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N. Y. Supreme Court.-In the Matter of John Seaman.
whether they have power to enforce such decrees by imprisonment? The authority to compel guardians to account in certain cases, and the power to settle their accounts, is not disputed; but it is said their jurisdiction extends no farther than to the mere business of compelling an account, and of ascertaining and determining the balance or amount that is due. It is true that surrogates' courts are courts of "peculiar and special jurisdiction." As such their powers are specified and pretty well defined; and though the statutory prohibition in relation to the exercise of any jurisdiction not expressly given by some statute of the State under pretence of incidental powers or constructive authority, has been removed by a repealing section in the act of May 16, 1837, (Laws of 1837, p. 536, sec. 71,) yet the common law principle remains that such courts take nothing by implication except what is necessary to enable them to carry out the powers which have been expressly granted. Now we think it is quite clear that the power to compel guardians to account with their wards, and to settle their accounts, includes necessarily the power to make an order or decree which shall declare the result of the accounts, determine the balance, and render the adjustment or settlement a final or conclusive one. The verb settle as applied to accounts means to adjust; to liquidate; to balance, as well as to pay; and when used as conferring power on a court, it means the power to determine what is uncertain; to establish; to free from doubt, as to settle questions or points of law.-(Webster.)
The statute of guardians and wards, speaks of the final order of the surrogate on the settlement of a guardian's account, and gives an appeal to the Chancellor. This shows that what the surrogate then does, is in form and effect a judgment or decree.-What sort of a judgment or decree he is to render in his final action upon the accounts will depend upon the nature and object of the proceeding. If the object is to ascertain the correctness of the guardian's accounts, the condition of the estate, and how the funds are invested, (the ward being still under age, and the guardianship to be continued,) then the surrogate will merely render judgment of approval or disapproval, correcting errors, if any, in the accounts and in the management of the ward's estate. If the object is to remove the guardian for cause, and to have another appointed in his stead, and this is done, the surrogate may of course order the displaced guardian to surrender the property of the ward, and to pay over the money in hand to the new guardian on pain of contempt. Again, if the ward has arrived at full age, and the object is to compel a final accounting and settlement, and such accounting has resulted in finding a balance of money to be due from the guardian to the ward, there can be no doubt of the surrogate's power to adjudicate such balance to be due, and to decree payment of it; and also, to order any specific property of the ward's in the guardian's hands, or standing in the guardian's name, to be delivered over. But the question remains-how are such decrees to be enforced? Here, again, the mode of proceeding must depend on the nature of the case. In some cases the surrogate may proceed by
N. Y. Supreme Court.-In the Matter of John Seaman.
attachment against the person-for instance, whenever it becomes necessary to enforce the surrender and delivery of specific property, securities and money to a succeeding guardian, or to the ward himself when of age, and it is ascertained that the guardian has in possession, or under his control, either money or securities specifically belonging to his ward, and which requires an act of transfer to the owner rather than act of payment to a creditor. The coercive remedy in such cases is attachment as for a contempt, founded on a refusal to do the act required. But when there has been a general accounting before the Surrogate, and he has ascertained a balance to be due, which his decree has established as a debt to be paid by one party to the other, there the law does not allow the non-payment to be treated as a contempt of his authority, because the ordinary form of execution as upon a judgment at law is suited to the case.
This distinction is recognised in the title of the R. S. relating to proceedings as for contempts, to enforce civil remedies, &c.-Sub. 3, of sec. 1 of that title, authorizes such proceedings against parties to suits, attorneys, &c., and all other persons for the non-payment of any sum of money ordered to be paid in cases where by law execution cannot be awarded for the collection of such sum. It follows, that if an execution can go, proceedings as for a contempt cannot be taken. Now in the act of May 16, 1837, the remedy by execution is provided in such cases as the present. After any decree is made by a surrogate for payment of money by an executor, or administrator or guardian, on application, the surrogate shall make a certificate, stating the names of the parties, &c., and the amount of the debt and costs directed to be paid by such decree. On this certificate a judgment may be docketted in the Supreme Court, to become a lien on lands, and on which execution may be issued in the same manner as though the same was a judgment obtained in that court; and if such execution is returned unsatisfied, recourse may be had to the party's bond in the surrogate's office-which is to be assigned for the purpose of being prosecuted.-Sec. 63, 64, 65. These statutory provisions in the law of 1837, must have been intended to supply what was found to be a defect in the law of surrogate's courts under the R. S., in regard to the enforcement of decrees for the payment of money, as distinguished from orders or decrees for the surrender and delivery over of specific property; and they serve to show that the power of surrogates as declared in the R.S. "to enforce all lawful orders, process and decrees of his court, by attachment against the person," &c., was only intended to be put in operation where obedience was refused to interlocutory orders, and to final orders or decrees in the description of cases last above mentioned; and not where a decree was made for the payment of money which had become due as a debt, owing by a guardian to his ward, or by an executor or administrator to legatees or next of kin; or if that power was originally intended to be otherwise, it seems now to be modified and made to harmonize with the principle, that where the law has provided an execution for the colfection of a debt in judgment, the harsher proceeding by a commit
N. Y. Supreme Court.-Halstead v. The Mayor of New-York.
ment as for a contempt cannot be resorted to. Believing the case in hand to be within that principle, we think the prisoner was not liable to this process of commitment. On that ground, as well as on account of the irregular and defective character of the precept itself, we reverse the order which remanded the prisoner, and direct him to be discharged.
[November General Term, 1848.]
Before the Honorable W. T. Mc COUN, E. P. HURLBUT, and HENRY P. EDWARDS,
DAVID P. HALSTEAD V. THE MAYOR, &c. OF THE CITY OF NEW-YORK.
A corporation has the right to institute and defend suits for the purpose of protecting its property and interests, and also for the purpose of protecting its corporate franchises and privileges, although no such right is expressly granted by its charter.
But this right can only be exercised in cases where the corporation is a party to the suit, or where, though not a party to the record, it is the real party in interest; as in defence of titles acquired from it, and which it is bound to defend, or in defence of persons acting by its authority, and in its behalf.
A corporation without any express power in its charter for that purpose, may make a promissory note, or bill of exchange, when not prohibited by law from doing so, provided that such note or bill is given in the course of its proper legitimate business.
But as the power to issue negotiable paper is only a special and conditional implied power, every person who takes such paper is charged with the knowledge that it is necessary as a condition precedent to its validity, that the debt which forms its consideration, should be contracted in the proper legitimate business of the corporation, and he will not be protected as a bona fide holder, without notice, although he had no actual knowledge that it was given for a purpose not authorized by the charter of the corporation.
THE facts and circumstances are contained in the opinion of the court.
Charles O'Conor, for plaintiff.
Willis Hall, for defendants.
By the Court-EDWARDS, J.-This action is brought upon two warrants or drafts given by the defendants, and made payable to P. A. Cowdrey or order; one in the sum of $2661,27; the other in the sum of $300. The proof shows that the drafts, after having been duly endorsed, were received by the plaintiff; and there is no evidence that he had any other notice of their consideration, than that which is given by the instruments themselves.
No objection is made either to the form in which they are drawn, or to the manner in which they are signed, but it is contended that the defendants had no authority to give them.
The consideration of the draft for the larger amount, consisted of taxable costs, which accrued in separate suits, brought in the name of the people of the state of New-York, against eight of the supervi
N. Y. Supreme Court.-Halstead v. The Mayor of New-York.
sors of the city and county of New-York, to recover a penalty of $250 from each of them, for refusing to allow the account of one of the associate judges of the Court of General Sessions of the city and county of New-York, as they were required to do by the fourth section of the "Act to enable the supervisors of the city and county of New-York to raise money by tax," passed May 26th, 1841, (Laws, 1841, p. 267.) The consideration of the other draft consisted of counsel fees which had accrued in the defence of the same suits.
The suits were commenced in the month of September, 1841; and some years afterwards judgments were recovered against the defendants in each of them. On the 8th May, 1847, and a few days before the drafts bear date, a resolution was passed by the common council, authorizing and directing the comptroller to pay the amounts of the several judgments, with the taxable costs, and reasonable counsel fees. It was under this resolution that the drafts are drawn; and they appear to have been given for all the costs and fees which had accrued in the defence of the several suits.
The first question to be considered is, whether the defendants had the corporate right and authority to give the drafts for such a purpose. The charter under which the defendants were incorporated, gives them no express power in reference to suits, except that of suing and defending suits in their corporate name and capacity. The extent to which they may exercise that power is not expressly stated; but, like every other incorporated body, they must have, by implication, and as a necessary incident to the powers expressly granted to them, the right to institute and defend suits for the purpose of protecting their own property and interests, and also for the purpose of protecting their corporate privileges and franchises. This is a right of self-protection which must belong as well to artificial as to natural persons. But, as a general rule, it can only be exercised in cases where the corporation is a party to the suit. There may be cases, however, in which as a matter of necessity, the defendants can exercise this right where they are not the actual parties to the record; as in defence of titles acquired from them, and which they are bound to defend; or in defence of persons acting by their authority, and in their behalf. The reason why the defendants would have the right to defend a suit in either of the cases last supposed is, that although not the nominal parties, they would be the real parties in interest. In cases, however, in which the defendants are neither the parties to the record, nor the real parties in interest, their corporate right to institute or defend suits must cease. In the case before us, it appears that the costs and fees, for which the drafts in question were given, did not accrue in any suit brought against the defendants, or against any persons who acted under their authority and in their behalf. On the contrary, they accrued in suits against persons who acted on their own individual responsibility. The suits were brought, too, for the purpose of enforcing a claim which the defendants had no interest in resisting, and for which they were not liable. They were, in no respect whatever, the parties in interest; and, although a question as to the constitutionality of the law under which
N. Y. Supreme Court.-Halstead v. The Mayor of New-York.
the associate judges held their offices, might have arisen incidentally, the case is not altered.
At the time when the suits were commenced, the act under which the associate judges were appointed, had been in force for upwards of a year, and they had acted as members of the Court of General Sessions during the greater part of that time. No proceedings had been instituted by the defendants for the purpose of showing that their corporate franchises had been abridged or impaired by the appointment of such judges. The constitutionality of the law under which they held their offices had thus been tacitly acquiesced in, and it does not appear that the defendants, in this respect, considered it any infringement of their corporate rights and privileges. If the supervisors chose to assume a different ground, and to disobey the law which required them to allow the accounts of the associate judges, they did so at their own peril, and they should bear the consequences. The act complained of was done on their own responsibility, and the penalty for their misconduct is entirely personal.
But it was contended on the argument, that even if it should be held that the defendants had no right to give their drafts for the consideration for which these were given, yet, that the plaintiff is entitled to recover as a bona fide holder without notice.
It is not denied on the part of the defendants, that the drafts in question are, in their legal effect, negotiable bills of exchange, and that the plaintiff is a bona fide holder, with no other notice of their consideration than that which appears upon the face of the drafts; but it is contended, that if they were given without corporate authority on the part of the defendants, they are void, even in the hands of a bona fide holder, without notice.
It will be remembered that the defendants have no express power given to them by their charter to issue negotiable paper. It has, however, long been a settled doctrine in this state, that a corporation without any express power in its charter for that purpose, may make a negotiable promissory note or bill of exchange, when not prohibited by law from doing so, provided such note or bill is given for a debt contracted in the course of its proper legitimate business. (Mott v. Hicks, 1 Conn. 113. Barker v. Merchants' Fire Insurance Co., 3 Wend. 94. Attorney General v. Life and Fire Insurance Company, 9 Paige, 477. Moss v. Oakley, 2 Hill 615. Kelly v. Mayor, &c. of Brooklyn, 4 Ib. 263.) But, as far as we are aware, the question has never been decided whether a note or bill issued by such a corporation, not in the course of its proper legitimate business, is valid in the hands of a bona fide holder without notice. In the case of The Attorney General v. Life & Fire Insurance, in which the question arose, the chancellor declined to express any opinion, and placed his decision upon other grounds. It was contended on the argument that the rule of the law merchant, which protects the bona fide holder of negotiable paper without notice, was of universal application; and that if the defendants had a right to issue negotiable paper, such paper must ex necessitate be subject to the same rules as the negotiable paper of an individual. This view seems plausible; but will it bear the test of examination?