author: Follett, J.:

text:
    Morris C. Mengis, Respondent, v. The Fifth Avenue Railway Company and Alfrederick S. Hatch, Appellants, Impleaded, etc.

      Evidence of a written resolution of a corporation — if rejected, how the ruling is reviewed on appeal — proof of the substance of such resolution, not pr'oper.

    Where a resolution of a corporation is in writing, if the corporation desires to offer it in evidence in an action in which it is a defendant, it should produce it, and if it is rejected should have it marked for identification and incorporated in the case on appeal, so that the court can determine upon the appeal whether it was competent.
    Where an offer is made by the corporation to prove the substance of such a resolution, which is objected to, it is proper for the referee to rule that the offer is improper and that the corporation should offer the resolution and have it marked for identification, in case it be rejected.
    Appeal by the defendants, The Fifth Avenue Railway Company and another, from portions of a 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 27th day of February, 1891, upon the report of a referee, directing the transfer of certain bonds and the payment of certain moneys to the plaintiff.
    In 1885 the Fifth Avenue Railway Company was incorporated under the laws of this State, with an authorized capital stock of $2,500,000, divided into shares of $100 each, for the purpose of constructing and operating a surface railroad in Fifth avenue and in other streets in the city of New York. A contract in writing was entered into between the plaintiff and the corporation on the 15th of September, 1885, which was modified by a written contract entered into .between the parties October 30, 1885, by which the plaintiff agreed to construct the road, of the corporation for $2,636,000 of its stock and $1,000,000 of its first mortgage bonds. The contract contains the following, among other provisions :

      “ That he (Morris C. Mengis) will promply proceed to obtain, at his own cost, all rights of way and necessary consents from the proper authorities and the property holders along the line of said railroad, and will in all respects comply with the legal recpiirements as to securing such rights and consents, and all provisions of law as to the building and completing of said road. * * *

      “ The party of the first part (Mengis) will, until the completion of said road, defray the current administrative expenses of said party of the second par’t (corporation) incident to its proper management, including salaries, office rent, employment of counsel, legal expenses, stationery, cost of printing securities, and all other ordinary expenses of such a corporation, but not exceeding in all the sum of twenty thousand dollars per annum. * * *
    “ "Wliile this contract shall remain in force the said party of the second part (corporation) will not issue, or agree to issue, to any person or persons or company, or for any purpose whatever, any stock or bonds or other securities in addition to the stock and bonds hereby agreed to be issued to the said party of the first part (Mengis), excepting the one hundred and forty shares of said capital stock now subscribed for, unless otherwise first agreed to by the party hereto of the first part (Mengis) in writing, and except that said party of the second part (corporation) may issue the five hundred shares of stock reserved in the treasury at any time after the payment of the first installment has been made to said party of the first part (Mengis) as herein provided, nor shall said capital stock be increased without the like consent of the said party of the first part (Mengis). * * *

      “ That in case said party of the first part (Mengis) shall- fail do obtain the necessary rights, privileges and authority, and shall fail to build and complete said road within five years from the date hereof, then the. said party of the second part (corporation) shall have the right and option to cancel this agreement, and thereupon both parties shall be absolved from any liability thereunder to one another. * * * ”
    The construction of the corporation’s road has never been authorized, and no part of it has been built. The defendant Alfrederick S. Hatch has been a director of the corporation since its organization, and in September, 1885, the plaintiff entered into an agreement with him by which he agreed to act as trustee for the plaintiff. Shortly afterwards the plaintiff sold to various persons options to subscribe at par for a portion of .the stock of the railway to which the plaintiff would become entitled under the terms of the contract. The sums received upon the sale of these options were deposited by tbe plaintiff with the defendant Hatch, who was then a member of the banking firm of A. S. Hatch & Co. The defendant Hatch opened an account with the firm of A. S. Hatch & Co. in the name of “ A. S. Hatch, in trust for M. C. Mengis.” Between September 15, 1885, and November 17, 1885, the plaintiff received from the sale of privileges for the purchase of shares $10,950, which he turned over to Hatch, who deposited it to the credit of said account.
    In October, 18S5, the plaintiff authorized Hatch to pay to the corporation $5,000 ' and charge it to the said account, which was paid October 8, 1885.
    On the 17th of November, 1885, the plaintiff authorized the corporation to sell the right to purchase such shares as he might become entitled to, at the rate of ten dollars per share, and deposit the sums received with defendant Hatch. Acting upon this authority the corporation sold the right to subscribe for a certain number of shares, realizing $13,320, which was credited to the trust account, thus making the total sum credited to said account and arising from the sale of privileges $24,270. From this sum Hatch paid to the plaintiff $13,760, leaving $10,510 to the credit of the account. February 6, 1886, Hatch, as trustee, by the authority of the plaintiff, paid to the corporation from said account $5,000, and February 8, 1886, a further sum of $5,000, leaving still to the credit of the account $510. On the 28th of June, 1886, Hatch, who was then treasurer of the defendant, purchased, with the money so received from the plaintiff, nine bonds of the par value of $1,000 each, for which he paid $9,993.75, and had them registered in the names of himself and of defendant William H. Lee, as trustees, which left in the hands of the defendant Hatch $6.25. Hatch received the interest paid on the bonds from time to time, amounting to $810, which, with the $6.25, stood to the credit of the corporation with the firm of A. S. Hatch & Co.
    In 1887 the defendant Hatch made an assignment for the benefit of his creditors, but prior to the execution thereof he transferred said nine bonds to Isaac B. Newcombe and William H. Lee, in whose names they were registered as trustees. Between January 1 and April 23, 1890, Newcombe and Lee sold three of the bonds and paid the proceeds arising from the sale to the corporation. Thereafter, and before tlie trial of this action, Newcombe and Lee received interest upon the bonds, amounting to $1,980, of which they paid $1,107.69 to the corporation, leaving in their hands $872.31. For a long time before this action was begun the plaintiff and the corporation have treated the construction agreement as abandoned.
    This action was brought to recover the bonds held by the trustees, Newcombe and Lee, the $872.31 in their hands, the $510 in the hands of Hatch, and the amount in the hands of the corporation. By the first clause in the judgment the defendants Newcombe and Lee are ordered to assign six of the mortgage bonds to the plaintiff. By the second clause in the judgment the defendants Newcombe and Lee are ordered to pay to the plaintiff $872.31, and all other sums which they may have received as interest on the bonds after deducting the costs in this action of May, Lee and Newcombe. By the third clause the plaintiff recovers of Hatch $510, and by the fourth clause he recovers of the corporation $816.25.

      James J. Allen, for the appellants.

      Lewis L.-Lelafield, for the respondent.
   Follett, J.:

The corporation appeals from the first, second and fourth clauses of the judgment, and Alfrederick S. Hatch from the third clause thereof. No other defendant appeals. The corporation urges that the judgment against it is not consistent with the case made by the complaint, and embraced within the issue,” as required by section 1207 of the Code of Civil Procedure. The construction contract of September 15,1885, the contract amendatory thereof of October 30, 1885, and the contract of November 17, 1885, by which the corporation was authorized and undertook to sell options to purchase shares which the plaintiff was to become entitled to receive under his contract, are set forth in the complaint. It is also alleged that the corporation sold options to purchase many shares of stock, and received a large sum of money in cash, which was paid over to Lewis May and Alfrederick S. Hatch, pursuant to the terms of the contract of November 17, 1885, which fund was subsequently transferred to Lee and, Newcombe, who were directors of the corporation. It is also alleged that the plaintiff is ignorant of the amount received for options so sold, and that all of the defendants are liable to account for and pay to the plaintiff the moneys received by them. The corporation alleges in its answer that it was agreed that the construction contract was not to be delivered to the plaintiff until $10,000 were paid over to it to be expended in payment of the administrative expenses referred to in the contract, but that afterwards, on the 8th of October, 1885, a resolution was adopted by the directors of the corporation that the contract be delivered to the plaintiff upon the payment by him of $5,000 and on receiving an agreement from him that half of any money thereafter received for the sale of options should be paid to the treasurer of the corporation until $10,000 should have been fully paid. That thereafter plaintiff paid to the treasurer of the corporation $10,000 received from the sale of options. It also alleges that it has expended more than the sum of $10,000 in paying the expenses of administering the affairs of the corporation. Other defenses are set up which were not established before the referee and which need not be referred to. Upon the application of the plaintiff the corporation was required to furnish a bill of particulars of the sums which it had paid out in administering the affairs of the corporation, which it refused to serve, and, by an order of the court, was precluded from giving evidence of the various items expended. Under this state of the pleadings it seems very clear that the issue as to how much the corporation had received, and how much of the sum remained unexpended and in its hands or in the hands of its officers or of the trustees, was clearly presented, and that the recovery against it was consistent with the case made by the complaint and embraced within the issue. Besides, the evidence of the amount of money and bonds in the possession or under the control of the corporation was not objected to on the ground that it was not relevant to any issue raised by the pleadings. The only objection that evidence offered by the plaintiff was inadmissible under the pleadings relates to a violation by the corporation of its agreement not to sell shares without the consent of the plaintiff.

On the trial the corporation by its counsel offered to prove the substance of the resolution of its board of directors, adopted on the 12th of September, 1885. This was objected to by the plaintiff’s counsel, and the referee ruled that the offer was improper and that the defendant should offer the resolution and have it marked for identification in case it was rejected. The resolution was not produced, and the referee was quite right in refusing to rule upon the offer. The resolution was concededly in writing, and if the defendant desired to offer it in evidence it should have produced it, and, if rejected, should have had it marked for identification, and incorporated in the case so' that the appellate court could determine whether it was competent.

By the sixteenth finding it is found that the $5,000 paid by Hatch from the trust account to the treasurer of the corporation was for the sole purpose of securing the payment by the plaintiff of the administrative and other expenses which he was required to pay by the terms of his contract. It is urged that this finding is contrary to the weight of evidence. Over this issue there was a sharp conflict in the evidence, and we think that the finding of the referee is amply sustained by the testimony and that the finding that this sum was paid to the corporation as a bonus for awarding the contract to the plaintiff has little support in the evidence. The sixteenth finding being well founded, the fifth conclusion of law, that such part of the $5,000 as was not expended by the corporation in the payment of administrative expenses belongs to the plaintiff, necessarily follows. The referee found (third finding of fact) that it was provided by the construction agreement that should the plaintiff fail to build the road within five years the corporation should have the right to cancel the contract, and thereupon both parties should be absolved from any liability thereunder to each other, and he also found that for some years both parties to the contract had treated the construction agreement as abandoned. It is urged that these findings are destructive of the right of the plaintiff to require the corporation to account for sums of money which it had received from him, but had not expended, pursuant to the terms under which they were received. This provision relates to the executory parts of the construction contract, and not to moneys received by the corporation under the contract of November 11, 1885. There is no provision in the contract that,, in case the plaintiff paid into the hands of the corporation a larger sum than was necessary for the payment of administrative expenses, he should forfeit it in case the construction of the road should become impossible by reason of the refusal of the authorities of the city to grant permission for its construction, and there is nothing in these findings inconsistent with the right to recover from the corporation the sums of money which he had paid over to it and which it liad not expended pursuant to the contracts.

The appeal on the part of Hatch is based upon the refusal of the referee to find that he had rendered services to the plaintiff equal in value to the sum ($510) retained by him, and for which a judgment was recovered. The referee found that the plaintiff agreed to pay Hatch a reasonable compensation for his services as trustee, but that the reasonable value of such services, over and above the value of an option given by the plaintiff to Hatch, did not appear from the evidence. Hatch ceased to be a trustee in 1887, and we think that the refusal of the referee to find that the services rendered by him previous to that date were of greater value than the option given him, and the profits derived from the use of the deposits in his hands and in the hands of the firm, was justified by the evidence.

The judgment should be affirmed, with costs.

Yan Brunt, P. J., and O’Brien, J., concurred.

Judgment affirmed, with costs.


source: Caselaw Access Project

author: Parker, J.:

license: Public Domain

text:
    Bank of Clarke County, Plaintiff, v. Theodore Gilman and Another, Defendants.

      Cormneraidlpaper indorsed “for collection” — respective rights and liabilities of the owner, and the bank in which it is deposited, and the correspondent of such bank — title thereto, in whom vested — revocation of the agency.

    Where persons, engaged in the business of banking and collecting, send to their correspondents or agents, in the regular course of business of receiving and sending notes between them for collection for mutual account, business paper received from customers for collection, the agent or correspondent acquires no better title to it or its proceeds than was possessed by the one transmitting it, unless he be a bona fide purchaser of it for value or advances are made upon it in good faith, without notice of any defect in the title.
    When the owner of commercial paper delivers it for collection to Bank A, which forwards it for collection to Bank B, which in turn forwards it for collection to Bank C, to which it is paid, and Bank C, instead of paying the money to Bank B, retains and applies it on a debt due from Bank B, the owner (Bank A being insolvent) may recover of Bank C, because the paper until paid remains the property of the owner, who indorses it for collection, and when paid, the title to the proceeds by way of substitution at once vests in the owner; and the person collecting it, or into whose hands the money comes, is liable to the holder for the veritable proceeds of the paper, or for the amount of such proceeds, if they become mingled with the collector’s own money.
    The rule within the State of New York is, that it is not within the implied authority of the collecting agent, when paper is to be collected at some place remote from that of the business of such agent, to employ a sub-agent in that locality, to make collection on account of the owner, but, in the absence of any understanding or agreement to the contrary, the collecting agent is deemed to employ such other collector on his own account, and the collecting agent becomes chargeable to his principal for the conduct of the bank or individual to whom he transmits his principal’s paper for collection.
    Whenever the owner chooses to revoke the agency conferred, he may seek the paper or its proceeds in the hands of the correspondent or his chosen agent, or follow it into whosesoever hands it may have gone, unless it shall have passed into the possession of a Iona fide holder for value, who received it from a party clothed with apparent title.
    The indorsement of commercial paper by the owner thereof “for collection ” is restrictive, and notice to every subsequent custodian thereof that it remains the property of him who thus indorses it, and the general rule of law applicable to paper transmitted “for collection” applies (as well when the owner’s agent is given authority to collect and credit) down to the point where the moneys shall have actually come into the hands of such agent.
    The title to commercial paper indorsed for collection continues to bo in the owner until paid, whereupon the title to the proceeds becomes vested in him, and so continues until he is able to reach it, and until the happening of such event he is clothed with the authority to revoke the agency and recover the check or the avails in the hands of any correspondent. The only exception to such rule is where the correspondent makes with the agent of the owner an express contract to purchase the paper, and, in pursuance thereof, actually pays to the agent the face value of it.
    A course of dealing under which a correspondent of a bank credits it with all paper received, whether for collection or deposit, and if on presentation such paper is not paid charges the amount thereof against the bank, does not make such correspondent the owner or purchaser of the paper thus received by him.
    One of the incidents of such legal relation is the possibility that if the collecting agent becomes insolvent, while the paper or its proceeds is in the hands of the sub-agent, the owner will seize the paper or its proceeds.
    The correspondent of a bank with which commercial paper is left for collection does not become vested with the title to such paper, even though he has remitted to such bank on general account in anticipation of the collection of such paper.
    Submission of a controversy upon an agreed statement of facts pursuant to section 1279 of tbe Code of Civil Procedure.

      Plaintiff and tlie defendants are engaged in the business of banking, the former at Berryville, Ya.; the latter in the city of New York. On the 12th bf January, 1892, the plaintiff sent to J. J. Nicholson & Sons, bankers at Baltimore, without any special instructions or previous special agreement varying the legal effect of its indorsement, a check for $500 of which it was the holder.
    The check was drawn on the National Bank of the Republic, New York city, and was indorsed “For collection and credit of Bank of Clarke County. J. R. Nunn, Cashier.”
    J. J. Nicholson & Sons received it, and indorsed it: “ Collect for J. J. Nicholson & Sons,” and sent it by mail to the defendants. The defendants received the check ofl. the morning of January fourteenth, but instead of presenting it to the National Bank of the Republic for collection, deposited it to their credit in the Manhattan Company indorsed “ For deposit in the Manhattan Company, to credit of Gilman, Son & Company.
    On the next day, January fifteenth, the Manhattan Company presented the check to the National Bank of the Republic for payment. It was paid, and chai-ged to the account of the maker. But on January fourteenth J. J. Nicholson & Sons failed, and notice of it came to the defendants some time during the day.
    This proceeding was instituted because the plaintiff insists that the check belonged to it at the moment it was presented to the Bank of the Republic for payment, and the proceeds of it likewise belonged to it, and that its agent having failed, and such failure having come to the knowledge of the defendants, it was their duty to have transmitted the proceeds of the check to the plaintiff. Were there no other facts than those we have referred to, it would at once be recognized that plaintiff’s position was so well grounded as not to admit of debate even. But between the time when the check was received by the defendants and the hour when knowledge of the failure of J. J. Nicholson & Sons came to them, such things were done by the defendants, and such transactions took place between them and J. J. Nicholson & Sons, as persuades the defendants that they have the right to insist, and to be sustained in insisting, that plaintiff’s check was by them paid to plaintiff’s agents prior to the knowledge of the failure of such agents being brought home to them.

      In the same inclosure by which J. J. Nicholson & Sons transmitted to the defendants for collection plaintiff’s check, they sent other checks and sight drafts, which, with plaintiff’s check, aggregated $12,700.98.
    In accordance with the course of business between them this $12,700.98, when received by defendants on the morning of January fourteenth, was at once credited to Nicholson & Sons as cash, thus canceling an existing overdraft of $2,913.74, and giving them an apparent cash balance of $9,787.24, increased later in the day by two collections of $90 and $88.33 to $9,965.57.
    While the defendants always credited J. J. Nicholson & Sons upon their books with all checks and drafts received, whether for collection or otherwise as so much cash, still it was the custom of the defendants to return to Nicholson & Sons checks thus credited to them when not paid on presentment, and to charge the same to their account. It was the agreement and course of business between Nicholson & Sons and the defendants, that defendants’ collections on account of Nicholson & Sons should bo remitted by payment of the drafts which Nicholson & Sons drew upon them on every day when sending a remittance (they usually drew one draft, which would cover nearly the entire amount of the remittance), and any smaller checks which Nicholson & Sons might have occasion to draw to make up the balance. Not only was this their custom, but it was their agreement that remittance should not be made in any other way. When sending the remittance of $12,700.98 by which Nicholson & Sons obtained, as we have observed, an apparent balance with defendants of $9,965.57, they drew a check against it for $10,330.73, which was presented to defendants for payment by its holder on the morning of January 14, 1892.
    This left Nicholson & Sons’ account with the defendants again overdrawn by $365.16. The defendants insist that this transaction was in effect a payment of the $500 check in question to plaintiff’s agent; that the remittance was as effectively made out as if the defendants had, upon receiving the check, shipped $500 in gold to Nicholson & Sons; and that by this act their responsibility in the matter, either to Nicholson & Sons or to the plaintiff, came to an end.

      There were still other transactions during the day, and before defendants learned of the failure of Nicholson & Sons.
    After the payment of the $10,330.73 check other small checks of Nicholson & Sons, aggregating $216.74, were presented and paid, thus increasing Nicholson & Sons’ overdraft to $581.90. Later in the day a note for $591.54, which defendants had previously received from Nicholson & Sons for collection, but which, not being at sight, they had not credited to them, was paid and credited, and thus the overdraft was canceled and a credit balance of nine dollars and sixty-four cents was created.

      Baldwvn <& Boston, for the plaintiff.

      Parsons, Shepard/ <& Ogden, for the defendants.
   Parker, J.:

The general proposition which lies at the foundation of a discussion of the merits of this controversy found expression by the Court of Appeals, in Dickerson v. Wason (47 N. Y. 439), in the following language: “ "Where persons in the business of banking and collecting send to their correspondents or agents, in the regular course of business of receiving and sending notes between them for.collection for mutual account, business paper received from customers for collection, the agent or correspondent acquires no better title to it or to its proceeds than was owned by the one transmitting it, unless there is a bona fide purchase of it for value or advances made upon it in good faith, without notice of any defect in the title.”

The essential elements of this rule are presented by the proposition put, by way of illustration, in Corn Exchange Bank v. F. N. Bank (118 N. Y. 443), as follows: “ When the owner of commercial paper delivers it for.collection to Bank A, which forwards it for collection to Bank B, which, in turn, forwards it for collection to Bank C, to which it is paid, it has been held that, if Bank 0, instead of paying the money to Bank B, retains and applies it on a debt due from Bank B, the owner (Bank A being insolvent) may recover of Bank O.” And it is said that this is so because the paper, until paid, remains the property of the owner who indorses it for collection. (Nat. B. & D. Bank v. Hubbell, 117 N. Y. 384; St. Louis & San Francisco Ry. Co. v. Johnston, 133 U. S. 566; Manufacturers’ Bank v. Continental Bank, 148 Mass. 553; First National Bank v. First Natl. Bank, 76 Ind. 561.)

When paid, the proceeds, by way of substitution, at once vest in the owner, .and the person collecting it or into whose hands the money comes is liable to the holder for the veritable proceeds of the paper, or for the amount of such proceeds, if they become mingled with the collector’s own money. (Commercial Bank of Penn. v. Armstrong, 148 U. S. 50, and cases cited, supra.)

In some other jurisdictions it has been held to be within the implied authority of the collecting agent, when paper is to be collected at some place remote from that of the business of such agent, to employ a sub-agent in that locality to make collection on account of the owner. But in this State the rule is otherwise, and in the absence of any understanding or agreement to the contrary, is to the effect that the collecting agent is deemed to employ such other collector on his own account. Thus the collecting agent becomes chargeable to his principal for the conduct of the bank or individual to whom he transmits the paper for collection.

Whenever the owner chooses to revoke the agency conferred, he may seek the paper or its proceeds in the hands of the correspond- • ent of his chosen agent, or follow it into whosoever hands it may have gone, unless it shall have passed into the possession of a bona fide holder for value, who received it from a party clothed with apparent title. (People v. City Bank of Rochester, 96 N. Y. 32; Naser v. First Natl. Bank, 116 id. 492.)

This right was, in the first instance, treated as an equitable one rather than one resting in contract, and the occasions for the assertion and enforcement of it doubtless arose from the insolvency of collecting agents, or from some other cause making it equally necessary to invoke the remedy. While the rights of the owner of commercial paper intrusted to an agent for collection merely, are of the character already asserted, yet, in order to secure all of its advantages, beyond question he must indorse the paper for collection.

Such an indorsement is restrictive and notice to every subsequent custodian of the check that it remains the property of him who thus indorses it. (Bank v. Hubbell, supra; Bank v. Armstrong, 148 U. S. 50.)

In this case the check was indorsed by the plaintiff “For collection and credit of Bank of Clarke County. J. R. Nunn, Cashier.”

It is said that the use of the word “ credit ” in the indorsement changes the rule which would otherwise obtain. But this suggestion is disposed of by Bank v. Hubbell (supra). According to it, the general rule of law applicable to paper transmitted “ for collection,” applies as well when the owner’s agent is given authority to collect and credit, down to the point where the moneys shall have actually come into the hands of such agent. Then the agent is authorized to credit the owner with the proceeds.

Thus it appears that when the check came into the hands of the defendants they were informed by the indorsement which the owner had placed upon the back of it, that Nicholson & Sons were simply the agents of the plaintiff, having authority to present the paj>er, demand j>ayment of it, and if paid to credit the proceeds to the owner. And they are presumed to have known that the title to the check was still in the owner, and would continue in it down to the moment when it should be paid, and then the proceeds would be substituted in its place, the title thereto becoming at once vested in the original owner and holder of the check.

Further, they must be presumed to have known that the owner could pass by the agent whom he had selected, and demand either the paper or the proceeds of the paper from the defendants so long as either should continue to be in their possession. And that the effect of insolvency on the part of Nicholson & Sons would be to revoke their authority to act for the owner of the check.

The logical result of the authorities upon this general subject, to some of which we have referred, seems to be that the only duty which devolved upon Nicholson’s correspondent was to present and •demand payment of the check, and if paid remit the proceeds. That such action not only constituted the full measure of the correspondents’ duty, but, further, that they had no right to do anything else. If the assertion of the right of a corresjoondent to deal differently with the paper of the owner thus coming to it for collection, should be sustained, the result would certainly be in hostility to the established doctrine that the title to such paper continues to be in the owner until paid, whereupon the title to the juoceeds becomes vested in him and so continues until he is able to reach it, and until the happening of such event he is clothed with the authority to revoke the agency and recover the check or the avails in the hands of any correspondent.

One of the incidents of this legal relation is the reasonable expectation that if the collecting agent becomes insolvent while the paper or its proceeds is in the hands of the sub-agent, the owner may interrupt the paper or its proceeds. (Bank v. Armstrong, supra.)

This reasonable expectation, and the protection which it insures, might be defeated if the sub-agent could provisionally advance the amount to the insolvent agent.

In Warner v. Lee (6 N. Y. 144) the court, referring to a case where the correspondent had received from the agent of the owners a note for collection, said: “Under these circumstances, if he had made advances upon account of it, he could not have held the note nor its proceeds against the plaintiffs.”

It has frequently been held that the correspondent does not become vested with the title to such paper, even when he has remitted on general account in anticipation of collection. (Dickerson v. Wason, supra; Nat. Park Bank v. Seaboard Bank, 114 N. Y. 28; Arnot v. Bingham, 55 Hun, 553.)

These decisions seem to be the logical and necessary result of the established doctrine that the title to such paper continues in the owner until payment, when the proceeds become vested in him as a substitute for the paper paid. If there be any exception to the general rule, which we think the authorities completely establish, it would seem to be confined to a case where the correspondent makes with the agent of the owner an express contract to purchase the paper, and in pursuance thereof actually pays to the agent the face value of it.

If the effect of the transaction between Nicholson & Sons' and \ these defendants is not to bring it within this possible exception, defendants would seem to be without defense in this controversy.

The defendants insist, among other things, that the facts stipulated in this submission establish that they had actually paid to the agents the amount of the check and had become the owners of it. That portion of the agreed facts upon which this contention is founded reads as follows: “ By the agreement and course of business between Nicholson, and the defendants, the sole method by which the collections made by the defendants on account of Nicholson and Nicholson’s customers, were remitted, or to be remitted, to Nicholson, was the honoring by defendants of drafts drawn upon them by Nicholson against the amount of Nicholson’s remittances * * * without waiting for the collection of the paper against which they were drawn. Said draft of $10,330.73, and said four drafts aggregating $216.74 (all paid by defendants before knowledge of Nicholson’s insolvency), in connection with said existing overdraft of $2,913.74, were intended by Nicholson and the two defendants to be the means by which the payment of said amount of $12,700.98, including therein the amount of plaintiff’s said check for $500, should be paid to Nicholson; and, so far as the agreement between Nicholson and the defendants provided, the defendants’ responsibilities for • the remittance to Nicholson of' the proceeds of. plaintiff’s said check ended when they had thus honored drafts of Nicholson upon them equal to or in excess of that amount and of the amount of all other remittances theretofore made to them by Nicholson.”

It will be observed that there was no express agreement with reference to the check in question. The stipulation refers to the general agreement and course of business between Nicholson & Sons and the defendants. There should be read in connection with it another stipulation contained in the facts agreed upon; it reads: It was the custom of the defendants to return to Nicholson checks credited to them and not paid on presentment, and charge the same to the account of Nicholson.”

According to their agreement and course of business then, the defendants credited Nicholson & Sons with all paper received, whether for collection or deposit, and, if on presentment such paper was not paid, then it was charged against Nicholson & Sons. Clearly, then, it was not the understanding or agreement of the parties that the defendant should become the owner of and absolutely bound to pay for all the paper with which they gave Nicholson & Sons credit upon their books. Both the credit and advancement were merely provisional. If the paper should be paid, the credit would stand, otherwise defendants would charge Nicholson & Sons with the amount of it, and return the dishonored paper.

It may be further said in this connection that the course of business between Nicholson & Sons and the defendants shows that the latter relied as largely upon the responsibility of the former as upon the paper transmitted by them. When the inclosure containing this and other checks was received Nicholson & Sons already had an overdraft of nearly $3,000, and, about the time of their receipt, Nicholson & Sons’ check was presented for payment and paid in an amount exceeding by $365.16 their total credit, based upon checks and drafts, which might or might not turn out to be collectible.

To this situation the remarks of the court in Bank v. Hubbell (supra) are entirely applicable.

The finding shows that the credit was a provisional one only. It was a mere matter of bookkeeping. It would seem to have been more in the form of a memorandum of the different pieces of paper received, because if any were not paid such as went to protest were at once charged back upon the books of the firm against the plaintiff, and returned to it with the expenses of protest charged to it. The firm never became absolutely responsible to the plaintiff for the amount of these collections until the collections were actually made and the proceeds received by them.” So, here the defendants intended the credit to stand provided the check was paid, but not otherwise. It was. a conditional credit; a matter of convenient bookkeeping. A mere statement of the facts, such as has been made, makes it sufficiently clear that there is no foundation for the claim that the defendants purchased the paper.

The transaction was in effect an advancement on general account, which, both on principle and authority, did not operate to divest the plaintiff and invest the defendant with title to the check.

The title to it then was in this plaintiff on the morning of the fifteenth, when the check was paid by the Bank of the Republic, at which time the defendants had full knowledge of the insolvency of Nicholson & Sons, which operated to revoke their authority as agents of the owner. That being so, the right of plaintiff to recover of the defendants the proceeds is established by the universal consent of the authorities.

Plaintiff should have judgment, with costs.

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

Judgment ordered for plaintiff, with costs.


author: Per Curiam :

text:
    Francis V. Green, as President of the Board of Officers of the Seventy-first Regiment, N. G. S. N. Y., Respondent, v. Frederick B. Carey, Appellant.

      Discovery — examination of a defendant before service of a complaint — restriction imposed thereon — direction to produce books.

    The provisions of the Code of Civil Procedure confine the examination of a party to an action to the purpose of eliciting information which will enable the plaintiff to frame his complaint, or will be used on the trial, and not for the purpose of determining whether the plaintiff has one or the other of two causes of action. The most that a plaintiff can claim before the service of the complaint is the right to examine the defendant, and it is improper for the order directing the examination of a defendant to direct the production of his books.
    If, for the purpose of testifying, resort to the books is necessary, the proposed defendant will be required to refer to the books for the purpose of giving the desired information.
    Appeal by the defendant, Frederick B. Carey, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 28th day of May, 1894, denying the defendant’s motion to vacate an order made in the action directing the examination of the defendant and the production of his books and papers.
    The defendant entered into a contract with plaintiff, by the terms of which the privilege was accorded him of obtaining advertisements to be inserted in a souvenir volume, and as a consideration for such privilege the defendant agreed at his own expense to print and deliver to plaintiff 3,000 copies of the book, and in addition to pay twenty-five per cent of the gross amount received for advertisements. The plaintiff alleges that but 1,000 copies of the book were ordered, printed or delivered; that the defendant failed to keep accurate books of account of his receipts, or to pay the proportion thereof that was due the plaintiff, and that he unlawfully solicited subscriptions for furnishing the armory, for which he has never accounted. The affidavit then states: “ That the action which deponent is about to bring against the defendant on behalf of said Board is to compel said Carey to specifically complete his contract, and to recover moneys due under said contract, and to recover subscriptions unlawfully collected by him * * * and the examination of said defendant is absolutely .necessary in order that he may prepare his complaint.”

      Abram Klvng, for the appellant.

      Henry 8. Van Duser, for the respondent.
   Per Curiam :

It is evident from a reading of the affidavit, and considering the form of action contemplated, that all the facts necessary to formulate the complaint are within the plaintiff’s knowledge. It may be that for the purposes of a trial an examination of the defendant may be necessary, but in order to prepare a complaint no facts in addition to those that the plaintiff swears to would be necessary, assuming, as the portions of the affidavit quoted would seem to indicate, that the plaintiff intends fo bring a suit' in equity for specific performance and an accounting. The plaintiff claims, however, that he is in doubt as to whether he shall bring such an action or one at law, and that the examination is required in order that he may determine this question. Ve do not think he is entitled to any such relief, the provisions of the Code of Civil Procedure confining examinations of parties to the eliciting of information which shall enable a plaintiff to frame his complaint, or for use on the trial, and not for the purpose of determining whether he has one or the other of two causes of action.

The order is also improper in that it directs the production of the defendant’s books, the most that the plaintiff could claim being the right to examine the defendant, and if in that connection, for the purpose of testifying, resort to the books were necessary, the defendant would be required to refer to the books for the purpose of giving the desired information. Considerable latitude is always permitted with respect to the examination of an agent by a principal, or by one towards whom the person being examined stands in a fiduciary relation, where the facts are peculiarly within the knowledge of the one under examination ; but the rule permitting such latitude does not go to the extent of allowing a person to ascertain all the defendant’s evidence with a view to selecting one of two causes of action against him. As the plaintiff here has sufficient information, as shown by his affidavit, to frame a complaint in a suit in equity, he should not, upon the ground that perhaps he might bring an action at law, be permitted to speculate upon the results of the examination of the defendant and his books, <or the facts that he might unearth thereby.

We think that the affidavit upon which the order was granted was insufficient and the order itself too broad, and that for these reasons the order should be reversed, with ten dollars costs and disbursements, but without prejudice and with leave to plaintiff to renew the application upon proper papers after he has determined the form of his action, if he can show that any information peculiarly within the knowledge of the defendant is essential to enable him to frame his complaint or necessary for use upon the trial.

Present — Y an Brunt, P. «L, O’Brien and Parker, JJ.

Order reversed, with ten dollars costs and disbursements, but without prejudice and with leave to plaintiff to renew application upon proper papers.


author: O’Brien, J.: Parker, J.: Van Brunt, P. J".

text:
    The People of the State of New York, Respondent, v. American Steam Boiler Insurance Company of New York City, Defendant; Henry S. Ward, as Receiver, etc., Appellant.

      Casualty insurance company — right of the receiver thereof to the interest on bonds deposited with the Superintendent of Insuromce — chapters 463 of 1853, 285 o/’ISSI and 690 of 1892.
    As the law stood prior to 1892, the Supreme Court had no authority to interfere with the fund deposited by a casualty insurance company with the Superintendent of Insurance of the State of New York, pursuant, to chapter 463 of the Laws of 1853, as amended, nor had it power to compel the Superintendent of Insurance to transfer the trust imposed upon him by such act.
    Chapter 285 of the Laws of 1884 provides for the transfer of securities and property by bankrupt corporations to their receivers, and for the transfer by the Superintendent of Insurance to receivers of insolvent life insurance and annuity companies of the funds and securities deposited with such Superintendent by such companies for the security of policyholders, but it is inapplicable to casualty insurance companies.
    Under the provisions of sections 14 and 75 of chapter 690 of the Laws of 1892, the duly appointed receiver of a casualty insurance corporation, whether it be solvent or insolvent, who has given the hond. in such act provided for, is entitled to the interest accruing upon securities deposited hy the corporation with the Superintendent of Insurance of the State of New York, pursuant to the provisions of chapter 463 of the Laws of 1853.
    Van Brunt, P. J., dissenting.
    Appeal by Henry S. Ward, as receiver of tbe American Steam Boiler Insurance Company of New York City, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk 'of the county of New York on the 26th day of June, 1894, denying the appellant’s motion to compel the Superintendent of Insurance of the State of New York to pay over to him, as such receiver, the interest accrued on a deposit made by the American Steam Boiler Insurance Company of New York City in the hands of said Superintendent.

      John O. O'Qonor, for the appellant.
    <7. W. Frcmois, for the respondent.
   O’Brien, J.:

On November 5, 1893, the American Steam Boiler Insurance Company deposited, pursuant to section 6, chapter 463 of the Laws of 1853, $100,000 in bonds with the Superintendent of Insurance. The company subsequently having ceased to do business an action was commenced by the People for the purpose of dissolving the corporation for non-user, winding it up and distributing its assets. In such proceeding the receiver was appointed afid duly qualified. The interest on the bonds so deposited became due on the 1st of May, 1894, and was collected by the Superintendent of Insurance, and to obtain such Interest the receiver applied to this court for an order directing the; Superintendent to pay it over to him, which motion was denied upon the ground that there was no power in the court to grant the application.

Although it was stated upon the argument that there was no question as to the company’s solvency, the fact being that it was not only able to pay all its debts, but would in addition pay a large dividend to the stockholders, this does not appear in the petition and cannot, therefore, be considered. As the law stood prior to 1892 there was no authority in this court to interfere with a fund such as this deposited under chapter 463 of the Laws of 1853, as amended, it having been directly held in the case of Ruggles v. Chapman (59 N. Y. 163) that the courts have no power to compel.the Superintendent to transfer the trust imposed upon him by said act. The judge writing the opinion in that case, in speaking of the difficulties in the way of harmonizing the two independent schemes of dealing with an insolvent insurance company, with part of its assets in the hands of the Superintendent of Insurance and part in the hands of the receiver, says: “We venture to add that it is better that the legislative power should be invoked to resolve the difficulty and to provide for the protection of the rights of the parties interested in such cases by general laws, than that the courts should attempt to build up a system out of the discordant and scanty material of positive enactments now to be found in the statutes.” To justify a transfer of the principal or interest in the hands of the Superintendent of Insurance express legislative authority must be shown. •

In the opinion of the court below reference was made to the act of 1884, chapter 285, which provides that the court, upon the application of the Attorney-General, should direct a transfer to the receiver of such corporation of the securities or fund deposited with the insurance department; and for the reason that the application was not so made, but was opposed by the Attorney-General, and as none of the provisions of that act was applicable to sustain the motion made, the court, therefore, denied it. We do not think that the law of 1884 has any bearing upon the question here. As shown by its title, the act itself is one to provide for the transfer of securities and property by bankrupt corporations to their receivers, and for the. transfer by the Superintendent of Insurance to receivers of insolvent life insurance and annuity companies the funds and securities deposited with such Superintendent by such companies for the security of policyholders. By its first section it makes provision for all cases where receivers are appointed for any corporation excepting only an insurance company; and by the second section it confines itself to the receivers of insolvent life insurance and annuity companies. The defendant here is an insurance company; but it is neither a life nor an annuity company, and, being a casualty insurance company, the law of 1884 is inapplicable.

Impelled, no doubt, by the force of the suggestions contained in the opinion from which we have quoted (Ruggles v. Chapman, 59 N. Y. 165), and the sentiment existing in favor of having the laws relating to these different companies consolidated and harmonized, the Legislature, in 1892, recognizing the various forms of insurance, classified them, making special provisions for each class and repealing laws, among others that of 1853, inconsistent with the new provisions. In addition to general regulations applicable to all insurance companies, the provisions for the different kinds relating to life, health and casualty insurance corporations ” — within which category this defendant would come — are embraced between sections 70 and 92 inclusive of the act. (Chap. 690, Laws of 1892.) Among the general provisions we find that section 14 provides that so long as the corporation depositing the securities shall continue solvent and comply with the laws of the State, it shall be permitted by the Superintendent to collect the interest or dividends on such deposits.” And by section 76, which has special application to a corporation such as the' defendant company, it is provided that when such a coloration is deemed insolvent and a receiver thereof appointed, the latter, upon giving his bond, shall take possession of all (such) assets and credits, including the securities deposited in the insurance department.” It will thus be seen that in either contingency, of the solvency or insolvency of the company, the interest should go to the receiver; in the case of solvency, by the express language of section 14; and in the case of insolvency, by the fair construction to be given to section 76, which requires that the shares deposited in the insurance 'department could be taken possession of by the receiver. It does not weaken the receiver’s position that he did not ask for the bonds themselves. If there is express authority for his right to the securities, this confers power upon the court in a proper case to direct the payment of the interest realized upon bonds to the receiver. In other words, the greater power that is given to the court of directing the transmission of the securities themselves necessarily includes the lesser, of ordering the transfer of interest realized from such securities. The Superintendent was not required by any statute to collect the interest, because this would place in his hands an amount in excess of the deposit required by law; and having this money, no reason was suggested why he should not pay it over to the receiver.

¥e think, therefore, that the court has the power in a proper case to grant the application. The learned judge below, upon the ground that the court had no power, refused to and did not pass upon the merits of the application. The petition here is rather meager, in failing to state the exact financial condition of the company ; and to the end that this may be remedied and all the facts bearing upon the question presented, a new application should be made, and an opportunity afforded the Attorney-General to furnish reasons, if any, why the application should not be granted.

The order accordingly should be reversed, with leave to renew, without costs to either party.

Parker, J.:

I think Mr. Justice O’Brien’s position is in accord with a reasonable construction of sections 14 and 76 to 92 of the Insiirance Law of 1892. It is not pretended that any possible public service can be subserved by a denial of the application. If the present statute is not broad enough then further legislation must be bad in the premises; otherwise, this large deposit will be unjustly diverted from one of the uses for which it was intended. ' This fact should not, of course, prompt a strained construction, and a reference to it is only made that the probable reason for the carefully chosen language of section 14 may be properly appreciated. It reads :

“ So long as the corporation depositing the securities shall continue solvent and comply with the laws of the State, it shall be permitted by the Superintendent to collect the interest or dividends on such deposits.”

By section 76 of the same act it is provided what shall be done with the securities in the event of insolvency. It is conceded that the defendant is solvent, but urged that section 14 requires something more in order to entitle it to collect the dividends and interest upon its securities, to wit, that it shall continue in the conduct of the business which prompted the incorporation. A sufficient answer would seem to be that the section says nothing of the kind. No reference is made to the business of the corporation or its conduct' in -the clauses concerning the collection of dividends and interest. Broader language is employed: So long as the corporation depositing the securities shall continue solvent and comply with the laws of the State, it shall be permitted ” to collect dividends. The defendant is solvent and complying with the laws of the State; it has concluded to pay its obligations and go out of business, as the statute provides' that it may, and to that end it is strictly employing the methods and procedure provided by the law of the State.

It would seem to follow that it is entitled to the dividends and interest.

Van Brunt, P. J".

(dissenting):

I cannot concur in the conclusion of Mr. Justice O’Brien that this motion should have been granted. Although the Superintendent is not required by any statute to collect the interest upon the securities deposited with him, it is only as long as the corporation depositing the securities continues solvent and complies with the laws of the State that it is permitted by the Superintendent to collect the interest or dividends on such deposit. It is manifest that it was the intention of the Legislature to only allow the corporation, so long as it was continuing its business, to collect the interest upon its securities, because there is no provision for any one collecting this interest except in the contingency which has happened in the .case at bar. In order to entitle the corporation to collect the interest, it must continue solvent and comply with the laws of the State. This cannot have been intended to apply to a corporation which is in the hands of a receiver, because, although it may be solvent, it is not continuing its business, and does not come within the language which is claimed as an authority for the granting of the motion in question.

It is undoubtedly true that the receiver is the successor of the corporation. But where a statute confers upon a corporation the power to do a thing, it certainly is not intended that the receiver shall have the same power which the statute confers upon the corporation itself. Therefore, when the statute speaks of a corporation being entitled to collect this interest, it means an acting corporation and not a corporation which has ceased to do business and is in the hands of a receiver.

I think the order appealed from should be affirmed, with costs.

Order reversed, with leave to rénew, and without costs to either party.


author: O’Brien, J.:

text:
    Mary Talbot, Appellant, v. Stephen Van Rensselaer Cruger and Others, Respondents.

      Acquiescence by an agent of a landowner, in a tenant’s statement as to the owner- - ship of a house thereon — neither owner nor agent estopped thereby — lessee of real estate — when his right to remove fixtures put there by him is lost.

    The acquiescence of the agent of an owner of land in the statement of a tenant that she owned the building thereon, is at best an admission. Such admission would not prevent such agent, or the owner of the land, from denying that such person was the owner of such building, or from offering evidence in support of the contention that she was not such owner, in an action in which the ownership thereof is involved.
    An agreement by the owner of the fee of land with a person who has built a house thereon that it is to remain personal property, only determines the rights of those interested in the agreement as of that daté. Such agreement may tend to show that such arrangement was continued, but can be in no way conclusive as to the relative rights of the owner of the fee, and a person claiming to own such house after a change in the tenancy of the realty and the transfer of his interest in the house by the builder thereof.
    If the lessee of real estate who owns a house erected thereon takes a lease, either verbal or in writing, for a subsequent year, without expressly reserving her right in the house and her right to remove the same at the end of her tenancy, the acceptance of such lease will operate, as a matter of law, as a surrender of her ownership in such house.
    If a tenant, having the right to remove fixtures erected by him on demised premises, accepts a new lease of such premises, including the buildings, without reservation or mention of any claim to the buildings, and enters upon a new term thereunder, his right of removal is lost, notwithstanding the fact that his actual possession has been continuous.
    A lease of land and premises carries with it the buildings and fixtures on the premises, and a tenant accepting a lease of premises, without excepting from the effect thereof the buildings thereon, takes a lease of the land with the buildings and fixtures, acknowledges the title of the landlord to both, and is estopped from controverting it.
    The law presumes that buildings, erected by one person on the land of another, become part of the realty and pass with the conveyance of the land, unless by the agreement of the respective owners they are to be regarded as personal property.
    Appeal by tlie plaintiff, Mary Talbot, from, a judgment of the Supreme Court in favor of tlie defendants, entered in the office of the clerk of the county of New York on the 30th day of May, 1894, upon the verdict of a jury, rendered by direction of the court after a trial at the New York Circuit, dismissing the plaintiff’s complaint "upon the merits.

      J. E. Hands, for the appellant.

      Stephen Philbin, for respondent Coffey.

      Henry H. Mem, for respondents Cruger and others.
   O’Brien, J.:

The action is brought to recover damages alleged to have been sustained by the plaintiff through the fraud and deceit of the defendants in procuring from, her a surrender of her house by falsely representing to her that the paper presented for execution and which she signed was a lease of the land, whereas in fact, as the ■defendants knew, it was a surrender of the 'house to the defendant Coffey. The testimony shows that the defendants Cruger and McVicar were partners and were acting as agents to collect the rents ■of certain property of Mrs. Fields; that the defendant Coffey purchased three lots at a sale ordered by this court on May 7, 1891, the referee’s deed bearing date June 8, 1891. The plaintiff, who was.in possession as a yearly tenant since 1888, claimed the ownership of a frame house and some sheds erected on the premises; and all the damage claimed resulted from the procuring by the defendants, as ■she alleges, of a release, of her rights in and to the frame building, and in removing her from the premises and denying her the right to remove the buildings upon other land.

The plaintiff claims no interest in the land itself, and it is clear that if she was not the owner of these buildings at the time she was removed, or the steps were taken to prevent her removing the building, from which she claimed damages flowed, she could recover nothing. It was, therefore, essential to plaintiff’s cause of action that she should prove that the house was by agreement personal property and belonged to her. This she sought to do by saying that she owned the house, and that the defendants Cruger & Co., the agents of the •owner of the land, knew and admitted that she was the owner. Her statement was a mere conclusion, and the acquiescence of the .agents in her statement made to them that she was the owner was at best but proof of an admission on their part, which would not, however, prevent them or the owner of the land from denying that she was such owner, or offering evidence in support of their contention that she was not such owner.

Apart from such evidence, it was sought to be shown that some twelve years ago one Hyland built the cottage or frame building under some arrangement with a Mr. McKesson, who at that time represented the owner of the fee. This arrangement was in writing, and the witness was not permitted to state its terms, although a foundation was laid for parol evidence of the contents of the agreement by showing that the written agreement itself was lost. This-ruling would have be'en a fatal error if material upon the question of ownership. But if we assume the view most favorable to the plaintiff, that by the terms of such arrangement the owner of the fee agreed with the person who built the house that it was to remain personal property, this would but fix the rights of those interested in the agreement as of that date and might be the basis for showing that such an arrangement was continued, but could be in no way conclusive as to the rights of the parties here, in view of the conceded change in the tenancy of the property and the transfer of any interest in the house, either by sale to the plaintiff or by the removal of Hyland from the premises prior to the rights of the parties to this controversy being fixed.

The plaintiff attempted to show that she purchased the house at sheriff’s sale, by producing the auctioneer’s receipt for the amount paid. This was objected to upon the ground that sufficient foundation had not been laid by proof that it was pursuant to a judgment and execution, although some evidence was given that the original judgment and execution could not be found, and secondary evidence of entries in the court records was offered to prove such facts. Here again we think that the rulings bore rather severely upon the plaintiff; but again assuming that what was sought to be-proved was proved, viz.— that at a sheriff’s sale, under a valid judgment and levy and execution, the plaintiff did purchase the house — another link in the chain of proof was essential to show her ownership at the time she was induced, as she claims, by fraud to sign the-release or surrender all her interest, from which flowed all the damages that she here seeks to recover. In other words, assuming that she became the owner of the house in 1888, the fact of her taking' a lease for the subsequent years, whether verbal or in writing, without expressly reserving her right in the house and her right tb remove the same at the end of her tenancy, would operate as matter of law as a surrender of her ownership. As said in Loughran v. Ross (45 N. Y. 792, head note) : “ If a tenant, having the right to' remove fixtures erected by him on the demised premises," accepts a new lease of such premises, including the building, without reservation or mention of any claim to the buildings, and enters upon a new term thereunder, the right of removal’is lost, notwithstanding his actual possession has been continuous.” And in the course of the opinion it is said: Elementary writers are very well agreed that when a tenant continues in possession under a new lease or agreement, his right to remove fixtures is determined, and he is in the same situation as if the landlord, being seized of the land with* the fixtures, had demised both to him.” It is conceded that the plaintiff was a tenant from year to year since 1888, and her omission to reserve the ownership of the house would have waived her claim and raised a conclusive presumption that she had parted with her property therein, for, as said in another part of the opinion from which we have quoted (Loughran v. Ross), “ a lease of land and premises carries with it the buildings and fixtures on the premises, and the tenant accepting a lease of the premises without excepting the buildings, takes a lease of the land with the buildings and fixtures and acknowledges the title of the landlord to both and is estopped from controverting it.” Upon the trial it was not shown whether the plaintiff’s lease was in writing or by parol, but whether one or the other, it did not appear that there was any agreement made between the plaintiff and defendants by which, under her last0 renting of the premises, she reserved the ownership of the buildings1 or the right to remove them on the expiration of her term.

It will thus be seen that there was a failure of proof on the part of the plaintiff to sustain the first essential fact upon which her whole case necessarily must', rest. That the defendants Cruger & Co. thought that she had some interest in the house clearly appears, not only from the correspondence between the parties, but from the fact of the efforts that they made to procure the release. But this impression or notion entertained by them as to plaintiff’s ownership did not establish the fact, nor estop any one from asserting the contrary; and even though we assume that there was sufficient evidence to warrant a submission of the question of fraud in procuring the .release to the jury, no advantage could accrue to plaintiff therefrom, because, no matter how much she may have been deceived in giving the release, she was in no way damaged if we are correct in our view that upon the evidence she made out no case showing ownership in the house. In other words, no matter how her signature to the paper called the release or surrender was obtained, it could not have damaged the plaintiff except in, the event that she had an interest in the house which she surrendered or released. In view of the rule of law which presumes that buildings, if erected by one person on the land of another, become part of the realty, and pass with the conveyance of the land, unless by the agreement of the respective owners they are to be regarded as personal property, and the other rule to which we have adverted, that if a tenant having the right to remove the house accepts a new lease of the land without reservation of or making claim to the building, his right of removal is lost even if his possession has been * continuous; and in view of plaintiff’s failure to bring herself within the exception to this rule by evidence showing not only original ■ownership in her of the house, but that in her continuous possession •and tenancy from year to year this separation was preserved, and her right to regard it as personal property not lost, she has failed to produce the proof of ownership essential to maintain her action.

Upon this ground of such failure we think the .direction was right, and that the judgment should be affirmed, with costs.

Yak Brunt, P. J., and Follett, J., concurred.

Judgment affirmed, with costs.


text:
    Jeanie E. Maddock, Respondent, v. George Steel, Appellant.

      Might of action f or the dissolution of a partnership — estoppel to deny the relation of ■ partners.

    Tbe right of a person to maintain an action brought for the dissolution of an alleged partnership, and to an accounting therein, does not depend upon the interest which the plaintiff may have'in the assets of the partnership, but depends upon the fact whether the relation existing between the parties is that of co-partners, and such fact is to be determined under the agreement entered into between them.
    Where parties have agreed between themselves, for the purpose of avoiding a prohibition contained in a statute, that they are partners, they cannot come into a court of equity and claim that because the interest of one of the persons was not sufficient, that no co-partnership existed.
    Appeal by tlie defendant, George Steel, in the above-entitled action, 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 7th day of May, 1894, upon the decision of the court rendered after atrial at the New York Special Term, and also from an interlocutory judgment of the Supreme Court, entered in said clerk’s office on the 19th day of June, 1894, resettling the former interlocutory judgment appealed from, and also a motion by the defendant for a new trial made on a case and exceptions at the General Term in the first instance.
    The action was brought to obtain an adjudication dissolving a partnership of Maddock & Steel, appointing a receiver and directing an accounting.

      A. W. Kent, for the defendant, appellant.

      F. W. Hinriehs, for the plaintiff, respondent.
   O’Brien, J.:

To present the questions intended for review the defendant has submitted a double record, substantially the same, but in form different, the one being a case and exceptions on a motion for a new trial, and the other a case on appeal from interlocutory judgments. As in either of these forms every question that the defendant seeks to raise is before us for review, we shall consider them, without reference to the distinct form in which they are presented, as though ■embodied in a single record. Though the main question as to the .status of plaintiff and her right to maintain this action was directly passed upon when this case was before this coui;t upon a former .appeal from an order continuing an injunction and appointing a receiver (see 68 Hun, 522), we are asked to review the question anew in the light of what are -claimed to be some additional facts and a reference to the statutes affecting the use of co-partnership names, which counsel says were not brought to his notice at the time of the former argument or decision.

It appears that a firm, of which plaintiff’s husband was a member, had conducted, for many years prior to 1887, the business of importers of and dealers in earthenware in New York, to which business the plaintiff’s husband, by the retirement of the other member, succeeded in 1887. After continuing it until the fall of 1889, he determined to retire from business; but with a view to preserving the same, which had been found to be a business of profit and value, until such time as his son Sidney should become of age in January, 1893, he (and subsequently the plaintiff herself) entered ihto certain agreements with the defendant, who up to that time had been acting in the capacity of a clerk. Some of these agreements are alleged to have been oral, and three are in writing, defining the terms, conditions and limitations under which the business was to be conducted. Of the written agreements the first is dated September 1, 1889, and is as follows:

“ Articles of agreement made on the first day of September, eighteen hundred and eighty-nine, between Henry Maddock and George Steel, both of Brooklyn, New-York.
“For the considerations hereinafter set forth Henry Maddock agrees —
“ To sell and transfer unto George Steel on the first day of January, 1890, the good will of the business now carried on by Henry Maddock in the city of New York, also the right to use the name of Maddock, either alone or jointly with his own name (so far as such right may be legally exercised), in conducting said business.
“ To secure to George Steel from January first, 1890, the exclusive agency of Messrs. John Maddock & Sons, of Staffordshire, England, for the sale of their products within the United States on terms substantially similar to those now enjoyed by Henry Maddock.
“ To lend to George Steel the sum of ten thousand ($10,000) dollars in cash, to be used as capital in the business, and to lend to him also such additional moneys from timé to time as may be required, in the judgment of Henry Maddock, to properly conduct the business, and to indemnify George Steel against any losses in said business to the extent of one-half of such losses.
“ For the considerations hereinbefore set forth George Steel agrees —
“ To contribute ten thousand ($10,000) dollars in cash as capital, exclusive of said loans; to continue the business substantially as now conducted, and to devote his entire time thereto.
“ To pay Henry Maddock interest at six per cent (6$) per annum on his advances, semi-annually.
To employ Sidney Maddock in the business from the first day of January, 1890, and to pay him for his services sums of money equal to^ one-half of the net profits, after deducting interest on capital at six per cent per annum, which profits shall be determined yearly; and to admit him as an equal partner on the 26th day of January, 1893, upon his contributing to the capital a sum in cash equal in amount to that contributed by George Steel and then standing to his credit on the books.
That he will not lend the funds, credits or effects of the business for private accommodation.
“ It is mutually agreed :
“ That George Steel and Sidney Maddock may, if they so desire, anticipate yearly profits to the extent of twenty-five hundred ($2,500) dollars each, and may draw that sum in monthly installments.
“ That the usual books of account shall be kept, which shall be open always to the inspection of either party, and Sidney Maddock also.
“ That the partnership name shall be Maddock & Steel.
“ That in the event of the death of George Steel or Sidney Mad-dock the business shall be continued by the survivor, and the interests or profits which would have been enjoyed by the deceased hereunder shall be paid to his legal representatives from time to time until the termination of this agreement; provided, however, the survivor shall receive, in addition to his share of the profits, three thousand ($3,000) dollars yearly for his personal services, which amount shall be charged to general expense account, and no> profits shall in such case be anticipated.
“ Witness the hands and seals of the parties hereto in the city of New York.
“ Executed in duplicate.
“HENRY MADDOOK. ‘ [l. b.]
“ GEORGE STEEL. [l. s.]
“ In presence of--.”

The other two in writing are both dated December 20, 1889, and are as follows:

“New York, Dec. 20iA, 1889.
“ Whereas, It is the desire of the parties to the foregoing agreement that the business therein set forth shall be conducted under the name of Maddock & Steel.
“And Whereas, It is doubtful whether the name of Maddock can be legally used until Sidney Maddock attains his majority and becomes a partner in 1893.
“And Whereas, Jeanie E. Maddock, wife of Henry Maddock, has consented to become a partner in the meantime.
Dhow, therefore, Eor the purpose of enabling George Steel to carry on the business under the name of Maddock & Steel, Jeanie E. Maddock is hereby constituted a partner under said agreement until January 26, 1893, and her interest is hereby declared to be one-half of the compensation provided in said agreement to be paid to the said Sidney Maddock.
“ HENRY MADDOOK.
“ GEORGE STEEL.
-“ Agreed to.
“ Jeanie E. Maddock.”
“New York, December 20iA, 1889.
“All differences arising under the foregoing agreements of'date September 1 and December 20, 1889, shall be determined by arbitration. Two arbitrators shall be appointed, one by George Steel and the other by Henry Maddock, and in the event of their, failure to agree, such arbitrators shall select a third arbitrator, whose decision shall be final and binding upon the parties to the controversy.
“ HENRY MADDOOK.
“ GEORGE STEEL.
“JEANIE E. MADDOOK.”

Subsequent tó the date of this last agreement of December 20, 1889. each party arranged to carry out the terms of the agreements, and as a result the business and assets of .the old firm were transferred to the new, so that the latter was in a position to begin business on the 1st of January, 1890, which was the date agreed upon by the parties. All the assets and good will of the old firm were turned over, the $10,000 agreed to be loaned by Henry Haddock was advanced, and the $10,000 additional which the defendant was to contribute to the capital was borrowed from his attorney, who had procured the same as a loan also from Henry Haddock. The business was thereafter carried on under the firm name of Haddock & Steel until the son became of age at the time fixed for the termination of the relation between plaintiff and the defendant, when the son declined to become a partner, and the affairs of the business being unsatisfactory, the plaintiff commenced this suit, claiming.to be a partner and asking for the appointment of a receiver, an accounting and the winding up of the business.

The defendant insists now as throughout the litigation that the plaintiff was not a partner, and, therefore, had no status to maintain the suit, claiming in effect that her status was but that of a nominal partner, or at best a trustee with the defendant for the purpose of preserving the business until the coming of age of her son, when a partnership was to be formed. This theory that the relation was that of trustee is sought to be strengthened by reference to the allegations of the complaint, wherein it was charged that it was “ intended by and orally agreed between the parties to said instrument that said Steel should simply conduct the business after said Henry Haddock’s retirement on January 1, 1890, and during his said son’s minority, in order to preserve the same, and should hold the same meanwhile in trust for a partnership to be formed of said defendant Steel and said Sidney Haddock, when the latter should have reached majority.”

In this view it is insisted that there could not be a complete determination of the rights of the parties without the presence of Henry Haddock and the son Sidney, and that for this, and the additional ground that it is an anomaly for one trustee to sue the other for the purpose of dividing between them the property of their cestui que tr ust, the judgment should be reversed.

This argument of the appellant is founded upon a narrow and restricted view taken of the relations between the parties, and of the rights that were conferred upon the plaintiff by virtue of the agreements themselves. If there were only the original agreement of September first, there might be some force in appellant’s position; because, although that speaks of a partnership, it is evident that the parties, thinking that the minority of the plaintiff’s son was an insuperable obstacle to his entering into a partnership, determined to accomplish what could have been achieved by a partnership in another way, leaving a half interest in the business in such a condition that the son would succeed to the same upon his majority, and that during the interval the business would have the benefit of the name of IVIaddock as part of the firm title. The error of this last assumption was discovered when attention was called to the statutes preventing the use of fictitious names, and then followed the subsequent agreements, which we have given in full. It would be of no advantage to analyze and determine the exact relation established by the first agreement, because, in view of all the facts appearing, it is undisputed that a change was effected in the original arrangement by the agreements subsequently executed, and to determine what was the relation of the parties on the 1st of January, 1890, an examination is necessary of all the agreements, with the light thrown thereon by the surrounding circumstances and the conduct of the parties.

That the plaintiff and defendant were not trustees to preserve the property itself is evident from the nature of the business, which involved the sale of stock and the constant replenishing thereof, but the intention was to constitute an arrangement between the parties by which they could continue the business in such a way that the defendant would have a half interest and the Maddocks the other half interest until the son became of age, when he could enter into possession as a full partner with the defendant. In the meantime, both by the terms of the agreements themselves and the position of the parties with respect to creditors, it is clear both upon the facts and the law that their status was that of partners. As stated by this General Term upon the former appeal (68 Hun, 521): u The question as to the right of the plaintiff to maintain this action does not depend upon the intei’est that she may have m the assets of this co-partnership, but it does depend upon the fact as to whether the relation existing between herself and Steel was that of co-partners. This rests 'upon what was agreed between these partners. Eor the purpose of avoiding the penalties of the statute preventing the use of the names of partners who were not interested in the business, this subsequent agreement was made, as appears upon its face, and business was conducted under it. Now, after the parties have agreed between themselves, for the purpose of avoiding a prohibition contained in a statute, that they are partners, certainly they cannot come into a court of equity and claim that, because the interest was not sufficient, therefore, no co-partnership existed.”

Notwithstanding the argument based upon the wording of the statute relating to the use of fictitious names, and the claim that a nominal partnership complies with the statute, we find no reason for departing from our former view, which is. strengthened and enforced by resort to the history of the statute in question. The original statute was chapter 281 of the Laws of 1833, and was the basis of section 363 of the Penal Code, which reads: “ A person who transacts business, using the name as partner of one not interested with him as partner, or using the designation ‘and company5 or ‘& Co.,5 when no actual partner or partners are represented thereby, is guilty of a misdemeanor.” The original law of 1833 read: “No person shall hereafter transact business in the name of a partner not interested in his firm.” And the change in-the language in the Penal Code from “ not interested in his firm55 to “ not interested with him as partner” seems clearly to be aimed against the evil of nominal partnership. Upon the law, therefore, there is no escape from the conclusion that the plaintiff was an actual partner. Apart, however, from this, and upon the facts, it appears that while she did not take an active part in the affairs of the business — being represented by her husband, who did • — • nevertheless, she was recognized throughout as the one who, together with the defendant, had the legal title to the assets and good will of the business. Thus her status, as correctly held by the judge at Special Term, gave her the right, upon proof of the acts complained of and in view of the condition of the firm, to maintain the suit for a dissolution, and the relief accorded was the natural sequence.

In such an action neither Henry Maddock nor his son Sidney Were necessary parties to a complete determination. Henry Mad-dock never had or claimed any interest other than that of a creditor, and though the word “ trust ” is used in the complaint and spoken of by the parties as relating to the son Sidney, it must be taken in connection with the conceded facts as to its meaning. There was no intention expressed or implied to constitute the plaintiff and defendant trustees for the son Sidney, the purpose being to constitute a partnership between them, to the end that the business might be continued, and upon his majority that Sidney might take his mother’s place as a partner in the firm. The son, as a matter of law, never acquired any actual interest in the assets or good will of the firm, nor had he any claim that he could enforce until he became of age ; and what claim ho then might have had it is not necessary to determine, because it is eliminated from our consideration by the fact that when that event occurred, upon which any rights of his might be vested, he declined to take advantage of the agreement in his favor, entitling him to enter into the firm as a partner, and, therefore, had no interest that would embarrass an adjustment of the affairs of the co-partnership between those who alone were interested as between themselves and the creditors in having it wound up.

A more serious question presented is as to whether or not the moneys advanced by Henry Maddock in the shape of a loan were to the defendant personally or to the co-partnership. The original agreement provides for a loan to defendant of the sum of $10,000, “to be used as capital in the business, and to lend to him also such additional moneys from time to time as may be required, in the judgment of Henry Maddock, to properly conduct the business.” The language thus used must be interpreted in the light of the situation of the parties at that time. This first agreement of September was directed to a situation in which there was an identity between the firm or business and the defendant personally; and though it provided that the partnership name should be Maddock & Steel, it is conceded that it was not then contemplated that any of the Maddocks should enter as a partner, but that the son should enter the employ of the firm at a compensation equal to one-half of the net profits. As there was but one person having legal title to the assets and business, there was in reality no co-partnership. This, however, was cured, as we have attempted to show, by the subsequent agreements between the parties; and when the identity between the defendant and the firm was severed, and he no longer constituted the entire firm, it is not logical to contend that the language applicable to the first condition is not to be construed in the light of the other agreements which effected a change in the condition itself. In other words, when the defendant had the entire business, a loan to him, to be used as capital in the business, was practically the same thing as a loan to the business; and that it was never contemplated that these should be personal loans becomes evident from the language that follows, which shows that the amounts in addition to the first that were to be advanced by Henry Haddock, depended upon his judgment as to tlieir being essential for the proper conduct of the business. So far, therefore, as the $10,000 is concerned, and the other amounts advanced from time to time, we think the learned judge below was correct in holding that they were advanced to the partnership, and that Henry Haddock is a creditor of the firm and not of the defendant, personally.

In regard, however, to the $10,000 borrowed by the defendant of his attorney and placed in the business as a contribution to the capital, a different view is to be taken. No matter where the attorney got it, whether from Henry Haddock or not, it was a loan made by the attorney to the defendant, for which he was" not responsible to Henry Haddock, and which Haddock could not claim as against the defendant or the business, but which was borrowed by the attorney, as it appears, upon security, and has since been paid to Haddock, and was contributed by the defendant after procuring it as his part of the capital. As to this amount, therefore, he is entitled to credit; and to that extent, and that only, do we think the findings should be corrected.

In addition to the principal questions which we have discussed,, there are numerous exceptions pressed upon our attention relating to the admission or rejection of evidence, to findings and refusals to find, to refusals to dismiss, and finally an exception as to the refusal of the court to grant a postponement of the trial. It is unnecessary to go over in detail each and all of these, some of which are technically good, but not of sufficient importance to justify a reversal of the judgment, which, upon the facts appearing, was right, and if all. that is claimed by the appellant were allowed, it would in no way affect the result.

Eor instance, if any serious question had been presented as to the effect of plaintiff’s testimony if produced upon the trial, there might be some strength in the exception taken to the refusal of the court to grant a postponement of the trial in order to enable the defendant to produce and examine her. Assuming, however, that the defendant was not guilty of laches — which is by no means clear — and considering the other question as to the materiality and influence of anything that the plaintiff could testify to, the concession made by the plaintiff’s attorney, that she did not in person participate in the business of Maddock & Steel, coupled with the finding upon the evidence that she did not personally contribute any capital, strengthened as much as her evidence could have done appellant’s contention that she was but a nominal, as distinguished from an actual partner. In this state of the record her testimony was not very material, and as the defendant had not secured her attendance upon the trial or taken her testimony by commission, he had no legal ground of complaint.

Upon the records, therefore, we think that the motion for a new trial should be denied and the judgment affirmed, with costs, and appeal from original judgment dismissed, without costs.

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

Motion denied, with costs. Judgment affirmed, with costs, and appeal from original judgment dismissed, without costs.


text:
    Marie Schutz, Respondent, v. Joseph Morette, as Sole Executor, etc., of Margaretha Metzger, Deceased, Appellant.

      Executor — power of, to settle an account existing against his testator — binding effect of the settlement thereof— when a claim will be deemed to heme been settled— complaint based thereon, when good on demurrer.

    An executor has power to settle an account or liability claimed to have been incurred by his testator, and if it be established that he has settled or stated such an account, it is sufficient to authorize a judgment against him in his representative capacity, in an action in which the plaintiff claims to recover on an account stated.

      The fact that the executor has settled such an account or liability may be established by proof of an express promise on his part, by acts on his part and on the part of the plaintiff, from which the law irrebuttably presumes an express promise, or by acts on the part of both, from which the tribunal determining the issue of fact properly infers the existence of such a promise.
    The fact that a settlement by an executor of an account or claim is not binding on the heirs, next of kin, devisees and legatees of a decedent, lends no support to the proposition that the executor is not bound by his settlement of a claim, or that he may dispute the claim in an action brought against him thereon. •
    A complaint will not be held bad on a demurrer which is based on the ground “that the complaint does not set forth sufficient facts to constitute a cause of action ” if the facts alleged are such as authorize the inference of a liability on the part of the defendant, or if the facts alleged are sufficient to authorize a finding that the defendant settled, or should be held to have settled, or to have adj usted, the claim upon which the action is brought.
    Where an executor has had a reasonable opportunity for an examination into the validity and fairness of a claim presented to him as such, his unexplained delay to dispute or reject the same, or to take any action in respect thereto, is sufficient to authorize the inference that it has been accepted by him as a liability of the estate.
    Appeal by tlie defendant, Joseph Morette, as sole executor, etc., of Margaretha Metzger, deceased, 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 13th day of August, 1894, overruling the defendant’s demurrer to the complaint, with notice of an intention to bring up for review on such appeal an. order made at the New York Special Term and entered in said clerk’s office on the Jth day of August, 1894, overruling such demurrer.

      John S. Davenport, for the appellant.

      J. George Flammer, for the respondent.
   Follett, J.:

An executor has power to settle an account or liability which, it is claimed, was incurred by his testator. If it be established that lie has settled or stated,such an account it is sufficient to authorize a judgment against him in his representative capacity, in an action in which the plaintiff claims to recover on an account stated.” The fact that the executor has settled such an account or liability may be established by proof of an express promise on his part, by acts on his part and on the part of the plaintiff, from which the law irrebuttably presumes an express promise, or by acts on the part of both, from which the tribunal determining the issue of fact properly infers the existence of such a promise. The foregoing propositions are too well settled by authority and founded in reason to require the support of many authorities. (Lambert v. Craft, 98 N. Y. 342; Magee v. Vedder, 6 Barb. 352; 3 Will. Exrs. [6th Am. ed.] 1772, 1940 and cases cited.) The fact that a settlement by an executor of an account or claim is not binding on the heirs, next of kin, devisees and legatees of a decedent, lends no support to the proposition that the executor is not bound and may dispute the claim.

A complaint will not be held bad on demurrer which is based on the ground “that the complaint does not state facts sufficient to constitute a cause of action,” if the facts alleged (being admitted and unexplained by the demurrer) are such as authorize the inference of a liability of the defendant, or in the case at bar, if the facts alleged are sufficient to authorize a finding that defendant settled, or should be held to have settled, or to have adjusted, the claim.

This action was begun April 17, 1894, by the service of a summons and by a conrplaint verified April 11, 1894, in -which it is alleged that, November 18, 1892, the plaintiff delivered to the defendant a verified statement of her claim against the defendant’s testatrix, a copy of which is set out in the complaint. If the statements contained in the verified claim are true, the testatrix, at the time of her death, was indebted to the plaintiff in the sum of $1,000. The claim is for personal services rendered by the plaintiff for the testatrix during some years immediately preceding her death. It is alleged, as before stated, that tlie claim was presented November 18, 1892, nearly seventeen months before this action was begun, during which time it is also alleged “ said defendant has had a reasonable opportunity for examination into the validity and fairness of the claim so presented; he has not disputed or rejected the same, and refuses to pay the same or any part thereof.”

This unexplained delay on the part of defendant to take any action in respect to the claim is sufficient to authorize the inference that it has been accepted by him as a liability of the estate within the rule laid down in Lambert v. Craft (supra), the facts of which are more fully reported in T N. Y. Civ. Proc. Rep. 364. In that case the verified claim was presented June 1] 1883, and on the thirtieth of the same month proceedings were begun in the Surrogate’s Court requiring the executor to show cause why he should not pay the claim. These facts being shown and the further fact that the executor had taken no action whatever in respect to the claim, the Surrogate’s Court inferred the liability and decreed payment, which adjudication was affirmed at General Term (32 Hun, 466) and by the Court of Appeals (98 N. Y. 342). ¥e think that under the case last cited the court would be authorized to infer, from the unexplained facts alleged in the complaint, that the defendant had acknowledged the liability of the estate for the claim presented.

On the trial of this case facts may be shown which will authorize the trial court to find that the defendant, under the circumstances, ought not to be held to have conceded the liability of the estate for the plaintiff’s claim. The facts alleged are now admitted, and, although the defendant may be unable to deny them in his answer, or to disprove them on the trial, he may be able to give evidence of , such explanatory facts as will leave the issue — whether the defendant has settled'the claim— an open one for the determination of the tribunal before which the action shall be tried.

The interlocutory judgment should be affirmed, with costs, with leave to the defendant to withdraw his demurrer and answer upon the payment of costs.

Yan Brunt, P. J., concurred.

Judgment affirmed, with costs, with leave to defendant to withdraw demurrer and answer on payment of costs.