Case Name: Merrick and others vs. Brainard and others
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1860-01-03
Citations: 38 Barb. 574
Docket Number: 
Parties: Merrick and others vs. Brainard and others.
Judges: 
Reporter: Barbour's Supreme Court Reports
Volume: 38
Pages: 574–597

Head Matter:
Merrick and others vs. Brainard and others.
A carrier can maintain an action in his own name, for an injury done to property intrusted to him to he carried; and in such action he may recover the value, which he will hold in trust for the owner.
The owners of a tow boat, undertaking to tow another boat, are, in the absence of an express contract limiting their liability, bound to exercise ordinary care and diligence, and are liable for the want thereof.
When a carrier of goods employs a tow boat to tow his vessel, and those in charge of the tow boat are guilty of negligence, whereby damage is done to the goods, and the carrier has not excepted in his contract such risks, he is liable tó the owners of the goods, for such negligence, on the principle of responsibility for the acts and neglects of his agent. And this liability over to the owners will enable him to maintain an action against the proprietors of the tow boat.
The right of action for an injury done to goods by a person whom the carrier has employed to tow his boat containing them, may be assigned by the carrier to another.
A right of action for a tort is assignable, and in an action brought by the assignee, the assignment being, on its face, valid, the defendants have nothing to do with the question of consideration.
Although a partner cannot, ordinarily, through a sale of his interest in the partnership, introduce the purchaser into the firm as a copartner, without the consent of the other members, yet there is no law which prohibits a partner from selling out his interest in the partnership.
Where, by the partnership agreement, it is provided that the interests of the partners shall be transferable, and may be transferred at the will of each partner, and that the purchaser shall be clothed with all the rights of his vendor, a transfer of the interest of a partner will work no dissolution, and the purchaser becomes to all intents and purposes a partner; and, as between the partner selling or assigning his interest and his copartners, the former will cease to be a partner, or to be liable as such.
A foreign corporation, migrating to this state and carrying on its business here, exclusively, and ceasing to transact any business in the state of its creation, loses its corporate rights and privileges, and becomes, as .to all persons dealing with it, a mere partnership.
A stockholder in such'a corporation is liable as a partner, in the association or partnership which the stockholders become, on the termination of the corporation. Morgan, J. dissented.
In an action against the owners of a towboat, for an injury done to the goods they have undertaken to transport, through their negligence, the defendants are not entitled to claim any deduction for so much of the loss as was cov ered by insurance.
APPEAL from, a judgment rendered at the circuit. The action was brought to recover for damages sustained by the negligence of the defendants’ servants and agents in towing the canal boat Camden from New York to Albany, by means whereof said boat and her cargo were injured by being forced upon a rock, in the Hudson river. Vandewater Brothers were common carriers on the Hudson river and Erie canal, and as such were employed by the plaintiffs and others to carry certain merchandise from New York to Albany and places north and west of that city. Vandewater Brothers owned the boat Camden, and caused to be shipped thereon a large .quantity of goods owned by the plaintiffs and others. The defendant Brainard was one of the proprietors of the Albany and New York towing line of steamboats, and the defendant Van Santvoord was one of the stockholders and a director and agent of a corporation created by the state of Connecticut, called the Steam Navigation Company. This corporation had chartered and Qmployd the tow boat Cayuga, which was owned by the association of which the defendant Brainard was agent and in which he was a partner. The Camden was taken in tow by the Cayuga under a contract to tow her to Albany, and during the voyage the loss for which the action was brought occurred.
Yandewater Brothers were indebted to the plaintiffs for moneys advanced, and to pay such advances assigned to the plaintiffs the claim against the defendants, for the injury to the Camden and the goods therein.
The cause was tried before Justice Allen, without a jury, at the Oswego circuit, in March, 1856. The court found the facts above stated, and that the injury to the Camden and the goods therein was caused by the negligence of those in charge of the tow boat Cayuga, and that the defendants were liable to the plaintiffs for the damages sustained by such negligence, amounting to the sum of $6846.56.
The court held, as matter of law: 1st. That Yandewater Brothers had a right of action against the defendants for the injury done to the Camden and her cargo. 2d. That such right of action was assignable. 3d. That the plaintiffs as their assignees could sue and recover. 4th. That the Steam Navigation Company having been created by the laws of Connecticut, and having transferred its whole business operations to this state, except holding meetings to elect directors, ceased to be a corporation within this state, and hence the defendant Yan Santvoord, being a stockholder therein, was liable as a partner in the association or partnership which the stockholders became, on the termination of the corporation.
C. Van Santvoord, for the appellant.
Henry A. Foster, for the respondent.

Opinion:
Mullin, J.
The importance of this case, as well by reason of the amount claimed as of the principles of law involved, makes it proper and necessary that it should receive a careful examination.
The first question presented for consideration is, whether the plaintiffs can in law maintain this action ; and this involves three other questions: 1st. Whether there was any right of action in Yandewater Brothers, the assignors of the plaintiffs. 2d. Whether, if there was, it was assignable. 3d. Whether it has been assigned so as to vest any interest in the plaintiffs.
Yandewater Brothers were common carriers of merchandise between the cities of Hew York and Oswego, and owned the canal boat Camden. In September, 1851, said firm contracted with an association of persons who had in their employ the tow boat Cayuga, to tow said canal boat Camden, with merchandise, from Hew York to Albany, for a compensation then and there agreed to be paid. Said tow boat took the Camden in tow and started on her voyage, and during said voyage, through the carelessness, as it is alleged, of those navigating the tow boat, the Camden was thrown on the rocks in the Hudson river and sunk, whereby she and her cargo were injured. The property on board the Camden was owned by sundry individuals, under contracts with whom Yandewater Brothers were carrying said goods at the time of the injury to said boat.
It is said in 1 Chitty's Plead. 48, that though at the time when the injury was committed the goods were in the actual possession of a servant, carrier, or other bailee, yet if the general owner had the right of immediate possession the action may be in his name, or it may be in the name of the pei'son having actual possession at the time of the injury hut only a special property, as by a factor, a carrier, a pawnbroker and but a mere servant.
It is further insisted that the plaintiffs cannot maintain the action, because one of the assignors was a partner in one of the lines that chartered the Cayuga, and therefore liable to contribute to the loss.
It is found by the referee that Yandewater, who was a partner in the Albany and New York towing company, had sold his interest therein to Mr. Meeks before the accident in question. It then comes to this: Can a partner dispose of his interest in the partnership, and thereafter prosecute the partners for a cause of action arising subsequent to the transfer? I know of no law which prohibits a partner from selling out his interest in the partnership. He cannot, ordinarily, through such sale, introduce the purchaser into the firm as a copartner, without the consent of the other partners. But that sush a sale will transfer the interest of the partner selling, I have no doubt. In Marquand v. The New York Manufacturing Co., (17 John. 525,) it was held that a bona fide assignment by one of several partners, of all his interest in the copartnership stock &c., ipso facto dissolves the partnership, • notwithstanding it was provided by the articles that the partnership should continue until' two of the partners should - demand a dissolution. And it was further held, in that case, that the assignee of the interest of the partner is entitled to an account of the profits, and to the share of such profits of the assignor. (1 Parssons on Contracts, 130 and note, 170, 171.)
From the manner provided for the transfer of the interests of partners in the forwarding lines that chartered the steamer Cayuga, it is quite clear that the interest of the persons forming such associations should be transferable, and might be transferred at the will of the partner; and that the purchaser should be clothed with all the rights of the person from whom he acquired his interest. Under such an arrangement a transfer of interest brought no dissolution, and the purchaser became to all intents and purposes a partner. As between the members of the association then, the partner who sold or assigned his interest and the other partners, the former ceased to be liable as a partner. But as between the retiring partner and third persons, dealing with the firm with knowledge that he was a partner, different consequences may arise.
The question is not here whether Vandewater may not be liable to third persons as a partner, but whether on a given day he was in fact a partner in the Albany and New York line. It being competent for him to transfer his interest, and he having done so in fact, by a valid conveyance, he was not a partner at the time of the happening of the injury for which this action is brought.
The assignor having a right of action, it was assignable. (Hall v. Robinson, 2 Comst. 293.) The defendants have nothing to do with the question of consideration. The assignment is, on its face, valid, and whether it was transferred for value, or was' a gift to the defendants, is wholly immaterial.
The next question is, were the defendants liable to respond to the plaintiffs for the damages resulting from the injury of the vessel.
If the defendants are liable it is because they are stockholders in the Steam Navigation Company, a corporation created by the legislature of Connecticut, in 1825. And as the stockholders of that corporation are not personally liable for the debts of the corporation, the defendants are not personally responsible for the damages claimed in this case, as such stockholders. The ground of liability insisted upon by the plaintiffs is that inasmuch as the corporation had ceased to carry on the business in the state of Connecticut, and had removed its whole operations to this state, except the formal business of electing its officers, the corporate functions ceased, and the stockholders became liable in this state, as partners, for the debts of the company.
The question then is reduced to this: Does a corporation created by another state lose its corporate rights and privileges when it ceases to transact business in the state of creation, and carries on its business exclusively in the state to which it has removed ?
It is not in the power of one government to grant rights or privileges which may be asserted or exercised, or impose duties which may be performed, within the limits of another government, without its consent. If a foreign corporation comes into this state and exercises any of its corporate functions, it is not by virtue of the powers conferred by its charter, but by the comity of this state. In the exercise of this comity, our courts are constantly engaged in the hearing of causes brought by foreign corporations, and in issuing process in their behalf against the property of other foreign corporations, and in the trial of causes in which they are defendants. These proceedings being conducted in the corporate name, they are an unequivocal recognition of the valid existence of such foreign corporations in this state.
If we entertain jurisdiction in cases in which foreign corporations are parties, thus giving effect to the law of the government that created them, we must in justice recognize and enforce the provisions of their charters. The rights conferred by such charters must be yielded to them, and the duties thereby imposed must be enforced against them. In other words, such .corporations can exercise in this state no power not conferred by their charters. I do not mean by this that our courts or officers will assume to enforce against such corporations forfeiture of their corporate franchises which may be imposed by the charter for the abuse by such corporation of such franchises. What I do mean to say is that our courts will see that the acts done by the corporation, and which form the subject matter of the action are within the powers conferred upon it by its charter, and that all th§ duties imposed upon it for the benefit of those dealing with it, and the observance of which is necessary to the protection of third persons, are fully and duly performed.
But it is said that this comity does not extend or apply to a foreign corporation that has no existence in fact in the state creating it, and its existence, if at all, is within this state. According to this doctrine, the corporation may be a valid and subsisting corporation in the state in which it was chartered, and yet, because its business has been transferred to another state, it has ceased to be within the principles of comity above alluded to, and which only extend, it is said, to corporations whose business is transacted where it was brought into being.
In Angell & Ames on Corporations, § 104, it is said "a private corporation whose charter has been granted by one state, cannot hold meetings, pass votes and exercise powers in another state. It can have no legal existence out of the boundaries of the sovereignty by which it was created, must dwell in the place of its creation, and cannot migrate to another sovereignty."
In the Bank of Augusta v. Earle, (13 Peters, 588,) Chief Justice Taney says: "It is very true that a corporation can have no legal existence out of the boundaries of the sovereignty hy which it was created. It exists only in contemplation of law, and by force of the law; and when that law ceases to operate and is no longer obligatory, the corporation can have no existence. It must dwell in the place of its creation, and cannot migrate to another sovereignty." The same doctrine is again asserted by the supreme court of the United States in Runyon v. The Lessee of Coste, (14 Peters, 122, 129.) See also McCall v. Byram Manufacturing Co., (6 Conn. Rep. 428.)
In Bard v. Poole, (2 Kern. 495,) Denio, J. delivering the opinion of the court, says: "They (corporations) are beings existing only in contemplation of law, and have no other attributes than such as the law confers tipofi them; and as the laws of a country have, in general, no extra territorial operation, a corporation 'cannot challenge, as a matter of right, the privilege of dealing in a country not under the jurisdiction of the sovereignty which created it."
"While the foregoing cases, and others which might he cited, assert the general propositions that a corporation can have no legal existence beyond the limits of the state or country creating it, and that it must dwell in the place of its creation, and cannot migrate, yet the courts follow them up with important qualifications. In Bard v. Poole, cited supra, Judge Denio says: "But in the absence of laws of that character, (laws interdicting foreign corporations from performing-certain single acts or conducting a particular description of business within its jurisdiction,) or in regard to transactions not within the purview of any prohibitory law and not inconsistent . with the policy of the state as indicated by the general scope of its laws or institutions, corporations are permitted by the comity of nations to make contracts and transact business in other states than those by virtue of whose laws they were created, and to enforce those contracts, if need he, in the courts of such other states.
In the Bank of Augusta v. Earle, cited supra, Chief Justice Taney says: "But although it (the corporation) must live and have its being in that state only, [in which it was created,] yet it does not by any means follow that its existence there will not be recognized in other places, and its residence in one state creates no insuperable objection to its power of contracting in another. It is indeed a mere artificial being, invisible and intangible, yet it is a person, for certain purposes, in contemplation of law, and has been recognized as such by the decisions of this court."
When, therefore, a1 foreign corporation brings an action in one of our courts, we do not stop to inquire whether it has removed from the state in which it was created, or whether there is any other legal objection to the maintenance of the action,. but on the principles of comity we entertain the action, and leave it for the defendant to allege the reasons why the action may not be maintained. If in such case it should be established that the corporation created by the laws of Connecticut had removed its entire business to New York, we could not take away its corporate franchises. That could only be done in the state in which it was created. And that state not having so declared, we must treat it ás a valid and subsisting corporation, unless the mere act of removing its business to this state is illegal and terminates, ipso facto, the existence of the corporation, in this state. "
In none of the cases cited has any such effect as that just mentioned been alluded to as resulting from the removal into another state of the entire business of a corporation. But if a corporation created in another state can transfer to this state the whole of its business and transact the same here, under the principles of comity above alluded to, then not only is our own legislature rendered useless and unnecessary, at least so far as the creation of corporations is concerned, but all the states in the union and all the legislatures in Christendom can create and let loose upon us a multitude of these corporations more destructive and pernicious than the frogs and lice let loose on the Egyptians,
It will not answer, then, to carry the doctrine of comity to this absurd extent. .We have shown our respect for our sister states and for foreign governments when we have permitted corporations created by them to come into our state and make contracts and transact any other lawful branch of business, and to use our courts for the enforcement of their rights, while they remain in the place of their creation, without allowing them to become by their own act domestic corporations. Such must have been the view of Judge Denio in Bard v. Poole, (2 Kern. 507,) when he says: "I consider that it would be a violation of our sovereignty for a foreign corporation to remove from the country or state where it was created, to locate itself wholly in this state." The violation of our sovereignty would be a matter of very little moment if, after it was done, onr courts' would still give effect to their contracts."
It is said it is not within the province of the courts to withhold from a foreign corporation the right to the protection of its charter, so long as the legislature has not asserted its sovereignty and excluded the corporation. In other words, it is insisted that until the legislature has forbidden the courts to give effect to the rights of a foreign corporation under its charter, it is their duty to extend to them the same protection as to domestic corporations.
The courts do not take cognizance of actions by and against, foreign corporations, by virtue of any legislative enactment, but on the ground of comity; and that comity must be extended to them, under certain restrictions and limitations, until forbidden by the legislature. Story, in his Conflict of Laws, page 37, says: "In the absence of any positive rule affirming or denying or restraining the operation of foreign laws, courts of justice presume the tacit adoption of them by their own government, unless they are repugnant to its policy or prejudicial to its interests. It is not the comity of the court, but of the nation, which is administered and ascertained in the same way and guided by the same reasoning by which all other prinóiples of the municipal law are ascertained and guided. It is for the. courts, therefore, to give effect to this comity, and to form their own judgments of what the state or nation can or cannot do, and it rests solely with them to determine whether effect can be given to foreign laws without prejudice to their own national rights and interests." (Confl. of Laws, 33 to 37.)
The question then comes to this: Is it consistent with the rights and interests of the people of this state to permit foreign corporations to immigrate into this state and exercise, within it, all their corporate powers ? It cannot be necessary to attempt an enumeration of the evils which would result from domesticating corporations over whose creation and conduct we can have no control. They would be with out limit as to number, without capital, competing with and unfairly excluding our own citizens from a share in the business of the country, or by combinations aided by aggregated wealth, not only exclude our people from a share in the business of the state, but wield a dangerous influence over our financial and commercial interests.
It seems to me that we must in self-defense declare that a corporation that thus migrates into our state loses its corporate rights, and becomes, as to all persons dealing with it, a mere partnership.
I think the learned justice was right in holding Yan Santvoord to be a joint charterer of the steamer Cayuga, and liable as such for whatever injuries were done by her to the Camden.
If the defendants are liable for damages done by the Cayuga or those who were in charge of her, it remains to inquire for what acts they are thus liable, and whether, on the evidence, such liability is established.
It seems to me that this is one of those cases in which the decision of a judge or referee ought not to be disturbed, unless the finding is clearly against the evidence. There is conflicting evidence, and the judge, with the witnesses before him, and with a more perfect knowledge of the facts than we can hope to acquire from these papers, has found the defendants liable, and it is fit and proper that a finding of facts should not be disturbed. But the party is entitled to an examination by us, in order to ascertain whether his allegation that the finding is erroneous is not true; and with this view I have gone through the evidence.
One who contracts to tow a boat laden with merchandise, for another, is not a carrier, and does not assume, nor is he charged with, the duties and responsibilities of a carrier. (Wells v. Steam Nav. Co., 2 Comst. 204.) In the same case, (4 Selden, 375,) it was held that the owners of a tow boat, in the absence of an express contract, limiting their liability, áre bound to exercise ordinary care and diligence, and are liable for the want thereof.
Such being the standard of liability, let us inquire whether there was evidence in the case which tended to charge the defendant with negligence in the navigation of the Cayuga, whereby the injury complained of occurred. The Camden, on board of which the merchandise was laden, was in good order, properly manned and equipped for the voyage. The plaintiffs' witnesses testify, in substance, that the night was a clear one; the pile of stones on which the vessel struck was well known; there was a sufficient width of channel, and depth of water, to navigate the tow; that the channel was unobstructed by vessels ] and that the steamer was carried too near the west shore; and that by reason of passing beyond the proper place in the channel, the accident occurred. Upon this evidence, standing alone, it cannot be claimed that negligence is not proved.
To rebut this evidence, and excuse the misfortune, the defendants' witnesses swear that while it was clear over head, it was hazy on the shore, so as to deceive pilots as to the distance of the vessel from the shore; that there were two vessels in the channel, one at anchor below the lighthouse point, and the other afloat just above, and between it and the southwest point-of the middle, and in the effort to escape the latter the Cayuga steered sharp to the west, and in the effort to straighten up the channel, and deceived by the haze, she was carried too.near the west shore, and the injury occurred. There are two witnesses on the part of the defendants that swear to there being two vessels in the channel, that night. There are six on the part of the plaintiffs who swear that they were in a situation to see the channel, and discovered no vessels. Three or four of the defendants' witnesses swear to the existence of a fog on the shore. The .plaintiffs' witnesses discovered no such thing. The effect of Uye's evidence, which doubtless had great weight in the opinion of the judge at the circuit, is attempted to be shaken or done away by the oaths of two or three witnesses on the part of the defendants, who swear that in their opinion íí ye could not see from the deck of his vessel how near the vessel was to the shore. But one fact is worthy of remark; that if he could not see, he guessed with astonishing accuracy. It ' would seem that just as he was in the act of remarking how dangerous it was for the vessel to run so close to the shore, the whistle sounded which was the evidence of the accident.
It is said that the hands on the Camden were guilty of negligence in not porting their helm, when ordered by the master of the Cayuga, just before the accident. The hands on board the Camden appear to have been men unaccustomed to the navigation of the river, and as to what duties it was necessary or proper for them to perform on board of that vessel while in tow. But if any duty was required of them to whom the safety of the vessel was intrusted, it was the duty of those on board the steamer to have informed them, and thus put upon them • the responsibilities which might result from neglect. It is quite obvious that a man should be on deck of the boat in tow, during the voyage, to perform such Services, and guard against such accidents, as vessels in tow are subject to or require. It appears that one man was on deck, as I understand the evidence, all the time. It further appears that no order was heard from the steamer, before the accident, requiring those on board of the Camden to do any thing in reference to that vessel. There was clearly no negligence imputable to the plaintiffs, under such circumstances.
It must be obvious to any one reading the testimony, that there was a conflict of evidence upon all the material facts in reference to the accident, and that the conclusion which the referee has drawn is the legitimate one, from the evidence.
The only remaining question to be considered, is one of damages. And in examining this, I shall confine myself to the specific objections taken by the defendants' counsel, as the question is one so peculiarly within the province of the referee to decide that the court could not, if it would, go into a review of the whole evidence on that question.
I have already attempted to show upon authority that a carrier can maintain an action in his own name, for damages done to property intrusted to him to be carried. But the defendants say that although this may be the general rule, yet in this case the goods being the property of third persons, and as Yandewater Brothers could not sell the goods, themselves, they could not for the same reasons sell the claim for the damages arising from injury to them. If this proposition is sound, it sweeps away the doctrine which I have shown is conclusively established, that the carrier may sué for an injury to the goods, and in such action may recover the value, and that he holds such value in trust for the owner.
"Again; so far as the right of action rests on contract, the contract is between the carrier and the charterers of the steamer, and there is no privity of contract between the owners and the charterers.
The right of action, then, being in the carrier, he has the right to assign it. No authority has been shown, nor reason-given, why he may not sell or assign his claim. As carrier he has only the custody of the goods; it is a breach of duty to use or dispose of them; but when a right of action accrues by reason of interference with his possession, or of injury to the goods, the right is in law his, and he stands answerable over to the owner for the value of the goods in the one case, or the damages incurred, in the other.
It is further insisted that as to so much of the property injured in this case as belonged to owners between whqm and the carriers there was an agreement exempting the latter from liability in certain cases, the plaintiffs were not entitled to recover, as the carrier was not liable over to the owners. This proposition assumes a fact not proven; to wit, that by virtue of any contract the carriers were not liable for the injury resulting from the sinking of this boat. 'I concede that if the boat was sunk by reason of the perils of the navigation and without the fault of the carrier, then he is not liable, and in the same event the defendants are not liable to either the carriers or owners. But when a carrier employs a tow boat to tow' his vessel from Hew York to Albany, and those in charge of the tow boat are guilty of negligence whereby damage is done to the property, and the carrier has not excepted in his contract such risks, then lie is liable to the owners for such negligence. The tow boat is his agent; its acts and neglects are his; and he must bear the consequences, in obedience to the maxim facit per alium facit per se.
The defendants' counsel further insist that the defendants are not liable for so much of the loss sustained by the sinking of the vessel as was covered by insurance. The defendants did not insure, nor pay for insuring the property, and the question is put to them with considerable force, by what right—upon what principle'—they are entitled to any benefit from such insurance.
I insure my furniture in my house; a person either willfully or negligently sets it on fire; and when I demand compensation for my loss, he insists upon his right to deduct the amount for which the property is insured. To say the least of it, the claim is wanting in modesty. But it is said that if I may retain the insurance money, and recover the value of the goods of the wrongdoer, I am the gainer by the accident. If I am, it ill becomes the wrongdoer to complain of it. If I cannot in justice retain more than the value of the property, which of the three parties concerned is entitled to the benefit of the deduction, the injured party, the wrongdoer, or the insurance company ? Most clearly the latter. If I have not been paid by the insurance company before I collect of the wrongdoer, I am limited in the amount I am entitled to demand of the company to so much as will, in addition to the damages recovered, make good the loss. And if I have been already paid, the company is equitably entitled to recover so much of the damages as I have received over and above my actual loss. (37 Eng. Ch. Rep. 273. Yates v. Whyte, 4 Bing. N. C. 272. Bull v. Fritz, 12 How. U. S. Rep. 466. Hovey v. The Steamboat Sarah E. Brown, decided by Judge Betts, in MS. Clark v. Inhab. of Blything, 2 Barn. & Cress. 254. 2 Sand. S. C. Rep. 496.)
After as careful an examination of this case as I have been able to bestow upon it, I am entirely satisfied that the case was properly disposed of at the circuit, upon both the facts and the law. The judgment should therefore be affirmed.
Bacon and Alken, Justices, concurred.