Case ID: abb-pr-ns_2/html/0296-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the Court—Robertson, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

GOODYEAR against BROOKS.
    
      New York Superior Court; General Term,
    
    
      April, 1866.
    Refebence.
    The power conferred by the statute (Code, § 271), to refer actions involving the examination of a long account, is intended more for the convenience of the court, than as conferring a right on the parties
    
      The difficult questions uf law, intended by the statute, are not merely those arising out of the facts presented by the issues in the case, but include questions growing out of the very character of the issues, such as questions of evidence on an issue of fraud.
    In the case of an action to foreclose chattel mortgages, where the defense was that the mortgages were fraudulent,—Meld, that the necessity of proving good faith and honest intent, would probably raise difficult questions of law, and, therefore, the case was not one which should be referred.
    
      It seems, that proof of an intention on the part of the defendants to apply for a trial of the issues by a jury, is not of itself, an objection to granting the plaintiff’s motion for an order referring the cause to a referee.
    An action for the foreclosure of a mortgage is not in a condition to have all the issues therein referred, while any defendants, against whom the plaintiff seeks a judgment over for a deficiency, have not been served with summons, or have been served with a notice that no personal claim is made against them, and have not appeared.
    Appeal from an order of reference.
    This action was brought by Charles, George, and George W. Goodyear and Henry Durand, against Edwin A. Brooks, and ten other defendants.
    The action was brought to foreclose two chattel mortgages, alleged to have been given by the defendant Brooks to the plaintiffs, to secure a large sum of money alleged to be due to the plaintiffs, part of it from the defendant Brooks, and part of it from the firm of Church & Brooks, which consisted of the defendant Church and the defendant Brooks. A judgment for a deficiency was only asked against both- of these defendants.
    The only defendants who appeared and answered, were judgment creditors of the mortgagor Brooks (claiming in their answers an interest in and lien upon the property alleged to be covered by the mortgages, under execution levied by them against Brooks), and the sheriff of the city and county of Hew York, by whom the executions were levied.
    These defendants also claimed in their answers that the mortgages were fraudulent, illegal, and void.
    The plaintiff, upon affidavit of one of his attorneys that the trial of the action would involve the examination of a long account, that the claim of the plaintiff secured by the mortgages was made up of numerous transactions had by the plaintiffs as brokers of the defendants, the items of which were very numerous, and that there were numerous items of credits, the examination of which was necessary to ascertain the amount due, obtained an order from a judge of the court at special term referring the issues in the action to a referee, to hear .and der termine the same.
    The defendants, in their affidavit to oppose this motion, alleged that the mortgages were fraudulent, that the defendants had a good defense, that the issues would involve much contradiction, questions of veracity, and various questions of fraud and that it was the intention of the defendants, as soon as the action should be at issue with respect to all the defendants, to move that the issues of fact be sent to a jury for trial, and further, alleged on belief that if, on the trial, the issues should be found in favor of the defendants, no examination of an account would be necessary: that the trial would involve the decision of difficult questions of law : that the action was not at issue with respect to all the defendants.
    From the order of reference, the defendants appealed.
    
      George H. Paine, for the respondents.
    I. This cause was in readiness for trial as to all the defendants, that have answered. All the defendants, but the defendant Church, had been served with the summons, and had answered, or were in default.
    The complaint alleges, as the ground of liability of Church, that he was a partner of the defendant Brooks. Therefore, the plaintiffs were right in moving the cause to trial, without serving the summons on the defendant Church (Code, § 136, subd. .1).
    II. It was objected, on the argument of the motion, that the affidavit on which the motion was made should have been made by the party. There is but one case, sustaining this objection (2 How. Pr., 7; Dec., 1845), and no reason is given for the rule. Since the Code, the common practice has been to move on the affidavit of the attorney, without stating why it was not made by the party.
    III. It appears from the complaint and from the affidavit that the trial of the action will involve the examination of a long account. This question having been decided at special term, will -not be disturbed on appeal. It is not an appealable order (Bryan v. Brennon, 7 How. Pr., 359; Dean v. The Empire State Mutual Ins. Co., 9 How., 69).
    TV". It is claimed that this cause involves difficult questions of law, and the affidavit read in opposition to the notice sets forth the grounds of the defense, to wit: that the mortgages set forth in the complaint were “made with the intent to hinder, delay/ and defraud ” the creditors of the defendant Brooks ; and the fraud alleged is an agreement not contained in the mortgages themselves, that they should not be filed, and that Brooks should continue his business as usual. This question of fraud, on the facts alleged in this affidavit, is a question of fact, and not of law (5 Rev. Stat, 5th ed., 225, § 4; Conkling v. Shelley, 28 N. Y., 360; Ford v. Williams, 24 N. Y., 359).
    V. Plaintiffs may proceed to judgment without service -on the defendant Church (Code of Procedure, §§ 136, 274; 21 N. Y, 300).
    YI. An action of the class formerly maintainable in chancery may be referred, when an issue in it involves the examination of a long account, the same as any other action. 1. The court may order a reference in the following cases of its own motion, or on application of a party. “ Where the trial of an issue of “ fact shall require the examination of a long account on either “side, in which case the referees may be directed to hear and “ decide the whole issue, or to report upon any specific question of fact involved therein ” (Code of Procedure, § 271, subd. 1). 2. The powers of referees to decide the whole issue in an equitable action are ample. The Code, § 272, provides that “ The report of the referees upon the whole issue shall stand as the decision of the court, and judgment may be entered thereon, in the same manner as if the action had been tried by the court ” (Palmer v. Palmer, 13 How. Pr., 363). 3. “ The distinction between actions at law and suits in equity, and the forms of all such actions heretofore existing are abolished, and there shall be in this State hereafter but one form of action for the enforcement of private rights, and the redress of private wrongs, which shall be denominated a civil action” (Code, § 69). 4. In Jackson v. De Forest (14 How. Pr., 81), the court of its -own motion referred the whole issues in an equitable action between, partners. In Mills v. Thursby (11 How. Pr., 113), Justice Mitchell referred a similar cause on motion. It was held at general term of superior court (3 Sandf., 739), that the Code authorizes a reference in all actions whatever.
    VII. It is well settled, that an order which directs a reference of an action which the court has power to refer is not appealable (7 Bosw., 680).
    
      Cram & Robinson, for the appellants.
    I. This order is an appealable one. An order which directs a reference in a case in which a reference is not authorized is appealable. Cram v. Bradford, 4 Abb. Pr., 193; Dickinson v. Mitchell, 19 Abb. Pr., 286.
    • II. A court and jury is the proper tribunal for the trial of the issues in this action. This action is brought to foreclose two chattel mortgages, and the- issues raised by the answers of such of the defendants as have appeared relate entirely to the validity of these mortgages. Should these mortgages be held invalid, that will be an end of the plaintiffs’ case, and no examination of any account whatever will be necesssary. Under these circumstances, a reference is improper. It subjects the parties to the increased delay, labor, and expense of an accounting before a referee, which the event may show to have been utterly unnecessary for the disposition of the case. It will be time enough to order an accounting, which in this case would be peculiarly long and laborious, when the validity of these mortgages has been determined, and it would be unjust and oppressive to do so, while that question remains to be tried. It was the intention of § 271 of the Code of Procedure never to compel a reference, except in cases in which the court could clearly see from the pleadings and proceedings that the trial must directly and necessarily involve the examination of a long account. In Graham v. Golding (7 How. Pr., 260), it was held that, where the necessity of examining'a long account depends upon the decision of another issue in the action, as whether a partnership existed, a reference will not be ordered until that issue has been first tried. Per Dean, J.: “ Until it is known that there is a partnership, it cannot be said in this case that the trial of the issue of fact in this case will involve the examination of a long account. * * * The general rule, therefore, must prevail that the question of partnership be first settled by an issue, or "by the court, before a reference can be ordered by the-court.” And so in Keeler v. The Plank Road Company (10 How. Pr., 11), a reference was refused for the same reasons. Per Dean, J.: “ But even if the plaintiff’s view of the case is correct, before it can be established, that issue is to be tried, and then, if decided in the plaintiff’s favor, it may be necessary to examine the accounts of the parties. If the issue is found for the defendants, then no accounts are to be examined. A reference can only be compelled when the court can see by the pleadings or other papers of the parties that the trial of the cause must necessarily involve the examination of a long account on either side.” In Cameron v. Freeman (10 Abb. Pr., 333; S. C., 18 How. Pr., 310), a reference was denied, the court, per Habéis, J., holding : “ That where it was denied that one of the defendants, to whose rights the plaintiff had succeded, was ever interested as a partner in the transactions in respect to which an account was sought, this issue must be established in favor of the plaintiff before an accounting can be necessary. And whether the transactions in which it was alleged that such • plaintiff had an interest were settled and closed with another defendant as one of the partners, this issue, too, would have to be determined against the defendants before the plaintiffs would be entitled to an accounting for any amount which might be due him.” 2. It is also evident, from the pleadings and affidavits, that the investigation of these issues will require the decision of difficult questions of law, and in such cases the court has no power to order a reference (Code, § 271; De Hart v. Covenhoven, 2 Johns. Cas., 402; Codwise v. Hacker, 2 Caines, 251; Low v. Hallet, 3 Caines, 82; Adams v. Bayles, 2 Johns., 374; Ives v. Vandewater, 1 How. Pr., 168). 3. Besides, as these mortgages are attacked on the ground of fraud, as all the issues involve that charge, and the whole defense rests upon it, the defendants have a right to a trial by jury, and a reference cannot be -compelled. On this ground an order of reference was reversed -in Freeman, v. The Atlantic Ins. Co. (13 Abb. Pr., 124; Supreme Court, General Term, 1861). See also Levy v. Brooklyn Fire Ins. Co. (25 
      Wend., 687), and title three, part two, chapter seven, section four of the Revised Statutes (5th ed., p. 225), which' provides that, in cases like this, the question of fraudulent intent shall he deemed a question of fact, and not of law. In dark v. Brooks (26 How., 285), an action for an accounting between partners, in which, however, one of the issues was as to the amount of the interest of one of the partners, the court sent this issue to a jury for trial, athough the application was not made wilhin ten days after issue, joined, as provided by Rule 33 of the court.
    III. In this case the pretended mortgages are alleged to have been given partly to secure the firm account of the alleged partnership of Church & Brooks, consisting of the mortgagors, Edwin A. Brooks and Harvey Church. Brooks has been served with a notice of no personal claim, and has not appeared; but Church, an equally necessary party, although made a defendant, has neither been served with process, nor appeared in the action. Under these circumstances, the cause not being at issue, or ready for trial, with respect to all the defendants, who are necessary parties, the court has no power to order a reference. “ Motion for a reference denied because it did not appear from affidavit that issue had been joined in the case.” (Jansen v. Tappen, 3 Cow., 34). A motion for reference was denied in Dutcher v. Wilgus (2 How. Pr., 180), because it did not appear sufficiently from the affidávit that issue was joined in law, which was requisite as well as in fact. “ The old rule requiring an issue of law or fact to be joined in regard to every defendant except those who are defaulted before the cause could be brought to argument, has never, to my knowledge, been abrogated, and as long as legal proceedings retain any degree of consistency or symmetry, it never can be disregarded ’ (Per Barculo, J., Burnham v. De Bevorse, 8 How. Pr., 159). “An action cannot regularly be brought to trial until it is in such a situation that a final judgment can be rendered between all the parties ” (Ward v. Dewey, 12 How. Pr., 193). If brought to trial upon the answer of part of the defendants only, when the others have not been served with process,' or appeared in the action, the court will not permit the action to proceed. “ The defendant who has not appeared or been served, is not before the court. * "" * * A complete determination of the controversy cannot be had without the presence of the third defendant; service of summons upon him, or his appearance in the action, is indispensable ” (Per Bosworth, J., Powell v. Finch, 5 Duer, 666). And in Hawkins v. Avery (32 Barb., 551), it was expressly held by the general term of the supreme court in this district that where there are some of the parties defendants in an action who have not been served with process, the action is not referrable, and that the proper place to take the objection is on the motion to refer. Per Allen, J.: “But a perfect answer to the objection taken by the defendant to proceeding to trial before the referee until the other parties were served with process ié that the objection related solely to the regularity to the reference, and made no part of the trial, and is not, therefore, the subject.of exception. If the above action was not. in readiness for trial, itwas not referrable (Code, §§ 270, 271). and the objection should have been taken on the motion to refer. The court then adjudged, if the parties did not concede, that the cause was at issue and in a condition to be tried, and the referee, who was only charged with the trial of the issues, could not overrule the action and decision of the court under whose appointment he acted.” i
    IV. The issues in this case being proper issues to be tried by a court and jury, the court would order, them so to be tried on the application of either party within ten days after issue joined. It was the intention of the defendants to apply for such order as soon as issue should be joined. They had no power to apply before, and the order of reference made before issue joined cut the defendants off from even the possibility of making such application, and deprived them, by no fault or laphes of their own, and without even a hearing, of the rights of having these issues passed upon by a jury.
    The order of reference should, therefore, be reversed, for the reasons already given, and for the additional purpose of allowing the defendants, at the proper time after issue joined, to make this application for a jury trial in a case in which it is eminently proper that it should be granted.
   By the Court—Robertson, Ch. J.

The necessity of deciding difficult questions in the investigation ” is expressly excepted from the grant of authority to courts to direct references of all the issues in an action to a referee to be tried, in case their trial requires the examination of a long account (Code, § 271).

The grant itself is, at most, permissive, not peremptory, and evidently intended more for the benefit of the court, than as a right of the parties, since it is allowed to exercise the power on its own motion. The questions of law which may be so required to be decided, are not confined to those arising out of the facts presented by the issues in the case; they may grow out of their very character, and the evidence necessary to their investigation. In this case the questions of law, in regard to the good faith and honest intent of the chattel mortgages held by the plaintiffs, may be very simple, and yet offers of evidence may raise very difficult ones. The answer, however, besides charging generally, that such mortgages were executed with intent to interfere with the collection by the other defendants, of their claims against Brooks, alleges an entire want of consideration for them, secrecy in their execution, and a continued possession of such chattels by the defendant Brooks, after such execution. This, which is not denied in any paper before us, throws on the plaintiff the burden of proving good faith and honest intent in executing such mortgages (2 Rev. Stat., 137, § I). And although such intent is made by the statute a question of fact and not of law, such good faith is not; the statute intended by it something besides the intent, and was evidently designed to cover cases where, although the mortgagee, had an honest debt, and his sole desire was to secure it, he allowed himself and it to be knowingly used to keep other creditors at bay.

But even if the statute meant precisely the same thing by “ good faith ” and intent not to hinder, delay, or defraud,” courts have made out of matters appearing on the face of an in-, strument, questions of law as to fraud. And even if the only ■ questions on the main issues were questions of fact, in addition to determining such questions as to the good faith and intent, yet, the relevancy of evidence offered and its sufficiency to establish them when in issue, may present difficult questions of law.

The mortgagee of course cannot introduce every thing he thinks proper, by way of proof of his honesty. Whatever is offered must have some legal, direct bearing on the questions at issue. A just debt to be seciued, undoubtedly lies at the bottom of such proofs, but the mere necessities or convenience of the mortgagor have been held not to be sufficient, alone, to go to a jury as evidence of such honesty of intention (Doane v. Eddy, 16 Wend., 523; Randall v. Cooke, 17 Id., 53). No rule has, however, been established as to any other circumstances. The fact that a jury is to pass upon the evidence of circumstances showing good faith, does not render the question of its admissibility less difficult of solution, or take away the necessity of the regulation of its admission by an experienced judge, instead of a referee, who is only required to possess the skill necessary to examine a long account. The fact that referees may and often do possess equal skill and experience does not alter the theory and object of the statute to leave litigation to the determination of ordinary tribunals created for the purpose, unless there is special necessity for the use of others. Unless the plaintiff in this case can prove his good faith and honest intent, he must fail at the trial, and the introduction of evidence for the purpose will most probably raise difficult questions of law.

I am not prepared to say that proof of an intention on the part of the defendants to apply for a trial of special issues in the action by jury, as provided in the 254th section of the Code would, of itself, even if proved, render an order for a ti’ial by a referee of all the issues erroneous, because I see no obstacle to authorizing such mode of trial, notwithstanding such order of reference.

The latter may in all cases be applied for and obtained immediately after issued joined, or at any time afterwards; the former may be done upon a notice given ten days after issue joined, beside which full time is allowed, for the settlement of such issues, if granted (General Court Rule 33). If the motion to refer can cut off that right, then the mere intent to apply ought to be sufficient to require the order of reference to be made conditional, unless such application be made within some specified time; but I cannot think the granting absolutely of an order of reference cuts off that right. If such issues were of the kind, that their determination would dispose of the case so as to render the taking of an account at all unnecessary, the rule would apply that the examination of a long account being unnecessary, a reference would be equally so (Graham v. Golding, 7 How. Pr., 260; Keeler v. Plank Road Co., 10 Id., 11; Cameron v. Freeman, 18 Id., 310; S. C., 10 Alb. Pr., 333).

I think, however, there is another objection in this case to a reference of all the issues. While the plaintiff has joined as a cause of action with his claim under the chattel mortgages, a personal liability of the defendants Brooks and Church for moneys advanced, he only prays for judgment against them for any deficiency in the amount so claimed, after applying the proceeds of the mortgaged property in satisfaction; but as appears by the affidavit of the attorney for the defendants he has served upon the defendant Brooks, besides a summons, a notice that no personal claim is made against him, while he has not served any summons at all on the defendant Church. Even, therefore, if the plaintiff can proceed in this action against the defendants Brooks and Church to recover judgment against them under-the 136th section of the Code, notwithstanding his notice that he made no personal claim against them, and if a j ndgment for a deficiency in an action for the foreclosure of a mortgage comes under the section last named, I do not see how the action is in a condition to have the liabilities of such two defendants determined on the trial of dll the issues therein before a referee, so as to’ have judgment and execution against the joint property of Church and Brooks. Assuming also Church to be a proper party to an action to which the defendants who are creditors of Brooks are made parties merely as having subsequent claims to that of the plaintiff upon the mortgaged chattels, and that the determination of Ms liability, or its amount, must be simultaneous with that of the rights of such defendants, since there can be but one trial and judgment in the action, it is not very clear how such trial can be had, or judgment given, until Ghuroh ñas been brought before the court. The first subdivision of such 136th section is a mere re-enactment of a previous statutory provision (2 Rev. Stat., 377, § 1), and could hardly have been designed to reach further than it did, although possibly by the reduction of forms of action, and jurisdictions, courts to one comprising equitable as well as legal forms and jurisdictions, joint liabilities may be embraced by it. It could not have been intended to extend to cases, where an action for such liability was joined with one where other causes of action were to be passed upon, other equities settled and relief given, besides such joint judgment. Section 375 of the Code permits an entirely new litigation of any liability of the joint contractors not served, involving of course the question of the validity of the mortgages. There is no good reason for omiting to serve' a party, if a resident, personally, or if absent, by publication, where the defendants have equities as between each other, except in an action on a joint liability, and the recovery of a simple judgment for the amount due upon if against joint contractors. The only reference that could have been ordered in this action, if Brooks and Church had been the sole defendants, and the former, having alone been served with the summons, had not appeared or answered, would have been one to take an account or proof of some particular fact necessary to enable the court to give judgment (Code, § 246, subd. 2). As there can be but one trial and judgment in the action, the referee, as a substitute for the court or jury, must assess the amount due from Brooks and Church as part of such judgment; yet no authority to do so is given him by the order of reference in question. Besides, the referee can only try the issues made by the pleadings in the action, and has no authority to determine equities between the defendants, under section 274 of the Code, or dispose of the costs.

There is no reason why any property held jointly by Church and Brooks, therefore, should be charged under an execution with the costs of the litigations respecting the validity of the mortgages given by the latter. While Church remains a party on the record, and is not brought in, the cause must be considered as not at issue as regards him, and, therefore, not in a situation for a reference to dispose of all the issues (Jansen v. Tappen, 3 Cow., 34; Dutcher v. Wilgus, 2 How. Pr., 180; Burnham v. Debevorse, 8 Id., 159; Ward v. Dewey, 12 Id., 193; Powell v. Finch, 5 Duer, 666; Hawkins v. Avery, 32 Barb., 551).

For these reasons, the order appealed from should be reversed, without costs to either party. 
      
       Present, Robertson, Ch. J., and Babboub and Garvin, JJ.