (40 N. Y. 504). In that case it was said: “ If a party brings an equitable action even now, when the same court administers both systems of law and equity, the party must maintain his equitable action upon equitable grounds, or fail, even though he may prove a good cause of action at law on the trial.” Such was the decision of the Court of Appeals in the case of Mann v. Fairchild (2 Keyes, 3), which was followed in the case of Bradley v. Aldrich (supra). In .the case last mentioned the action was brought for equitable relief and that the defendant be required to rescind a contract, which it was claimed he had procured by fraud.

The answer in that case denied the allegations of the plaintiff, but it did not raise the question that there was an adequate remedy at law. The court, at Special Term, found the facts entitling the plaintiff to relief at law, but denied equitable relief. The judgment there entered was reversed at (General Term, without prejudice to the right of the plaintiff to bring an action at law. In the Court of Appeals the judgment of the General Term was affirmed, upon the sole ground that the plaintiff, having failed to establish a right to equitable relief, could not, in an action brought for that sort of relief, secure a remedy at law. The court says it was not the intent of the law “ to enable the plaintiff to compel a trial by the court by merely alleging some ground for equitable relief, and failing in that, have a trial of issues in an action for fraud and an assessment of damages therefor, without a jury.” That case, as I said, is precisely in point, and requires the court to hold here that the plaintiff cannot recover in this action upon the proof made at the trial.

But it is claimed that the defendant has waived the right to object to a trial at the Special Term, because he has failed to set up in his answer that the plaintiff had an adequate remedy at law, and several cases are cited which hold that a defendant cannot, when sued in equity, avail himself of the defense that an adequate remedy at law exists, unless he pleads that defense in his answer. That doctrine was established when equitable jurisdiction was vested in the Court of Chancery and legal jurisdiction in the courts of law, and it was applied in cases where the jurisdiction of the two courts was concurrent.

In such cases, where the plaintiff might have sued at law and obtained some sort of a remedy, or might have brought his action in the equity courts and obtained a more complete remedy, it was held that if the defendant permitted him to proceed to a hearing in the equity action without raising the point that he had a sufficient rem-

edy at law, lie bad waived it. Tbe reason was tbat tbe court of equity bas jurisdiction, because, upon tbe facts proved, tbe plaintiff yrould be entitled to equitable relief, and tbat to permit tbe defendant to allow tbe case to proceed to a bearing, before attempting to oust tbe court of its jurisdiction, would result in a great injustice to tbe plaintiff. But it will be found tbat tbe rule was applied only in cases where tbe remedy was concurrent, and it was only in sucb cases tbat tbe defendant was obliged to assert, at the threshold of tbe case, bis claim tbat tbe action was not an action in equity. Tbe rule was then, as it is laid down in the case of Bradley v. Aldrich, tbat where tbe plaintiff came into court invoking tbe jurisdiction of tbe court of equity upon matters as to which a court of law bad no jurisdiction, be was obliged to prove a cause of action in equity, and failing in that, be lost bis case.

I have been unable to find any case where there was exclusive jurisdiction in tbe equity court, in which tbe plaintiff, upon failing to prove bis right to relief in equity, was still entitled to a judgment at law. In sucb cases, tbe plaintiff was always required to proceed in tbe law courts to obtain the relief to which be was entitled.

A claim precisely like tbe one made here was presented to tbe Court of Appeals in the case of Dudley v. The Congregation of St. Francis (138 N. Y. 451) and was held not to be tenable. Tbe opinion of tbe court in tbat case, at pages 459 and 460, sustains tbe conclusion I have here reached upon the authority of Bradley v. Aldrich (supra). See, also, Hawes v. Dobbs (137 N. Y. 465).

Tbe court is requested to send this case to tbe Circuit for trial, but I do not think tbat sucb a course would be proper. It was not done in tbe case of Bradley v. Aldrich, and I think tbat this case .should have tbe same direction as was given to tbat one.

Tbe complaint must, therefore, be dismissed, but not upon tbe merits.


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    The Town of Salamanca, Plaintiff, v. The County of Cattaraugus, Defendant.

      Board of supervisors — power to act through agents — submission of a controversy, when urumthorized.

    The board of supervisors of a county may act through agents, but where an agent is required to discharge any of the duties of the board there should be no question as to the intention to delegate such power to him.
    If the parties to the submission of a controversy upon an agreed statement of facts, pursuant to section 1279 of the Code of Civil Procedure, are natural persons, they should execute the agreement to submit, and the requisite affidavit should be made by one of them.
    The fact that the board of supervisors of a county passed a resolution to the effect that they employ “ Messrs. Hazard and Nash to attend to the county interest in the bridge cases now pending before the board,” and also subsequently passed another resolution that "N. M. Allen, Esq., be employed to act with Messrs. Hazard and Nash in defending the interests of the county in any suit brought against the county for reimbursement of moneys paid out for bridge purposes,” gives no authority to such.attorneys to execute an agreement submitting the matter in controversy to the court upon an agreed statement of facts, nor to agree upon facts which would relieve the board of supervisors of the power of auditing the claims in question, and the Supreme Court has no jurisdiction to determine a controversy so submitted.
    Submission of a controversy upon an agreed statement of facts, pursuant to section 1279 of tbe Code of Civil Procedure.

      O. 8. Vreeland, for tbe plaintiff.

      William H. Henderson, for tbe defendant.
   Haight, J.:

At tbe annual session of tbe board of supervisors, of tbe county of Cattaraugus a claim was presented on bebalf of tbe town of Salamanca for $7,620.98 for money expended by its highway commissioner in tbe erection of bridges within tbe town in excess of one-sixth of one per centum of tbe assessed valuation of tbe taxable property of tbe town for that year. Tbe claim was rejected, and a resolution passed that the board employ “Messrs. Hazard and Nash to attend to tbe county interest in tbe bridge cases now pending before tbe board,” and also another resolution, that, “ N. M. Allen? Esq., be employed to act with Messrs. Hazard and Nash in defending the interests of the county in any suit brought against the county for reimbursement of moneys paid out for bridge purposes.” Thereupon Messrs. Allen, Nash and Hazard executed an agreement in writing with J. S. Whipple, the supervisor of the town of Salamanca, submitting the matter in controversy to this court upon facts agreed upon.

The controversy between the town and the county would seem to involve a construction of sections 130, 132 and 133 of chapter 568 of the Laws of 1890, but we are only called upon to answer certain questions involving abstract questions of law and not for the awarding of any judgment. (The People, etc., v. The M. E. & A. Association, 92 N. Y. 622.)

Again, there is a question as to whether the attorneys representing the board of supervisors had the authority to agree upon the facts and submit the matter in controversy. Allen, as we have seen, was employed to act with Hazard & Nash to defend the interests of the county in any suits brought. Hazard & Nash were employed to attend to the county’s interest in the bridge cases pending before the board. This is all of the authority that appears to have been delegated to them. The Code (§ 1279) provides that The pcurties to a question in difference which might be the subject of an action, being of full age, may agree upon a case. * * * ppe cage must pe accompanied with the affidavit of one of the parties to the effect that the controversy is real. * * * The submission must be acknowledged or proved and certified in like manner as a deed to be recorded in the county where it is filed.”

If the parties to the submission had been natural persons they should have executed the agreement, and the affidavit should have been made by one of them. (Bloomfield v. Ketcham, 95 N. Y. 657.)

The board of supervisors possibly may act through agents, but where an agent is required to discharge any of the duties of the board there should be no question as to the intention to delegate such power to him. The board of supervisors doubtless had the right to audit and determine the amount that had been expended during the year by the highway commissioner, of the town. The amount so expended is definitely fixed in the facts agreed upon accompanying the submission, so that we are confronted with the question as to whether the attorneys representing the county were .authorized, first, to agree upon a submission of the matter in controversy; and, second, to agree upon facts which would relieve the board of the power of auditing the claim. Our conclusion is that authority was not given, and consequently we have not jurisdiction to determine the controversy.

It may be, as is claimed, that those representing the town have been misled by the attorneys representing the county. They joined with the representative of the town in submitting the controversy to the court for its determination, and then, upon the argument, took the position that the submission should not be acted upon by the court. Their practice is not to be commended. But this cannot .affect the question of our jurisdiction.

The proceeding must be dismissed, but without costs.

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

The proceedings dismissed, without costs to either party.


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    George B. Dayton, Respondent, v. The New York, Lake Erie and Western Railroad Company, Appellant.

      Railroad company — liability for cattle, not belonging to an adjoining owner, hilled by its trains — chapter 565 of 1890 and chapter 867 of 1891.
    Where a railroad corporation neglects to maintain fences along its road, as required by statute, and cattle get upon its tracks and are injured by its engines or cars, the corporation is liable to the owner thereof in damages, although such owner is not an adjoining proprietor and it does not appear how the cattle escaped from his pasture; this rule remains unchanged notwithstanding the passage of section 32 of chapter 565 of the Laws of 1890 and chapter 367 of the Laws of 1891.
    Appeal by the defendant, The New York, Lake Erie and Western Railroad Company, from a judgment of the Supreme Court in favor ■of the plaintiff, entered in the office of the clerk of the county of Allegany on the 21st day of October, 1893, upon the verdict of a jury, rendered after a trial at the Allegany Circuit, and also from an order entered in said clerk’s office on or about the 17th day of October, 1893, denying the defendant’s motion for a new trial made upon the minutes, with notice of an intention to bring up for review on such appeal said order.

      'James JE. Stevens, for the appellant.

      Glcorenee A. Farnum, for the respondent.
   Haight, J.:

This action was brought to recover damages for the killing of five head of cattle. It appears that the cattle had escaped from the plaintiff’s pasture upon the adjoining lands of one Osborn and from thence passed through an open barway at a farm crossing on to the defendant’s railroad track where they were run over and killed by a. passing train. The bars had been removed for more than six months, and some of the evidence tends to show that the bars were-removed with the knowledge and consent of Osborn.

It is contended that the court erred in refusing the defendant’s motion for a nonsuit. We are, however, of the opinion that the case was properly submitted to the jury. It has been held that where a railroad corporation neglects to maintain fences along its road as required by the statute, and cattle get upon the track and are injured by its engines or cars, the corporation is liable to the owner in damages although he is not an adjoining proprietor and it does not appear how the cattle escaped from his pasture. (Corwin v. N. Y. & Erie R. R. Co., 13 N. Y. 42; Bradley v. Buffalo, N. Y. & Erie R. R. Co., 34 id. 432; Rhodes v. U. I. & E. R. R. Co., 5 Hun, 344, Purdy v. N. Y. & H. H. R. R. Co., 61 N. Y. 353; Kelver v. N. Y., Chi. & St. L. R. R. Co., 126 id. 365.)

It is insisted, however, that these cases have no application for the reason that the statute has been changed. We are, however,, unable to discover any substantial difference in the'new statute. The Laws of 1854 (Chap. 282, § 8) provide: Every railroad corporation * * * shall, before the lines of such railroad are opened, erect and thereafter maintain fences on the sides of their roads of the height and strength of a division fence as required by law, with openings or gates or bars therein at the farm crossings of such railroad for the use of the proprietors of the lands adjoining such railroads, and shall also construct, where the same has not already been done, and hereafter maintain, cattle guards at all road crossings,, suitable and sufficient to prevent cattle, horses, sheep and hogs from, getting on to such railroad, and so long as such fences and cattle guards shall not be made and when not in good repair such railroad corporation and its agents shall b.e liable for damages which shall be done by the agents or engines of any such corporation to any cattle, horses, sheep or hogs thereon, and when such fences and guards shall have been duly made and shall be kept in good repair, such railroad corporation shall not be liable for any such damages unless negligently or willfully done.”

The Laws of 1890 (Chap. 565, § 32), as amended by the Laws of 1891 (Chap. 367), provide as follows : “ Every railroad corporation * * * shall, before the lines of its roads are opened for use and so soon as it has acquired the right of way for its roadway, erect and thereafter maintain on the sides of its road, fences of the length and strength of a lawful division fence, with openings or gates or bars therein at the farm crossings for the use of the owner and occupants of the adjoining lands, and shall also construct where not already done and hereafter maintain cattle guards at all road crossings suitable and sufficient to prevent cattle, horses, sheep and hogs from going upon its railroad. So long as such fences are not made or not in good repair, the corporation, its lessee, or other person in possession of its road, shall be liable for all damages done by their agents or engines or cars to any domestic animal thereon, but when made and in good repair they shall not be liable for any such damages unless negligently or willfully done.”

It will be observed that in the former statute provision was made for openings or gates or bars at the farm crossings “ for the use of the proprietors of the lands adjoining such railroads,” whilst in the new statute provision is made for openings or gates or bars at farm crossings “ for the use of the owner and occupants of the adjoining lands.” The former is for the use of the proprietor and the latter for the owners and occupants. Certainly, this variation cannot operate to change the rule of liability as established by the' cases above referred to.

The judgment and order appealed from should be affirmed.

Dwight, R. J., Lewis and Bradley, JJ., concurred.

Judgment and order appealed from affirmed.