Arnold v. Morris

Joseph F. Daly, J. [after stating the facts of the case as given above].—Upon these facts the learned judge, at special term, held that the promise of Rouss & Bell to plaintiffs to hold the stock attached in the Hoboken store, and additions to the stock, as security for plaintiffs against loss, by reason of their indemnifying the Musers for giving the undertaking to discharge the attachment, created a trust in favor of the latter, which they were entitled to enforce as a lien against the stock in the Hoboken store, and the goods with which the same was replenished, and by which they were entitled to the proceeds of the sale of such stock and goods in the hands of the assignees of Rouss, Bell & Co., viz.: the sum of $5,110 51; and he gave judgment for that amount, with interest and costs. The questions raised on the appeal are as to—1st. The agreement by which the trust was raised and the lien created, — 505 — and the power of Rouss & Bell to act in that regard for their firm. 2d. The non-joinder of Mary Jane Taylor, the other partner, as a party to this action. 3d. The liability of the Musers to pay $6,312 50 upon their undertaking, and the obligation of plaintiffs to repay the Musers that sum upon their bond of indemnity to the Musers. 4th. The right of plaintiffs to the proceeds of property with which the stock in the Hoboken store was replenished, from time to time, after the creation of the trust. The promise of Róuss & Bell to plaintiffs, upon the faith of which the latter indemnified the Musers, was a verbal one. The plaintiff, Arnold, was the only witness called to sustain the issue, although he swore that his partner, Mr. Banning, the other plaintiff, Mr. Bull, their salesman, and Mr. Bell, defendant, were present. But if Banning was not called to corroborate Arnold as to the promise, Bell was not called to corroborate Rouss in his denial of it. The testimony of Banning would have been cumulative merely, and his non-production, as a witness, even though a coplaintiff, could not, as matter of law, raise any presumption against plaintiffs’ case. The judge doubtless took it into consideration in determining the fact in issue, as a judge might, and defendant could ask no more; he did not in fact ask that. (Bleecker v. Johnson, Ct. Appeals, 4 N. Y. Weekly Digest, 402, reversing this court; 51 How. Pr. R. 380.) The judge who tried the cause, in his opinion, printed in the case, gives very convincing grounds for believing that the promise was made, and a perusal of the whole evidence leaves the same conviction in my mind. And the agreement, as sworn to by Arnold, was sufficient to create the lien in plaintiffs’ favor. Rouss said to plaintiffs that he had a stock of goods in Hoboken, which had been attached for a debt contracted by Weir, and he had been unable to find a resident of New Jersey to go on a bond to release the goods —any intimate friend of his—but that he had found a party who would do so if he could get some friend of his to indemnify the party. He desired the plaintiffs to become security against any loss by these residents of New Jersey. — 506 — He said the goods attached were worth between #10,000 and $15,000 ; they were in first class order; that he was doing a nice business there; and that it interrupted his business very much; and he was anxious to have them released as soon as possible ; that if plaintiffs would give the indemnity to the Musers, they might have the stock and goods as their own—if they wished, put one of their clerks or salesmen over there to take charge of it; that he would keep it replenished, and up to its present value at that time; and that they might put up their own sign; that he would hold the goods as indemnity for them or to secure them, or a word of like import. Upon this promise plaintiffs did as requested,, became indemnitors of the Musers, who then executed the undertaking to release the goods, and defendants Rouss and Bell became bound accordingly to “keep the stock replenished to its then value,” and “hold it as indemnity” or security for plaintiffs, thus creating a valid trust for plaintiffs’ benefit, and giving plaintiffs a lien on the goods and a right to follow the property or its proceeds into the hands of a general assignee for their indemnity or security; the intention that the stock of goods should be plaintiffs’ security against loss on their bond being manifest and unmistakable (Haggerty v. Palmer, 6 John. Ch. R. 437; Burn v. Carvalho, 4 Mylne & Craig, 690—702; Seymour v. The Canandaigua N. F. R. R. Co., 25 Barb. 284; Barry v. Bansom, 12 N. Y¿ 462; Hale v. Omaha Nat. Bank, 49 N. Y. 626). But had Rouss and Bell, two of the firm of Rouss, Bell & Co., power to pledge the goods of the firm for this purpose ? In all matters relating to the firm business they had general authority as partners to act for their firm. The goods seized by the sheriff were the property of the firm, and the object of having the Musers execute the undertaking in the attachment suit was to release the goods of the firm and enable it to carry on its business. This was an act done for the benefit of the firm wholly irrespective of the question as to whether the attachment was rightfully levied on those goods, and whether the action in which the attachment issued was against the firm or against Rouss and Bell indi — 507 — viduaUy, or against another copartnership formed by them and Weir. The release of the goods of Rouss, Bell & Co. was the business in hand, and to effect it plaintiffs were requested by two of that firm to indemnify the parties who, if so indemnified, were willing to give the necessary undertaking. In making the promise to plaintiffs, Rouss and Bell were acting for the firm of Rouss, Bell & Co., whose goods-were wrongfully seized and whose business was suffering injury, and the benefit derived from the plaintiffs indemnifying the Musers was a benefit to Rouss, Bell & Co. The act of Rouss'and Bell was not subversive of the objects of the copartnership, but to further its interest, and enable it to carry on its business, and was a direct benefit to the business. The consideration for such benefit was properly offered bjr that firm, and in creating a lien upon its goods for that purpose, the partners, Bell and Rouss, were not exceeding their authority, nor committing a fraud upon their copartner, nor using the copartnership property to secure their individual debts, although, as appellants contend, the attachment was issued against the copartnership property of John E. Weir & Co. (consisting of Rouss, Bell and Weir), and was wrongfully levied on the property of Rouss, Bell & Co. Mary Jane Taylor, the other member of the firm of Rouss, Bell & Co., being a secret partner, is bound by all the acts of the ostensible partners Rouss and Bell, to whom she committed the charge of the copartnership affairs; her consent in any other form is not necessary to be proved, nor (and this touches the next question raised on this appeal) is she a necessary party to any action affecting the copartnership property. Although the assignees of Rouss, Bell & Co-were trustees of an express trust, and are to turn over the surplus, if any, in their hands, after paying the debts, to the assignors as tenants in common of the surplus, it is merely a question for the assignees as to whether they will render such surplus, if any, to Rouss and Bell, the ostensible managing partners, who would hold it for themselves and as trustees for Mary Jane Taylor under the copartnership, or whether they would j3ay to the latter her share. But Rouss — 508 — and Bell alone—who, as the active partners, managed the whole business for themselves and Mrs. Taylor, created the trust to plaintiffs and the trust to these assignees with Mrs. Taylor’s consent.—are necessary parties in all questions affecting the assignment of the copartnership property. As a secret or dormant partner she need not be joined as a defendant (North v. Bloss, 30 N. Y. 374). The next question to be considered is as to the obligation of plaintiffs under their bond of indemnity to repay the Musers the sum of $6,312 50, which the latter had paid out to the attaching creditors in New Jersey in satisfaction of their liability under their undertaking in the attachment suit. It is contended by defendants here that the Musers were liable for no more than the sum of $1,065 13, the judgment of Falconer & Co., the plaintiff in the attachment suit, and were not bound to pay the judgments of other creditors, who, under the New Jersey statute, were admitted to the benefit of the attachment. There are three provisions of that statute for discharging attachments by giving undertakings. The 33d section provides : “ That if the defendant appear to any attachment, he shall enter into bond with one or more sufficient sureties, being resident in this State, in case the attachment shall have been issued out of the Supreme Court, and in case the attachment shall have been issued out of the Circuit Court or Court of Common Pleas, then in the county in which such court shall be held, which bond shall be approved by the court, or a judge thereof, and shall be given to the sheriff of the county in case the attachment shall issue out of any Circuit Court or Court of Common Pleas, apd to such sheriff as the court or judge shall direct in case the attachment shall issue out of the Supreme Court; which bond the sheriff is hereby required to take in his own name, in double the amount of the personal property attached, conditioned for the return of the goods and chattels, rights and credits, moneys and efféets seized and taken by virtue of such writ of attachment, in case judgment shall be rendered for the plaintiff; and said sheriff shall, in case of a breach of such condition, on application of the plaintiff or any ap — 509 — plying creditor of the said debtor, assign the said bond, without fee or reward, to such person as the court shall direct, to be prosecuted for the benefit of the plaintiff and such creditors as shall have applied to the court or auditors under such attachment in conformity to this act.” The 37th section provides: “That if the said defendant, instead of giving any of the bonds before mentioned, shall make, execute, and file in the office of the clerk of the court out of which an attachment shall have issued, a bond with two or more sureties, to be approved by said court or a judge thereof, to the plaintiff in attachment, and a like bond to each of the creditors, who shall have applied as aforesaid, in double the sums respectively sworn to by them, conditioned for the payment of such moneys as may be adjudged to be due to them severally; and shall also enter his appearance to the suit of the said plaintiff and each of said creditors ; then it shall be lawful for the said court or a judge thereof, either in term time or vacation, if it shall appear just so to do, to order the said attachment to be set aside, and that both the real and personal estate of the defendant be released and discharged from the lien thereof.” The 41st section provides that it shall be the duty of the officer by whom any writ of attachment shall be executed to deliver any property attached by virtue of such writ to the person in whose possession the same is found, upon the execution, in the presence of the officer, of a bond to the plaintiff by such person with one or more sufficient sureties in double the value of the property, conditioned that the defendant shall perform the judgment of the court in the action, or that the property or its value shall be forthcoming, and subject to the order of the court for the satisfaction of such judgment. The undertaking executed by the Musers was under the last section, which does not, in terms, refer to applying creditor's, nor provide for the enforcement of their judgments against the attached property, or the obligors in the undertaking. It was not shown on the trial that such a liability — 510 — had ever been enforced against the sureties; but, on the .other hand, it had not been denied, and the question is in doubt. Looking at the intention and spirit of the statute taken in connection with the other provisions of law on the subject, it does not seem difficult to reach a conclusion. The 41st section affords the defendant in attachment a more summary mode of relieving his property than those permitted in the 33d and 37th sections. Such an enactment in no wise warrants the supposition that the rights of applying creditors were to be cut off by it, and the property freed from their liens. This would render all the other provisions of the law practicall)r useless, since the easiest form of proceeding by the debtor yielded him such greater benefit. The 41st section is not inconsistent with the provisions of law permitting other creditors to be admitted to the benefit of the attachment, and does not supersede it; it appears to me, in fact, to provide generally for their security. It will be seen that the undertaking executed by the Musers under that section (41) was conditioned that the defendant shall perform the judgment of the court in the action, or that the property or its value shall be forthcoming and subject to the order of the court for the satisfaction of such judgment. Under the provisions of the statute, other creditors of the defendants in that action applied in the action and recovered judgments in their favor. The aggregate of their judgments and that of Falconer & Co., the plaintiffs in the action, amounted to more than $6,312 50. These together formed the “judgment in the action for the satisfaction” of which the Musers undertook that the attached property should be forthcoming. The applying creditors had no remedy except ,to file their affidavits of claim; issue was joined between each applying creditor and the defendants in attachment as well as between the latter and the plaintiffs in the attachment ; those issues were tried together and judgments entered in favor of all the creditors. In case of default, one judgment would be entered up in favor of the plaintiff and all the applying creditors, and for their benefit. Here there — 511 — were several judgments, but all in the same attachment proceeding, and there was really but one action, and, it follows, but one judgment, though in favor of different parties for •different amounts. The obligation of the Musers to produce the attached property for the satisfaction of the judgment in the action would not have been performed by merely satisfying the judgment of Falconer & Co., the plaintiffs. The opinion expressed by the witness Gilbert Collins, Esq., an attorney and counsellor-at-law in the courts of New Jersey, and his reasons for his opinion, seem to me to be satisfactory, although the questions arising upon the facts are not free from doubt, as stated by Richard Wayne Parker, Esq., the other counsel examined on the point. The next question is as to the proceeds of goods put in the Hoboken store after the creation of the trust in plaintiffs’ favor, in order to replenish the stock and keep it up to its value at the time of such trust. If the agreement between Rouss & Bell and plaintiffs' were that the former might sell the goods then in the store pledged to plaintiffs, and substitute others for them, which might in time be sold and their place supplied, the plaintiffs’ lien to open and shut, to let out and take in, and finally to attach to whatever might remain when the plaintiffs chose to enforce it, I should have little hesitation in holding the agreement invalid. No such fatal intention is to be assumed from the mere fact that the defendants (not the plaintiffs) spoke of keeping the stock “replenished” to its then value. An agreement to secure plaintiffs by a lien on stock which defendants might dispose of next day, or by a lien on goods that they might thereafter buy, would be no security, as it would give no lien. To give any meaning or force to the agreement we must construe it according to the positive promise “ to hold the goods ” for plaintiffs’ indemnity or security, without considering the vague and unexplained addition as to replenishing the stock. If, therefore, Rouss, Bell & Co., holding the stock in trust for plaintiffs’ security, without the latter’s knowledge or consent, disposed of parts — 512 — of it, and put in other stock to .supply its place, the latter mingled with the former and became subject to the trust. The judgment should be affirmed, with costs. Charles P. Daly, Ch. J., concurred. Judgment affirmed with costs.