42 N.Y.S. 1015 | N.Y. App. Div. | 1896
From April, 1884, to October, 1884, the Mexican National Eailway Company and the Mexican National Construction Company trembled on the verge of bankruptcy. In the latter month, after constant and continuous effort, the two companies succeeded in effecting an agreement between themselves and certain holders of the bonds and stock of the railway company for a scheme of reorganization whereby the railway company was to be absorbed in a new corporation to be thereafter formed, fresh money was to be injected into the languishing enterprise, payment of its bonds provided for, the plan of its organization preserved, and the purpose of its creation fostered and progressed. This instrument is known to this action as the “ Matheson-Palmer Agreement.” It does not appear that there has ever been any disagreement or difficulty respecting the fulfillment to the letter of every stipulation contained in this agreement by the respective parties thereto, so far as the same relates to the reorganization scheme. Under it the new corporation was organized, the properties therein mentioned have been delivered to and accepted by the respective parties and companies, the securities provided for have been executed and delivered to those entitled thereto, the bondholders have ratified the scheme and accepted the substituted securities, the new bonds have been sold and the fresh money has been realized for the purposes contemplated. The particular fund which is the subject of this controversy is now awaiting distribution to the present claimant, or, in the event of failure in this regard, it will go to swell the reserve fund for the payment of the obligations of the defendant. When the present claim was first asserted the parties negotiated for a settlement of it for nearly three years, and, failing to agree, resort was had to a friendly and, it was hoped, a speedy settlement through the medium of an arbitration. No one, however far-seeing, could have contemplated the tortuous course which the litigation was to take, or the fierce battle which was to ensue. After proceeding with the arbitration from the 14th day of April, 1890, to the 16th day of July, 1891, and when there seemed some prospect of an end being reached, the defendant served notice of revocation. Thereupon, on the 12th clay of September, 1891, this action was commenced. On the 28th of October, 1891, the Supreme Court, upon petition of
This result brought the action again hito the Supreme Court of this State, and it found its way to a trial before Mr. Justice Cullen in May and June, 1895, resulting in a judgment in plaintiff’s favor for the sum of §95,237.92. An appeal by the defendant from the judgment, and by the plaintiff from certain parts of the judgment, particularly specified, brings the matter before this court. In the orderly administration of justice by the courts there must come a time when a given litigation must be composed, and when, if necessary to that end, technical and somewhat arbitrary rules must be enforced or disregarded as the case may be. (Greenwood v. Marvin, 111 N. Y. 440.)
This litigation is closely allied to the class where justice demands an application of this rule, and a proper regard for all parties requires an earnest attempt to settle finally the questions at issue. It is not at all surprising, in this maze of accounts, creating a very labyrinth, that confusion should arise. The most patient labor finds itself bewildered, amidst the various. contracts and accounts, each one a complication by itself, and the whole a staggering mass in amount, and of an intricacy which makes the attempt to reach a correct .result nearly as elusive as is the pursuit after perpetual motion. Such a condition makes it possible for counsel to march in steady column with page upon page of brief to the demonstration of a particular theory extracted from the mass. This condition furnishes abundant reason why, in the disposition of the questions pre
So far as we purpose to discuss the questions presented it appears that the plaintiff seeks to recover, as assignee of the construction company, a debt due by the railway company to the construction company, in the sum of $111,454.28. This sum is made up of two items, $104,244.10 for work, labor and materials, and $7,210.18 for interest upon the principal sum to September 30, 1886. It appeared without dispute that upon the books of both companies the entries showed this amount of indebtedness, and the plaintiff becomes entitled to recover this sum unless it be defeated or reduced by the defense which has been offered. Plaintiff also claims to recover an additional sum of $80,000.
Defendant insists that in fact no indebtedness existed in favor of the construction company agairfst the railway company on the date of the Matheson-Palmer agreement. On the contrary, it is claimed that the indebtedness was upon the other side.
First, in that there had been an overissue of stock and bonds by • the railway company to the construction company in. payment for construction; that this excess of stock was illegally issued, and constituted no obligation against the railway company; that, as it was in fact paid for in securities provided by the Matheson-Palmer agreement, no debt now exists which the construction company is equitably entitled to enforce.
Second. That the Matheson-Palmer agreement worked a general release of the claims of each company as against the other.
Third. That an indebtedness actually exists in favor of the railway company against the construction company for $207,000 which is an offset to the claims of plaintiff.
Fourth. That the fund of $217,000 inserted in the MathesonPalmer agreement was procured to be so inserted by the fraud and misrepresentation of the officers of the construction company, and, therefore, does not embrace its claim.
The discussion will proceed in this order.
First. It is quite true as claimed that the railway company was, for all practical purposes, the creation of the construction company, and that the latter at all times elected a majority of its board of direct
Second. It is not contended that the Matheson-Palmer agreement contains any specific or general words of release of all claims due by the railway company to the construction company. The parties therein made particular specification respecting the written obligations which the construction company held, and dealt with all the property owned by the two companies, making particular disposition as to each. In the clause which sets apart the sum of $217,000 to be applied in liquidation of the indebtedness of the railway company, no words of exclusion are used, but in its terms is embraced any person or company who were creditors of the railway company
Third. So far as this claim is based upon the alleged failure of the construction company to comply with its contract to furnish the equipment to the railway company for the stock and bonds issued to it, in consequence of which failure the lease contract of equipment is claimed to be invalid, it cannot be upheld. The lease contract of equipment stands upon practically the same footing as the claim made respecting the overissue of stock and bonds for construction. In pursuance of the latter contract the railway company agreed to pay the construction company for rolling stock, etc., $1,120,000 in ten years from the date of the contract. The construction company subsequently assigned this contract to the Guaranty Trust and Safe Deposit Company of Philadelphia, by an instrument known as the “ Assignment and transfer in trust,” and the latter company issued thereon equipment trust certificates to the construction company in an amount equal to the sum secured by the contract. The construction company pledged $1,000,000 or more in these certificates for loans to it by third parties, and some of these certificates •remained pledged at the time of the execution of the MathesonPalmer agreement. This agreement, with respect to this matter,
Fourth. This claim is that no part of the $217,000 is applicable to the payment of debts due the construction company. The basis for this assertion rests in the claim that provision had been otherwise made for the payment to the construction company of all its claims, and more, in other provisions of the Matheson-Palmer agreement, and that the construction company through its officers fraudulently made up a false statement of the floating indebtedness of the railway company, and furnished the same to the representatives of Matheson & Co., upon their request, at the time the negotiations were pending which resulted in the Matheson-Palmer agreement, and that by reason of such false statement the persons representing
We must, therefore, proceed to consider the claim of fraud upon the presumption that Messrs. Smithers and Beaman knew that the provision which provided the fund for the payment of floating debts embraced any company which held such debts, including the construction company, if any such debts existed in its favor. Consequently, when the statement was made up, upon which it is said they exclusively acted, it must follow that they did not know, and could not know, from it a single individual or company embraced in the item “Individuals and Cos.,” or for that matter in any other item, for not a single creditor is named therein which held the floating debt or any part of it. If it was their purpose to know, and if they required the statement with the object of finding out. not alone the amount, but to whom the debts were due, then, confessedly, the statement failed to give any information upon the latter point, and did not intend or assume so to do. If the purpose 'was in asking for a statement of the floating indebtedness, to obtain therefrom a knowledge to whom it was due, then, evidently, we must conclude that such purpose was, by them, abandoned, as they obtained no such information, and so far as appears were content with the information received, and this related alone to the amount due, and not to whom due. In this view we are prepared to concur in the opinion expressed by the court below and by Judge Wheeler,. that it was the amount of indebtedness which Messrs. Smithers and Beaman regarded as the important thing, and that they were not concerned with the question as to the parties to whom it was due, and in consequence such question is not important now. It is, therefore, evident that they could not have been misled to their prejudice by this statement. But we may go further than this. It is to be noted that nearly the whole amount of the construction company’s
Eespecting the plaintiff’s claim to recover the additional sum of $80,000, the substantial facts are admitted by the answer, and in, brief are as follows: The railway company needing money to pay/ interest, made' eight promissory notes which were indorsed by the construction company, and the money realized therefrom was paid to the railway company. In order that the railway company might obtain the money, the construction company loaned to it, among other securities, 8,000 shares of stock of the railway company, which the former pledged as collateral security for the payment of the notes. This loan of stock was accompanied by an agreement, whereby the railway company agreed to return the stock loaned or pay therefor $10 a share and thus keep the construction company indemnified from liability upon the notes. The $40,000 was obtained by the construction company of Charles S. Hinchman, upon the securities pledged, accompanied by an option executed by the railway company to take the stock at any time before the maturity of the notes, in payment therefor, at $5 per share. Hinchman exercised this option by talcing 8,000 shares at $5 per share and discharged the notes. The construction company demanded a return of the shares of stock thus loaned, or payment therefor as provided in the contract, with which demand the railway company never complied. The answer concedes that the securities which were loaned were the property of the construction company. It is clear, therefore, that to the extent of the $40,000 which it is conceded the railway company had and used for its purposes, and which it has never repaid, a liability was created against it which is properly chargeable against this fund. The court below has so held, and we see no reason for disagreeing with that conclusion. Both Judge "Wheeler and Judge Cullen rejected the claim for the bonus to be paid for failure to return this stock. We think the construction correct, which holds that this claim for failure to return the stock did not exist as an indebtedness in the sense in which that term was "used in the Matheson-Palmer agreement, and was not, -therefore, such indebtedness as was contemplated by it or embraced within it, or to which the fund was to be applied. The claim to this extent was,
The court below, in adjusting the plaintiff’s account, struck therefrom an item of $23,962.09 which the plaintiff now claims was error. "We have examined with care the argument presented in favor of the claim, and, not without hesitation, agree with the conclusion reached by the court below. We do not agree with the appellant that the question presented is solely one of law, but conclude that it presents alone a question of fact. The transaction between the construction company and the railway company relating to this item was not a sale of the material, but a transfer, by which the construction company sought to protect and place the property beyond possible reach of creditors,.so that construction or operation might proceed in the event .that the latter company became financially embarrassed. It is needless to set out in detail the accounts which evidenced this transaction. By the omission of this item from the reverse entries of the transaction in the books, and the presence of other reverse entries relating to the property, it is asked that inference be made of a subsequent actual sale of material to the railway company of this amount. This inference is based upon the fact that the jnojjerty, when last heard of, was in the custody of the railway company;. that the books evidenced the change; that the entries were properly made by honest and competent men; that the charge was undisputed for nine years, and was not discovered or complained of by the persons who made the entries, and that, practically, the whole item of the pledged material was accounted for in the reverse entry. As an offset to this it was testified by Webb that this item should have formed a part of the pledged material account; that there is no evidence of any actual sale, and that while the railway company was the actual custodian of the property when Webb last saw it, yet it was then the property of the construction company, and claim is made that as such it entered into the account current where the construction company had credit for it. We might have reached a different conclusion respecting this item ; but upon no legal principle can we disturb the finding. (Baird v. Mayor, etc., of N. Y., 96 N. Y. 567.)
The court below held that this was an equitable action, and that the
The judgment appealed from will be modified so far as the interest items are concerned, as herein indicated, and as so modified should be affirmed, with costs to the plaintiff.
All concurred, except Cullen, J., not sitting.
Judgment modified so far as interest items are concerned, as indicated in the opinion, and as modified affirmed, with costs to the plaintiff.