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$500 was necessary for the payment of her debts, then it should not be considered that there was any remainder left unexpended by her. The whole fund having once become absolutely hers, became absolutely subject to the claims of her creditors, and the right which they had to reach it prior to her death followed it in the hands of her executor after her death. In other words, so far as creditors are concerned, such $500 became and was assets of her estate, and her executor was accountable to her creditors for the same. This conclusion seems to follow from the well-settled rule of equity above quoted, and the judgment rendered herein is clearly in conflict with it. Upon the record before us the question is one presented between the plaintiff and the creditors of Mrs. Travis, deceased. The executor claims that the $500 is needed to pay Mrs. Travis' debts, and, so far as the evidence discloses, it will be so needed. The trial court has decreed, in substance, that such $500 was not assets of Mrs. Travis, but was the property of this plaintiff. Such conclusion was error, and for that reason the judgment must be reversed.
Judgment reversed, and new trial granted; costs to the appellant to abide the event. All concur.
WILLIAMS et al. v. STATE.
(Supreme Court, Appellate Division, Third Department. May 4, 1904.) 1. SUBCONTRACTOR'S CLAIM AGAINST STATE-NOTICE-PAYMENT TO CONTRACTOR.
After notice that a contractor has assigned a portion of the money to become due him to a subcontractor, the state cannot pay the contractor to the prejudice of the subcontractor, and successfully defend the latter's
claim on that account. 2. COURT OF CLAIMS-JURISDICTION-SPECIAL STATUTE-CONSTRUCTION.
Laws 1900, p. 1614, c. 755, conferring jurisdiction on the Court of Claims to audit and determine the claim of certain persons against the state, and providing that no award shall be made or judgment rendered against the state unless the facts proved shall make out a case which would create a liability against an individual or corporation, is merely a waiver by the state of its sovereign right to decline to answer in its own courts, and an authority to the Court of Claims to award judgment against the state upon facts warranting a recovery against a citizen of the state. Appeal from Court of Claims.
Proceedings in the Court of Claims by Richard J. Williams and Edward Manogue, composing the firm of Williams & Manogue, for the collection of a claim against the state of New York. From a judgment dismissing the claim, claimants appeal. Reversed.
On the 25th day of September, 1897, the board of managers of the Long Island State Hospital made a contract with one George Fruh, in consideration of $76,900, which had been appropriated by the state for that purpose, for the heating, ventilating, and hot-water supply of the cottages connected with said hospital. The plans and specifications were prepared by the State Architect, and approved by the State Lunacy Commission. Shortly after, and on September 28th Fruh entered into a written contract with the claimants, by the terms of which the claimants agreed to perform certain of the work, and furnish certain of the materials called for by said plans and specifications, for
and 122 New York State Reporter the sum of $23,300. On the same day, Fruh made a written assignment to the claimants of all his right, title, and interest to moneys due him, and to grow due on said original contract, to the extent of $23,300, "the engineer in charge of said contract work to allow, as said moneys became due, such payment to the said Williams & Manogue as the work so done by them may call for up to the time of said allowance." This assignment was filed the same day it was executed with the treasurer of the board of managers in the office where the treasurer's records were kept, and an abstract thereof was entered in a book kept in said office, which the law provided should be kept for such purposes. The date of filing was indorsed on the assignment, which remained in the office until after the claimants had completed their work. A copy of the assignment was on the same day mailed to the State Architect, and duly re ceived by him. A copy of the subcontract between Fruh and the claimants was also filed with said treasurer shortly after the filing of the assignment. Subsequently, upon the completion of the whole work, a balance of $2,194.57 was still unpaid to the claimants, and Fruh having become insolvent, and the state refusing to pay this balance, a claim for the same was presented against the state to the Court of Claims, pursuant to the provisions of chapter 755, p. 1614, of the Laws of 1900. Such court rendered judgment dismissing the claim, and from that judgment this appeal is taken.
Argued before PARKER, P. J., and SMITH, CHASE, CHESTER, and HOUGHTON, JJ.
John T. Norton, for appellants.
John Cunneen, Atty. Gen., and S. S. Taylor, Dep. Atty. Gen., for the State.
PARKER, P. J. It must be conceded that the assignment by Fruh, to the claimants, of an interest in his contract with the state, to the extent of $23,300, was a valid assignment, and as between the claimants and Fruh could have been enforced by them against him as fast as they earned the amounts which such assignment was made to secure. Brace v. City of Gloversville, 167 N. Y. 452, 457, 60 N. E. 779; Hackett v. Campbell, 10 App. Div. 523, 42 N. Y. Supp. 47, affirmed 159 N. Y. 537, 53 N. E. 1125.
It must also be conceded that the fact of this assignment, to the extent of $23,300, was known to the state. The facts appearing in the record before us clearly show that. It became the duty of the state, therefore, to pay that full sum of $23,300 to the claimants, instead of to Fruh, as fast as it was earned by Fruh, or on his account, according to the terms of his contract. After such notice, payment of any part of such amount to Fruh would not be warranted. Brill v. Tuttle, 81 N. Y. 454, 37 Am. Rep. 515; Lauer v. Dunn, 115 N. Y. 405, 22 N. E. 270; Bates v. Salt Springs Nat. Bank, 157 N. Y. 322, 327, 51 N. E. 1033. It appears from the record before us that all the work and materials which Fruh undertook to perform and furnish under his contract was performed and furnished by the 8th day of October, 1899, and that the claimants had by such date fully performed and furnished so much thereof as they had undertaken to do and furnish. Also that the state, up to that date, had paid to the claimants, by reason of the assignment by Fruh to them, all of the $23,300, except the sum of $2,194.57. That amount the state had paid to Fruh, instead of to the claimants. The whole work under Fruh's contract having then been fully performed and accepted by the state, and the whole contract price thereof having been fully
earned, I can discover no reason why the state should not pay to these claimants the full amount that Fruh so assigned to them. The case seems to be reduced to that single and very simple proposition of law. It is no defense to a debtor, who had notice of such an assignment, that he had paid a portion of the assigned amount to the assignor. The act of May 4, 1900, p. 1614, c. 755, under which this claim is presented to the Court of Claims, I consider to be nothing more than a waiver by the state of its rights, as sovereign, to decline to answer in its own courts, and as an authority to such Court of Claims to award judgment against it upon any state of facts that would warrant a recovery were the claim against a citizen of the state. Nothing more was intended by such act, and nothing more is necessary to sustain this claim against the state.
I am of the opinion that the decision of the Court of Claims should be reversed, and, inasmuch as there is no dispute whatever over the amount for which the state is liable, if it is liable at all, that judgment should be now directed against the state and in favor of the claimants for the sum of $2,194.57, and interest thereon since October 8, 1899. Waller v. State, 144 N. Y. 579, 601, 39 N. E. 680. All concur.
(94 App. Div. 219.)
(Supreme Court, Appellate Division, First Department. May 6, 1904.)
BANK--CERTIFICATE-RECITALS OF CERTIFICATE-DISPOSITION OF SPECIAL
1 Rev. St. (1st Ed.) p. 764, pt. 2, c. 4, tit. 1, § 4, provided that, on the formation of a special partnership, a certificate should be filed, stating the amount of capital which each special partner should have contributed. Section 8 provided that, if any false statement should be made in such certificate, all persons interested in the partnership should be liable as general partners; and by section 17, as amended by Laws 1857, p. 837, C. 414, any interference by a special partner with money contributed by him was prohibited. On the formation of a special partnership by taking a special partner into a firm, the special partner, in good faith, paid to the general partners the sum which he was to contribute to the partnership, and such sum was deposited in a bank to the credit of the new firm; and the money was subsequently paid to the bank on an overdraft of the old firm, before the filing of the certificate, the fact that it had not been filed being known to the bank. Held, that the bank was not liable to the new firm for the deposit on the theory that the disposition of the
deposit rendered the certificate false, and the special partner liable. 2. SAME-MISAPPROPRIATION OF FUNDS.
Where a contract between partners and one who was to enter the firm as a special partner required him to contribute a sum in cash, and provided that all the assets of the old firm should become the property of the new one, and the special partner's contribution was deposited in a bank, and then drawn on by the new firm to pay a debt of the old firm
to the bank, there was no misappropriation of the funds of the new firm. 8. SAME-PAYMENT OF INDIVIDUAL DEBTS.
The rule that property of a copartnership cannot be employed to dis
charge individual indebtedness had no application to the case. 4. SAME-BANKS-ACTION BY DEPOSITOR-PLEADING-PAYMENT-EVIDENCE.
Where the members of a special partnership sued a bank to recover a deposit, and the answer alleged payment, the bank could show that the
and 122 New York State Reporter sum had been paid on a check drawn by the special partnership to balance an indebtedness due by the firin before the entry of the special partner, and that the agreement between the partners was that the new firm should take over all the assets of the old.
Van Brunt, P. J., and Hatch, J., dissenting in part. Appeal from Judgment on Report of Referee.
Action by Edward La Montagne, Jr., and others against the Bank of New York National Banking Association. From a judgment in favor of plaintiffs, defendant appeals. Reversed.
Argued before VAN BRUNT, P. J., and HATCH. McLAUGHLIN, O'BRIEN, and INGRAHAM, JJ.
Wheeler H. Peckham, for appellant.
INGRAHAM, J. The facts in this case are stated in the opinion of Mr. Justice HATCH, in which I generally concur. I do not, however, agree with him so far as he holds that any use by the general partners of the capital contributed by the special partners after its actual payment to the general partners, but before filing the certificate, would make the special partner liable as a general partner, or render the statement contained in the certificate, that the contribution of the special partner had been fully paid in cash, untrue. Undoubtedly the truth of the certificate is to be determined as of the time of its being filed with the county clerk, but, if then true, it fulfilled the purpose for which the law was enacted. White v. Eiseman, 134 N. Y. 101, 31 N. E. 276. If at the time the certificate was executed and filed the special partner had actually paid the nioney to the general partners, so as to part with all control over it, the statute was complied with. Durant v. Abendroth, 69 N. Y. 148, 25 Am. Rep. 158. The certificate which was required to be filed with the county clerk, provided for by section 4 of 1 Rev. St. p. 764, which was in force at the time this partnership was formed, must state the amount of the capital which each special partner shall have contributed to the common stock; and section 8 provides that, if any false statement be made in such certificate, all persons interested in such partnerships shall be liable for all engagements thereof as general partners. The certificate is not required to contain a statement that the amount of capital which the special partners have contributed remains intact in the hands of the general partners at the time the certificate is filed; and where a special partner has in good faith paid to the general partners the money which he is to contribute to the partnership in cash, so that he has no further control over it, and the amount that he has so contributed is correctly stated in the certificate, the statute is complied with, and the special partner is not responsible for any act of the general partners in relation to the money after he has actually paid it to the general partners. Metropolitan Nat. Bank v. Sirret, 97 N. Y. 320. Having once actually and in good faith paid to the general partners the amount of cash which he was to contribute to the partnership, any interference with that money by the special partner is expressly prohibited by the statute, and such an interference would make the special partner liable as a general partner. Section 17
of the Revised Statutes, as amended by chapter 414, p. 837, of the Laws of 1857.
Take a case where the special partner actually paid to the general partners his contribution in cash upon the day that the copartnership articles were executed and the certificate actually signed, and the general partners, in good faith, without the knowledge or consent of the special partner, on the day of its receipt, applied a part of the contribution of the special partner in the purchase of a warehouse in which, or other property with which, to conduct their business, which was to commence on the following day. Such a use by the general partners of the contribution of the special partner would not be a violation of the statute, making the certificate when it was filed on the following day a false certificate, and making the special partner liable as a general partner. And this is, it seems to me, what was done in this case. Prior to the organization of this special partnership, the general partners had been conducting a business in the city of New York. A special partnership was formed to take over that business and to carry it on, and the contribution of capital by the special partner was made for that purpose. On the 22d day of June, 1892, the copartnership articles were executed. They provided that the limited partnership should begin on the 23d day of June, 1892; that the special partner should contribute as his share of the capital of the limited copartnership the sum of $200,000; that the members of the old firm should contribute to the capital stock of such copartnership the sum of $100,000, which should be so contributed by transferring to said limited copartnership all of the property, assets, and good will of the former copartnership of La Montagne, Clarke & Co.; that the old firm covenanted that such property and assets so transferred by them were worth, and within one year would yield in cash, over all the liabilities of the old firm, the sum of $100,000. On that day the certificate required by the statute to be filed was executed, and, at the time these copartnership articles and certificate were executed, the special partner actually paid to the general partners the sum of $200,000. The whole capital of the new firm was to consist of the $200,000 contributed by the special partner, and the assets of the old firm contributed by the general partners; and on June 22d, after these papers had been executed, the contribution by the special partner was deposited in the defendant bank to the credit of the new copartnership. It was proved that it was stated to the officer of the bank at the time of the deposit that the firm was not to commence business until the following day, when the certificate would be filed; but there was no restriction upon the general partners or the new firm which prevented a withdrawal of that deposit from the bank upon the same day on which it was deposited, or before the new firm did business.
By the deposit there was created the relation of debtor and creditor between the bank and the new firm, and the bank was bound to honor the drafts of the new firm upon it to the extent of the deposit. By the execution of these copartnership articles, the new firm became the owner of the assets of the old firm, as transferee of the assets of the old firm, and the new firm was responsible for the payment of the debts of the old firm, to the extent, at any rate, of the amount that it had received