Case ID: ny-sup-ct_10/html/0401-01.html
Source: Caselaw Access Project
Author: {"author": "Learned, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JAY GOULD, Respondent, v. THE TOWN OF ONEONTA, Appellant.
    
      Stock — agreement for sale of, by town —payment of money by purchaser to discharge lien on — right of recovery upon rescission of contract —■ When town bound by acts of its officers — illegal contract.
    
    The commissioners of the defendant having, in its behalf, subscribed for certain stock in the A. & S. R. R. Co., a dispute arose as to .the amount due; the company claiming a balance of some §6,000 for back interest, and refusing to issue the scrip until such amount should be paid. Subsequently, the commissioners agreed to sell the stock to one Wilbur, the plaintiff’s assignor; nnd, to enable him to procure a transfer of the same upon the books of the company, authorized him to pay the amount claimed by it to be due. which amount was accordingly paid by him. At the time of entering into the contract, Wilbur gave the commissioners a bond for §500, and bis check for the balance, upon the agreement that the check was not to be presented until the stock had been transferred on the hooks of the company.
    Subsequently, an action was commenced by the defendant, and an injunction obtained preventing the transfer of the stock to Wilbur, who thereupon rescinded the contract, and brought this action against the town of Oneonta to recover the amount paid by him to the company, and the value of the bond. Held (1), that Wilbur, in paying the money to the company, acted' as the agent of the commissioners, and that the transaction was substantially the same as though he had paid the money to them and they had paid it to the company, and that as the defendant had had the benefit cf the payment, it was liable therefor to Wilbur; (2), that even if the commissioners had no authority to make the contract, as it was not for cask, still, as it was not immoral, opposed to public policy, or criminal, tke plaintiff was entitled to recover what had keen paid under it.
    Appeal from a judgment in favor of the plaintiff, entered upon the trial of this action by the court, without a jury.
    
      H. Sturges, and Bundy dk Scramlimg, for the appellant.
    ' This sale or attempted sale of the stock by the commissioners, was a clear violation of the statute, in two particulars: it was not a sale at par, or for cash. (Session Laws, 1857, vol. 1, p. 813, § 6.) A check of a responsible drawer, who has funds to meet it, is not of itself payment until it is in fact paid. (Turner and others v. Bank of Fox Lake, 23 How., 399; affirmed in Court of Appeals, 3 Keyes, 425; 1 Cow., 359; 4 N. Y., 312; Bradford v. Fox, 16 Abb., 51, 53; S. C., 39 Barb., 203; 42 N. Y., 538, 541, 542; 6 Rob., 157; 21 Wend., 211, 215, 218, 219.) These railroad commissioners are required to sell for “ cash; ” they cannot, therefore, sell on time, and any securities taken by them must be void. (Decker v. Jackson, 16 N. Y., 442; Morton v. Campbell, 14 Abb., 414, and cases cited; S. C., 37 Barb., 179; Webb v. Albertson, 4 id., 51.) This case is not like that of Clarke v. The City of Rochester (28 N. Y., 605). “ A special authority must be strictly pursued, and every purchaser is presumed to know that special authority, wThere it is contained in a public statute." (Dunning v. Smith. 3 John. Chy., 332; Delafield v. State of Illinois, 8 Paige, 527; S. C., 26 Wend., 192; 2 Hill, 159; Farmers and Mechanics’ Bank v. Butchers and Drovers' Bank, 16 N. Y., 137.) Officers of a corporation are special, and not general agents, and have no authority to bind the corporation, except within the limits prescribed by the charter and by-laws. (Adriance v. Roome, 52 Barb., 399.) “ The principal is not bound by the’ special acts of an agent beyond his authority.” (Munn v. Commission Co., 15 John., 44; Beals v. Allen, 18 id., 363; Scott v. McGrath, 7 Barb., 53; Stringham v. St. Nicholas Ins. Co., 3 Keyes, 280; People v. Bostwick, 32 N. Y., 445; Marvin v. Wilber, 52 id., 270.) It is clear, from the foregoing authorities, that this sale, or attempted sale, was void and not binding on the defendant. (Arnot v. Pitston Coal Co., 9 Sup. Court R. [2 Hun], 591, 594-596; Saratoga Co. Bank v. King, 44 N. Y., 87.) We claim the rule to he, that this contract being illegal and void, the money paid on it cannot be recovered back. (Burt v. Place, 6 Cow., 431; Merryweather v. Nipan, 2 Smith’s Leading Cases, 528; Best v. Strong, 2 Wend., 319; Perkins v. Lange, 15 Wend., 412; Nellis v. Clark, 20 Wend., 24; S. C., 4 Hill, 24; Mayor, etc., v. Erben, 38 N. Y., 305; Otis v. Harrison, 36 Barb., 210.) It is like the case of officiously and without authority or request paying the debt of another, in which case it is well settled that the payment affords no' cause of action, and cannot be recovered back (Jones v. Wilson, 3 John., 434; Menderback v. Hopkins, 8 id., 436; Wyman v. Farnsworth, 3 Barb., 369; 14 N. Y., 181; Fowler v. Scully, 72 Pa., 466, 467, 468.) Wilbur could recover this money back of the railroad company, under the case of Merritt v. Millard (4 Keyes, 208), but not of the defendant. (Melchoir v. McCarty, 11 Am. R., 606.) No interest was due from the town to the railroad company. That this subscription does not of itself draw Interest is very clear. (Southern Central R. R. Co. v. Town of Moravia, 61 Barb., 180, 186-188; Session Laws, 1857, vol. 1, p. 810; Starin v. The Town of Genoa, 23 N. Y., 439, 453-455, 458, 459; Town of Venice v. Breed, 1 N. Y. S. C. R., 130.) This company had no control or authority over the question of. interest whatever. The law, and not any resolution of the company, governs the question of interest. And the statute does not give interest on the refusal of an “ individual subscriber ” to pay in compliance with a call of the company. Its only effect is to forfeit the stock and all previous payments. (3 Statutes at Large, 619, § 7; Lake Ontario R. R. Co. v. Mason, 16 N. Y., 451, 464.) Interest cannot be recovered without an agreement to that effect. (Tyler on Usury, 78; 3 Parsons on Contracts, 104; Colton v. Bragg, 15 East, 223.) If the court found that this interest was due, then we insist it is wholly unsupported by the evidence, and the judgment should, for that reason, be reversed. That this court has such power, is now unquestioned law, and it is frequently exercised. (Macy v. Wheeler, 30 N. Y., 231; Smith v. The Etna Life Ins. Co., 49 id., 211; Barlow v. Hubbell, 1 N. Y. Sup. C. R., 225.) “ If a finding upon the facts will not sustain the conclusions of law, the judgment must be reversed.” (Nelson v. Ingersoll, 27 How., 1-4; Buckingham v. Payne, 36 Barb., 87; Smith v. Etna Ins. Co., 5 Bans., 552.) “ After the payment of the principal of a debt, an action will not lie to recover for interest merely.” (Stevens v. Baringer, 13 Wend., 639; Facett v. Emmett, 11 Paige, 142; Southern Central R. R. Co. v. The Town of Moravia, 61 Barb., 180.)
    
      Chapman & Martin, for the respondent.
    The commissioners had power to make the contract with Wilbur. They had power to sell the town bonds for cash. A check in -the mercantile world is always treated as cash. The law used the word “cash” in the ordinary mercantile sense, as opposed to time sales or exchange sales. It was not a sale, but an agreement to sell for cash. Power to sell for cash implies power to make an agreement to sell for cash. But whether the commissioners had power to make such contract or not, if they did make it, claiming to act for the town, and Wilbur parted with his money upon the strength of it, he would have been entitled to recover. In making it at best for defendant, they simply exceeded their power. Their making of that contract was not even an act malum prohibii/um, much less m,al/wm in se. It was an act not expressly authorized. Wilbur’s paying to the railroad company, at their request, is precisely the same as if he had handed the money to these commissioners as agents for the town, and they as such agents had used it for the town. If, before they paid it over to the town, Wilber had sued to recover it back, the contract being executory, and not yet executed, he could have . recovered. (7 Mass., 31; 22 Pick., 181.) The town did, subsequently, ratify their acts. The commissioners had power to agree with the company as to the validity of its claim for back interest, and to adjust it. Such power would be implied from their relation to the company' as indicated by the act. They had a general power “to carry into effect the purposes of this act.” (Laws 1856, § 1, ch. 64.)
   Learned, P. J.:

The important facts are briefly these. The commissioners of the . defendants had subscribed for certain stock of the Albany & Susquehanna Railroad Company for the town. This subscription they had paid up, except that the company claimed that there was a balance of some $6,000 due for back interest. About this there was a dispute between the commissioners and the company; and the company refused to issue scrip until this was paid. While matters were in this condition, the commissioners contracted to sell the stock held by the town to Wilbur, the assignor of the plaintiff, at par. As part of this agreement, and in order to obtain the issue of the stock, Wilbur, by the direction of the commissioners, paid to the railroad company the amount of the disputed back interest; and he also paid to the commissioners themselves a town bond of $500. In making this payment to the' railroad, Wilbur, by direction of the commissioners, did so under protest; and the receipt given him so expresses. After this, the defendants brought an action, and by injunction prevented a transfer of the stock to Wilbur. Wilbur then rescinded his contract, and demanded back what he had paid. The commissioners subsequently obtained the scrip for this stock, and sold it. The plaintiff, assignee of Wilbur, now seeks to recover the money thus paid, and the value of the bond. Judgment was rendered in his favor at Special Term, from which defendants appeal.

The commissioners were the agents of the defendants in respect to the subscription for this stock, and in respect to its sale. As such, they contracted for the sale, and fixed the price. When they required, or authorized, Wilbur to pay to the railroad company this money, as a part of the purchase-price, and lie so paid it, the transaction was substantially the same as if he had paid it to the commissioners, and they had paid it to the company. If they were authorized to sell and receive payment, then their direction to the purchaser to pay to some one else, when acted on, was a payment to them. The price at which they agreed to sell, included this balance of alleged back interest; and Wilbur paid this as a part of the purchase-price. Or the claim of the company may be considered to be a lien alleged to exist upon the stock, without the payment of which the company refused to issue it. The commissioners, protesting against their liability, yet authorize Wilbur to discharge this alleged lien, in order that, by so doing, they may transfer the stock to him, and receive payment for it. In this view of the matter, also, the money was practically a payment on the contract for the sale of the stock. The contract has been rescinded, and it is unreasonable that Wilbur should lose his part payment.

Again, the defendants have had the benefit of the payment. They have had the stock and sold it. They say now : — true, we have had the stock, but we ought to have had it without the payment of this back interest. But the answer to this is, that their agents authorized the payment of this back interest. If it was, as appears, paid under protest, that was a protest on the part of the commissioners, and on behalf of the defendants, against their liability. Let the defendants then recover the money from the railroad company, to which they caused it to be paid. Let them claim that, in order to obtain this stock, they were compelled to pay this back interest, and let them show that they were not justly liable therefor. For the evidence shows that the railroad company refused to issue the stock until this back interest had been paid.

In opposition to this view, it is urged by the defendants that the commissioners had no right to make the contract which they did make; for the reason that, as alleged, it was not for cash. Assuming even that the contract was not for cash, still, as is well pointed out by the learned justice who tried the cause, “ the contract was not immoral, opposed to public policy, or criminal. It was simply the exercise of an excess of power by officers who were restrained by the law.” This ease has therefore no similarity to those in which the courts refuse relief to any parties who have entered into an immoral contract,

The question is further made, whether the commissioners had authority to settle and adjust the back interest with the railroad company. The claim made by the company was, that the subscription had not been fully paid, on account of a loss of interest upon the bonds delivered in payment of the subscription. The company claimed that the subscription should be as of certain date, and should bear interest as of that date. Whatever the justice or injustice of that claim might have been, it seems plain that an adjustment of it was within the authority of the commissioners. At least it was so far within their authority, that Wilbur would be justified in paying money on this claim, by their direction.

They were, in fact, the only persons who could adjust the balance alleged to be due to the railroad company. And it seems to have been within the duties imposed on them, to arrange the matter of interest with the company. And whether, in the present instance, they did actually agree on the balance as due, or only paid it under protest in order to obtain the scrip, in either case the payment which they authorized Wilbur-to make, was a part payment on this contract; was made by their direction, and for the benefit of the defendants. When the defendants broke the contract,' and Wilbur rescinded it, they ought not to have retained the money of which they had thus had the benefit.

The judgment should be affirmed, with costs.

• Present — Learned, P. J., James and Potter, JJ.

Judgment affirmed, with costs. 
      
       Merritt v. Millard, 4 Keyes, 208.
     
      
       Tracy v. Talmage, 14 N. Y., 162.
     
      
       Laws 1856, chap. 64.