Case ID: ny-st-rep_41/html/0236-01.html
Source: Caselaw Access Project
Author: {"author": "O'Brien, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Anthony J. Drexel et al., Pl’ffs, v. Eliza A. Pease, Ex’rx, et al., Def’ts. George St. Arnaut, Resp’t, v. The Mechanics’ Nat. B’k et al., App’lts.
    
      (Court of Appeals,
    
    
      Filed December 1, 1891.)
    
    1. Joint account—Lien—Priority.
    This action was brought by the plaintiffs to establish their lien as hankers to a priority of payment out of property sent by defendant St. Arnaut from France to Joseph M. Pease, deceased, of New York, for money furnished Pease, which he advanced to St. Arnaut, and a judgment against the receiver of Pease gave plaintiffs their money and a reference was had between St. Arnaut and attaching banks as to the balance, which the referee awarded to St.Arnaut. Held, no error; that the letters of St. Arnaut to Pease did not import a contract of sale, but a joint enterprise between them and a packer tor the shipment and sale of sardines, and after payment of advances and expenses a division of the profits between them.
    2. Same.
    The fact that in St. Araaut’s answer Pease was characterized as his selling agent in New York was disregarded by the courts below. Held, that this was not such an error as would warrant this court in interfering with the judgment.
    
      Appeal from judgment of the supreme court, general term, first department, affirming judgment recovered at special term.
    
      Horace E Deming, for app’lts; O. J. Wells, for resp’t.
    
      
       Affirming 37 St. Rep., 166.
    
   O'Brien, J.

The controversy which resulted in this appeal grows out of a written contract made in March, 1883, between Joseph M. Pease, a merchant doing business at the time in the city of New York, and George St. Arnaut, a merchant doing business in Paris, France. Before making any further reference to the terms of the contract it is necessary to get a clear idea of the proceedings .through which St. Arnaut and the parties representing Pease are before this court. In August, 1884, Pease failed and made an assignment for the benefit of his creditors. Immediately after this failure, the defendant, the Mechanics’ National Bank, and the National City Bank of New York, as creditors, instituted suits and proceedings against him, in which attachments were issued and levied upon goods in his possession, and upon a large number of open accounts due to him. In these suits the goods were reduced by the banks to possession and many of the accounts collected.

It seems that these proceedings, and whatever lien the banks obtained upon the property, preceded the assignment. The goods seized, it is claimed, were shipped to Pease by St. Arnaut under the contract and the accounts collected represented goods shipped to and sold by Pease under the same arrangement. St. Arnaut claimed that the title to these goods, and their proceeds, remained in him and did not, under the agreement, pass to Pease or his creditors. The plaintiffs, Drexel, Morgan & Go., by means of a letter of credit, furnished to Pease the funds which he advanced to St. Arnaut under the agreement, and they claimed a banker’s lien upon the goods and their proceeds by virtue of the advances to, afid an arrangement with, Pease, which has been found.

The plaintiffs brought this action to enforce the lien and made the attaching banks, the assignee of Pease and St Arnaut parties defendants, who all answered. In the meantime, with the consent of the parties, a receiver was appointed in the action of the fund representing the collected accounts and the proceeds of the goods which had been attached and subsequently sold.

The case having been brought to trial at special term, an interlocutory judgment was entered directing the receiver to pay to the plaintiffs the sum of $4,264, with interest thereon and costs, out of the fund, in satisfaction of their lien, which was adjudged. This disposed of the plaintiffs’ interest in the controversy and none of the defendants now seem to raise any question as to this part- of the judgment. The court, however, did not then pass upon the conflicting claims to the rest of the fund by St. Arnaut on the one hand and the banks, as attaching creditors, on the other, but a provision was inserted in the judgment providing for a reference to ascertain the particular portion of the goods, or the proceeds in the receiver’s bands, received by Pease from St. Arnaut under the agreement, and also whether the judgments ertained by the banks, against Pease, were for an individual debt due from him or for advances made to him on account of the business, under the agreement through which the goods came from St. Arnaut, and that all other questions between the defendants be reserved until the coming in of the • report upon the reference.

Prom that part of the judgment directing a reference the bank» and the assignee appealed to the general term, but the appeal was dismissed. The reference proceeded and the referee reported that all the goods and their proceeds that came to the hands of the-receiver were received by Pease from St. Arnaut under the agreement and all the accounts collected were for the purchase of like goods that Pease had received and sold under the same conditions.. That the indebtedness of Pease to the banks was on his individual account and that the lien of the banks did not attach till St. Arnaut was paid. That there was due to him September 16,1884r for goods delivered under the agreement, after deducting all advances, . expenses or profits, the sum of $23,630.41. That the receiver had realized from the goods and accounts that came to his-hands the sum of $24,924.75. That he had paid the plaintiffs, on account of their banker’s lien, pursuant to the judgment of the court, $6,053 and in other expenses $532.60 leaving in his hands a balance of $18,338.49 subject to his commissions and certain disbursements. The case came on for trial again at a special term held by another judge. The trial was had, mainly if not entirely, upon the report of the referee, the proofs reported by him to the court, and exceptions to his findings. The court'overruled the exceptions and substantially adopted the finding of the referee and adjudged that St. Arnaut was entitled to the whole fund in the hands of. the receiver’. Upon this decision final judgment was entered, and upon appeal was affirmed by the general term. The banks and the assignee appeal to this court from the judgment of affirmance and they also bring up for review the order of the general term dismissing the appeal from that part of the interlocutory judgment directing a reference of the special questions above stated. We are asked to reverse the judgment and order upon substantially three grounds;

1. That the contract between St. Arnaut and Pease constituted a sale to the latter of the goods and that, consequently, the fund in the receiver’s hands is bound by the lien of the attachments.

2. That the finding of the court, that the fund was the proceeds of the goods received by Pease from St. Arnaut under the contract "is without any competent evidence to support it.

3. That the court had no power to refer the questions before stated and that the general term should have reversed that part of the interlocutory judgment instead of dismissing the appeal.

The correspondence between St. Arnaut and Pease resulted, as-the court below found, in the following contract, to which reference has been made in the foregoing statement:

“Your favor of 5 th inst. is duly at hand. I had an interview with the packer (Dumagnou) and owner of the Billett Brand, who is willing to give us the monopoly of these sardines, the agreement to be as follows:

“ We to advance eighty per cent of cost of each invoice as they are forwarded from the factories, this advance to be halved by you and I.

“ As a basis we take the amounts of 1,000 of American Js, and 4,000 cases of 100 low Js, to be handled during the season, we to have the liberty of stopping shipments and annulling the agreement at any time during the season, if we find it unprofitable or have any other good reason.

“ Interest to run on the account of six per cent per annum. No commission to be charged by us nor profit to be added by him. You to charge brokerage only when actually paid by him.

“ Goods to be sold from wharf, unless some very good reason should exist for doing otherwise.

“ Any loss occasioned by failure of your buyers to be supported in thirds, one-third each by you, the owner of the brand and myself.

“ The total of net proceeds of all accounts sale, compared with the total cost, shall determine the profit of the season, which shall be divided in thirds in same manner as stated in previous paragraph. If this should show a loss, this loss is borne by the packer.

“ There are about 500 cases of tins cut to size of old American which will be sent on first, in order to get as many in as possible under the four cent duty.

“ In studying the foregoing you will see that we are entirely in your hands as to the result, and without my knowledge of your straightforwardness and business integrity through many years, I would never have suggested you to my friend here. I hope to have your early answer, and I trust that this will lead to something in a larger business way between us.”

This language of St Arnaut does not import a contract of sale, but, as the court below held, a joint enterprise between Pease, St Arnaut and the packer Dumagnou, for the shipment and sale of sardines, and after payment of advances and expenses the division of the profits between them in equal parts. The interest of Dumagnou was assigned to St. Arnaut, who, as the representative of the joint ownership and enterprise, had in equity a title to the goods or their proceeds superior to that of the individual creditors of Pease. But the learned counsel for the banks insists that this.was not the claim that St. Arnaut set up in his answer, and perhaps upon a strict construction of the pleadings this may be true. The complaint, which was the pleading of Drexel, Morgan & Co., stated that St. Arnaut claimed an interest in the goods. The banks and the assignee admitted this allegation and St. Arnaut set forth in his answer the facts of the transaction according to what was, perhaps, another view of their legal effect, in which Pease was characterized as his selling agent in New York. The trial court disregarded the variance and the general term agreed with it We do not think that any error was committed in this respect that would warrant us in interfering with the judgment The superior equity of St Arnaut attached to the fund in the receiver’s hands. I. & T. N. Bank of N. Y. v. Peters, 123 N. Y., 272; 33 St. Rep., 182; Knatchbull v. Hallett, L. R., 13 Ch. D., 723; Van Alen v. Am. Nat. Bk., 52 N. Y., 4; Sadler’s Appeal, 87 Penn., 158.

At the close of the testimony before the referee, the attorneys for all the parties stipulated and consented that the referee “may refer ad libitum to the printed case upon appeal in this action to-ascertain any fact for his information.” The printed case here referred to was that upon appeal from that part of the interlocutory judgment directing the reference and contained eveiything in the present record except the proceedings before the referee and subsequent thereto. Much evidence was given before the referee with a-view of showing that the fund was derived from sales of goods that were shipped by St. Arnaut under the agreement, and many objections were made and exceptions taken to some parts of it. But the referee had no power to make a decision on any of these questions which this court can review, and the record does not show that any ruling was made upon these by the court that made the final decision in the case.

It was not asked to pass upon any exception to matters of evidence, or to strike out any improper answers given. The stipulation above referred to carried with it to the special term every fact and every paper that was before the referee. In this condition of the case we cannot hold that the finding made by the trial court, that the fund was derived from sales of goods sent by St. Arnaut to Pease under the agreement, was without evidence. On the contrary, we think that the record contains evidence sufficient to justify the finding. In regard to the order of reference, it does not appear that any question was raised at the trial before the special term in regard to any irregularity or want of power torn ake it when the report of the referee was before it for consideration. The appellants took the chances then of a favorable result for them upon the report which they now claim was unauthorized,, and without any objection, apparently, took the same chances of a favorable report from the referee. Moreover, this provision of the interlocutory judgment was not specifically excepted to. Under these circumstances it is reasonable to conclude that the trial proceeded without much regard to the question whether the reference was within the power of the court or not' But we think the court had power to direct the reference. By the last clause of § 1013 of the Code power is given in such a case as this to order a reference “to report the referee’s finding upon one or more specific questions of fact involved in the issue.” The other references provided by this section are to hear, try and determine. The last clause confers power upon the court to refer one or more specific questions of fact, not to determine, but to report upon, for the information of the court That is all that was done in this case. The special term was not bound by any finding or ruling of the referee. It could adopt the findings, or from the testimony make new ones. On the whole we are of opinion that no material error was committed in the disposition made of the case, and that, the judgment and order should be affirmed, with costs.

All concur.