Manhattan Savings Institution v. Town of East Chester

Lawrence, J.: While it is true that where towns are authorized to issue bonds under special statute, to pay the expenses of improvements, the holders of the bonds must show that the requirements of the law have been complied with, we think in this case that the plaintiff made a prima facie case, and as the defendant offered no evidence to show that the statute had not been complied with, we do not [542] think that the first and second points argued by the appellant’s counsel can be sustained. (See Cagwin v. The Town of Hancock, 84 N. Y., 532, and other cases cited as to the liabilities of towns). The plaintiff proved the taking of the oath by the commissioners and by McLean, one of the commissioners, that they entered upon the discharge of the duties prescribed by the act, and that the Midland avenue road was one of the roads and boulevards built by them, and that bonds were issued by the town on requisitions from the commissioners for the improvement of that avenue, and that all the commissioners acted. As has been stated, the defendant in its answer admits that the bonds set forth in the complaint were made, signed and countersigned, as therein mentioned. It seems to us that this admission, taken in connection with the proof offered by the plaintiff at the trial, in the absence of anything tending to throw suspicion upon the fairness and honesty of the transaction, makes out a prima facie case that the bonds were duly and properly issued. The criticism which is made by the appellant’s counsel, that the proof shows that the work was not wholly completed when the commission was legislated out of the office, we do not regard as sound, because section nineteen of the act of 1869 seems to contemplate that the bonds shall be issued from time to time as the work progresses and that the commissioners were not obliged to wait until the entire completion of the work before they could draw a requisition for the issuing of a bond by the supervisor and town clerk. McLean’s testimony establishes that those bonds were for that work, and, as has been said before, in the absence of any evidence to show bad faith, we must assume, with McLean’s evidence before us, that the commissioners acted in good faith, and that the bonds were issued for work which had already been done, or which was being done in accordance with a contract properly entered into by the commissioners. The'evidence establishes beyond all question that the plaintiff’ fairly purchased the bonds referred to and paid the par value therefor, and all the interest which had accrued thereon between the date of the bonds and the sale of them to the plaintiff. We do not understand that it is beyond the power of a court of equity to give relief in cases of this character upon a proper bond of indemnity being furnished. The bonds in question being payable to bearer were negotiable, and independently of any statute courts [543] of equity, upon the loss of sucb securities, upon a proper Done! o± indemnity being tendered to the debtor, decree relief to the holder of such securities. (See 1 Story’s Eq. Jur., §§ 82, 86, and cases cited; see, also, The People ex rel. The Manhattan Savings Institution v. Otis, 24 Hun., 524, and cases cited by Gilbert, J.) The decision in that case, which was subsequently affirmed by the Court of Appeals (90 N. Y., p. 48), is not adverse to the plaintiff’s position here. There an act of the legislature was passed for the relief of the plaintiff, which, after providing that the city of Yonkers could'issue duplicate bonds, went on to provide that the city, after the delivery to the bank of the duplicate bonds therein provided for, should be discharged from all liability on the original bonds to all persons purchasing the same after due publication of the notice prescribed by the act, and gave a right of action against the bank upon the bond of indemnity to the lawful owner of such bonds, in place of the liability of the original obligor. (See Laws 1880, chap. 59, § 2). The court held that that provision was unconstitutional, as the effect was to destroy the negotiable quality of ’the bonds, and to impair the obligation of contracts, and also because it deprived a person of property without due process of law. The case is not an authority for the position that the remedy of the plaintiff is by application to the legislature. (See opinion of Gilbert, J., 24 Hun, pp. 522 and 523). We see no reason why a town cannot be as fully protected by a bond of indemity as an individual, nor any reason why, if a proper case is made out, a court of equity should not exercise the power herein before referred to. (See 1 R. S. [7th ed.], p. 840, §§ 1, 2, 3 and 8.) We do not regard the case of Lorillard v. The Town of Monroe, (11 N. Y., 392,) as promulgating any doctrine adverse to the views above expressed. It is claimed by the appellant’s counsel that -the court would be, in effect, making a new contract for the town of East Chester if the judgment below is sustained. We da. not accede to this proposition. The contract was made at the time the bonds were issued in conformity with the statute, and when-' the plaintiff paid its money to the commissioners for the benefit of the town. The object of this action is to enforce the liability thus incurred on the part of the town, and at the same time to protect [544] tbe town by the same safeguards as would be provided in the case of an individual. There is one point, however, made by the appellant, which we think inust be sustained. The action was brought to recover the sum of $5,000, the amount of the principal of five bonds numbered from 27 to 31, inclusive, which became due and payable on the 1st of July, 1883, with interest thereon, and also the interest upon the remaining forty-five bonds from the 1st day of July, 1878. The action was commenced on or about the 13th of July, 1883, and the court awarded judgment not only for the principal of the bonds which were due on that day, but also for the principal of five other bonds which fell due on the 1st day of July, 1885. The complaint was not amended, and it will thus be seen that the plaintiff was allowed to recover upon a cause of action other than that stated in the complaint. We do not understand the cases cited by the respondent as obviating this difficulty. Those cases were cases in which it was held that if a fact had been assumed on the trial it might be assumed at all future stages of the action, and that for the purpose of upholding the judgment proof could be given on the argument of the appeal; and that the court may treat the pleadings as having been amended in conformity with the proofs, in any respect, in which the court ought clearly to allow an amendment at Special Term. This case does not fall, it seems to us, within that class of cases. It was not assumed at the trial that this action was brought to recover any other principal sum than the $5,000 due upon the bonds which became due before the commencement of the action, and there is nothing in the admission made at folio 54 of the case, upon which the plaintiff relies, which indicates that either party supposed that the principal sum of the five bonds which became due in 1885 could be a subject of recovery. It was agreed by the counsel on the trial, “that the numbers and description of the bonds and time of payment of principié and interest as stated in the complaint be considered as the bonds that were stolen.” There was no agreement to amend the complnint, to the effect that the plaintiff might claim to recover the sum of $5,000, for the five bonds which became due about two years after the action was commenced. (See Barnes v. Quigley, 59 N. Y., [545] 265; Reeder v. Sayre, 70 id., 180, 190; Robertson v. Robertson, 9 Daly, 44, 57; Sheldon v. Adams, 18 Abb. Pr. 405.) Tbe judgment below must, therefore, be reduced by deducting from the amount thereof the principal sum of the five bonds which fell due on the 1st of July, 1885. The amount of the bond of indemnity must also be proportionately reduced, and with such modification the judgment will be affirmed, with costs. Yan Brunt, P. J., and Bartlett, J., concurred. Jndgment modified as directed in opinion and affirmed as modified, with costs.