text:
    In the Matter of the Petition of Andrea Fontana and Another, Appellants, to be Made Parties Defendant in an Action Between the Atlantic Trust Company, as Trustee, Respondent, v. The Haskin Wood Vulcanizing Company and Another, Defendants.

      Corporation — intei-venUon of stockholders in a litigation, discretionary with the court — extension of the time to appeal.

    Where a corporation is the real party in interest in a controversy, it is a matter resting in the discretion of the Special Term, notwithstanding the mandatory language of section 452 of the Code of Civil Procedure, to permit stockholders of such corporation to intervene and be made parties to the action, subject to the review by the General Term of such exercise of discretion.
    After a litigation in a court of competent jurisdiction and the entry of judgment therein, and in the absence of allegations on account of which a court of equity in a collateral action would have jurisdiction to set the judgment aside, the right of stockholders of the corporation, asking for leave to be brought in as parties to the action, and thus to revive and extend the time to appeal from such judgment, is doubtful, after the time to appeal, so far as the corporation is concerned, has expired, and its right to appeal has been lost.
    Where no fraud or collusion, so far as the receiver of the corporation is concerned, is charged, and the litigation has been actively and strenuously fought by one at least of the petitioning stockholders, and where from the facts it cannot be determined whether or not the refusal of the receiver to appeal (in which he is shown to have been supported by many of the parties in interest), was justifiable, no sufficient ground is presented to the Special Term to require it, in the exercise of a wise discretion, to grant the right to intervene.

      Appeal by the petitioners, Andrea Fontana and another, from an order of the Supreme Co art, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 3d day of May, 1894, denying the prayer of the petitioners to be made parties to the action brought by the Atlantic Trust Company, as trustee, against the Iiaskin Wood Yulcanizing Company and another.
    The petition of the stockholder Fontana, in which another stockholder joined, and which is the basis of this application, shows that an action was begiin in this court wherein the Atlantic Trust Company, as trustee, is plaintiff against the ITaskin Wood Yulcanizing Company, for the foreclosure of a mortgage upon all the property of the latter corporation; that in furtherance of a scheme in the interest of the bondholders the president and the management of the corporation permitted the plaintiff to enter a judgment of foreclosure and sale on the 18th day of October, 1893, and the property was advertised for sale on the 20th of November, 1893. In October, 1893, certain judgment creditors commenced an action to sequestrate the property of the corporation, in which action one David Thomson was appointed receiver of the corporation and took possession of its property.
    Subsequently an order was made by this court opening the judgment of foreclosure and allowing the receiver to come in and defend. After his answer was interposed, the issues were, by consent, referred to a referee to hear and determine. The referee subsequently reported in effect that the mortgage was invalid as a lien upon all the property of the corporation as to the creditors and receiver, but valid as against the corporation as to a portion of the property, and directed a sale and judgment for deficiency, if any there was, due plaintiff. Such judgment was entered and a sale advertised thereunder. The receiver likewise advertised a sale of all the property of the corporation. Certain stockholders and judgment creditors requested the receiver to appeal from the judgment of foreclosure, and on his refusal requested the court so to instruct him, which the court, for reasons stated in the opinion, declined to do.
    The petitioner, after reciting such facts, says : “As I am advised and verily believe, my rights as a stockholder of the defendant corporation are seriously endangered and imperiled by said judgment, unless I am allowed to come in, defend the action and appeal. * * * I supposed that said David Thomson was appointed receiver to protect the rights of the stockholders as well as all others interested in the defendant corporation, but as I am informed and believe, and as shown by his affidavit in the motion to instruct him to appeal, he acts simply for the creditors and does not intend to protect the right of the stockholders.”
    This petition is supported by affidavits, the one presented by the stockholder who joins in the petition showing that upon an application made to the attorney-general to take into consideration the position assumed by the receiver, there resulted an arrangement by which he was permitted to appear at the reference, examine and cross-examine the witnesses, and in every way to assist the receiver in maintaining the defenses that had been interposed to the validity of the mortgage.
    In answer to the petition and affidavits, the receiver denies that portion of the petition which states that the receiver “ acts simply for the creditors and does not intend to protect the rights of the stockholders.” There was also the affidavit of the attorney for the Atlantic Trust Company, trustee, plaintiff in the foreclosure suit, showing the five grounds of defense set up by the receiver and all the proceedings subsequently had, from which it would appear, not only that the stockholder who joins in this petition took an active part throughout all the proceedings, but that at different stages the attorney for the petitioner intervened, notably after the motion for judgment upon the referee’s report, and prior to the entry of judgment upon a settlement of an order for sale.
    In addition to the showing thus made of the part taken by the petitioners and their knowledge of the proceedings in the foreclosure suit, the attorney for the trust company in his affidavit directly assails the good faith of the application, and asserts that one of these stockholders (referring to the one that appeared upon- the reference and examined the witnesses) has been conversant with every step of the litigation, and that “ one of the judges of this court stated to said Mitchell that if he was not satisfied with the conduct of this litigation he should intervene, and that deponent has frequently suggested the same thing, but that he has not hitherto endeavored to do so; that it is the opinion, of your deponent that the object of this motion is in effect to take an appeal and use said appeal to delay the sale of the property by the receiver. That the defendant company is hopelessly insolvent, and that a speedy sale is desired and urged by ninety-five per cent of the creditors.”
    Some other affidavits and papers are used, but the substantial facts relating to the merits of this application have been stated.

      Franlclvn Bien and Jolm Murray Mitchell, for the appellants.

      William, O. Osborn, for the respondent.
   O’Brien, J.:

By section 452 of the Code of Civil Procedure it is provided that where a person not a party to the action has an interest in the subject thereof, * * * and makes application to the court to be made a party, it must direct him to be brought in by the proper amendment.” Relying, no doubt, upon the mandatory language of the section, the petitioner applies to be made a party, to the end that he may ajijieal from the judgment of foreclosure and sale.

It is apparent that the proper party to the action in the first instance would be the corporation, which was joined, and which, through the receiver, interposed its defenses to the mortgage. The real party in interest, therefore, having been made a party, the petitioners were not entitled as a matter of right to be brought in, the question being one clearly within the discretion of the court. (Ithaca Gas Light Co. v. Treman, 93 N. Y. 660.) That was an application by a stockholder to be allowed to come in as a party defendant in an action brought by the company against its president and treasurer for alleged malfeasance. In a memorandum handed down it is said: “ The Supreme Court has the power, under section 452 of the Code, to grant or refuse Beatley’s ajiplication to be made a party to this action, and we cannot, therefore, interfere with the exercise of its discretion.” The General Term, however, has the right to determine whether the discretion vested in the Special Term of the court has been wisely exercised.

We have examined the petition and the affidavits in support thereof and those in opposition, with a view to determining that question. From them it appears that in a foreclosure suit, which was strenuously fought, with the aid of one of the petitioning stockholders, by the receiver, a decree or judgment of foreclosure and sale has been rendered. That such judgment was in some respects favorable to the receiver appears, and that the difference of opinion which has arisen between the receiver and the petitioning stockholders as to the propriety and advantage of appealing resulted in this application. As against the opinion of these stockholders, who hold shares of the corporation individually, the par value of which represents a large sum, the receiver, iu his refusal to appeal, is supported by ninety-five per cent of the creditors.

Whether the course pursued by the receiver in not appealing was right, or whether the opinion expressed by counsel for the petitioners is correct, that the judgment would be reversed on appeal, must remain a subject of conjecture in the absence of anything before the court enabling it to determine that question. It is true that the form of the judgment seems anomalous, in that it holds the mortgage void in part, so far as it affects the receiver, and valid with respect to certain puopeiW, so far as it affects the corporation; but it would be hazarding an extreme opinion to hold, upon this mere appearance of inconsistency in the judgment, that it was invalid and should be reversed. Such a conclusion, without anything before the court upon which to base it, would be to destroy all the presumptions which naturally exist in favor of tlio validity of judgments. Wc think, therefore, that it was incumbent upon the petitioners to have 'set forth sufficient facts, not only showing the likelihood of reversal on appeal, but going a step further and showing that the final result, so far as the corporation and stockholders were concerned, would be a more favorable judgment. It may well be that this judgment was as favorable to the corporation as it had a right to expect, in which event the refusal of the receiver to go further would be but protecting the interests of the corporation which he represented. Upon the meagre facts presented in support of the application, either relating to the merits or showing that the receiver in refusing to appeal acted in bad faith or contrary to the interests he was appointed to protect, no collusion or fraud being charged, and in the light of the opposing affidavits, we cannot conclude that the Special Term improperly exercised its discretion.

Apart from this, we think the relief sought of doubtful utility, in view of the judgment which has been entered against the corporation, the time to appeal from which, as respects the corporation, having expired.

In Alexander v. Dondhoe (143 N. Y. 203), which was an action brought by a stockholder to set aside and annul various transactions relating to, and conveyances of, property alleged to belong to the corporation, among others, the foreclosure of a mortgage executed by the company, on the ground that the conveyances and transactions, including the foreclosure proceedings, were fraudulent, but the complaint in which action did not allege collusion or other grounds that would give a court of equity jurisdiction to set aside the judgment against it, it ivas held that the plaintiff was estopped by said judgment, the court, in the course of the opinion, saying: “ Suing as a stockholder, the plaintiff’s right of action is a derivative one. He sues, not primarily in his own rights, but in right of the corporation. The wrongs of which he complains are Avrongs to the corporation; they were not aimed at him and did not involve his personal or individual rights. He suffers as a member of the corporation, and it is the party to sue for and recover damages for the wrongs or equitable relief against the frauds alleged.” And in speaking of the action, the judgment recovered in which was sought to be set aside, the opinion continues : “ And in that action substantially the same issues Avere tried as are presented by the pleadings in this action, and the adjudication then upon all the issues was against the defendants there. The judgment in that action was rendered without any collusion, after a real litigation, by a court of competent jurisdiction, and no allegations are made against it on account of which a court of equity in a collateral action would have jurisdiction to set it aside. The judgment binds the plaintiff as a stockholder * * * and bars his recovery in this action.”

The distinction between the action thus brought by the stockholder and an application made upon petition to be allowed to intervene in the very action in AAdiich the judgment was obtained is of course apparent; but this does not destroy the rule that is applicable in respect to the binding force and effect of a valid judgment. If the petitioners can be permitted practically to occupy the position of the receiver, who refuses to appeal, and in his stead contest on behalf of the corporation the validity of the mortgage, then we see no reason why, if these stockholders are defeated, other stockholders may not come in, and so on ad infinitum. Such a course would indefinitely postpone a sale. Unquestionably the court lias the power in a proper case to permit a stockholder to intervene, as shown by the case already referred to of Ithaca Gas Light Co. v. Treman; but after judgment obtained, as said in Alexander v. Donohoe {supra), “ after a real litigation, by a court of competent jurisdiction,” and without allegations “ made against it on account of which a court of equity in a collateral action would have jurisdiction to set it aside,” the rights of these petitioners to revive and. extend the time to appeal is, to say the least, doubtful, after such time, so far as the corporation is concerned, has expired, and its right to appeal has been lost.

Without deciding this, however, we think that where, as here, no fraud or collusion, so far as the receiver is concerned, is charged, and where from the facts it cannot be determined whether or not the refusal of the receiver to appeal — in which he seems to have been supported by so many interested — was justifiable, after & litigation actively and strenuously fought by one at least of the petitioning stockholders, no sufficient ground was presented to the court below to require it, in the exercise of a wise discretion, to grant the right to intervene. Upon examination we have concluded that no proper case has been made out which would justify us in interfering with the discretion exercised by the Sjiecial Term.

Order affirmed accordingly, with ten dollars costs and disbursements.

Yan Brunt, P. J., and Parker, J., concurred in result.

Order affirmed, with ten dollars costs and disbursements.


source: Caselaw Access Project

author: O’Brien, J.:

license: Public Domain

text:
    Frank R. Abbey, an Infant, etc., by Theodore L. Frothingham, his Guardian ad Litem, Respondent, v. Jerome B. Wheeler, Appellant, Impleaded with Others.

      Leasehold interest — goes to executors — equity jurisdiction of actions for an accounting — equity may incidentally direct an accounting.

    Semble, that, in the absence of any specific bequest contained in his will, the interest of a testator in a lease of land passes under the statutes of the State of New York to his executor and not to his heirs.
    In suits for the partition of land or in other appropriate actions at law between tenants in common, where it appears that one or the other party has consumed or destroyed part or all of the property held in common, such party will be obliged to respond therefor to his co-tenant; but an equity action, brought solely for an accounting, cannot be maintained by one co-tenant against another who has been guilty of appropriating or taking away some portion of the property owned in common.
    Such inhibition against the right to bring an action in equity, simply for an accounting, is not confined merely to co-tenants, but applies to every relation which may be established between persons other than fiduciary or trust relations, and it is only between persons wdio stand in the latter relation that actions simply for an accounting can be maintained in equity, although in other appropriate actions a court of equity may compel an accounting where that is incidental, and not the primary relief sought.

      Ma/ñiin v. Brooks (94 N. Y. 80), followed.
    Appeal by tbe defendant, Jerome B. Wheeler, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the Yth day of November, 1891, upon the decision of the court rendered at the New York Special Term overruling the said defendant’s demurrer to the plaintiff’s complaint, with notice of an intention to bring up for review upon such appeal the decision of the court at Special Term, upon which said judgment was entered.
    The complaint alleges, in substance, that in 1881 one Charles F. Abbey died, leaving a will wherein, after directing the payment of .his debts, he provided:

      “Second. The residue of my estate, real and personal, I direct to be carefully invested for the benefit of my boy Frankie, and such of the income thereof as is necessary to be used for his support during his minority, and any balance invested annually for his benefit.”

      “Third. In case of his death before arriving at full age, the property remaining to be paid, share and share alike, to my mother, Indiana Tolex Abbey, and my sister-in-law, .Anna M. Heath, or their lawful heirs.”
    That letters testamentary were issued to the defendant Talmadge, as executor, which are in full force and effect. That plaintiff is the person mentioned in the will, and the only descendant of Charles F. Abbey, who left no widow. That at the time “ of his death the said Charles F. Abbey was the owner in fee of one undivided fifth part of a piece or parcel of land situated in the Roaring Fork mining district in the county of Pitkin and State of Colorado, and known as the Emma Mining Claim, and was the owner of an undivided two-thirds of a lease for one year from November 20th, 1883,- of the remaining four-fifths of said mining claim, and that one Nevitt was the owner of the other undivided third part of said lease.”
    That the defendant Jerome B. Wheeler became the owner in fee of the said undivided four-fifths of said mining claim, subject to the said lease. That in 1884 the said Wheeler, by some “ arrangement with the said Nevitt, the exact nature of which is unknown by the plaintiff, took possession of said mining claim and worked a mine thereon, and thereafter took and removed from said mine a large quantity of mineral, amounting in value to upwards of seven hundred thousand dollars, and sold the said mineral and received therefor to the plaintiff’s use upwards of two hundred and fifty thousand dollars.” That, although requested, Wheeler has refused to account to the plaintiff. Wherefore, judgment is demanded, (1) that he account for the mineral taken and removed from the mine and for the sales thereof, and (2) that the rights and interests, if any, of the defendant Talmadge, as executor, and of the defendant Anna M. Heath in the premises be ascertained and settled.
    The demurrer states three grounds: “First, that the court has not jurisdiction of the subject of the action; second, that causes of action have been improperly united, in that a cause of action for minerals or for an accounting in respect thereof is joined with one for the construction of a will, and the determination of the lights of parties under it; thi/rd, that the complaint does not state facts sufficient to constitute a cause of action.”

      A. G. Brown, for the appellant.

      Henry W. Hmdon and Treadwell Glemla/nd, for the respondent.
   O’Brien, J.:

In analyzing the complaint it will be found difficult to determine the theory upon which the plaintiff predicates his right to recover, whether as tenant in common of the land, or as co-owner with the defendant Wheeler in a lease. The Special Term concluded that the suit was brought by plaintiff in his double character, as co-tenant of the land and co-owner of the lease, and that in this double capacity he could maintain the action for an accounting and a determination of the interests of the other persons who, in addition to himself, are named in the will of his father.

There is in the complaint sufficient to justify the conclusion that the plaintiff asserts a claim to all the title which his father had in the real estate, which was, as averred, subject to a lease. There is also a statement that the defendant Wheeler became the owner in fee of the balance, but such interest is expressly stated to have been subject to the lease. There is no statement that, as owner of the fee, the defendant Wheeler ever entered into possession, the averments being that, by some arrangement with Nevitt, who had an interest with the testator in the lease, the defendant Wheeler entered into possession of the property and removed the ore for which, in this action, he is called to account. We think it clear, therefore, that it is not as a co-tenant in the land, but as a co-owner in the lease, that the plaintiff seeks to enforce his rights here.

It is extremely doubtful whether the plaintiff has the right to maintain such an action. No bequest of the testator’s interest in the mining lease is made to the plaintiff, and though he be the sole heir and only descendant, the interest of the testator in the lease, under the statutes of our State, in the absence of a specific, bequest, would go to Talmadge, the executor, and not to the plaintiff, the heir. (2 R. S. 82, § 6, subd. 1.) It is not necessary, however, for us to determine the question, because there is a fatal objection to this complaint.

The plaintiff, in either or both capacities, brings this action for an accounting and for a determination of the interests of himself and others under the will of his father. Under the authorities we do not think such an action can be maintained, for the reason that a court of equity will not assume jurisdiction of an action brought solely for an accounting, but in an appropriate action it may compel an accounting where that is incidental and not the prime relief sought. The cases of Ludlow v. Simond (2 Caines Cas. 1) and Post v. Kimberly (9 Johns. 470), though cited in support of the right to maintain such an action, áre really authorities for the proposition which we have stated. Ludlow v. Simond was a case where 'the relief sought was the enforcement of a guaranty and, as incidental thereto, an accounting. Post v. Kimberly was an action for a discovery. In the former case the chancellor made some general statements as to the jurisdiction of a court of equity in all actions of accounting; and whether we regard those as mere obiter dicta or a summary of the authorities as they then stood, the later cases in England and in this country do not support the statement there made, that equity has assumed and will assume jurisdiction in all actions of accounting.

As said in Marvin v. Brooks (94 N. Y. 80): “The basis and extent of the equitable jurisdiction over matters of account appears to have been seldom considered in our courts, but often discussed in the English authorities * * * The best considered review of the authorities puts the equitable jurisdiction upon three grounds, viz.: the complicated character of the accounts, the need of a discovery, and the existence of a fiduciary or trust relation. The necessity for resort to equity for the first two reasons is now very slight, if it can be said to exist at all, since a court of law can send to a referee a long account too complicated for the handling of a jury, and furnishes by an examination of the adverse party before trial and the production and deposit of books and papers almost as complete a means of discovery as could be furnished by a court of equity. But the jurisdiction of the latter court over trusts and those fiduciary relations which partake of that character remains, and in such cases the right to an accounting seems well established, but the existence of a bare agency is not sufficient. If it was, it would draw into equity every case of bailment in which an account existed.”

Here there is no suggestion that as between the plaintiff and Wheeler there is a fiduciary or trust relation; nor are there any averments which under the authorities have been held sufficient to entitle the plaintiff to the relief sought. TJpon allegations from which the inference is to be drawn that lie is co-owner in the fee or lease, the plaintiff brings this action simply for an accounting, which, as we have endeavored to point out, we do not think, on the authority of Marvin v. Brooks, can be maintained.

Our conclusion in no way affects the right of whoever is entitled to do so to compel the defendant Wheeler in an appropriate action to respond for the mineral which he has taken and sold, if this has' been done without right and authority. And whatever may have been the rule at common law against the right of one co-tehant to compel another in possession to respond for the value of the premises occupied by him for the rents and profits which he may have received, or for waste permitted or suffered, this must be regarded, as long as the case of McGabe v. McGabe (18 Hun, 158) remains the law, as settled in this State. That was an action brought for the partition of lands on which there was a stone quarry, and is authority for the proposition that a tenant in common who is made a defendant may set up in his answer that the plaintiff has been in possession óf the premises, has collected the rents thereof and quarried and sold stone therefrom, and may require an account to be rendered of the moneys so received by the plaintiff and have an allowance made to himself therefor. As therein said : “ It may be necessary to adhere to the rule that for mere occupancy the co-tenant shall not be liable to account. But there is no reason to extend that rule to a case where the co-tenant actually consumes or takes off and disposes of a part of the property held in common.”

While, therefore, in suits for the partition of land, or other appropriate actions at law between tenants in common, wherein it is made to appear that one or the other has consumed or destroyed part or all of the property held in common, he will be obliged to respond therefor to his co-tenant, this is far from saying that an equitable action solely for an accounting can be maintained by one co-tenant against another who has been guilty of appropriating or taking away some portion of the property owned by them in common. This inhibition against the right to bring an action simply for an accounting is, of course, not confined merely to co-tenants, but applies to every relation which may be established between persons other than fiduciary or trust relations. It is only between persons who stand in the latter relation that an action simply for an accounting can be maintained. And while in other appropriate actions a court of equity may compel an accounting, where that is incidental, and not the primary relief sought, it will not assume jurisdiction, except in the cases mentioned, of a simple action for an accounting.

It may be that the policy which for a long time has prevailed of not regarding forms of action may in time destroy the force of the rule as laid down in Marvin v. Brooks. And there would seem to be no good reason for permitting a tenant in common, though the relation between him and his co-tenant may not be fiduciary or trust, when sued, to require an accounting for mineral removed and sold from a mine, and yet denying him the right to maintain an action on his own behalf against the person so using the joint property for an accounting. We do not regard it, however, as an open question or one that calls for discussion, holding as we must under the authority of Marvin v. Brooks, that the facts here presented make an insufficient showing for the assumption of jurisdiction by a court of equity in this action, which is brought solely for an accounting.

The judgment, therefore, must be reversed and the demurrer sustained, with leave to plead over on payment of costs in the court below and of this appeal.

Parker, J., concurred; Yan Brunt, P. J., concurred in result.

Judgment reversed and demurrer sustained with leave to plead over on payment of costs in the court below and of this appeal.


text:
    Hector De Castro, Plaintiff, v. Compagnie Francaise du Telegraphe de Paris a New York, Defendant.

      Insufficient performance of a contract — contract induced by false representations.

    If, with, a view to enabling a corporation to do business, a person contracts to get something f®r the corporation which is entirely unnecessary and which, in point of fact, he does not get, the mere ascertaining by him that there is no ' necessity for getting it will not be a compliance with the contract.
    The plaintiff in an action cannot recover where the contract upon which the action was based was entered into by the defendant relying upon erroneous and mistaken representations of the plaintiff which, though they were made in perfect good faith, were untrue.
    A contract was entered into by correspondence between a foreign telegraph company, proposing to land a cable on the American coast, and a party residing in New York oily, by which the corporation agreed that if such person should obtain l'or the company “ a declaration of the Federal government which assures to it the .enjoyment, without restriction and unattackable, of the landing right which it holds from the separate government of the State of Virginia — an enjoyment which cannot be attacked by it in any connection, without obligation or prohibition to connect it at any fixed point, that it would pay to such person ” a certain sum. As to the unconditional and unattackable character of the Federal government’s declaration the written opinion of an attorney in New York was to be obtained.
    On application to the United States government it was learned that there was no legislation of the United States conferring authority upon the President to grant or deny the permission sought for.
    The attorney in New York, whose opinion was to be obtained, wrote as follows: “I do not apprehend any difficulty or danger in the laying of the cables, so far as executive interference is concerned. At all events, nothing further can be done to insure safety.” “When the cable has been laid its operation will be subject to the authority of Congress under the clause of the Constitution permitting that body to ‘regulate commerce.’” “This is, of course, a risk that all enterprises of this kind must incur. This comes to all.”

      Held, that there had not been such a compliance with. the requirements of the contract, as entitled the party with whom this agreement was made by the company to receive the money provided to be paid thereby.
    Motion by the plaintiff, Hector He Castro, for a new trial on a case containing exceptions, ordered to be heard at the General Term in the first instance upon the verdict of a jury in favor of the defendant, rendered by direction of the court, after a trial at the New York Circuit on the 27th day of April, 1894.
    In this action it is sought to recover upon an agreement alleged to have been entered into between the parties and which is embodied in the letters or correspondence between them. The plaintiff resided at New York, and the defendant is a foreign corporation created and existing under and by virtue of the laws of the Republic of Prance, and doing business at the city of Paris.
    On January 22, 1892, the Legislature of Virginia passed an act permitting the defendant to land its cables on the coast of that State, to connect with telegraph, telephone and other lines in the State, and to acquire the land necessary to be used for the landing of its cables. On September 2, 1893, the plaintiff wrote to defendant referring to steps which he had taken to assure to it the peaceful enjoyment of the right which it obtained from the State of Virginia, and naying: “I can in thirty days from now assure to you the remittance of tlie Federal official document consecrating your right to land your Porto Plata cable in the United States.”
    On September ninth plaintiff wrote: “ I am more certain than ever of the incontestable validation of the rights which the State of Virginia grants to you. Nevertheless, #this act being in fact the expression of a contract entered upon between this State and your ■company, it is indispensable even for the validity of the rights for which we wish the Federal and incontestable sanction, that you •establish here and as soon as possible the fact that your company agrees to submit to the conditions to which the enjoyment of these rights is subordinated.”
    Inclosed in this letter were resolutions to be adopted by defendant, which accepted the franchise conferred by the State of Virginia, and all the restrictions and obligations required by the laws of the United States, “and particularly the law relating to telegraphs, entitled EXV of the Revised Statutes of the United States.” The resolutions contained a copy of the Virginia act, and also copies of sections 5263 to 5269 of the United States Revised Statutes, conferring upon telegraph companies the right to construct, maintain and operate lines of telegraph over, under or across navigable streams or waters of the United States, and requiring such lines to be so constructed and maintained as not to obstruct navigation, the language at the commencement of section 5263 being: “ Any telegraph company now organized, or which may hereafter be organized, under the laws of any State shall have the right to construct, maintain and operate lines of telegraph through, * * * over and along any of the military or post roads of the United States,” etc.
    These resolutions the plaintiff undertook, when returned to him properly authorized, -to deposit with the Postmaster-General, which when so returned he accordingly did.
    On September 22, 1893, the company adopted the resolutions and transmitted them to- plaintiff, and in a letter of the same date wrote him: “ At its meeting of this day the council authorized me to agree with you that, if you obtain for our company a declaration of the Federal government which assures to it the enjoyment, without restriction and unattackable, of the landing right which it holds from the separate government of the State of Virginia, an enjoyment which cannot be attacked by it in any connection, without obligation or prohibition to connect it at any fixed point' — in a word, unconditional — you will receive * * * one hundred thousand francs. * * * You will receive besides * * * a sum of two hundred thousand francs, payable the day when the vessel'having the cable on board shall put -to sea for the purpose of laying it. '
    “ The council expressly demands that to give it entire confidence you will kindly take the written opinion of Mr. Coudert upon the unconditional and unattackable character of the Federal government’s declaration, and address the same to the company. * * *
    “ It seems to me useless to insist on the necessity for the Oompagnie Francaise, after the difficulties it has encountered on the first occasion, not to drop into new discussions on the validity of the landing rights which it holds since 22nd January, 1892. I cannot, then, call your attention too much to the precision of the terms of the authorization which we propose to you. * * * ”
    The declaration of the Federal government which the plaintiff claims met the requirements of the company’s letter was as follows:
    “ Department oe State, } “Washington, August 28, 1893. (
    “ Jeeeerson Chandler, Esquire,
    “No. 120 Broadway, New York City:
    “ Sir.— I have received your recent letter enclosing a printed brief in support of an application made to this department by Cie Francaise du Telegraphe de Paris á New York, a French corporation, for permission to land its cable on the shores of Yirginia, which has already been granted, as you affirm, by the State of Yirginia.
    “ There is no legislation of the United States conferring authority upon the President to grant or deny such permission, and in the absence of such legislation, executive action of the character desired would have no binding force.
    “ I am, sir,
    “Your obedient servant,
    “ W. Q. GRESHAM.”
    On November 2, 1893, Mr. Coudert gave a memorandum, in which, referring to the declaration of Secretary Gresham, he, among other things, said: “ I do not apprehend any difficulty or danger in the laying of the cables so far as executive interference is concerned. At all events nothing further can be done to ensure safety. It is plain that the Executive can give us no permission if it disclaims jurisdiction.”
    On November 4, 1893, Mr. Coudert addressed a formal communication to the company, in witich he says : “ In view of all the facts, and especially of the unqualified disclaimer of jurisdiction on the part of the Executive, I can see no reasonable grounds upon which such interference may be feared. * * * Once the cable has been laid, its operations will be subject to the authority of Congress, under the clause' of the Constitution permitting that body to ‘ regulate commerce.’ That is, of course, a risk that all enterprises of this kind must incur; it is common to all.”
    On November 11, 1893, plaintiff wrote asking for the 100,000 francs, and transmitting a copy of Mr. Gresham’s declaration and certificate of the Postmaster-General that the resolutions of the company were on file in his department, Mr. Coudert’s opinions and a legal opinion of Mr. Chandler, dated October 12, 1893.
    Upon the trial there were offered two additional letters from Mr. Coudert, dated in December, 1893, and February, 1894, and which were excluded because written after the commencement of the suit. There was also excluded an offer to show that plaintiff obtained a charter for the company in New York ; and an offer to show verbal declarations by Secretary Gresham was likewise excluded.

      John, E. Parsons, for the plaintiff.

      Edward W. West, for the defendant.
   O’Brien, J.:

Ye think that the exceptions presented upon these rulings excluding the evidence offered should be overruled. If, however, we regard them as relevant and competent, they do not change the conclusion to be reached upon the question of plaintiff’s right to recover. That question turns upon the determination of whether the letter written by the Secretary of State of the United States, Mr. Gresham, as explained by the opinions of Mr. Coudert contained in his letters, shows a fulfillment of the conditions upon which the plaintiff’s right to compensation depended.

At the outset it will be noticed that the letter of Mr. Gresham bears date August 28, 1893, and in the absence of evidence to the contrary, its existence may, therefore, be presumed at the time when the correspondence relating to this subject was opened by the plaintiff with the defendant, the first lettér in which bears date September 2, 1893. Whether Mr. Gresham’s letter was received at the latter date or its existence known to plaintiff does not appear. If it was already in existence at that time, plaintiff’s claim being based upon its procurement by him from the United States Secretary of State, it can make no difference whether he knew of its existence or not. If he did not know of its existence, he certainly did not procure it; if he did know, and the defendant did not, the contract subsequently made would be void as to the defendant and it could not be required to pay for the procuring of something which already existed.

If, however, we take the inference most favorable to the plaintiff, that Mr. Gresham’s letter was not written until after the company, at the suggestion of plaintiff, had authorized him to proceed and obtain the rights mentioned in their letter, it still remains to detérmine whether that letter complied with the contract.

It cannot be seriously contended that the defendant entered into a contract by the terms of which it was to pay the large sum in two payments of 300,000 francs, and in return receive nothing or very little of substantial value. We may concede, as argued by plaintiff, “ that the Virginia act gave to the defendant company an unrestricted and unattackable right to land its cable.” If so, there was nothing further that it could obtain from the Federal government. The filing with the Postmaster-General of an agreement to be bound by the conditions affecting telegraph companies, though done at the suggestion of the plaintiff, did not confer any additional rights or privileges upon the defendant because it will be noticed from the language of the section quoted, that i't relates to domestic corporations, its express terms confining it to telegraph companies now or hereafter organized “ under the laws of any State; ” and in the opinion of the Attorney-General (1812, ZIY, Opinions of Attorneys-General, 62) it is said: “ It is manifest that this act was intended to apply simply to interior lines of telegraph designed for communication between points within the United States, and not to exterior oceanic lines designed for telegraphic intercourse with foreign lands.” ílie filing, therefore, of defendant’s acceptance, in view of the effect thereof and of the terms of the agreement between the parties, was not a compliance with the contract entitling plaintiff to the compensation; and even if we regard it as a step in that direction, it did not secure to the defendant all that it sought to obtain.

This, we think, is conceded by plaintiff, who stakes his recovery upon the position that the letter of Mr. Gresham was a compliance with the contract, and was the only declaration which, in view of the situation and of the facts known to the parties, could possibly be obtained or have been within their understanding or intention. Was that, however, all that the defendant wished and that the plaintiff undertook to secure ? We think a reading of the correspondence shows that the parties at the time were in doubt as to whether the Virginia act was sufficient to confer upon the defendant the right to land its cable and to engage in the business of telegraphy in the United States, and that both parties were impressed with the necessity of securing from the Federal government a recognition of their right, under the Virginia act, to do business in the United States without interference from the general government. If in this -they were both mistaken, and if, upon obtaining the right from the State of Virginia, the defendant with safety could have proceeded with the laying of its cable and the transaction of its business here, then the mutual mistake into which the parties had fallen of supposing something more to be necessary, would not give the plaintiff a right to enforce the terms of such a contract in his favor as against the defendant. In other words, if, with a view to enabling the defendant to do business, the plaintiff undertook to get something which was entirely unnecessary, and which in point of fact the plaintiff did not get, the mere ascertaining that there was no necessity for getting it would not be a compliance with the contract. What the plaintiff undertook, to use his own language, was to procure a Federal official document oonseorat-mg the right to land the company’s cable in' the United States; what the defendant agreed to pay for was :c a declaration of the Federal government which assures to it the enjoyment, without restriction and unattackable, of the landing right which it holds from the separate government of the State of Virginia, * * * without obligation or prohibition to connect it at any fixed point • — ■ in a word, unconditional.” This right, it would seem, the plaintiff concluded he could obtain from the executive department of our government — a right which, as stated in plaintiff’s letter to Mr. Coudert of November sixth, would assure the company “ against all interference, prohibitive or restrictive, by the Federal government in the exercise of the right of landing which it holds from the State of Virginia.” What plaintiff obtained — assuming for the sake of argument that it was secured after the agreement was entered into — was a statement from the executive department contained in the letter of Mr. Gresham that There is no legislation of the United States conferring authority upon the President to grant or deny such permission, and in the absence of such legislation executive action of the character desired would have no binding force.”

It will thus be seen that the executive department, to which the application was made, conferred no additional rights upon the defendant, but dismissed the application with the statement that the President had no authority or jurisdiction over the subject, leaving the company, therefore, in the same position as it was before the application was made, with all- its rights that it had received from the State of Virginia, and no others.

It is insisted, however, that this was an expression of an opinion by that department of the government which, by stating that it had no jurisdiction in the matter, removed doubt as to the possibility of its interference with the landing of the company’s cable. It may well be that this was all that could be obtained from the Executive ; but it was not all that the plaintiff agreed to obtain, or that the defendant had a right to expect. In the letters of Mr. Coudert, which were written in response to letters confining his attention to particular questions formulated by the plaintiff, it appears that he was considering the effect of Mr. Gresham’s letter so far as it related to executive action. If that was all there was, we agree with what he says in his letter of November ninth. It is clear that the Executive having decided that he was entirely without authority, could not, without going beyond his powers, yield the required permission, but it is equally clear that if the President has not the power to act in the matter, he could not, without usurping rights which he declares he does not possess, interfere to the injury of the company in the enjoyment of itá right of landing.”

We think, however, it is giving too narrow and restricted a construction to the agreement to hold that a mere disclaimer upon the part of the Executive of any authority to interfere with the company’s right to land its cable, was all that the parties contemplated. The offer held out by the plaintiff, and which the defendant accepted and agreed to pay for, was a recognition and permission in some form by that branch of the Federal government, having jurisdiction of the subject, of the defendant’s right to land its cable and transact business in the United States, subject to the same obligations as were imposed by Congress upon other companies. If so regarded, however, we do not think that the obtaining of Mr. Gresham’s letter was* a performance of the contract between the parties. Both assumed that the Executive could grant some right to the defendant, and such right was applied for; but the letter is not an assurance to the defendant, nor does it grant any permission or confer any franchise upon it; it is a statement from the Secretary of State of the view that the President was without power to grant what was asked, and was practically a refusal. As Mr. Coudert well says in one of his letters: It is possible that a different view may be entertained by some succeeding administration of the government; ” such a view for instance as might prevent the landing of the cable or impose reciprocity conditions on the defendant as a French corporation. Whether or not such an exercise of the President’s power or superior force would be lawful it was immaterial for the defendant to inquire. The letter has not any permanent value or effect as a judicial decision. Notwithstanding its existence the Executive (if the power vested in that department), or Congress, by means of a general law, might impose terms or stipulations upon the defendant, as prior conditions to landing or operating the cable, which might be so onerous as practically to prohibit it if such terms were obeyed by the defendant.

We think the whole difficulty with this case is in not keeping in view what we have endeavored to point outj that the defendant entered into this contract relying upon the mistaken views of the plaintiff as to where the power lay in the general government^ which, as shown by Mr. Gresham’s letter, was by plaintiff erroneously represented to be in the Executive. The defendant was not concerned with where such power vested, but desired an authoritative declaration upon the part of the Federal government that the grant conferred by the act of Virginia might be enjoyed. And while, in the light of the present knowledge of the parties, it may be claimed that the act of Virginia alone was sufficient ,to confer upon the defendant all the rights it required, still this would not. give to the plaintiff a claim for the large amount, the first portion of which is sought to be obtained in this action, for obtaining what was practically of little use. If a declaration by Congress was required it is not claimed that plaintiff obtained it.

There is much in the suggestion that electric telegraphy,- by the instrumentality of submarine cables, owned or operated by foreign corporations, comes under the head of foreign commerce, concerning* which Congress has exclusive power to permit, regulate or prohibit ; and not having legislated generally on the subject it is thus giving its silent permission that this branch of foreign commerce shall be free, subject of course to future legislation by Congress should it' at any future time see fit to exert its power. But whether Congress has exclusive power in this matter, or whether,- subject to such conditions as it may see fit to impose, each separate State can permit or prohibit the landing of submarine cables by foreign corporations, it is not necessary for us to determine, though the weight of authority would seemingly be upon the side that in respect thereto Congress has exclusive jurisdiction. The doubt created as to whether the State of Virginia or the Federal government had the right to permit the landing of the. defendant’s cable, was what the parties had in contemplation to remove, and we do not think it has been solved by the letter obtained from Mr. Gresham. He but expresses the opinion of the present administration as to the power of the Executive on the subject, and does not undertake to define the powers of Congress over the subject. Who had the right was a question which the plaintiff seetns to have concluded in favor of the Executive, and under this mistaken notion he made the representations to the defendant which resulted in the agreement, the fair construction of which required that the doubt existing as to the extent of the rights conferred b}r the act of Virginia should be removed by some authoritative declaration of the Federal government, and it was to secure this that the defendant agreed to pay the large stipulated sum.

It is contended that, -whether the plaintiff had secured what he agreed to or not, was a matter referred to Mr. Coudert, as arbitrator, and that he having decided favorably to the plaintiff, this concludes the defendant. This contention, we think, is erroneous in its premises. Mr. Coudert was not agreed upon as an arbitrator, but he was selected by the defendant as the counsel where opinion was to be obtained upon the unconditional and unattackable character of the Federal government’s declaration for transmission to the company. The opinion so given is clear and entirely satisfactory upon the questions with which it deals. But such opinion, instead of being -an argument in favor of plaintiff, we think is strongly in favor of the defendant, for though Mr. Coudert does state that the declaration from Mr. Gresham was all that could be obtained from the Executive, he does not say it is an authoritative declaration, nor anything which amounts to that, in any way binding upon the Federal government, or in any way conferring upon the defendant any right or franchise which before that time it did not possess. And he points out that it would not be binding even upon the executive department of the government, saying: “A direct permission (to land the cable) * * * might have been revocable if given ; ” and again, “ It is possible that a different view may be entertained by some succeeding administration of the government; ” and, “ Once the cable has been laid, its operations will be subject to the authority of Congress.” And his conclusion, that “ at all events nothing further can be done to ensure safety,” is entirely different from saying that plaintiff has performed, on his part, the conditions of the contract, and that by a binding and authoritative declaration of the Federal government the defendant’s Virginia lauding rights are now unattackable and unconditional. Mr. Coudert is very careful in his expressions, and he clearly shows that all that plaintiff obtained was a statement that the Executive had no jurisdiction in the matter. The contract, however, does not confine it to the Executive, but was for the securing of a right which it defines as “ an enjoyment which cannot be attacked by it (the Federal government) in any connection.” This clearly does not mean that the defendant is to be assured only against the mere likelihood or probability of Executive interference, but contemplates an authoritative expression that it is to be allowed to land its cable without any conditions or obligations imposed upon it by any department of the Federal government, except such as, by the- United States Revised Statutes, are imposed on all companies.

We conclude, therefore, by saying that there is a grave question whether this letter of Mr. Gresham’s was not in existence when the contract was made, which would negative the claim that it was procured in consideration of the payment to be made by defendant; and that, apart from this, the plaintiff cannot recover, the contract having been entered into by the defendant relying upon erroneous and mistaken representations of plaintiff, which, though they may have been made in perfect good faith, were, nevertheless, untrue as to the power of the Executive to give an authoritative declaration and confirmation of the rights which the company had secured from the State of Virginia, to land its cable preliminary to its engaging in the business of telegraphy in the United States.

We think, therefore, that the exceptions should be overruled and the motion for a new trial denied, with costs.

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

Exceptions overruled and motion for a new trial denied, with costs.


author: O’Brien, J. :

text:
    Henry P. Talmadge and Another, as Trustees under the Will of John B. Seaman, Deceased, Respondents, v. George W. Seaman, Individually and as Administrator, etc., of George A. Seaman, Deceased, and Others, Defendants; Ashbel P. Fitch, Comptroller of the City of New York, Appellant.

      Beneficial vesting of property — when a person becomes beneficially entitled under chapter 899 of 1893 to property liable to taxation thereunder — the tax is based on the succession, not on the estate — to what extent the act is retroactive.

    Limitations of future or contingent interests in personal property are subject to the same rules, so far as they are prescribed by the Revised Statutes in relation to future estates in lands, but there is a distinction between what is termed “vesting” in the one case and in the other.•

      A legacy cannot be said to be vested, unless the legatee, if sui juris, has power to extinguish it by release or to give a perfect title thereto by assignment.
    While, in a strictly legal sense, persons having a vested or contingent, a defeasible or indefeasible, a possessory or an expectant interest in property by will or by deed, may be said to be beneficially interested, and thus answer the description of persons who, becoming “beneficially entitled in possession or expectancy ” to property, would be liable to taxation, such is not the meaning to be attached to such words as used in chapter 399 of the Laws of 1892, and, for the purposes of taxation under that act, one only becomes beneficially entitled to property when the time arrives at which he has the title, or is entitled to the possession thereof, or when a contingent interest vests, or when a defeasible estate becomes indefeasible.
    The tax imposed by chapter 399 of the Laws of 1892 is on the succession and not upon the estate, and a person is not liable to the tax until he succeeds to the property.
    By the language of subdivision 3 of section 1 of chapter 399 of the Laws of 1892 there is imposed a tax upon the successions to property transferred by will prior to its passage, where the beneficial interest therein vests subsequent to its passage, and while such construction seems to give a retroactive effect to the act which in all cases should be avoided, if possible, its effect is retroactive only so far as the legal estate is concerned, but not as to the beneficial interests, and where such beneficial interests did not spring into existence until after the passage of chapter 399 of the Laws of 1892, the persons entitled to succeed to the beneficial enjoyment of the property become liable for the tax under said act.
    Appeal by the defendant, Ashbel P. Fitch, as comptroller of the city of New York, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 6th day of August, 1894, upon the decision of the court rendered after a trial at the New York Special Term.

      Edgar J. Levey, for the appellant.

      Ljucíms H. Beers, for the respondents.
   O’Brien, J. :

The only question raised upon this appeal is as to the liability of the estate included in the residuary trusts created by John B. Seaman’s will to taxation under the act of 1892 in relation to taxable transfers of property (Laws of 1892, chap. 399). The residuary clauses of said will are as follows :

Sixth. All the rest, residue and remainder of my estate, real and personal, I give, devise and bequeath to my executors, hereinafter named, in trust to apply and pay over tlie income of one equal undivided balf part thereof to my said adopted daughter and niece, Elizabeth Seaman, during her natural life; and upon her decease T give, devise and bequeath said equal undivided one-lialf part of my estate so held in trust for my said adopted daughter-and niece to the children of my nephew, George A. Seaman, living at the time of her death, share and share alike.
/Seventh. I direct and order my said executors hereinafter named to apply and pay over the income of the other equal undivided half part of my estate so held in trust by them, to my said adopted son and nephew, George A. Seaman, during his natural life; upon his decease I give, devise and bequeath the said equal undivided half of my estate so held in trust for my said adopted son and nephew to the children of my said nephew, George A. Seaman, living at the time of his death, share and share alike.”

The will was made and the testator died and the will was admitted to probate in 1876. At the time of the making of the will and at the time of the death of the testator the life tenants were both living. The four children of George A. Seaman, who are defendants in this action, were also all living both at the time of the making of the will and of the death of the testator. George A. Seaman also had one other child, Hubert Seaman, who was born in 1880, and died at the age of about six months. The estate consisted almost entirely of personal property. A portion of the real property, which was small in comparison with the entire estate, was sold under the authority of the power of sale contained in the will, a few lots, valued at $1,000, remaining unsold. The two life tenants died in January, 1893.

On May 1, 1892, chapter 399 of the laws of that year, entitled An act in relation to taxable transfers of property,” became a law. By the latter portion of the 3d subdivision of section 1 thereof it was provided : “ Such tax shall also be imposed when any such person or corporation becomes beneficially entitled, in possession or expectancy, to any property or the income thereof by any such transfer, whether made before or after the passage of this act.”

The question presented is, did the children of George A. Seaman become “ beneficially entitled, in possession or expectancy,” to the remainders of the funds held in trust for the life tenants, upon the termination of such life estates, and thus subject their interests to the payment of a tax ?

The learned judge at Special Term correctly said : “ If the transfer -would have been taxable under the law of 1892, if it had been in force at the time the will took effect, then it is not taxable now.” Piad such a law been in force at the time the will took effect, it is insisted that the children of George A. Seaman then living were persons “ in being who would have an immediate right to the possession of the lands upon the ceasing of the intermediate or precedent estate; ” that their estate was, therefore, then vested (1 R. S’. 723, § 13); that the amount of the tax payable by the estate given in remainder as a whole could have been fixed, since the remainders in any event would have passed to collateral relatives, and upon determining the value of the life estates the total value of all the remainders taken together could be easily ascertained. On the other hand, it is as strenuously urged that as to the personal property the law of this State is settled that dispositions thereof, such as were here made, directing distribution at some future time among persons whose right to take depends upon relation to some future event, vest no legal estate in such persons prior to the happening of such event; and that under this will the children of George A. Seaman took each a contingent interest, the vesting of which' was dependent upon their surviving the termination of the two trusts.

As said in the note on vesting in Abbott’s New Cases (Yol. 18, p. 300): “ Limitations of future or contingent interests in personal property are subject to the same rules so far as prescribed in 1 Revised Statutes, 722, etc., in relation to future estates in land. (1 id. 773, § 2.) But notwithstanding this provision, the distinction between what is termed vesting in the one case and in the other continues. The term ‘ vested ’ is constantly used of legacies to indicate more than not being contingent in the common use of that term as to estates in real property, viz., to indicate one which is not subject to be divested, one that is not defeasible by lapse of time or otherwise. A legacy is not said to be vested except when the legatee if sui juris has power to extinguish by release, or give perfect title by assignment. * * * ” And the learned author, in formulating general principles to guide in the interpretation to be put on a gift of personalty in words of futurity, says: “ Where words of futurity are annexed to the substance of the gift, and there is nothing in the will to manifest a different intention, the gift itself will be deemed future, and the question of who is the beneficiary will be deemed dependent upon the state of facts when that future time shall arrive, and in this class of cases, of which the case in the text is an illustration, the legacy is said meanwhile not to be vested, although if it were an estate in real property given in the same language it would technically be called a vested as distinguished from a contingent remainder.”

This distinction we endeavored to point out in The Matter of Curtis (73 Hun, 185). The Court of Appeals, however, in reviewing that case (142 N. Y. 219) did not consider it necessary to pass on the question of vesting. And in the more recent case of Matter of Hoffman (143 N. Y. 334) it is said : “ Our decision in Matter of Gurtis is not decisive, because the facts are essentially different; but in that case is expressed what was our decided drift of opinion in cases more like the present, and was fairly settled later in Matter of Estate of Roosevelt (143 N. Y. 120). We are obliged to follow one of two lines of construction. We must open all the nice and difficult questions which arise under a will as to the vesting of technical legal estates, although future and contingent, and assess the tax upon what are in reality only possibilities and chances, and so complicate the statute with the endless brood of difficult questions which gather about the construction of wills; or we must construe it in view of its aim and purpose and the object it seeks to accomplish, and to subordinate technical phrases to the facts of actual and practical ownership. Eor taxation is a hard fact, and should attach only to such ownership, and may' properly be compelled to wait until chances and possibilities develop into the truth of an actual estate possessed, or to which there exists an absolute right of future possession.”

And in The Matter of Roosevelt (supra) it is said: “It does not follow because the Legislature taxes persons beneficially entitled to property or income in possession or expectancy, that a tax was thereby imposed upon an interest that may never vest; until that time arrives the power to tax does not exist.” And the opinion concludes as follows: “The Legislature, in the act of 1892, has given a practical construction to its previous legislation on this subject when it provides that where, the fair market value of the property or interest cannot be ascertained at the time of the transfer, the tax shall become due and payable when the beneficiary shall come into actual possession or enjoyment.”

While, therefore, in a strictly legal sense, persons having a vested or contingent, a defeasible or indefeasible, a possessory or expectant interest in property by will or deed, may be said to be “ beneficially interested ” — which has been regarded as synonymous with “ beneficially entitled ” — and thus answer the description of persons who, becoming “beneficially entitled, in possession or expectancy,” to property, would be liable to taxation, we do not think this is the meaning that is to be attached to the words as used in the act of 1892. As we have endeavored to point out, the latest expression of the Court of Appeals favors the view that for the purposes of taxation one only becomes beneficially entitled to property when the time arrives that he has the title or is entitled to possession, or when a contingent interest vests, or when a defeasible estate becomes indefeasible. While there are objections to and possible hardships in such a construction, by rendering subject to a tax an interest or property which was free therefrom when created, it nevertheless presents the most practicable rule to be applied in the construction of acts relating to the taxing of inheritances.

Under these acts it was in the beginning a question as to whether the tax was one upon the estate, as distinguished from one upon the succession, but this is no longer an open question, because we regard it as now settled by the Court of Appeals that this tax is on the succession. (In the Matter of Hoffman, 143 N. Y. 330; Matter of Estate of Swift, 137 id. 77.) This being so, one should not be liable until he succeeds to the property, and the injury or injustice of a rule that would hold one liable or responsible for a tax upon property in which he might have a contingent interest, b\it which might never vest, has, in many of the later cases, been pointed out.

We think then that had the law of 1892 been in existence at the time of the making of the will or the death of John B. Seaman, the interest of the children of George A. Seaman would not then have been taxable, because they did not, within the meaning of the Transfer Tax Act, become beneficially entitled, in possession or expectancy, to tlie Remainders of tlie funds field in trust during tlie lives of tlieir aunt and father respectively, until the termination of such life estates. Upon the death of the testator, these children had an interest which could only ripen into a beneficial one by their outliving, as to half of the estate, their aunt, and as to the other half, their father; and if then obliged to pay a tax they might never reap any resulting benefit, because if they died before either of the life tenants they would never succeed to any interest in tlie property. As said in Matter of Curtis (142 N. Y. 219): “The law itself gives abundant evidence in its language of the intent to subject only real and beneficial interests to taxation, and nothing in its policy justifies the imposition of such a burden where no corresponding benefit has been received.”

In disposing of questions, therefore, under these tax acts we are not to be controlled by the legal divisions of estates as classified and defined in the Revised Statutes, but the language referring to the character of estates that should be taxed must be taken in its ordinary and popular sense; and where, as here, the act provides for a transfer tax as against those who become beneficially entitled in possession or expectancy,” it was intended by the Legislature not to tax a mere legal estate or interest, which might or might not ripen into a beneficial one. The obligation to pay the tax was not to be imposed except upon one who has “ a present enjoyment or a fixed and absolute right of future enjoyment” of property, and the appraisal of the property or the fixing of the tax is to be proceeded with when this can be ascertained. Thus, as said in Matter of Hoffman (supra): “ The State will get its tax when the legatees get their property.” As the tax is a burden placed permanently on the succession, and not upon the estate, if the act of 1892 liad been in force when the testator died, the State could not have got its tax, because there was no certainty as to which of the children would eventually get the property, and the matter would have had to be deferred until the termination of the life estates. Here, before such termination, the law of 1892 was enacted, and as by its provisions the tax was to be imposed upon any one who became beneficially entitled, in possession or expectancy, to any property, whether the instrument under which such property was acquired was made before or after the passage of tlie act, we fail to see any valid reason wby it should not apply in the present instance.

It is to be noticed that the word used in the statute is “ transfer,” and this was regarded by the Special Term as confining its application to deeds, so that where, as here, the instrument creating the estates was a will the statute would not be applicable. "W e think this, however, is too narrow a construction, it being evident from a reading of the entire act that the Legislature intended to include not only transfers by deed hut also transfers by will. By its language the act imposes a tax upon successions to property transferred by will prior to its passage, though the beneficial interest therein vests subsequent to its passage, and while that construction seems to give a retroactive effect to the act, which in all cases should, if possible, be avoided, its effect is retroactive only so far as the legal estate is concerned, but not as to the beneficial interest, which in this case did not spring into existence until after the passage of the act., and thus the persons entitled to succeed to the beneficial enjoyment of the property became liable for the tax.

Our conclusions, therefore, are, that this act imposes a tax upon successions to property transferred by will before the passage of the act whenever any beneficial interest therein vests subsequent to its passage; that the beneficial interests of the children of George A. Seaman in the trust funds, which by the terms of' the will were to be distributed to such of them as should be living at the deaths of the respective life tenants, did not vest until January, 1893, ^.and that upon such vesting the children became liable to pay the tax.

The judgment of the Special Term should accordingly be reversed and a judgment in accordance with the views herein expressed entered, with costs to the appellant.

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

Judgment reversed and judgment ordered as directed in opinion, with costs to appellant.


author: O'Brien, J.:

text:
    Otis Corbett, Respondent, v. The Spring Garden Insurance Company, Appellant.

      Vire insurance — term “ actual total loss ” defined — evidence.
    The term “actual total loss,” as applicable to a building insured against fire, means not that its materials were utterly destroyed by fire, but that the building, though part of it remains standing, has lost its identity and specific character as a building and instead has become a broken mass, or cannot longer properly be designated as a building.
    If a building ceases, by reason of a fire, to be such, thereby losing its identity and character as a building, the whole sum insured is due, although the -materials may not have been absolutely destroyed.
    Upon the trial of an action brought to recover upon a policy of fire insurance which insured the plaintiff against loss or damage by fire on his lease of a building, it appeared that all that was left of the building consisted of the foundation and four standing walls, the walls being more or less injured. The policy of insurance provided “it is a condition of this insurance that, in case of such destruction by fire of the above-named premises, that the lease held by the assured shall be by its terms and in fact canceled, this company shall be liable to pay an amount not exceeding the sum hereby insured.”
    The lease provided that, in case of the total destruction of the building by fire, the rent should be paid up to the time of such d«struction and the lease should come to an end.

      Held, that the court did not err in refusing to determine as a matter of law that there was no total destruction of the building;
    That there was sufficient evidence to go to the jury upon the question as to-whether the building had lost its identity and specific character as a building; that if it had, then there was a total destruction within the intent of the parties, and the policy, although there was no evidence to show that there was a total destruction of the component parts and material that made up the building ;
    That the answer to a question put by the defendant’s counsel, whether the insured “building was totally destroyed, as understood in building,” was prop'erly excluded as calling for a conclusion.
    Upon the trial of the action the court refused to -charge, as requested, that there was not sufficient evidence as to the value of the plaintiff’s lease, as there was no evidence given of the estimated cost of repairs which the plaintiff expressly covenanted to make during his term, or of the annual water charges which he also agreed to pay, and'that the jury could not find a verdict for substantial damages against the defendant.
    By the terms of the lease the plaintiff was only obliged to make such repairs as he might deem necessary, and the evidence showed that the building was in good, tenantable condition at the time of the fire.

      Held, that it would be the purest speculation and conjecture to estimate what might be the possible or even probable repairs that the plaintiff might think necessary to make in the future, and that the request was properly refused.

      Appeal by tlie defendant, Tbe Spring Garden Insurance Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in thp office of the clerk of the county of New York on the 21st day of November, 1894, upon the verdict of a jury, rendered after a trial at the New York Circuit, and also from an order entered in said clerk’s office on the 27th day of November, 1894, denying the defendant’s motion for a new trial made upon the minutes.
    This is an action upon a policy insuring the plaintiff against loss and damage by fire on his lease of a building. It provided as follows : “It- is a condition of this insurance that in case of such destruction by fire of the above-named premises that the lease held by the assured shall be by its terms and in fact canceled, this company shall be liable to pay an amount not exceeding the sum hereby insured.”
    The lease provided: “And it is further agreed between the parties of these presents, that in case the building or buildings erected on these premises hereby leased shall be partially damaged by fire, the same shall be repaired as speedily as possible at the expense of the said party of the first part; that in case the damages shall be so extensive as to render the building untenantable, the rent shall cease until such time as the building shall be put in complete repair; but in case of the total destruction of the premises by. fire or otherwise, the rent shall be paid up to the time of such destruction and then and from thenceforth this lease shall cease and come to an end.”
    The building was six stories in height in front, and five in the rear, with an iron front, and side and rear walls of brick. It was occupied by plaintiff as a furniture store and warehouse. There was some decoration on the walls and ceiling of the first and second floors where furniture was exhibited, and above that the brick walls were tinted. The plaintiff testified: “ It was used for warerooms up to the fifth and sixth stories, where we had our upholstery department and furnishing rooms ; otherwise it was entirely ojoen; there was no divisions.”
    On November 23, 1892, while the above lease and policy of insurance were in operation, a fire occurred, which caused damage. The roof was entirely gone, the debris therefrom having fallen right down to the foundations; the front wall, constructed of iron, was somewhat heated, and “that would burn off the bolts and whatever would attach the iron together; ” the ornamental top and cornice were taken down by the firemen. The connecting arches on the fifth and sixth stories were badly damaged. The woodwork, sashes and glass were gone throughout. The east and west walls both had very large op>enings in them in the upper parts, large enough, as described by one of the witnesses, “ to drive a horse and wagon through.” The bricks were badly burned and blackened; the mortar was out in a good many jflaces, and there were many loose bricks, and the surface of others had been burned, taking the face off so that it exposed the interior of the brick. The rear wall was in a worse condition than the side walls. The lintels and sills were broken and scaled off, and the wall itself out of plumb. The entire interior of the building, which consisted as stated of six floors, was gone down to the cellar, and there is no question but that the interior of the building was wholly destroyed.
    Immediately after the fire plaintiff surrendered his lease and demanded his insurance, which was' refused upon ' the ground, mainly, that there was not a total destruction of the premises.

      Michael H. Ccvrdozo and Edgar J. JFathan, for the appellant.

      Francis JD. Dowley, for the respondent.
   O'Brien, J.:

Upon the trial the plaintiff insisted that the building, as a building, had ceased to exist by reason of the fire, and that in consequence the insurance company was liable. On the other hand, the defendant contended that because the building was worth a large sum, and a considerably smaller sum was expended in restoration, it was not liable, because there was not a total destruction. And again, upon this appeal, the defendant insists that the contract of insurance was enforcible only in the event of the “ total destruction ” of the premises, and that upon the evidence no total destruction within the meaning of the policy was shown; that the only destruction was to the roof and the interior woodwork; that the foundations and the brick walls at the side and rear remained in place, and were in fact used without rebuilding; that the iron front was used, with repairs only at the top ; and that as to the lintels and sills, only about one-lialf were replaced. In addition to this summary of the extent of the loss, the strongest showing made by defendant was that the building was restored and put in complete repair at a cost of about one-third of the sound value of the building at the time of the fire.

If this last proposition had been so conclusively established as to make it a question of law, it would be difficult to evade the conclusion that the weight of evidence was against the verdict, which, in effect, found that there was a total destruction of the building. But while there can be no question as to what it cost to repair, because the repairs were made and the money paid, there is room for different inferences as to what was the sound value of the building prior to the fire.

Three of the four witnesses examined on the part of the defendant did not see the building until after the fire, and the fourth testified that he did not estimate the total value of the building before the fire. And as to their knowledge of the value of the material destroyed, their testimony in this respect was to some extent weakened, upon cross-examination, by the fact that, as to some of these witnesses, they were not speaking of their own knowledge, but based their estimate upon information received from sub-contractors and iron men. And against the estimates thus furnished as to the sound value of the building before the fire as compared with what it cost to restore it, we have other witnesses for the defendant, who furnish us a statement of the injury done, to the building. They stated that it was necessary to put on a new roof, to remove the whole interior of the’building with hardly an exception ; that the reconstruction began at the ground and ran up to the roof. The evidence, therefore, proved that all that was left consisted of the foundation and four standing walls, the latter being more or less injured, according to the version of all the witnesses.

Upon the defendant’s motion to dismiss the complaint, we think the court correctly ruled in denying it; but on the case as it stood when all the evidence was in, upon the defendant’s motion to direct a verdict, a more serious question was presented. As the evidence then stood, was there presented a question of law or one of fact ?

The appellant insists that tiie evidence was not open to debatable presumptions or doubtful inferences; that the plaintiff had not made out a case for the enforcement of his contract, and the court should have held, as matter of law, that there was no total destruction ; that all that was shown was untenantability, and that there was no warrant for submitting the question of total destruction as one of fact, under the circumstances of this case, to the jury. On the other hand, the plaintiff insists that it was a question of fact upon the evidence as to whether the building as a building had ceased to exist by reason of the fire; that while the standing walls or a structure remained, this is not a building in the ordinary acceptation of that term ; that within the intent of the lease and of the policy, when there was a destruction, not of the structure, but of the building as a building, then the loss was one. covered by the policy.

Actual total loss “ as applicable to a building means not that its materials were utterly destroyed, but that the building, though part of it remains standing, has lost its identity and specific character as a building, and instead has become a broken mass, or cannot longer properly be designated as a building. Absolute extinction is not meant. c "Wholly destroyed ’ may be an equivalent expression.” (Anderson’s Law Diet. 639.)

“ A total loss does not mean an absolute extinction, but only a destruction of a thing in the character in which it is insured. If a building ceases by fire to be such, losing its identity and character as a building, the whole sum insured is due, although the materials may not have been absolutely destroyed.” (May on Ins. [3d ed.] § 421a.)
“A burned building is a total loss when it ceases for all practical purposes to be a building, though some of its component elements remain.” (Riddle on Ins. § 1315.)

While we are referred to no decision of our Court of Appeals, we have byway of illustration and argument from other States, the case of Williams v. Hartford Fire Ins. Co. (54 Cal. 450), and Huck v. Globe Ins. Co. (121 Mass. 306), in the former of which the court approved a charge to the jury which was in the following words: the fact- that after the fire a large portion of the four walls were left standing, and some of the iron-work still attached thereto, still, if you find that the fact is that the building has lost its identity and specific character as a building, you may find that the property was totally destroyed within the meaning of the policy.” And in the latter case (Huck v. Globe Ins. Co.) Gray, Ch. J., says: “Of the building forming the eastern half of the block, the roof and the whole interior, with all the floors and divisions thereof, had fallen, and nothing remained standing but the outer walls and the elevator, constituting a mere shell or ruin and not a standing building in any proper sense.”

“A total loss does not mean an absolute extinction. The question is not whether all the parts and materials composing the building are absolutely or physically destroyed, but whether, after the fire, the thing insured still exists as a building. Although you may find

"While it will be conceded that after the fire there was left a structure, the question is whether such structure constituted a building. TJpon the evidence we do not think the court erred in refusing to determine this as a question of law. There was sufficient to go to the jury upon the question of whether the building had “lost its identity and specific character as a building.” If it had, then there was a total destruction within the meaning and intent of the parties and the policy. It is true there was no evidence to show that there was a total destruction of the component parts and material that made up the building; but there was evidence tending to show a total destruction of the building as a building, and it was this that was the subject-matter of - the insurance.

In regard to rulings upon evidence, the defendant, on cross-examination of one of plaintiff’s witnesses, asked him if the building was totally destroyed as understood in building. A like question was put to one of defendant’s witnesses. The objection to these, calling as they did for a conclusion, was properly sustained.

The only other question arises upon assigned errors in the charge of the court to the jury. Defendant requested the court to charge that “ There is not sufficient evidence as to the value of plaintiff’s lease, as there is no evidence of the estimated cost of repairs which the plaintiff expressly covenanted to make during his term, or of the annual water charges which he also agreed to pay, and the jury cannot find a verdict for substantial damages against the defendant.” This was asked also in another form, whereby the court was requested to charge that “From-the amount which the plaintiff might save annually in rent under his lease, must be deducted the payments which the ¡ffaintiff would be required to make under his lease, and there is no proof as to Avliat such payments would be.”

By the terms of the lease the plaintiff was only obliged to make such repairs as he might deem necessary, and the evidence showing that the building was in good tenantable condition at the time of the fire, it would be the purest speculation and conjecture to estimate upon what might be the possible or even probable repairs that the plaintiff might think necessary to make in the future.

It is true that in addition to this the lease required the plaintiff to pay the water rates imposed upon the premises, and the amount of these should have been given. But considering the uses to which the premises were put, we have some knowledge, as the jury undoubtedly possessed, of what the charges for water rates on such premises would be; and the only evidence as to the value of the lease being that offered by the plaintiff, from which it could be inferred that the unexpired portion of the lease was worth over $30,000, upon which there was an insurance of but $20,000, the failure to present for consideration the amount of water taxes as a proper deduction in estimating the value of the lease cannot have resulted in any injury to the defendant, and being such a small matter it should not be available to reverse the judgment if otherwise right. De minimis non ov/rat lex.

Upon the main question, as to whether there was sufficient evidence to go to the jury upon the question of total destruction, we think that the learned trial judge was right in submitting it to the jury, and their verdict upon the facts should not be disturbed.

Judgment and order accordingly affirmed, with costs.

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

Judgment and order affirmed, with costs.