Court Opinion

ID: 7339177
Source: CourtListenerOpinion
Date Created: 2022-07-25 23:36:27.600423+00
Date Added: 2024-06-11T16:20:14.857383
License: Public Domain

INGRAHAM, J.
(dissenting). I think this case was tried upon a wrong theory, that competent and material evidence was excluded, and for that reason there should be a new trial. The allegation of the complaint is that “on or about the nth day of July, 1900, this plaintiff loaned to the defendant, at its special instance and request, the sum of fprty-two thousand seven hundred and forty-nine and 10/ioo dollars ($42,749.10), which sum the defendant agreed to pay upon demand to the plaintiff, with interest at six per cent.,” and it is for this sum that the plaintiff has recovered judgment. This allegation the defendant denies, and alleges as a separate defense that at the time mentioned in the complaint one James N. Stout was vice president of the plaintiff corporation, and also vice president and owner of a number of shares of stock of the defendant corporation; that certain taxes for the year 1899 on the St. James Building, the property of the defendant, were paid by Bruce Price and the said James N, Stout with money belonging to them; that the money paid by the check of the St. James Company to the receiver of taxes on or about the nth day ■of June, 1900, for the taxes for the year 1899 on the said St. James Building, amounting to the sum of $42,749.10, was money belonging to the said James N. Stout and said Bruce Price, and not the property of the said St. James Company. It was entirely upon the evidence of James N. Stout that a loan by the plaintiff to the defendant was sought to be established. He testified that at the time of the transaction in ■question he was the vice president of the plaintiff and also of the defendant ; that Stout and Price were the owners of all the stock of the plaintiff corporation, and owned a large proportion of the stock of the defendant corporation; that the plaintiff had erected a building, called, the St. James Building, upon Broadway, in this city, and subsequently had conveyed it to the defendant corporation by a deed dated February 28, 1899, and recorded March 24, 1899; that the taxes upon this property for the year 1899 were not paid by the defendant, and in June, 1900, a mortgagee, who had a mortgage upon the building wrote a letter to the defendant, stating that the taxes must be paid or the mort*743gage would be foreclosed. Without consulting any other officer or director of either the plaintiff or the defendant corporations, he deposited over $42,000 in the bank to the credit of the plaintiff corporation, and then drew a check of the plaintiff corporation to the order of the receiver of taxes, and paid the taxes on the building belonging to the defendant, and this is the transaction upon which he predicates a loan by the plaintiff to the defendant. Upon the trial he produced a receipt, which is as follows:
“N. Y. July 11th, 1900. Received oí the St. James Company its check of even date on the Second National Bank of New York City to the order of ‘Receiver of Taxes’ for the sum of forty-one thousand, one hundred and eighty-seven ($41,187.60) dollars 60/100 same to be used to pay the taxes overdue on the St. James Bid. Bway & 26th St., and the amount returned to the St. James Company on demand with 6% interest.
“[Signed] The Security Trust & Life Ins. Co.
“James N. Stout, V. P.”
So far as appears, no one except Stout knew of this receipt until the trial, when he produced it and introduced it in evidence. The transaction was entirely managed' and controlled by Stout in his capacity as vice president of both corporations. He claims no special authority on behalf of the defendant to borrow this money, and although the company had a president who was the principal executive officer of the corporation, and a board of directors who were responsible for the management of its affairs, the transaction was carefully concealed from all of its directors, officers, and employes, no entry being made in any of its books showing either the receipt or the payment of the money. The money never went into the defendant’s bank account, or appeared in any way as a transaction of the defendant corporation. Stout swears that it was his money, and states in a general way that he was indebted to the plaintiff in a large amount, and paid the money to the plaintiff on account of that indebtedness, but the foundation of such an indebtedness was not at all explained. Whether the defendant corporation was indebted to him at the time does not clearly appear. It does appear, however, that all of the money that Stout deposited in the bank to the credit of the plaintiff, from which this check to the receiver of taxes was paid, was drawn by Stout for the defendant, and that Price and his wife had furnished Stout with large sums of money, which were used for their joint account. In support of the defense that this money which had been placed by Stout to the credit of the plaintiff corporation, and by it paid to the receiver of taxes, was not in fact the money of the plaintiff, but was money contributed by Stout and Price or Mrs. Price for the purpose of paying these taxes, the defendant sought to prove the relation that existed between Stout and Price, where, as a fact, this money came from; that subsequent to the payment of these taxes Price and Stout had a settlement in which there was included the money that Stout had used to pay these taxes, from which it was claimed that it would appear that the money used to pay the taxes was furnished by Stout and Price, or Mrs. Price, and was charged up against Price in the settlement between Price and Stout; so that, as a matter of fact, under the arrangement between them, Stout and Price, or Mrs. Price, had furnished this money that *744had paid the taxes, and it never became the property of the plaintiff, and there was no obligation existing in favor of the plaintiff against the defendant. It also appeared that Stout had made to an intended purchaser of a large block of stock of the defendant company from the company itself a statement that there was no indebtedness of the defendant company, and statements to others which were entirely inconsistent with his testimony that by this transaction there was created an indebtedness of the defendant corporation.
Considering the circumstances under which this alleged loan was created, the fact that the money that paid these taxes was deposited in the bank to the credit of the plaintiff upon the day the payment to the receiver of taxes was made by Stout, without any authority from any of the officers of either the defendant or the plaintiff, and the fact that Stout acted for both parties in furnishing the money to the plaintiff, in drawing the money from plaintiff's bank, and in paying it for the benefit of the defendant to the receiver' of taxes, neither of the parties was absolutely bound by the apparent condition that Stout had created which would estop the defendant from showing the true ' facts in relation to the transaction; and if it appearéd that this money never was the money of the plaintiff, that it never was intended to be loaned to the defendant, but was money contributed by Stout and Price, and under an agreement between them used for the purpose of paying these taxes, the mere fact that Stout, without authority from any one, caused the transaction to take such a form as would create the appearance of an indebtedness, would not make the defendant liable to the plaintiff.
‘ It was proved-that, subsequent to the payment of these taxes, Stout and Price had a dispute in' relation to their accounts and the management of the defendant corporation; that Stout had been removed as an officer and director of the defendant corporation; that he then had a settlement with Price, in which their accounts were settled; that Price had conveyed to Stout his interest in the stock of the plaintiff corporation; and it was after this transaction, for the first time, that Stout presented this claim against the defendant corporation and insisted on its payment. There was also evidence tending to show that, at the time this payment was made, the plaintiff corporation had substantially gone out of business and had no assets, and Price testified that he conveyed his stock to Stout upon the statement of Stout that the company had no assets, and that its stock was of no value.
Now, in endeavoring to prove that the plaintiff never had the money except as a mere matter of convenience in paying the taxes; that the money was never the money of the plaintiff corporation, but was, in effect, money that had been contributed by Stout and Price, or Mrs. Price, for their joint enterprise and for the benefit of the defendant; and that the payment of this money had been settled for on the accounting between Price and Stout—facts which, if true, would, as £ view it, have been a defense to the action to recover as for a loan of money—the learned referee, upon the objection of the defendant, excluded most material and important evidence, as he seemed to have thought that as long as the money had been actually in the bank account of the plaintiff, and a check of the plaintiff used to pay these *745taxes, all evidence as to the source from which the money had been received by the plaintiff was entirely immaterial and the defendant was liable. Stout had testified, in answer to a question as to where he got the money that was deposited in the bank to the credit of the St. James Company: “I had a current account with the Security Trust & Life Insurance Company between the 28th of June, 1900, and the 11th day of July, 1900. I drew from the Security Trust & Life Insurance Company the sum of $42,000. I didn’t deposit that money in the St. James Company. I put it in my bank. I drew checks from my bank to the order of the St. James Company.” That the St. James Company did not have to its credit on the 1st day of July, 1900, $2,000. That it may have had $1,000. He also testified that between the 28th day of June and the nth day of July, 1900, he drew from the defendant the sum of $42,000, and that he paid that identical sum over to the plaintiff. There was also introduced in evidence a letter from Stout to Mrs. Price, which is as follows: “I have waited a few days before answering your letter of last Thursday, hoping to be able to give you some definite information regarding your money. The best that I can say now is that $20,000 of it is safe. Had it not been for the fact that we paid last year’s taxes, the remaining $40,-000.00 would be reasonably secure. As it stands now, that is in jeopardy, but it is by no means lost to us. * * *” If the payment of these taxes had jeopardized Mrs. Price’s money, that payment could not have been made with the money of the plaintiff. Stout was then asked: “You testified yesterday that you purchased Mr. Price’s stock in the St. James Company; is that correct?” to which he answered, “Substantially so.” He was then asked when he purchased it, which was objected to, and the objection sustained. He further testified that in the latter part of February, 1901, Mr. Price and he had an accounting which involved the affairs of the St. James Company. Counsel for the defendant then stated: “I propose to show that Mr. Price and Mr. Stout in their accounting of the affairs, involving all of the affairs of the St. James Company, and during that accounting Mr-Stout submitted to Mr. Price the accounts of the company’s affairs, and the affairs of the company were closed up, and any assets .or liabilities of that company as of that time”-—-when the referee interposed, “I don’t think it is competent,” to which the defendant excepted. He was then asked other questions as to his accounting with Price in relation to the affairs of the St. James Company, and was asked: “In your accounting with Mr. Price did you charge the items of the taxes paid on the St. James Building for the year 1899, amounting to $42,-749.10, one-half to you and one-half to Mr. Price?” “Did you, in the latter part of the month of February or during the month of March, 1901, have an accounting with Mr. Price in reference to the moneys which you and Mr. Price had borrowed from Mrs. Price?” “Did Mr. Price pay one-half of the taxes for the year ’99 for the Security Trust & Life Insurance Company?” “Was he charged with one-half?” “Did he pay it to you, Mr. Stout, in the year 1901, at any time?” These questions were objected to, and the objection sustained. He was then asked: “Mr. Stout, the money that you paid *746in the St, James Company was it your own personal money?” That was objected to, the objection sustained, and defendant excepted.
Mr. Pattison, who was the president of the defendant, was called, and testified that he never heard of this loan; that Stout did not any time call his attention to the fact of the loan; that he was at the office of the defendant during the time of this transaction; that Stout had several times stated that there were no liabilities of the defendant company; and that the witness was in New York on the 9th day of July, and presided at a meeting of the directors on that day, and was in New York every week. Mr. Price was then called as a witness, and was asked questions which tended to show that this money used to pay these taxes was money contributed by himself and his wife and Mr. Stout for that purpose, but his testimony was all objected to by the plaintiff and excluded by the referee. He was asked whether he knew who it was that paid the taxes on the St. James Building for the year 1899, which was objected to, and the objection sustained. He was also asked whether he had an accounting with Mr. Stout in the month of February or March, 1901, which was objected to, and the objection sustained. He was asked whether he had a conversation with Mr. Stout in reference to the payment of the taxes at the time of their payment, and what Stout said before the payment, which was objected to, and the objection sustained. He was then asked if the taxes for the year 1899 on the St. James Building were paid by the St. Janies Company, which was objected to, and the objection sustained. He was asked if he knew whether the St. James Company in that year had any money, or had any assets, in the month of February or March, 1901, which was objected to, and the objection sustained. He was then asked, “Mr. Price, do you know of advances made to the Security Trust & Life Insurance Company by Mr. Stout as set forth in the account of James N. Stout in the records of the Security Trust & Life Insurance Company?” to which he answered, “Yes.” He was then asked: “Mr. Stout has testified in this proceeding that the money was his money—personal funds. Do you know whether or not that statement is correct?” That was objected to, and the objection sustained. Pie was then asked: “Do you know what money or who the money belonged to that was advanced into that account credited by James N. Stout in that account?” That was objected to, and the objection sustained. He was then asked as to the accounting between himself and Stout, and a copy of a statement of the accounts was produced, and the defendant sought to show that in that accounting, which was an accounting of the joint transaction between Price and Stout in relation to the affairs of the defendant and plaintiff corporations, the item of the payment of taxes on this building for the year 1899 was charged and was paid out of the moneys belonging to the witness and Stout jointly. This was all objected to, and the objection sustained, and these rulings were all excepted to by the defendant.
All the evidence offered by the defendant to prove the actual facts as to the ownership of the money that Stout deposited in the name of the plaintiff, and then as an officer of the plaintiff loaned to the defendant, he acting as an officer of the defendant in making the loan, and that such money had been advanced by Price and Mrs. Price to *747Stout for the purpose of their joint undertaking, and was with the consent of all three used to pay these taxes, was excluded.
If Stout, acting for himself and the others interested in the defendant corporation, had applied money which had been contributed by those interested in the corporation to be used for its benefit or for their joint adventure in relation to it, and had applied such money, with the consent of those contributing it, to relieve this defendant of the obligation to pay these taxes, and subsequently, on an accounting between himself and the others interested, had charged them with their proportion of those taxes, and had received from them credit as a payment on account of this money thus contributed, it would tend to prove that the money that had been used to pay these taxes was not the money of the plaintiff corporation, and his efforts so to treat the money which he held for this specific purpose, and which had been by this accounting repaid to him, could not be used as a basis of a liability to the plaintiff. An examination, of this record will show that these defendants never had a chance to prove the facts in relation to this transaction, and to sustain the defense set up in the answer, which, if proved, would defeat the plaintiff’s claim. They were not allowed to cross-examine the substantial plaintiff, who owned all the stock of the plaintiff corporation, and who is thus seeking for his own benefit to recover this money; and the testimony to prove that he held it in a fiduciary capacity, and paid it under the direction of those who were entitled to it for the benefit of the defendant corporation, was all excluded. The defendants were entitled to prove the facts to sustain their defense, and it was error to exclude this testimony.
I think the judgment should be reversed.
HATCH, J., concurs.