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"In August, 1893, the new firm made an assignment of all its assets to the plaintiff Fulton, Jr., in trust, to collect the same and pay the debts of the firm, and in such assignment they authorized him in such collection to use the name of the firm and to maintain and continue the bank account in the name of the firm, and otherwise to absolutely control the same. The account was finally closed on October 16, 1893. The passbook had been balanced and vouchers returned therewith by the bank 15 different times between the times of opening and closing the account. The $60,000 check was not found by the plaintiff Fulton, Jr., with any of the returned vouchers, although it was shown to have been returned, and Fulton, Jr., did not learn of the giving of the $60,000 check until several years after he had closed the account. After June 22, 1892, the account of the old firm was carried for three days, and was then closed; the balance being checked out."

This action was brought by the general partners to recover said sum of $60,000 and interest, upon the ground that the defendant had no right, under the circumstances, to pay the check of the new firm for that amount on the 22d of June, 1892. The referee held that the defendant was not entitled to credit for the sum so paid, and ordered judgment for the plaintiffs for that amount and interest. The Appellate Division reversed and dismissed the complaint, on the ground that such payment was not a misappropriation of the funds of the special partnership, and, having been lawfully made, did not render the defendant liable for the amount thereof. Two of the justices dissented in part, holding that the judgment should be modified by deducting therefrom the sum of $50,593.79, with interest thereon from December 13, 1895, and affirmed as to the balance. The plaintiffs appealed to this court.

Augustus C. Brown, for appellants. William B. Hornblower and Hoffman Miller, for respondent.

VANN, J. (after stating the facts). When the new firm indorsed the certified check for $200,000 and deposited it with the defendant, a contract was thereby made between the parties thereto whereby the bank agreed to pay that sum or any part thereof to said firm upon demand. That contract was not modified by the statement, whether casually made or not, that, although the copartnership papers had been signed, the certificate of limited copartnership could not be filed until the next day, and the firm would not commence business for two or three days. In view of the fact that the firm had already commenced to do business with the bank, the statement apparently was intended to apply only to the formal opening of its doors by the firm for the

transaction of business with the public generally. However that may be, it is clear that the relation of debtor and creditor between the new firm and the bank commenced with the deposit, and it would have continued, even if the certificate had never been filed and the firm had never begun to carry on business generally. The deposit was neither special nor unauthorized; for a common member of both firms, in the presence of all the members of the new firm, indorsed the check "for deposit" and signed the firm name thereto. A few minutes later the same person went to the bank, with a member of the new firm who had not been a member of the old, deposited the check so indorsed, and received a passbook in the usual form with the amount of the deposit duly credited thereon; both men having signed the signature book. No notice was given that the account could not be drawn upon at once, or that the deposit was intended for a special purpose. The bank was not obliged to look beyond these facts, even if it was notified that the certificate of limited partnership had not been filed, and that there would be some delay in beginning business. It was its duty to pay the check for $60,000 when it was presented, and it would have broken its contract if it had refused. If the members of the new firm who made the deposit had before they left the bank drawn a check payable to bearer and had presented it for payment, we see no ground upon which the bank could lawfully have declined to pay it. Whether the parties had so complied with the provisions of the statute relating to limited partnerships as to protect the special partner was of no concern to the bank. That was not its business, for it did not affect the validity of its contract. A limited partnership has the same power to make a contract of deposit as a general partnership, and the case is the same in that respect as if the partnership had been general, but by the terms of the formal agreement was not to commence until the day after the transaction in question. If the firm could indorse a check for deposit on June 22d, as it did, all its members being present, it could sign a check on that day and bind itself in the one case the same as in the other. The question does not arise, as in the cases relied upon by the appellants, whether creditors of the new firm could hold the special partner liable as a general partner; but the simple inquiry is whether the new firm, whatever its character, after assuming to make a contract with the bank on June 22, 1892, could say, years afterward, when disaster had come, "We had no right to make that contract on that day, for the firm was not authorized to do business until the next day."

The articles had been signed before the deposit was made, and the bank was so in

formed by two members of the new firm. It was not informed, however, of the provision therein that the firm should "begin on and include the 23d of June," and the remark, after the deposit was made and the contract completed, "that the firm did not expect to start to do business for two or three days," fell so far short of notice of that provision as not even to put the bank upon inquiry. Power to do business at once was implied from the fact that the articles had been signed, and was not affected by the expectation of the firm with reference to opening its doors. The bank had the right to assume that if the papers were signed the firm could do business at once, even if it did not expect to formally begin its general business for a few days. The deposit is all there is of this case; for an authorized deposit is an authorized contract, and the defendant simply performed the contract. A bank need not look into copartnership articles to learn the actual authority of the various members; for it has the right to rely on their apparent authority, and to act on the presumption that each is the duly authorized agent of the firm. When one copartnership by a written instrument transfers all its assets to another, intended to take its place, and covenants that they are worth a sum stated over all liabilities, and that in one year they will yield that amount in cash, nothing further being said about the debts, such transfer is necessarily subject to the payment of the debts of the old firm; for otherwise it would be fraudulent, as there would be nothing left to pay creditors. Under such circumstances there is no beneficial transfer of anything except what remains after the debts are paid, and the new firm is under obligation to pay the debts of the old, at least to the extent of what was fairly and in good faith realized from the assets. There was no misappropriation, therefore, of the assets of the new firm by paying the amount of the overdraft which was a debt of the old.

Upon the facts found by the learned referee, we think his conclusion of law that the defendant is liable for the sum of $60,000 and interest was erroneous, and required a reversal by the Appellate Division. As to the balance of the deposit remaining in the bank after payment of the check for $50,593.79 we express no opinion, as the facts may not have been fully developed in that regard. We announce these conclusions to guide the course of the new trial, which we deem it our duty to order, without attempting to add to the arguments of the learned Appellate Division. The facts depend mainly upon oral evidence, and we are not satisfied that all the evidence in existence has been produced, with reference more particularly to the balance of $9,406.21 remaining after payment of the check for the overdraft. The disposition of that sum does not appear so clearly as to make it certain that the facts cannot be

changed by further investigation. Ross v. Caywood, 162 N. Y. 259, 56 N. E. 629.

The judgment of the Appellate Division should be so modified as to order a new trial, and, as modified, affirmed, with costs in all courts to abide event.

CULLEN, C. J., and GRAY, BARTLETT, HAIGHT, and WERNER, JJ., concur. O'BRIEN, J., absent.

Judgment accordingly.

(183 N. Y. 190)

MCCARTHY v. MEANEY et al. (Court of Appeals of New York. Nov. 21, 1905.)

1. GAMING-BUCKET SHOPS - RECOVERY OF MONEY LOST EVIDENCE.

The clerk, working under the orders of the manager of a branch bucket shop, telegraphed the orders received from its customers to the principal office in another city, and, if they were accepted, gave the customers memoranda of such transactions, with the margins paid thereon. Held, that such statements were competent evidence in an action, under 1 Rev. St. (1st Ed.) p. 662, pt. 1, c. 20, tit. 8, § 9, to recover against the proprietor of such gambling house the moneys lost or paid on the transactions; they being the very contracts under which the money was paid to the defendants. 2. EVIDENCE-ADMISSIONS.

Where the manager of a branch bucket shop was accustomed to telegraph orders of customers to the main house, and to issue to customers, through a clerk, memoranda or statements of transactions, with the margins paid thereon, such statements were not competent as original evidence in an action by such manager to recover moneys lost or paid in transactions on his own account, as they neither constituted contracts nor declarations made in the course of agency; the clerk having no power to bind the proprietors by any contract made by and for the manager of the branch office. 3. WITNESSES EXAMINATION REFRESHING MEMORY-ADMISSIBILITY OF WRITING.

In an action by the manager of a branch bucket shop to recover from the main house moneys lost in transactions for his own account, statements issued by his clerk to him at the time of such transaction, in the manner in which statements were issued to other customers, cannot be considered as evidence to supply defects in the recollection of such manager, where he did not testify that he was unable to recollect the transactions represented by the statements, or that the statements were correct, and could not tell whether the money represented by the statements as paid to the defendant by him had been paid at all, or were simply charged against the amount coming to him from gambling transactions.

[Ed. Note. For cases in point, see vol. 50, Cent. Dig. Witnesses, §§ 877, 892.]

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by William F. McCarthy against John F. Meaney and others. From a judgment of the Appellate Division (88 N. Y. Supp. 1108, 94 App. Div. 614), affirming a judgment for plaintiff, defendants appeal. Modified.

W. F. Mackey, for appellants. Hull Greenfield, for respondent.

CULLEN, C. J. This action was brought under the statute by plaintiff in his own right and as assignee of others to recover moneys lost on wagers. The defendants were engaged in conducting that kind of gambling business denominated by the referee and popularly known as a "bucket shop"; that is to say, ostensibly they were carrying on business as stockbrokers, but in reality, while they accepted orders of customers, they neither bought nor sold stocks in compliance therewith, but when the transaction was closed they either paid to or received from their customers gains or losses as determined by the fluctuation in prices on the stock exchange in the city of New York. To use the euphemism of one of the defendants on the witness stand, they "stood on their trades," taking, however, from the amount due their customers one-quarter of 1 per cent. as a so-called commission. Of course, these contracts between the defendants and their customers were mere wagers. Hurd v. Taylor, 181 N. Y. 231, 73 N. E. 977. Therefore the parties who lost or paid money to the defendants on such contracts were entitled, under the statute, to reclaim the amounts paid upon them. The judgment of the referee having been unanimously affirmed by the Appellate Division, there is no question of fact before us, and the only objection now presented is as to an alleged error of the referee in admitting certain written statements in evidence.

The principal place of business of the defendants was in the city of Buffalo, but they had a number of branch offices at various points in the western part of the state, among them the city of Auburn, where the transactions which are the subject of this suit took place. There one Taylor was their manager, or agent, who was compensated by permitting him to retain one-half of the socalled commissions that were received at the place; Taylor paying out of such compensation the rent and expenses of the office, including the wages of a telegraph operator, who transmitted the orders received in Auburn to the office in Buffalo. This operator, Mooney, was hired by Taylor and subject to his direction. One of the claims assigned to the plaintiff is that of Taylor, who alleged that he lost and paid to the defendant | several sums of money in speculation on his own account. In the course of business Mooney would telegraph to the Buffalo office the various orders received in Auburn, when, if they were accepted by the defendants, he would give the customer a statement showing the nature of the transaction and the margin paid thereon. During the trial of the action these statements, given to the plaintiff and to his assignors, were identified by the persons to whom they had been given and received in evidence over the objection and exception of the defendants. As far

as the statements related to transactions with others than Taylor, they were unquestionably properly received. They were not only declarations made by the defendants' agents in the course of the agency, but were the very contracts under which the money was paid to the defendants. So far, however, as they related to the transactions of Taylor a different question is presented. When Mooney telegraphed orders to the Buffalo office he did not give the names of the customers, but the orders were identified simply by numbers. The defendants could not tell in any particular case who was the person who had given the order. Taylor testified that the defendants said that he

might speculate himself; but this gave Mooney, who was Taylor's employé, no power to contract on the defendants' behalf with Taylor. Doubtless Taylor could recover any moneys he had lost to the defendants in his speculations. That, however, is not the question here, which is whether the statements made by Mooney to his immediate employer, Taylor, were original evidence against the defendants. If Mooney had no power to bind the defendants by any contract with Taylor, then the statements given Taylor neither constituted contracts nor were declarations made in the course of the agency. Hence they were not evidence, nor were they competent to supply the defect in the recollection of Taylor or of Mooney, the rule as to which is clearly stated in Howard v. McDonough, 77 N. Y. 592: “(1) A witness may, for the purpose of refreshing his memory, use any memorandum, whether made by himself or another, written or printed, and when his memory has thus been refreshed he must testify to facts of his own knowledge; the memorandum itself not being evidence. (2) When a witness has so far forgotten the facts that he cannot recall them, even after looking at a memorandum of them, and he testifies that he once knew them, and made a memorandum of them at the time or soon after they transpired, which he intended to make correctly, which he believes to be correct, such memorandum, in his own handwriting, may be received as evidence of the facts therein contained, although the witness has no present recollection of them." The testimony brought the case within neither rule. If Taylor had, after refreshing his recollection from the statements, testified of his own knowledge (which he did not) that he had the transactions therein recited, that would not make the statements themselves evidence. Nor could they become evidence on account of his entire failure to recollect the transactions, because the memoranda were not made by him, nor verified by him at the time, as was done in Clark v. National Shoe & Leather Bank, 164 N. Y. 498, 58 N. E. 659. The error in admitting these papers was not cured by the subsequent testimony

of Mooney. To make the statements competent evidence it was necessary to show, first, that after refreshing his recollection by looking at them Mooney was unable to recollect the transactions they represented; second, that he knew the statements were correct. Neither fact was shown. On the contrary, Mooney's testimony is to the effect that often the statements did not correctly represent the facts, and that moneys specified in the statements as having been received at the time they bore date were not then received. Both Taylor and Mooney testified their inability to tell whether the money represented by the statements to have been paid to the defendants by Taylor had been in reality paid at all, or waş simply charged against the amount coming to. Taylor from the gambling transaction in which both parties were engaged. In any aspect of the case, therefore, the learned referee erred in admitting this evidence, and it is clear that the error was of a most substantial character.

The judgment should be reversed, and a new trial granted, costs to abide the event, unless the plaintiff elects to abandon his third cause of action, which is for the moneys lost by Taylor, and to deduct from the judgment recovered by him the sum of $1,995, with interest from August 29, 1902, in which case the judgment as reduced is affirmed, without costs in this court to either party.

GRAY, BARTLETT, HAIGHT, VANN, and WERNER, JJ., concur. O'BRIEN, J., absent.

Judgment accordingly.

(183 N. Y. 182)

HOGG et al. v. ROSE et al. (Court of Appeals of New York. Nov. 21, 1905.) 1. MORTGAGES-TRUST DEED-SALES-APPORTIONMENT OF INCUMBRANCE.

Where, at the time of the execution of a trust deed by a husband and wife, a mortgage covering part of the land of the husband and all of the land of the wife was made by them, and part of the proceeds thereof was used to pay a prior mortgage upon the land of the wife, and the remainder of the proceeds was turned over to the trustees to be applied upon the debts of the husband, and subsequently the trustees brought a suit for an adjudication of their claims for advances made by them under the trust, and for a sale of the lands to pay such claims, a judgment directing the sale of all the lands, and that the part of the proceeds of the mortgage executed by the husband and wife which was applied upon the mortgage on the wife's land should be charged upon the land formerly owned by the wife, and that the part applied to liquidate the debts of the husband should be charged upon the land owned by him, was proper.

2. SAME APPORTIONMENT OF PROCEEDS.

A judgment directing the sale of a tract of land as an entirety, and providing that the proceeds of the sale should be apportioned between the different parcels of the land sold ac

cording to their respective acreage (such parcels being subject to distinct equities), is erroneous, in the absence of any finding as to the value of the land, or that its value is in proportion to its acreage; but the proceeds of the sale should be apportioned in accordance with the relative values of the property.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by William Hogg and another, individually and as executors of Agnes Hogg, deceased, against Eliza R. Rose and others. From a judgment of the Appellate Division (87 N. Y. Supp. 1136, 93 App. Div. 607), affirming a judgment entered upon the report of a referee, defendant George T. Hogg appeals. Modified.

George T. Hogg and Ansley Wilcox, for appellant. W. W. Waring, for respondents.

CULLEN, C. J. From the record before us it appears that in 1890 Wilson Hogg and his wife, Agnes Hogg, were each the owners of certain lands in Cattaraugus county. The lands owned by Wilson comprised what was known as the "upper farm" and another tract, which was used and cultivated with the lands owned by Agnes as a single farm, called the "lower farm." On the lands of Agnes there was a mortgage for the sum of $1,400. At that time Wilson Hogg, being financially embarrassed, conveyed by quitclaim deed to the plaintiffs all the lands owned by him under a trust or agreement, the details of which it is unnecessary to recite further than to say that in substance the grantees were to advance moneys to discharge Wilson Hogg's debts and to pay certain annuities to Wilson during his life and to his wife, if she survived him, and that for such advances and payments the lands were to stand as security. In 1895 Wilson Hogg died, devising all his property to his wife Agnes. In 1902 Agnes died, leaving a will by which she devised all her property, which included both the farms, to her children, the defendants in this action. Thereafter the plaintiffs instituted this action, praying that the amount due to them for their advances should be ascertained, and the lands conveyed to them by Wilson Hogg should be sold, and out of the proceeds of the sale the plaintiffs should be paid the amount found due. At the time of the conveyance to the plaintiffs, Wilson and Agnes Hogg had arranged with the Buffalo Savings Bank to obtain a loan on the "lower farm" of $2,800; the existing mortgage on Agnes' land to be paid out of the loan, so that the new mortgage might be a first lien on the farm. The mortgage to the Buffalo Bank had been executed and recorded, but the money not yet advanced by the mortgagee. The agreement between Wilson Hogg and the plaintiffs provided that out of the money to be received from the Buffalo Savings Bank there should be paid the mortgage on the lands of Agnes and

that the surplus should be applied on Wilson Hogg's debts. Subsequently this agreement was carried out, and $1,456 paid to satisfy the Agnes Hogg mortgage. The plaintiffs asked as further relief that the amount due on the savings bank mortgage be apportioned between the two tracts of land. The appellant answered, alleging that the lands embraced in the lower farm had always been used as a single farm, and that a separate sale of that part of the farm owned by Wilson Hogg in his lifetime would greatly prejudice the interest of the parties to the action. He prayed as relief that the farm be sold as an entirety and the proceeds of the sale apportioned between the parties. The action was tried and proceeded to a judgment, which, having determined the amount due the plaintiffs, directed a sale of both farms. There is no dispute as to the amount due the plaintiffs, and complaint is made of the judgment rendered only in two particulars, which we will now consider.

The decree charged on Agnes Hogg's separate lands that portion of the mortgage to the savings bank which had been applied to the satisfaction of the prior mortgage on those lands. The remainder was charged on the lands conveyed by Wilson to the plaintiffs. The appellant contends that the whole mortgage should have been charged on the lands of Wilson Hogg, under the general rule in equity that where several pieces of property are subject to a single and common lien, and are conveyed to different persons, such parcels are liable for the satisfaction of the lien in the inverse order of their alienation. That rule, however, has no application to a case like the present, where the separate parcels of the mortgaged premises are owned by different persons. Commissioners v. Woodward, 40 N. J. Eq. 23. Indeed, the rule is not of universal application, even where the grantor owns the whole premises. Which piece of property should be sold first to satisfy the lien of a mortgage depends entirely on the agreement of the parties at the time of the conveyance. If a grantor conveys a portion of the premises with warranty, or receives the whole purchase money, then the lands conveyed are not to be sold until after the lands retained by the grantor have been first applied in satisfaction of the mortgage. So, on the other hand, the grantor may by his conveyance charge the whole or any portion of the mortgage debt primarily on the lands conveyed. In the present case Wilson Hogg, by his conveyance to the plaintiffs, did not charge or assume to charge any part of the mortgage debt on the lands conveyed by him. Those lands were subject to the mortgage of the savings bank, and necessarily so, because no acts of the owners of the equity of redemption could discharge or impair the mortgagee's lien on any of the mortgaged premises; but between the plaintiffs and Agnes Hogg or her devisees the lands were subject to the lien of the mortgage to

the same extent and in the same proportion as they would have been in the hands of Wilson Hogg and said Agnes. In the hands of those parties their respective lands were liable in the proportions in which the loan had been received by the parties or appropriated to their use. The trial court, therefore, properly held that the lands of Agnes were primarily liable for the amount applied in satisfaction of the old mortgage thereon. During the pendency of this action the appellant acquired the mortgage of the Buffalo Savings Bank. He contends that the trial court could not, as against the mortgagee, apportion the lien of the mortgage between the two parcels of land. Doubtless, in this position he is correct, for a mortgage of $1,000 on two pieces of land cannot by any action on the part of the owner of the equity of redemption be transmuted into two mortgages for the sum of $500 each on the separate parcels. But we do not understand the decree as having any such effect. The Buffalo Savings Bank, the original mortgagee, was not a party to the action, and the plaintiffs did not seek any relief against it, but asked solely for an adjustment of the primary liabilities of the owners of the equity of redemption as between themselves. In our opinion this is all the decree effects. The question, however, is now of no importance, for the "lower farm" was sold as an entirety, and the appellant's mortgage has been acquired by one of the plaintiffs.

The second objection is to the apportionment which the judgment directed to be made of the proceeds of the sale of the lower farm, in case it was sold as a whole. This objection is well founded. The judgment directed that the farm be first offered for sale in two parcels: (1) That previously owned by Wilson Hogg; (2) that previously owned by Agnes Hogg-and that then it be offered for sale as an entirety, and that whichever manner of sale produced the largest offer for the whole tract should be accepted and stand. The judgment then directed that, in case the farm was sold as an entirety, the proceeds of sale should be apportioned between the two parcels according to their acreage, which is specified in the decree. Of course, the plaintiffs had no right to a sale of the lands of Agnes, no matter how desirable it might have been to have the lands on which they held a lien sold in connection with hers. But they did not ask for any such sale. That was directed at the request of the appellant, made in his answer. Therefore he cannot now complain that the lands of Agnes were sold in an action brought solely to foreclose a lien on the lands of. Wilson. But as to the provision for the apportionment of the proceeds of the sale he is in no way concluded. The direction made by the court that the apportionment should be made according to area seems to us entirely arbitrary. There is no finding as to the value of the land, or that the value was

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