173 N.Y. 455 | NY | 1903
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *458 This action was brought by the plaintiff, as receiver of the Commercial Alliance Insurance Company, against the defendants, as directors of that company, to recover the sum of ten thousand dollars and interest.
The Commercial Alliance Insurance Company was incorporated under the laws of this state and continued in business until October, 1894, when the plaintiff was appointed receiver *459 in an action brought for that purpose by the attorney-general of the state. The evidence taken upon the trial tends to show that prior to the bringing of the action by the attorney-general the defendants, and other persons beyond the jurisdiction of the court, were acting as directors of the company, and that they entered into negotiations with the ten surviving incorporators of the Maine and New Brunswick Insurance Company, a corporation organized under the laws of the state of Maine, for the purchase and control of that company; that such negotiations were finally consummated on the third day of May, 1893, by the president of the Commercial Alliance Company who, acting in pursuance of the direction of the defendants and their associates, took from the funds of the company thirty-five thousand dollars and paid the same to the ten surviving incorporators of the Maine and New Brunswick Company, giving to each the sum of three thousand five hundred dollars, and taking from them a paper in which they purported to transfer and assign "all their right, title and interest as corporators, associates or otherwise in said Maine and New Brunswick Insurance Company." Simultaneously with the execution and delivery of this paper and in pursuance of that agreement, all of the officers and directors of the Maine Company resigned their places and the same were filled by the defendants or persons acting for or on their behalf. Shortly thereafter, and on the 22d day of July, 1893, the Maine and New Brunswick Company was judicially declared by the Supreme Judicial Court of Maine to be insolvent and a receiver was appointed to wind up its affairs. After the plaintiff was appointed receiver of the Commercial Alliance Company he brought an action against the ten surviving incorporators of the Maine and New Brunswick Company in the United States Circuit Court for the district of Maine to recover back the thirty-five thousand dollars which had been paid to them under the direction of the defendants. Subsequently, this action was compromised under the direction of the court, the plaintiff receiving from such surviving incorporators the sum of twenty-five thousand dollars, and he *460 thereupon executed and delivered to them an instrument in which he released and discharged all of the defendants in that action "from all claims or demands arising from said suit or the subject-matter thereof, and also from all claims, demands, actions and causes of action whatsoever in favor of said Commercial Alliance Insurance Company or of myself as receiver of said Company to date. The execution of this instrument shall not affect any cause of action of the receiver against any person not named herein." It also appeared upon the trial that the defendant Miller had brought an action against the Commercial Alliance Company prior to the appointment of the plaintiff as receiver, in which he claimed that a large sum of money was due and owing to him from the company. This action was settled upon the payment to him of the sum of eight thousand dollars, and thereupon mutual releases were exchanged between him and the company upon the consideration expressed therein of one dollar.
We fully concur in the conclusions reached by the Appellate Division, to the effect that the transaction by which thirty-five thousand dollars were taken from the treasury of the Commercial Alliance Company and paid over to the incorporators of the Maine and New Brunswick Company was ultra vires and constituted a waste of the funds of the Commercial Company, and that the defendants, who authorized such appropriation of the moneys, became liable to respond to the plaintiff in damages. We also are of opinion that the Appellate Division properly disposed of the claim of the defendant Miller under his release.
There is but one question upon which we deem further discussion necessary. That arises out of the release given by the plaintiff to the Maine incorporators upon the settlement of the action against them for twenty-five thousand dollars. It is contended by the defendants in the first place that, if they are required to return to the plaintiff the thirty-five thousand dollars which they paid or caused to be paid to the Maine incorporators, they would become in equity entitled to subrogation to the rights of the plaintiff and entitled to recover the *461 money which they had paid to the Maine incorporators and that the release would operate to deprive them of this right. In the second place, they contend that the release was a settlement of the entire claim and that its effect was to discharge them upon the theory that they were joint tort feasors.
It is not our purpose to question the character or the motive of the defendants in carrying out the transaction. We may readily concede that they thought they were acting for the best interests of the company which they represented. They, doubtless, thought that by getting control of the Maine Company and getting themselves installed as officers they could get the policyholders in that company to transfer their insurance into the Commercial Alliance Company; but good motives and good intentions do not render the transaction valid or relieve them from liability for the wrong which they have committed. The Maine incorporation was not a stock company. Its officers had no stock in the company which they could sell or transfer, and consequently there was nothing that the Commercial Alliance Company could purchase. The thing accomplished by the transaction was the resignation of the officers of the Maine Company and the substitution of the defendants or their representatives. It was, therefore, a misappropriation of the moneys of the Commercial Alliance Company by the defendants and their associates which operated to waste the funds of the company and they thereby became wrongdoers, and among themselves joint tort feasors. We are also of the opinion that the officers of the Maine Company also committed a wrong. If they, as officers of the Maine Company, could transfer any of the property of that company to the Commercial Alliance Company they had no right, as such officers, to divide up the thirty-five thousand dollars among themselves and put it into their own pockets. If they had no property rights which they could transfer to the Commercial Alliance Company then they had no right to take the money of that company and convert it to their own use, so that, as among themselves, they were joint tort feasors. As to whether they were joint *462 tort feasors with the defendants we do not deem it necessary to now determine, for it is our purpose to consider the question in both aspects.
If the defendants had paid the Maine incorporators thirty-five thousand dollars of their own money to resign their position in that company and have the defendants substituted in their places, we are aware of no equitable or legal principle upon which they could recover the money. They got what they purchased. They understood fully what the Maine officers had to transfer. In using the money of the Commercial Alliance Company they committed, as we have seen, a wrong upon that company, and our attention has been called to no case in which equity has enforced the right of subrogation in such a case. Indeed, we had supposed the policy of the law to be to leave wrongdoers without aid in equity from the burdens of the position in which they have placed themselves. The rule is well settled that, as among themselves, equity would not compel contribution or enforce subrogation. (Peck v. Ellis, 2 Johns. Ch. 131; Miller v. Fenton, 11 Paige 18; Thorp v. Amos, 1 Sandf. Ch. 26, 34; Pierson v.Thompson, 1 Edw. Ch. 212, 218; Wehle v. Haviland, 42 How. Pr. 399, 410; North v. Sergeant, 33 Barb. 350, 354; Weidman
v. Sibley,
In considering the effect of the release we shall assume that the defendants were joint tort feasors with the Maine incorporators, and that the release, under seal, of a claim given to one joint tort feasor operates as a release of all. (Barrett
v. Third Ave. R.R. Co.,
In England the modern authorities appear to be quite uniform upon the question. They are to the effect that, as between joint debtors and joint tort feasors, a release given to one releases all; but if the instrument contains a reservation of a right to sue the other joint debtor or tort feasors, it is not a release, but in effect is a covenant not to sue the person released, and a covenant not to sue does not release a joint debtor or a joint tort feasor.
In the case of Duck v. Mayeu (L.R. [2 Q.B. 1892] 511) the question was as to whether the plaintiff had released a joint tort feasor. He had accepted from one a sum of money, but without prejudice to his claim against the other. SMITH, L.J., in delivering the opinion of the court, said with reference thereto: "In determining whether the document be a release or a covenant not to sue, the intention of the parties was to be carried out, and, if it were clear that the right against a joint debtor was intended to be preserved, inasmuch as such right would not be preserved if the document were *464 held to be a release, the proper construction, where this was sought to be done, was that it was a covenant not to sue, and not a release. In the case of Bateson v. Gosling, at Nisi Prius, the same canon of construction was applied, and it was held that, the release being, as it was, limited by a proviso reserving rights against the surety, it must be taken that it was a covenant not to sue, and not a release; and this ruling was unanimously upheld by the Court of Common Pleas, as reported in Law Rep. 7 C.P. p. 9."
In Price v. Barker (4 Ellis Bl. 760 [E.C.L.R. vol. 82]) COLERIDGE, J., says: "With regard to the first question, two modes of construction are for consideration. One, that, according to the earlier authorities, the primary intention of releasing the debt is to be carried out, and the subsequent provision for reserving remedies against co-obligors and co-contractors should be rejected as inconsistent with the intention to release and destroy the debt evinced by the general words of the release, and as something which the law will not allow, as being repugnant to such release and extinguishment of the debt. The other, that, according to the modern authorities, we are to mould and limit the general words of the release by construing it to be a covenant not to sue, and thereby allow the parties to carry out the whole of their intentions by preserving the rights against parties jointly liable. We quite agree with the doctrine laid down by Lord DENMAN in Nicholson v. Revill (4 A. E. 675 [E.C.L.R. vol. 31], as explained by Baron PARKE in Kearsley v.Cole, 16 M. W. 136) that, if the deed is taken to operate as a release, the right against a party jointly liable cannot be preserved; and we think that we are bound by modern authorities (see Solly v. Forbes, 2 Br. B. 38 [E.C.L.R. vol. 6],Thompson v. Lack, 3 Com. B. 540 [E.C.L.R. vol. 54], andPayler v. Homersham, 4 M. S. 423 [E.C.L.R. vol. 30]) to carry out the whole intention of the parties as far as possible, by holding the present to be a covenant not to sue, and not a release." (See, also, Currey v. Armitage, 6 Weekly Repr. [Eng.] 516.)
In the case of McCrillis v. Hawes (
In the case of Ellis v. Esson (
In Sloan v. Herrick (
We have thus called attention to the English authorities and those of some of our sister states. We have also referred to some of the conflicting cases in our own courts. The question appears to have first received attention here in Kirby v. Taylor (6 Johns. Ch. 250, 253) in which it was held that a release is to be construed according to the clear intention of the parties, and where it contains a reservation, the other obligee was not discharged.
In the case of Irvine v. Millbank (
And finally, in the case of Whittemore v. Judd Linseed Sperm Oil Co. (
It thus appears that the decisions of this court are in accord with the English rule and in harmony with our statute in reference to joint debtors. (Code Civ. Pro. §§ 1942, 1944.) They give force and effect to the intention of the parties to the instrument, which, we think, is more just and the wiser and safer rule. Where the release contains no reservation it operates to discharge all the joint tort feasors; but where the instrument expressly reserves the right to pursue the others it is not technically a release but a covenant not to sue, and they are not discharged. It follows that the release, so called, did not operate to discharge the defendants.
The order of the Appellate Division should be affirmed and judgment absolute ordered in favor of the plaintiff upon the stipulation, with costs.
PARKER, Ch. J., GRAY, BARTLETT, CULLEN and WERNER, JJ., concur; O'BRIEN, J., absent.
Order affirmed.