Case ID: ny-super-ct_46/html/0022-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.—Van Vorst, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHN C. RUST, Appellant, v. CHARLES HAUSELT, Impleaded with HENRY RANCKE, Respondent.
    
    I. Refebence, otheb than of issues.
    1. Report of referee.
    
      
      (a) Confirmation of.
    1. Rule 30. By force of the rule itself the report becomes absolute and confirmed, unless exceptions thereto are filed and served within eight days after service of notice of filing the report. No order of confirmation, either upon motion or ex parte, is necessary.
    
    1. So held as to a reference to take and state an account.
    
      (b) Unnecessary motion to confirm.
    1. If, notwithstanding no exceptions are filed, a motion is made to confirm, which after opposition is granted, an appeal from the order of confirmation entered thereon brings up nothing for review.
    
    (c) Exceptions, filing nunc pro tunc.
    1. Effect of.
    
    Although, after a motion to confirm has been heard and granted, exceptions are filed nunc pro tunc, yet no benefit can result therefrom, on appeal from the order of confirmation.
    
    1. To obtain any benefit therefrom, there must be a rehearing of the motion upon the exceptions.
    1. If such rehearing is had after an appeal from the original order, it would involve an abandonment of the appeal.
    2. Power to order. The court has power to permit the filing of exceptions nunc pro tunc, and to that end may malee such disposition of an appeal from an order confirming a report to which no exceptions were filed, as may be necessary to prevent a failure of justice.
    H. Reversal of judgment and new trial.
    1. ACTION FOR AN ACCOUNTING, EFFECT OF REVERSAL IN. ' '
    
      (a) Where an action is brought for an accounting, and judgment is rendered dismissing the complaint on the ground that there has been an accounting by the defendant, which is binding and conclusive on the plaintiff, and adjudges that defendant recover for the amount found due him on such accounting, the effect of a reversal of such judgment is that upon these facts appearing upon the trial, the plaintiff was entitled 
      
      to an accounting, and to the payment of such mm as on such accounting he might be found entitled to.
      
    
    III. Bona fide holder for value.
    
    1. Value parting, what is.
    (<$) Partnership. Surrender of chattel mortgage on individual PROPERTY, BROUGHT BY THE MORTGAGOR INTO THE FIRM, SUBJECT TO THE INCUMBRANCE.
    1. Constitutes a valuable consideration for the firm’s.indorsement-s of notes given, on the surrender of the mortgage, by the mortgagor, for his individual debt secured thereby.
    IV. Chattel mortgage—not filed.
    
    1. Validity of, as between partners.
    (os) An unfiled chattel mortgage on property subsequently brought by the mortgagor into a firm of which he becomes a member, as his proportion of the capital, is not invalid as to the other partners by reason of its non-filing.
    The property comes into the concern impressed with the lien of the mortgage.
    V. Ratification.
    
    1. By one partner of the acts of his copartner.
    (as) Where one partner, without the assent or knowledge of his copartner, gives to H. his own notes with the firm name in
      dorsed thereon by him, in payment for his individual debt, ■which is secured by a chattel mortgage made by him on his individual property, which property, subject to the mortgage, he had brought into the copartnership as his proportion of the capital, H. at the same time surrendering his chattel mortgage, and. thereafter there is a transaction between the firm and H. as to some wire gauze, and thereafter the firm makes an assignment to II. for the benefit of creditors, and in the schedule of liabilities annexed thereto states its indebtedness, to H. to be $3,000; and upon the evidence it appeared that there could not be so large a claim in favor of H., except upon the basis that the firm acknowledged its liability on the said indorsements; and it also appeared that upon that basis the claim in favor of H. would be-much larger, unless the firm had received a credit in respect of the wire gauze; and H. testifies as follows:— “Q. In Ex. 1,” being the schedule of indebtedness, “the-firm indebtedness to you is stated at $3,000; state how that amount was arrived at? A. They owed me $6,000, and after deducting the wire gauze, they agreed that the balance should be $3,000. I accepted the assignment upon the schedule of liabilities handed me by Rancke & Rust, which included my debt at $3,000.”
    Held,
    A ratification of the act of the partner who gave the firm indorsement for his individual debt-, and an adoption by the firm of the original claim against the individual partner as a firm obligation.
    VI. ASSIGNEE IN TRUST FOR BENEFIT OF THE CREDITORS OF A FIRM.
    1. Accounting.
    
      (a) Action for, by one of the partners, against his copartner and the assignee.
    1. Result op above holding as to ratification.
    1. As between the parties to the action the assignee is entitled to charge against the assets of the firm said sum of $3,000, and is under no obligation, to account for the proceeds or value of the. gauze as part of the assigned estate. 
    
    Before Curtis, Ch. J., and Van Vorst and Speir, JJ.
    
      Decided February 2, 1880.
    
      This action was brought to compel the defendant Hauselt to account, as assignee of the firm of Rancke & Rust, of which firm the plaintiff was a member. Upon a trial at special term the plaintiff’s complaint was dismissed, and an affirmative judgment was rendered against him. This judgment was reversed at general term, and a new trial ordered. Upon appeal to the court of appeals, the decision of the general term was affirmed, and judgment absolute was rendered against the defendant. Upon the remittitur of the court of appeals being filed in this court, and judgment thereon being entered, an order of reference was made to William F. Shepard, Esq., counselor at law, to state the account, and to ascertain and determine the amount due the plaintiff.
    The referee stated the account, and reported nothing due to the plaintiff, and the defendant moved at special term to confirm the report. No exceptions had been filed by the plaintiff to the report. The court confirmed the report. The order made states that the report was “ confirmed in 'all things, it appearing that no exceptions had been filed to such report.”
    • Whereupon the plaintiff appealed from the report of the referee and from the order confirming same. The plaintiff then moved at special term for leave to file exceptions, nuno pro tuno, which motion was denied, and the plaintiff thereupon appealed from such order.
    Both appeals are now considered.
    Dixon, Whitlock & Anderson, attorneys, and John H. Bergen, of counsel, for appellants, urged:
    I Rule 30 does not apply to the report of the referee in this case at all, and the judge at special term should have heard the motion on the merits, a. This reference was like one to take testimony and report with opinion, and on the coming in of the report, it was the .duty of the court to hear argument on the merits and render judgment. It was-made under the provisions of section 194, Code Civ. Pro. b. No exceptions were necessary to such a report, but it was the duty of the court to decide upon the facts reported and the evidence. c. If exceptions were necessary, then the coui’t should have allowed them in furtherance of justice. d. The court had power to allow the; exceptions to be filed nuno pro tuno, and it should have done so (Douglass v. Douglass, 7 Hun, 272).
    II. The court of appeals, in affirming the general term of this court, held that the plaintiff was entitled to judgment against the defendant; and the decision of the referee being made upon the same facts upon which this court at general term and the courf of appeals had passed, is directly in the teeth of both of those decisions, and in effect overrules both this court at general term and the court of appeals. The court of appeals, by its judgment, determined that no error had been committed by the general term in granting a new trial, and thereupon rendered judgment absolute upon the right of the appellant (Code Civ. Pro. § 194). The opinion of the former general term showed that they passed upon all the questions of fact sought to be again raised before the referee, to wit: The indebtedness of the firm to Hauselt. The binding effect of the accounting and settlement between Bust and Bancke. The ownership of the wire gauze. All these were by that opinion decided in favor of plaintiff. The matters having thus been decided in favor of plaintiff, and defendant having chosen to appeal and give the usual stipulation, the decision of the court of appeals affirming that of the general term, in the absence of an opinion, must, be deemed to be an affirmance in every respect, and their judgment must be in these respects a judgment absolute in favor of plaintiff, and upon the right of the defendant as appellant. These questions should therefore have been treated by the referee as. res adjudieata.
    
    III. Upon the merits : It was proved and not contradicted that the defendant Hauselt was the assigneeof the firm of Ranche & Rust. Under that assignment-he received $13,000 in notes, which he collected in full. He also had in his possession, when the assignment-was made to him, certain goods belonging to Rancke- & Rust (wire gauze), which had been transferred to him by Rancke, without the knowledge or consent of • Rust, in payment of an individual past due debt from Rancke to Hauselt, from which goods he subsequently realized net $1,986.86. Hauselt, as assignee, paid out in liquidation of all claims against the firm of Rancke- & Rust, $11,235.32, thus leaving in his hands in cash:
    Balance of amount realized from notes which he received under assignment, over and above amount of debts of firm, - - $1,764.68
    Also the net proceeds of the wire gauze, which was firm property, and for which he must account,....... 1,986.86
    $3,751.54
    From which he is entitled to deduct the
    amount the firm owed him, - - - 1,000.00
    Leaving balance,......$2,751.54
    To be accounted for by him as assignee, less his commission.
    These facts are not disputed on this accounting, and yet in the face of this evidence and of these facts, the referee decided there is nothing due the plaintiff.
    IV. The law is perfectly settled, that Hauselt is not entitled to hold the goods of the firm of Rancke & Rust, to pay the individual debt of one of the firm to-him (St. Nicholas Nat. Bk. v. Savery, Gen. Term, Super. Ct., Weekly Dig. April, 1879, p. 67; also decision in this case at general term, which was affirmed in court of appeals).
    V. The pretense of a chattel mortgage amounts to nothing, as it never had any validity ; it was not filed, and Rust never knew there was such a thing in existence.
    VI. Rancke’s acts in transferring the wire gauze to Hauselt (which was firm property) in payment of his •individual debt, and in giving him the indorsement of the firm for the same purpose, being without the "knowledge of Rust, were void, and Hauselt must account for the gauze, and for the balance of the money in his hands, precisely the same as if no such transaction had ever taken place, a. Hauselt never got title to the wire gauze until he accepted the assignment. Until the execution and delivery of that instrument, the wire gauze was the property of the firm of Rancke & Rust, and they could have maintained replevin or trover for it. When the assignment was delivered, then the title to this gauze passed to Hauselt as assignee, and he must account for it in this action.
    VII. The plaintiff is clearly entitled to a judgment in this action upon the undisputed facts, for $2,751.54, with interest, at least, from February 24,1875, the date when the assignee turned over the claims to firm and settled his account, less the commissions of the .assignee.
    
      S. Kauffman, attorney, and Lewis Sanders, of couasel, for respondent, urged:
    I. The order of July 24, 1879, is not appealable, being granted in default of exceptions. An order on default is not appealable,; but if the order is appealable, Rule 30 of the supreme court, in terms, says, that “the report shall become absolute, and in all things confirmed ” notwithstanding error appear upon the face of the referee’s report. (Opinion by Daniels, J. Catlin v. Catlin, 4 N. Y. Supr. Ct. [T. & C] 667). There is no error in the' order appealed from, and it must be affirmed. The order is granted in default of exceptions, and is not appealable (Innes v. Purcell, 58 N. Y. 390).
    II. a. The order of October 7, 1879, denying the' motion for leave to serve exceptions to a report confirmed three months before, and from which confirmation an appeal was then pending, was discretionary with the court below, and involved no substantial right, and hence is* not appealable, b. If appealable, there are no merits, unless a bald ignorance of law in the face of a direct motion to confirm the report, be meritorious. But if this court should grant the application, how will it affect the order confirming the report ? As has been shown, that order is absolutely unassailable, and no attempt has been made to set it aside ; this court will not make a useless order; it does not sit as a moot court.
    III. Plaintiff has no case. The findings of fact are fully borne out by the testimony, and the opinion of the referee is of itself a conclusive argument in support of his conclusions of law.
    IV. The only points at issue were what Ranke & Rust owed Hauselt at the date of their assignment to him. In their schedule of creditors they placed amount due Hauselt at $3,000. The evidence given by plaintiff to impeach" his own account was improbable, and involved a fraud upon the other creditors. Mr. Hauselt’s evidence supported the schedule of creditors, as made out by plaintiff’s book-keeper, and in the absence of the books of Rancke & Rust, and of all explanation for their absence, the referee rightly concluded that the schedule was correct, that Mr. Hauselt was not party to a fraud, and that the debt was $3,000, and that the balance due by Rancke & Rust to defendant was $1,764.68, and that upon an accounting, nothing is due from defendant to plaintiff.
    V. The wire gauze claim is discussed by the referee, and the referee clearly shows : 1st. That the wire gauze was no part of the property assigned; and, 2d. That it is no part of the complaint, and consequently not referred to him to compute, because it is not in this action. This is so clear a proposition that a single test will dispose of it. Assume that Rancke wrongfully disposed of the wire gauze to Hauselt in payment of an antecedent private debt of Rancke, a demand by plaintiff for the wire gauze would be in trover, while the present action is for an account. If this had been stated in the complaint, it would have been a clear misjoinder of actions. Hot being put in the complaint, there can be no recovery therefor, and plaintiff may still bring his action for the wire gauze, as the present judgment does not conclude him.
    VI. The chattel mortgage. The recording of the chattel' mortgage is to prevent fraud, and applies only to subsequent purchasers and mortgagees in good faith for value. It is not pretended that Rust became a purchaser from Rancke ; and if it were, the evidence does not support it. The 'firm of Rancke & Rust had the benefit .of the goods belonging to Hauselt under the chattel mortgage, and it is immaterial whether Rust consented or not, so long as this firm got the goods by means of the firm indorsement. The firm got the consideration for their indorsement.
    VII. The referee was warranted in finding a ratification. Rancke told Hauselt that Rust consented to the indorsement. Hauselt says: “At the time the'assignment was made, I received a schedule from Rancke & Rust of their ¡liabilities. This is that schedule,” marked Defendant’s Exhibit Ho. 1. “I believe Mr. Rust was present when the assignment and Exhibit Ho. 1 were delivered to me. ... In my assignment account of Rancke & Rust no reference is made to the wire gauze or the $6,000.” Q. In Exhibit No. 1 the firm indebtedness to you is stated at $8,000—state how that was arrived at % A. They owed me $6,000,—and after deducting the wire gauze, they agreed that the balance should be $3,000. “I accepted the assignment upon the schedule of liabilities handed hie by Rancke & Rust, which included my debt at $3,000. I never agreed to, and never was requested to hold the wire gauze, or the proceeds thereof, as assignee.” The referee, under this evidence —the larger portion entirely new evidence—could not have found otherwise than he did, when to find otherwise would be to make defendant a party to a fraud and a perjury. The referee chose to believe Hauselt, plaintiff’s witness, and Rancke & Rust’s schedule of liabilities, and the statement Rancke made when he gave the firm indorsement, and the firm got the goods. His decision accords with good morals and common sense. The orders should be affirmed.
    
      
       Previous to the decision here reported, this case has been before the courts in various phases. See 41 Super. Ct. 467; 42 Id. 573; 43 Id. 571; 69 N. Y. 485; 76 Id. 614.
    
    
      
       This rule would probably not apply if, on the hearing of the motion, exceptions were, either by express or tacit consent, made orally, argued and passed on by the court, and these exceptions were subsequently reduced to writing and ordered to be filed nunc pro tunc, eo that they might appear in the record.
    
    
      
       The language used by the court, considered by itself, would seem to justify the conclusion that such reversal would have no greater effect than that stated in the head-note. It undoubtedly would necessarily have such effect, but it does not seem to follow that such would be its only effect.
      In view of the fact that there was, before this general term, evidence (not before the previous one), which, had it been before that general term (viz.: the oral evidence of H. set forth in the head-notes) might have led it to the same conclusion, as to the rights and liabilities of the assignee, to which this general term afrived, it is submitted that the above decision does not go to the extent of holding that where the reversal is on the ground that the accounting is not binding and conclusive because it charges against the plaintiff items with which he is not chargeable, and that the elimination of such items would result in a balance in plaintiff’s favor, such reversal is not a decision to the effect that such items are improperly included, and must be eliminated, which is binding on the trial court on a new trial, the evidence being the same as that upon which the general term based its decision, whatever may be the power of a subsequent general term, to disapprove of, and overrule the decision of the former one.
    
    
      
       See Rust n. Hauselt (41 Super. Ct. 467).
    
   By the Court.—Van Vorst, J.

Rule 30 of the general rules of practice provides, that in references, other than for the trial of issues in an action, the referee’s “report shall become absolute, and stand in all things confirmed, unless exceptions thereto are filed and served within eight days after service of the notice of filing same.”

The reference in this case, which was not of the issues, but to state the accounts of the defendant, Hauselt, as assignee, and of his indebtedness to the plaintiff, is within the rule requiring exceptions to be filed, and none having been filed, the defendant was entitled to an order confirming the report. In fact, the report had become absolute by force of the rule itself.

The record shows no error in the order made at special term, confirming the report. The merits of the report do not appear to have been at all considered.

The order confirming the report of the referee was made on July 24, arid on July 31, the plaintiff appealed from the order. Thereafter he applied to the special term for leave to file his exceptions nunc pro tunc. Had the order been granted at that time, an appeal from the order of confirmation being then pending, it is not apparent how the appeal could be aided by exceptions thereafter filed, and which had not been in substance even considered on the motion to confirm. In order to have obtained the benefit of exceptions, filed in fact after the report had been confirmed, it would have been necessary to have obtained a rehearing of the original motion, which would have involved an abandonment of the appeal.

The grounds upon which the motion for leave to file exceptions nunc pro tunc was denied do not appear. Thfe court had doubtless power, at a proper stage of the proceeding, to order the exceptions, which, through a misapprehension of the practice in such cases, had not been filed, to be filed nunc pro tunc (Douglass v. Douglass, 7 Hun, 272), and if the exigencies of the case even now require it, such disposition of these appeals might be made as to allow that to be done which would be necessary to prevent a failure of justice.

And this involves a consideration of the merits.

The referee by his report has stated the account, and has reported that the balance of moneys in the hands of the assignee, which he has fixed at $1,764.68, is not sufficient to pay the indebtedness due him from the assignors, irrespective of his commission. He has also reported that there is no sum or amount due from the defendant Hauselt to the plaintiff.

The report of the referee covers the matters which were committed to him for examination and determination. It is claimed on the behalf of the appellant that the referee erred in both of the conclusions at which he arrived, and which are above indicated.

It is urged that the referee has decided in opposition to the decision of this court (41 Super. Ct. 467) at general term, and to that of the court of appeals (76 N. Y. 614) in affirming the judgment of the general term.

We do not regard this point as well taken. By the original judgment rendered at the special term, it was decided that an accounting had been had by the defendant of his trust, for which reason the complaint was ordered to be dismissed. The judgment further awarded to the defendant Hauselt the sum of §1,881.08 against. the plaintiff. This judgment was reversed. The effect of the reversal is that upon the facts appearing upon the trial, the assignors were entitled to an accounting from the assignee, and to the payment over of any of the assigned estate or property in his hands to which the plaintiff was- entitled. That is what the plaintiff asked in his complaint, and the relief he in substance demanded.

That accounting the referee, appointed by the court, was ordered to take. Whether anything was due to the assignors or either of them, could only be ascertained by such accounting.

The principal objections urged by the appellant to the referee’s report are his conclusion that the assignors were indebted to the assignee, at the time of the assignment, in the sum of $3,000, and to his refusal to hold that the defendant Hauselt should account in this action for certain merchandise, consisting of wire gauze, which had been delivered to him by one of the assignors previous to the dissolution of the firm, and before the assignment was made.

In disposing of these objections on the merits, certain facts are to be considered.

Before the copartnership between the plaintiff and the defendant Bancke was formed, Bancke was indebted to the defendant Hauselt in the sum of $5,000. To secure this claim Bancke executed and delivered to Hauselt a chattel mortgage, covering merchandise owned by him individually.

Afterwards Bancke entered into partnership with the plaintiff, and brought into the concern, as his pro'portion of the capital stock, his merchandise, encumbered by this mortgage.

Afterwards, and before the assignment was made by the firm for the benefit of its creditors, the defendant Hauselt demanded from Bancke the payment of his claim, or the delivery of the goods covered by his mortgage. Bancke, to satisfy Hauselt, delivered to him his notes, indorsed in the name of his firm, for the amount of the debt, and Hauselt delivered up the chattel mortgage. *

Hauselt claims that the firm’s indorsement was at the time assented to, or has been since ratified by the plaintiff. He testifies that when the firm’s indorsement was asked, Bancke replied that he would see Bust about it, and when he gave the notes said, ‘‘ Mr. Bust said it was all right.” The evidence of Hauselt is corroborated in this regard by that of his bookkeeper, the witness Wiegand. The defendant Bancke, upon the hearing before the referee, denied that he was authorized by his partner to indorse the note, and the plaintiff testified that he never knew of or assented to the indorsement by his,firm. t Afterwards, and before the assignment was made, a quantity of wire gauze, belonging to the firm of Bancke & Bust, was delivered by Bancke to the defendant Hauselt, with bills of sale therefor, executed in the firm name, on account of this indebtedness.

With the assignment, executed by the firm to the defendant Hauselt, for the benefit of their creditors, was delivered a schedule of their creditors, stating the amounts due to each. In this schedule the debt due to the defendant Hauselt is stated to be $3,000.

The evidence does not justify so large a claim in favor of the defendant Hauselt, unless upon the basis that the firm acknowledged its liability on the indorsement made for Rancke’s individual debt.

It is quite clear, that for such indorsement the firm received, through the surrender of the defendant’s chattel mortgage, which was a lien upon the property covered thereby, a valuable consideration.

That mortgage, although void as to creditors, and subsequent purchasers in good faith, for the reason that it had not been filed, was nevertheless valid as to the mortgagor, and the merchandise of Rancke went into the concern impressed with its lien.

Although by the copartnership agreement these chattels became joint property, Rancke could not, by simply placing the goods in such new relation, he still remaining an owner and being in possession, deprive the mortgagee of his legal and equitable rights under his mortgage.

In finally adjusting the claim of the defendant Hauselt against the firm at the sum of $3,000, at which amount it is stated in the schedule, delivered with the assignment, there must have been some recognition of the transaction with respect to the wire gauze, the value of which must have been taken into account, in reducing the claim of the defendant, which had been increased to $6,000, to $3,000.

The defendant Hauselt testifies that at the time the assignment was made he received a schedule from the assignors, of their liabilities.

“Q. In Exhibit No. 1, the firm indebtedness to you is stated at $3,000; state how that amount was arrived at.
“A. They owed me $6,000, and after deducting the wire gauze, they agreed that the balance should be $3,000. I accepted the assignment upon the schedule of liabilities handed me by Rancke & Rust, which included my debt at $3,000.”

This amounts to a ratification of what had been theretofore done, and is an adoption of the original claim against Rancke, for which the firm indorsement had been given as a firm obligation.

It is to be observed that this particular transaction is not sought to be impeached by the complaint in this action, nor are the creditors of the firm concerned in this proceeding.

The complaint urges neither fraud nor mistake as a ground for relief against the assignment, or the statement of the claim in favor of Hauselt. The usual accounting from an assignee is asked for, upon the closing up of the trust.

As between these parties the amount of the debt, in favor of the defehdant Hauselt, against Rancke & Rust, must be considered as the sum of $3,000. The assignors are estopped by their own action. With respect to it the parties must be left where they placed themselves. And that disposes of the question of the wire gauze sold to Hauselt before the assignment, and which was taken into account in adjusting the balance.

Amid the conflict in the evidence, it was for the referee to determine which of the witnesses he would believe, and we fail to see, in the result reached by him, any error in law, or any real injustice.

The orders appealed from are affirmed, with costs to respondent of one appeal.

Curtis, Ch. J., and Speir, J., concurred.

Subsequent to the above decision various proceedings of interest were had at special term. On one of these Judge Russell wrote an opinion in which a general review of the proceedings in the action is given.

In .view of the interesting questions’disposed of by Judge Russell, and the fact that they grew out of the above disposition made of the case by the general term, the reporters have thought proper, contrary to their usual practice, to report that special term decision in this connection.