Simmons v. . Sisson

| NY | Mar 5, 1863

Lead Opinion

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The principal questions in this case are those raised by the exceptions to the findings of the referee: 1st, as fact admitted by the pleadings, that the sum of $736.86 was paid, laid out and expended by the intestate, in his lifetime, for the plank road company, by direction of the board of directors, and of persons authorized by them; and 2d, as a conclusion of law, that the company was indebted to the intestate, at the time of his death, in the sum of $607.14, besides interest.

The substance of the pleadings, so far as they relate to these questions, are as follows: The plaintiffs allege that the intestate, in his lifetime, while acting as treasurer of the plank road company, from time to time, by the direction of the board of directors, advanced and laid out in keeping the road in repair, a large sum, amounting to about $800, over and above the amount received by him from the tolls and earnings of the road; and that at the time of his death the company was justly indebted to him in the sum of $744.74, on account of such advances. To these allegations the defendants answer:

1. That they have no knowledge or information sufficient to form a belief that, at or before the decease of the intestate, said company was justly indebted to him in said sum of $744.74, or any sum whatever, for money expended in repairing the road, or in any other manner.

2. That the intestate, during the time the indebtedness is alleged to have accrued, was secretary and treasurer of the company, and well acquainted with the condition and the amount of earnings and expenditures; and was directed and authorized by said company "to lay out and expend in the repairing, grading and the work and labor necessary to do the same, the surplusreceipts and earnings of said road and no more;" and that the alleged advances, if made at all, were made by said intestate, "contrary to the wishes and instructions of said company, and inhis own wrong."

The first defence (the particular form of denial being such as is prescribed by the Code) is the exact equivalent of nildebet, at common law. It may admit of some doubt whether nil debet was not a proper answer to this complaint. The facts stated in the complaint are peculiar; and do not vary materially from an indebitatus count in debt, according to ancient forms of pleading. The statement of the advances to the amount of about $800 beyond tolls and earnings, is not put forth as the cause of action, but only as inducement; the cause of action being that at the time of the intestate's death there remained due to him, as a balance of advances, over and above tolls and earnings, the sum of $744.74; and for this sum judgment is demanded. To such a complaint I think the ancient plea of nil debet is a good answer under the Code. In Gates v. Wheeler (2 Hill, 233), BRONSON, J., says: "In debt for rent, by indenture, or for an escape, or for a devastavit by executor, it has been held that the indenture, or the judgment, is but inducement; and that the arrears of rent, the escape and devastavit are the foundation of the action; in these cases nil debet is a good plea." (Bullis v. Giddins, 8 Johns., 82" court="N.Y. Sup. Ct." date_filed="1811-05-15" href="https://app.midpage.ai/document/bullis-v-giddens--brown-5472817?utm_source=webapp" opinion_id="5472817">8 John., 82; Dartmouth College v.Clough, 8 N.H., 28.)

But whether the preceding position is correct or not, it was too late to object, at the close of the trial, that this division of the answer did not put the fact of indebtedness in issue. Under the former system of pleading, nil debet to an action of debt on bond or judgment was bad on general demurrer, but if, instead of demurring, the plaintiff went to trial on that issue, it was always held to put him to the proof of his cause of action. Mr. Starkie says (2 Starkie's Ev., 140): "The plaintiff in an action on a bail bond, whether he be the sheriff or his assignee, under the plea of non est factum need prove the execution only; but if he should inadvertently have joined issue upon a plea of nil debet, instead of having demurred, he will be bound to prove all the averments, the issuing of the writ, the arrest, the execution of the bond, and the assignment if the action be brought by the assignee." This effect has constantly been given to the plea of nil debet, notwithstanding its acknowledged insufficiency if demurred to, both in England and in this country. (Rawlins v. Danvers, 5 Esp., 38; Anonymous, 2 Wils., 10; 2 Phil. Ev., Cow. Hill's ed., 168; 1 Chitty on Pleading, 433, Springfield ed., 1844.) In Myers v.McLean (2 Johns., 183" court="N.Y. Sup. Ct." date_filed="1807-02-15" href="https://app.midpage.ai/document/meyer-mclean-5472052?utm_source=webapp" opinion_id="5472052">2 Johns., 183), the court says of such a plea to debt on a judgment: "We are all of opinion that the plaintiff, having treated this plea, in the present case, as a legal plea, and gone to trial upon it, he cannot now allege anything against it, and is concluded by his own acts." This decision was on a motion in arrest of judgment, but the ruling has been the same where the objection was taken in evidence, under the plea at the trial. InRush v. Corbett (2 Johns. Cas., 256" court="N.Y. Sup. Ct." date_filed="1801-04-15" href="https://app.midpage.ai/document/rush-v-cobbett-5474844?utm_source=webapp" opinion_id="5474844">2 Johns. Cas., 256), where nil debet was plead to an action of debt on a judgment, it was insisted on the trial, that the plea did not put the judgment in issue. The contrary was held, and, on a motion for a new trial, RADCLIFF, J., delivering the opinion of the court, said: "If the plea ofnil debet had any effect or operation, I think it was incumbent on the plaintiffs to prove the record. It is the general issuewhich admits nothing, and is a total and general denial of the plaintiff's right of action." I think, therefore, that under the strictest rules of special pleading, the first defence of this answer, if not objected to as insufficient, before the trial, by demurrer, would always have been held sufficient, on the trial, to put in issue the plaintiff's cause of action; and that, in view of the late gentle admonition of the legislature to courts, that, "in the construction of a pleading, for the purpose of determining its effect, its allegations shall be liberally construed, with a view to substantial justice between the parties," the referee erred in holding that the defendant had admitted the indebtedness of the corporation, when they expressly denied it.

There are, I think, much stronger reasons now for holding such answer sufficient, on the trial, to put the question of indebtedness in issue, than there were when the decisions were made, to which I have referred. There was then no method of objecting to the pleadings except by demurrer, which was an expensive and dilatory proceeding. Parties are now provided with short and cheap methods, by motion, to compel defective pleadings to be amended, stricken out, or that judgment be pronounced upon them summarily; and they can have no excuse for reserving such objections until the close of a trial. I am of opinion that where that course is taken, the party must stand upon the pleadings and the evidence together; that the judgment must be such as the whole case, pleadings and evidence united, demands, and that it would be the duty of the court, under section 176 of the Code, to disregard defects in the pleadings not before noticed, or to order the required amendments under sections 170 and 173. If, however, the case should be such as to satisfy the court that either party had been misled by the defects in the pleadings, it should be disposed of under section 169. As the present case may be disposed of without adopting any principle so general, the decision, of course, will not depend upon its soundness.

The second division of the answer was also sufficient to put in issue the alleged indebtedness. The plaintiffs say that Simmons made advances for repairs, by direction of the directors, to the amount of $800 over and above his receipts, and that when he died the company was indebted to him $744.74 on account of such advances. The defendants answer, that at the time the indebtedness is alleged to have accrued, Simmons was treasurer, and received the earnings of the road, and was authorized to expend in repairs the surplus earnings of the road, and no more. This allegation, without any aid from the subsequent portions of the answer, puts in issue the authority of Simmons to make any advances beyond the receipts, or to create any indebtedness against the company. The words "and no more" are equivalent to "et non" or "absque hoc," the technical words of traverse of the old system of pleading. The brevity of the expression takes nothing from its force, and it amounts to a denial of all authority in Simmons to make advances beyond the receipts, and consequently to create a debt against the company. The attention of the court below does not appear to have been called to this view of the answer.

There is a further allegation in the answer, to the effect, that Simmons was expressly forbidden to incur any liability on the part of the company, which was properly characterized in the court below as new matter, to be proved by the defendants; and that court held that the question whether the allegation was proved was for the referee to decide, upon the evidence, and that his decision was final. If he had decided the question upon the evidence, although it might appear to this court that the allegation was sufficiently proved, the decision would be regarded as conclusive. The referee, however, did not pass upon the evidence, but held the fact of indebtedness admitted by the pleadings, without reference to the evidence, in which respect I think he committed an error in law that cannot be overlooked. A new trial must, therefore, be granted, and it is unnecessary to examine the questions presented by the decisions in regard to the admission and rejection of evidence.

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Concurrence Opinion

The referee and the Supreme Court wholly misapprehended the nature and effect of the allegations of the complaint and answer, and both improperly held that the defendants admitted by their answer, the allegation in the complaint, "that Simmons, the plaintiffs' intestate, while he was acting as treasurer of the Dresden and Penn Yan Plank Road Company, advanced and paid, laid out and expended money, under and by the direction of the board of directors of said company and the person or persons authorized by said directors, in and about keeping said plank road in repair, and in paying for material and work and labor done on said plank road over and above the amount received by him from the tolls and earnings of said plank road."

The second answer contains this language: "And these defendants say that the said Simmons, before and during the time he was making said advances alleged in said complaint, was strictly forbidden, by said plank road company, to expend any greater amount of money, material and labor upon said road than he received from the earnings of said road, and not to incur any liability on the part of the said company greater than the tolls and earnings thereof would pay. And these defendants allege, that the said alleged advances, if made at all, were made by said Simmons contrary to the wishes and instructions of the said plank road company in his own wrong."

The averment in the complaint, that the advances were made "under and by the direction of the board of directors, and of the person or persons authorized by said directors," simply means that they were made at the request of the company and in accordance with its directions. The word "directions" in the complaint and "instructions" in the answer, in the connection in which they are used, are synonymous. Adopting this as the correct and legal paraphrase of the language used, it is impossible, in the nature of things, that the language of the second answer above quoted should not be regarded as a general, and a full and complete denial of the allegation in the complaint. It is a contradiction and an absurdity to say that the advances were made by the request of the company, and by its instructions or directions, and, at the same time, that they were made contrary to the wishes and instructions of the company. The answer does not need the aid of the liberal construction prescribed by the Code in order to constitute a full and complete denial of the allegations of the complaint. Giving to its language its ordinary signification, it amounts to such a denial, and it is only by a forced and unnatural construction that it can be made to speak less. Nor is it the less a denial of the allegations of the complaint, if it be conceded that other portions of that answer introduce new matter. This new matter, so called, has no necessary connection with the portion of the answer above quoted. It is not needed as the foundation or inducement of the denial, nor does it qualify or abridge, in the least degree, the signification or effect of the part quoted. But if the liberal rule of construction prescribed by the Code is applied to the second answer, it is impossible, with any degree of fairness, to attribute to it an admission that the alleged advances were made by Simmons at the request, or even with the assent, of the corporation or of its board of directors, or of any of its agents.

The erroneous ruling of the referee in regard to the force and effect of the answer, was the cause of many of the other errors committed by him during the progress of the trial. In this class was his improper admission of the testimony of Graves and Brown, in opposition to the defendants' objection, that no authority or request by the corporation to Simmons to make the advances had been proved. The question presented and decided by the referee under this objection was as to the competency of the offered evidence in the absence of proof of the authority or request insisted on by the objection, and the error cannot be evaded by saying that the question was merely one relating to the order of proof. The referee did not put his decision upon any such ground.

The orders drawn by Legg and Sisson, as directors, on Simmons, as treasurer of the plank road company, were improperly admitted in evidence. Assuming that Legg and Sisson had authority to draw the orders, the payment of them by the treasurer is presumed to have been made out of the funds of the corporation in his hands, and they afforded no ground of action against the corporation. The evidence referred to by the court below, as the ground for sustaining the decision of the referee, instead of furnishing any reason for the admission of the orders in evidence, on the contrary furnishes the most conclusive reason for the rejection. It is said that it appeared that Sisson and Legg were appointed to superintend the labor on the road and the expending of this money; but the money referred to is distinctly designated in the resolution, spoken of by the witness as having been passed by the board of directors, to the effect that they should expend the money on hand and the receipts for tolls accruing on the road, in graveling, and no faster. In the absence of all evidence to the contrary, the drafts are presumed to have been drawn upon the fund in the treasurer's hands belonging to the corporation.

The referee also erred in rejecting the testimony offered to be given by the defendant showing that he heard a conversation between the plaintiff's intestate and Townsend, in June or July, 1857, in which the intestate admitted to Townsend that he was instructed by the board of directors of the plank road company, in June, 1856, to expend no more money on the road than the money in the treasury and the ordinary receipts from the tolls. This evidence was rejected upon the ground that a conversation heard by the witness, who was a party to the action, was a transaction had personally between him and the deceased, and could not, therefore, be testified to by him, under section three hundred and ninety-nine of the Code of 1860. The prohibition of that section does not prevent a party testifying in an action in which the legal representatives of a deceased person are adverse parties, to a conversation between the deceased and a third person, which was overheard by the witness. The hearing of such conversation is not "a transaction had personally between the deceased and the party," within the meaning of the section of the Code referred to. This language has reference only to business done or negotiations carried on in person between the deceased and such party. That this is the true construction of this language is evident from the amendment of this section of the Code in 1862, which inserted the words "conversation or" before the word "transactions," so that the section now prohibits a party testifying in such an action in regard to any conversation or transaction had personally between the deceased person and such party. Even as the section now stands, it does not prohibit a party testifying to a conversation between the deceased and a third person, heard by the party, and in which he did not participate.

The referee also improperly refused to allow this witness, Legg, to testify that the board of directors did not give the intestate any directions or permission to expend money upon the plank road, except the money in the treasury and the ordinary receipts of the road. This error was in consequence of the previous erroneous ruling of the referee as to the construction of the defendant's answer.

It was also an error to allow proof of the admission of Legg that the account of the intestate against the plank road company was correct. The admissions of a member of a corporation aggregate are not competent to charge the corporation unless they are made in relation to a transaction in which such member is the authorized agent of the corporation. (Ogden v. Manhattan Co., 3 Cow., 623" court="N.Y. Sup. Ct." date_filed="1824-04-15" href="https://app.midpage.ai/document/thallhimer-v-brinckerhoff-5464299?utm_source=webapp" opinion_id="5464299">3 Cow., 623; Hartford Bank v. Hart, 3 Day, 493.) The doubt which formerly existed upon this subject was settled by these decisions, and the statute (2 R.S., 408, marg.; 3 id., 5th ed., 692), was merely an affirmance of this rule. That statute declares that in suits by or against an aggregate corporation, the admission of any member thereof, not named on the record as a party to such suit, shall not be received as evidence against such corporation, unless such admission was made concerning some transaction in which such member was the authorized agent of such corporation.

Nor were the admissions of Legg competent to charge his co-defendants. The liability of stockholders in plank road companies, for the debts of the corporation, is a several and not joint liability; and yet the referee allowed Legg's admission to be proved to charge his co-defendants.

The referee's report contains no finding as to whether the plaintiff's intestate was a stockholder of the plank road corporation at the time he made the advance for which he seeks to recover. The defendant's second answer, however, avers the fact, and the plaintiffs themselves gave evidence that he was such stockholder in the years 1855, 1856 and 1857. The 38th section of the general act (2 R.S., 5th ed., § 120) declares that no person shall be a director unless he is a stockholder in the company, and the plaintiffs proved that their intestate was a director during the years named. When the plaintiffs rested, a motion for a nonsuit was made, and the first ground stated is that the plaintiffs had entirely failed to make out a cause of action. This is the only ground stated under which it can be claimed by the defendants that the question may be raised whether a stockholder can bring an action under section 46 of the act (2 R.S., 5th ed., § 129), against one or more stockholders, less than all, to recover a demand due to him from the corporation. We think the ground upon which the motion for a nonsuit was made was not sufficiently specific to bring the question referred to before the referee. And the referee's report contains no finding as to whether the plaintiff's intestate was a stockholder at the time he made the advances. The exceptions to the referee's conclusions of law, based upon the facts found, do not enable the defendants to raise the question whether a stockholder could maintain such action. Without deciding the question, it may not be improper for the court to say that the more appropriate action would seem to be one brought under section 44 of the act (2 R.S., 5th ed., § 127) for contribution, against all the stockholders liable to contribution, as was suggested in the case of Bailey v. Banks (3 Hill, 188). In the act of 1855 (2 R.S., 5th ed., p. 514, chap. 390, §§ 154 — 156), the legislature deemed it necessary to declare that a stockholder, having a claim against the corporation, should be deemed a creditor, and entitled to appear in an action authorized by these sections and prove his claim and have judgment therefor. It would seem, from this decision and this legislation, that a stockholder could not bring an action under section 129.

The judgment should be reversed and a new trial ordered, with costs to abide the event.

SELDEN, J., concurred in all the points of this opinion not discussed in his own: all the judges concurring,

Judgment reversed, and new trial ordered.