247 F. 758 | 2d Cir. | 1917
Lead Opinion
(after stating the facts as above).
“No District Court shall have cognizance of any suit (except upon foreign bills of exchange) to recover upon any promissory note or other chose in action in favor of any assignee, or of any subsequent holder if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had.been made, etc.” U. S. Compiled Statutes (1916) Annotated, § 991.
The argument is that, if no. assignment hád been made of these certificates by Farwell, Sage & Co., of the city of New York, to whom they were originally issued, no suit could have been brought, as there would not have been the requisite diversity of citizenship. Therefore it is said the complainant, as the assignee of Farwell, Sage & Co., cannot maintain the suit as the subject-matter of the suit is choses in action, and the bill contains no averment that suit could have been maintained by the assignees, if no assignment had been made. And counsel call our attention to the fact that the Supreme Court has held in a series of cases beginning with Turner v. Bank of North America, 4 Dall. 8, 1 L. Ed. 718 (1799), that the presumption is that a cause is without jurisdiction of the court, unless the facts which confer jurisdiction are set forth upon the record.
The complainant’s brief, however, contains the following statement:
“The allegations in the bill of complaint, and the decree appealed from, make it clear that a federal constitutional question is raised. That such a question is raised under the pleadings appears from Penn Mutual, etc., Co. v. Austin, 168 U. S. 685, 695, 18 Sup. Ct. 223, 42 L. Ed. 626; Leonard v. City of Shreveport (C. C.) 28 Fed. 257.”
It is evident that the complainant bases his right to sue, not upon diversity of citizenship, although he is a citizen of Connecticut and defendant is a citizen of New York, but upon the ground that a federal question is involved. The federal question presented is that complainant claims that he has been deprived of his property without due process of law, and that the obligation of the contract under which the certificates sued upon were issued has been impaired by certain legislation of the state of New York. Where the right claimed is founded, as it is in this case, on a federal question, diversity of citizenship of the parties is immaterial and unnecessary. Elk v. Wilkins, 112 U. S. 94, 5 Sup. Ct. 41, 28 L. Ed. 643. The jurisdiction dees not turn upon the validity of the claim set up, but upon the fact that there is a real and substantial controversy respecting a federal question. The
This brings us to inquire as to the real merits of the controversy. The Eaws of 1871 of the State of New York, chapter 765, entitled “An act to provide for the laying out of streets, avenues, roads and parks in Eong Island City,” named certain persons therein designated as commissioners for the purpose of performing the acts and duties prescribed by the statute, including the power to grade, sewer, and pave streets within the district described. The Laws of 1871, chapter 461, tit. 6, § 23, entitled “An act to revise the charter of Eong Island City,” and in force when the certificates were issued, provided that all sales for taxes in that city should be made for the shortest period for which any person would take the premises and pay the taxes or assessments, interest percentage and expenses. '
The Laws of 1874, chapter 326, entitled “An act to provide for improvements in and adjoining the First ward of Eong Island City,” directed the commissioners to ascertain and certify to the board of assessors the expenses of the grading, sewering, paving, etc., provided for in the act. It required the estimated cost to be assessed upon the several lots within the improvement district, and declared that the assessment should be a lien on the property assessed to the extent of the amount assessed, together with the interest at the rate of 10 per cent, per annum. The interest was to commence to run three months after the filing of the assessment roll, and was to run until the assessment with interest was fully paid. Section 5 of the act provided as follows:
“No warrant shall be issued or required for the collection of any assessments under this act; nor shall any warrant be issued for any sale of lands for nonpayment of such assessments until ten years after the filing of such assessment roll; but all lots, pieces or parcels of laud on which any assessment under this act shall remain unpaid on and after the day of the expiration of ten years after the filing of the assessment roll, affecting the section or sub-district in which the lot is located, shall be advertised and sold "for the payment of such unpaid assessment; and such sale or sales shall be made by the receiver of taxes or other officer then charged by law with the duty of selling lands in said city for nonpayment of city taxes and the proceedings for such sale, and such sale shall be the same and on the same notice and like terms; and said lots or parcels of land so sold may be redeemed, and in default of such redemption title thereto shall be given and perfected in the same manner, to the extent and with the same force and effect. * * * ”
Section 6 of the act provided as follows:
“ * * * The improvement certificates hereinafter provided for shall be receivable at all times at par and accrued interest in paymeilt of any assessment under this act, and of the interest accrued thereon. All moneys received by said treasurer in payment of such assessments or interest shall be placed to the credit of the improvement fund, consisting of the amounts in the hands of the treasurer growing out of payments of said assessments, and interest, and shall be kept separate and apart from any other moneys, in his hands, and no part of said fund shall ever be paid out by him, except for the purchase of such improvement certificates as provided in the seventh section of this act. or as is herein otherwise provided. * * *"
“They [certificates] shall be receivable at all times, at par and accrued interest in payment of any assessments laid under this act and of the accrued interest thereon and shall be payable with interest as aforesaid in the manner hereinabove provided, out of any moneys which shall come into the said treasurer’s hands to the credit of said improvement fund.”
It also provided that:
“On receiving any of said certificates in payment of assessments or interest, or by purchase, as hereinbefore provided, said treasurer shall cancel such certificate,” etc.
Section 11 of the act provided:
“Upon the completion of the sales for the nonpayment of the assessments levied, as hereinabove provided, of the lots and parcels of land in said improvement district, after the expiration of ten years from the filing of the assessment rolls, all the certificates issued by the said commissioners shall be paid off,” etc.
The laws of 1879, chapter 501, section 10, provided that at the sale-of any lot for nonpayment of assessments it should be the duty of the-officer making the sale to receive the improvement certificates in payment of the assessments, and that such certificates when received by him should be permanently canceled.
In 1886 an act was passed governing tax sales in Long Island City,, known as chapter 656. This act authorized the city treasurer to sell lands at public auction for nonpayment of taxes or assessments and provided that such sales should be—
“for the lowest term of years for which any purchaser will take the same and pay the aggregate amount due thereon, and if no person shall so offer to-purchase such property for a term of years, said treasurer or his representative shall sell such parcel in fee simple, to the highest bidder. * * * Said treasurer shall bid in, in the name of the city for the use of the proper fund or account, all parcels of real estate at such sale, and to be sold for unpaid taxes, assessments, water rates and rents, which shall not be sold to any other person.”. Section 4.
The act also provided, if real estate so. sold was not redeemed as-provided for in the act, the treasurer should execute to the purchaser a lease, or, if sold in fee, a conveyance, which conveyance should vest in the grantee an absolute estate in fee, and that the lien or liens for which the same had been sold should thereupon be canceled.
The improvements made under the act of 1874 were considerable and expensive, and converted what was a vast meadow or swamp of practically no value into a valuable property. Streets were laid out, graded, and sewered. A large proportion of these streets were curbed, guttered, flagged, and paved. The contractors who did the work were paid
The law under which the certificates were issued provided for a sale of the lots assessed in case of the nonpayment of the assessments levied, and as a large portion of the assessments remained unpaid it became necessary for the treasurer of Dong Island City to advertise the lots for sale. The first sale occurred in December, 1888. At that sale the amount bid for each lot was equal to or in excess of the amount of the assessment. But in 1892 and 1893 subsequent sales were made, and lots were sold for much less than that for which they were assessed. In some instances sales were made for only 5 per cent, oí the assessment, and the average price at which the lots were sold was 40 per cent, of the amount of the assessment. The result, in short, was that the improvement fund which ihe act of 1874 provided for, and out of which the certificates alone were payable, was not produced in the amount originally contemplated, and after all the lands assessed had been sold there were certificates having a face value of $300,000 which were left unpaid, and with no fund out of which payment could be made as originally provided. It appears that the plaintiff acquired a number of these unpaid certificates. They came into his possession as a member of the banking house of Benedict, Flower & Co. He was the senior member of that house, and Mr. Flower, who was associated with him, after-wards became Governor of the state of New York. This house advanced to the contractors, Farwell, Sage & Co., the money which was used in making the improvements, and for the moneys so advanced Benedict, Flower & Co. received payment in certificates issued to the contractors by the authorities of Dong Island City. The certificates sued upon, as has been heretofore mentioned, aggregate the sum. (face value) of $8,000, and were received by the plaintiff as a part of hi§ share in the assets of the firm of Benedict, Flower & Co., and on its ■dissolution in 1875 he has been the owner and holder of them ever since.
The plaintiff does not claim that any primary obligation to pay the certificates existed on the part of Dong Island City; and this suit is not brought to enforce any such liability. He does not claim that the certificates were in the nature of promissory notes for the payment of money, given by Dong Island City as promisor. The plaintiff claims:
(1) That the commissioners appointed under the act of 1874 for the purpose of making certain improvements in Dong Island City, fo pay for which the certificates were issued were the agents and representatives of the city, for whose acts the city was liable.
This the defendant denies, and asserts that the commissioners were independent public officers, and not servants or agents of the municipality. This question, for reasons hereinafter appearing, the court does not find it necessary to determine.
The plaintiff also claims:
This the defendant likewise denies. This question, for reasons hereinafter appearing, the court also finds is unnecessary to pass upon.
The plaintiff also claims:
(3) That the treasurer, and therefore Long Island City, was in fault because lots assessed' for the improvements made were sold for less than the assessments and accrued interest, and for not preserving the lien of the assessments intact.
This the defendant likewise denies, and calls attention to the decision of the Court of Appeals of New York in Nelson v. Bleckwenn, 137 N. Y. 565, 33 N. E. 338, which affirmed without opinion the judgment of the General Term for the Second Department, reversing the action of the court below in issuing an injunction against the treasurer of Long Island City, which restrained him from selling any of the lots for less than the face value of the assessment and from receiving in payment improvement certificates instead of cash. The General Term expressly held that the. treasurer might accept bids for less than the amount of the assessment and still accept the certificates in payment. This the qourt thought allowable under the acts of 1879 and 1886. The question as to whether these acts violated the Constitution of the United States was not discussed and does not appear to have been considered.
The plaintiff contended on the argument before us that the acts violate the federal Constitution, in that the construction placed upon them by the New York courts deprives him of property rights vested in him by virtue of the act of 1874 as the only way in which the liens of the assessments could be made secure and paid was by a sale of lots for the full amount of the assessments. Upon that question it may well be that this court is not concluded by the decisions of the state courts. But in the view we take of this case, and for reasons which will be stated in a subsequent part of this opinion, we are not called upon to determine whether the statutes referred to are void as to this plaintiff, as depriving him of his property without due process of law, or as impairing the obligation of the contract contrary to the provisions of the Constitution of the United States.
' (4) That the act of 1874 created a statutory or express trust, in that it provided for an improvement fund out of which the certificates were to be paid; the act imposing no liability to pay the certificates except out of that fund.
We have seen'that section 6 of that act, heretofore set forth, required that all moneys received by the treasurer of Long Island City in payment of the assessments or interest should be placed to the credit of the improvement fund, which was to consist of the amounts in the hands of the treasurer growing out of payments of the assessments and interest. This fund the statute required to be kept separate and apart from
The complainant insists that, while the city treasurer was made the recipient of the fund and charged with its collection and disbursement, he took it as an officer of Long Island City, or as its agent, and that the trust -was imposed upon the city in its corporate capacity. The certificates which were issued were in form as follows:
“Improvement Certificate.1 $-
“No.-. State of New York, Long Island City.
“January 6, 187—.
“This is to certify that Harwell, Sage & Co., or hearer, is entitled to --- dollars, with interest thereon at the rate of 7 por cent, per annum, from the date hereof, payable out of the improvement fund in Long Island City, established under chapter 326 of the Laws of New York, passed May 5, 187d, entitled ‘An act to provide for improvements in and adjoining the Mrst ward of Long Island City,’ this certificate being issued under the provisions of said act, and the said amount and interest being payable as provided therein.
-. P. G. Van Alst,
“Wm. Bridge,
“H. S. Anable, Commissioners.
“Countersigned: John B. Morris, Treasurer of Long Island City.
“$-. $-
The defendant, in strenuously denying that any trust was imposed upon the city, gives as its reasons the following allegatioñs of what it conceives to be the facts: That Long Island City, as such, was not authorized to issue the certificates involved, or to make the improvements for the payment of which the certificates were issued, or to levy the assessments, but that power was lodged in independent officers ; that the city, as such, was not authorized to collect any of the assessments after they were levied, or to foreclose- the liens of the assessments by selling the properties, but that power was vested in an independent officer, the city treasurer. And defendant insists that no obligation was imposed in terms upon the city either to create or to maintain the redemption fund; and it insists, further, that Long Island City could not have been a trustee, as under the terms of the statute it was not invested with title to the assessments and to the moneys which were received from the sale of the properties. The conclusion it deduces from the facts assumed is that no express trust, and no duty in the nature of a trust, and no power in trust, was imposed upon the city for the benefit of the certificate holders. ■
But, as we stated in an earlier part of this opinion that it was not necessary to determine whether certain officers were mere agents of the city or not, so, for reasons about to be stated, it is not necessary now to say whether the trust which we think came into existence in connection with the issuance of the certificates was one imposed upon the city in its corporate capacity, or simply upon the official whose duty it was to collect and disburse the fund.
' (5) .That in the sale of the lands for less than the amount of the assessments, with interest, and in receiving in payment therefor certificates, instead of the currency of the country, and in canceling the assessments before payment in money had been made in full a gross breach of the trust was committed-, by reason of which the fund provided to be raised for the payment of the certificates under the terms of the act of 1874 was never raised. He therefore asks that the trust be recognized and enforced, and that an accounting be had- of the amounts that would have been received by Long Island City and its treasurer from the sale of the lands, if the same had' been sold for the full amount of the assessments, with interest, as required by the law as it stood when the certificates-were issued, and that the amount due upon the certificates owned by him be ascertained and be decreed to be paid to him.
It is also apparent that this open and final repudiation of the trust was known to the plaintiff’s agent in 1892. That agent testified that he had entire charge of all the plaintiff’s interests in Long Island City at that time, and that he was present at the sales made in 1892, and protested verbally and in writing against the course the treasurer pursued and the specific acts now complained of, and that he was then told by that official that he should do exactly what was done. This repudiation of the trust then and there made to the agent thereby became the knowledge of the principal, the plaintiff herein; for the knowledge of the agent is the knowledge of the principal, so that the plaintiff knew of the conduct complained of 17 years before the present suit was commenced. This, in our opinion, is the crucial [act in this case. This it is which malees it impossible for him to maintain this suit at this late day. This it is which makes it immaterial whether the trust was imposed upon, the city or upon the city treasurer in his individual capacity; and this it is which made it unnecessary to consider whether the various persons engaged in these transactions acted as agents of the city or as independent officers.
Statutes of limitation do not run against .express trusts until openly repudiated, to the knowledge, of the cestui. They do, however, begin to run at that time. Such is recognized to be the law in the courts of New York (Zebley v. Farmers’ Loan & Trust Co., 139 N. Y. 461, 34 N. E. 1067), and in the courts of the United States (New Orleans v. Warner, 175 U._S. 120, 130, 20 Sup. Ct. 44, 44 L. Ed. 96). The principle is recognized generally throughout this' country, as well as in England.
•‘In eases of concurrent jurisdiction, courts of equity consider themselves bound by the statutes of limitation which govern courts of law in like cases;*768 and this rather in obedience to the statutes, than by analogy. In many other eases they act upon the analogy of the limitations at law.”
Authorities to support the above statement are numerous and decisive. Godden v. Kimmell, 99 U. S. 201, 210, 25 L. Ed. 431. We think the action is barred under the New York statute; if not under the 6-year statute (Code of Civil Procedure, § 382), then under the 10-year statute (Code of Civil Procedure, § 388).
The treasurer’s duty to collect the assessments by making sales of the property assessed was a duty which he was bound to perform under tire act of 1874 after the expiration of 10 years from the filing of the assessment rolls. If he failed to perform it, or performed it improperly, a .cause of action then accrued. In the case at bar the cause of action, arose at the time the treasurer repudiated the obligation to create and maintain the improvement fund. After the sales of the assessed properties in 1892 and 1893, there was no property of any kind in the hands of the treasurer out of which payment of these certificates could be made, and no property out of which the redemption fund could be created.
“To let in the defense that the claim is stale, and that the hill cannot, therefore, be supported, it is not necessary that a foundation shall be laid by any averment in the answer of the defendants. If the case, as it appears at the hearing, is liable to the objection by reason of the laches of the complainants, the court will, upon that ground, fee passive and refuse relief. Every case- is governed chiefly by its own circumstances. Sometimes the analogy of the statute of limitations is applied; sometimes a longer period than that prescribed by the statute is required; in some cases a shorter time is sufficient; and sometimes the rule is applied where there is no statutable bar. It is competent for the court to apply the inherent principles of its own system of jurisprudence, and to decide accordingly.”
In the instant case the plaintiff’s acquiescence appears to have been absolute from 1892 to 1905, with the exception that he commenced a suit in June, 1893, to restrain the treasurer of Eong Island City (a) from receiving certificates from property owners, when redeeming their properties from the assessment sales; and (b) from marking upon the books, as paid, any assessment where, the property was sold' for less than the amount of the asssessment. He apparently never did anything more with the 1893 suit than to begin it. After 1905 there were negotiations with the .city, not upon a claim of right, but of grace. Under the circumstances, the plaintiff has not acted with reasonable diligence. And it is a fundamental principle that nothing will call forth the aid of equity but conscience, good faith, and reasonable diligence. If during this period there had been persistent and immediate litigation, which had failed because of some misapprehension as to the remedy available, and upon the failure this suit had been commenced, there would have been some ground for the claim that the laches at least were excusable. As it is, there is none.
Decree affirmed.
The following is a copy of the back of the certificate.
“This certificate is one of the improvement certificates in Long Island City issued under the provisions of the act within mentioned. It draws interest at the rate of 7 per cent, per annum and is receivable at par and accrued interest at any time in payment of any assessment laid under said act and of ilie accrued interest on such assessment. Allen & Chard.”
The names signed were those of attorneys.
Concurrence Opinion
concurs, on the ground that plaintiff’s claim is stale.
