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Edwin S. Chapin, deceased. From a judgment of the Appellate Division, 96 N. Y. Supp. 1147, affirming a judgment for defendant, plaintiff appeals. Reversed and remanded.
John A. Graver, for appellant. L. Laflin Kellogg, for respondent.
fore, were, at the time of ratification, subject to alienation and disposition by these two beneficiaries. We are, therefore, led to the conclusion that the adult beneficiaries, Hermann and Frank C. Pommer, have bargained away their right to now insist on a reinstatement of the lien of the mortgage so far as their interests are concerned, and that the plaintiffs, who represent their interests, can have no greater rights than they have.
The judgment of the Appellate Division should be reversed, and the judgment of the trial court modified by directing that the $6,500 mortgage be re-established as a lien and foreclosed for only one-half of that amount, with interest, in favor of the two infant beneficiaries. As so modified, the judgment of the trial court is affirmed, and the record is remitted to the Special Term, with directions to render judgment in accordance with the views herein expressed, without costs of this appeal to either party as against the other.
CULLEN, C. J., and O'BRIEN, HAIGHT, VANN, and HISCOCK, JJ., concur. WILLARD BARTLETT, J., not sitting.
(185 N. Y. 395)
STERLING v. CHAPIN. (Court of Appeals of New York. June 12, 1906.) 1. PARTNERSHIP ACCOUNTING DEBTS
Testator and defendant, who was testator's brother, formed a stock brokerage partnership, testator furnishing all the capital. A stock exchange seat was purchased in defendant's name at a time when the rules of the stock exchange required that if a candidate for membership had borrowed money with which to purchase his seat he must, before being elected, file with the exchange a release of his claim for the benefit of other members of the exchange. Such a release was filed, signed by testator individually. Thereafter, however, defendant was debited in his own handwriting on the books of the firm with the price of the seat, and this item was carried on the firm books for many years, during which defendant was debited with interest on the same and credited with various payments on the account. At one time defendant wrote deceased acknowledging the existence of the debt. Held, that these facts sufficiently showed chat the indebtedness of defendant was to the partnership, and not to his brother individually, so that on a settlement of the partnership affairs defendant was chargeable with the amount paid for the seat. 2. SAME-EFFECT OF RELEASE.
The evidence was also sufficient to show that the release was intended merely to satisfy the rule of the stock exchange, and did not extinguish the indebtedness of defendant to the firm for the money advanced to purchase the seat.
Cullen, C. J., and Haight and Gray, JJ., dissenting.
Appeal from Supreme Court, Appellate Division, First Department.
Action by John W. Sterling, as executor of Edwin S. Chapin, deceased, against Albert K. Chapin, individually, and as executor of
HISCOCK, J. This action was brought for a partnership accounting of the affairs of the stock brokerage firm of E. S. Chapin & Co., composed of Edwin S. Chapin, the plaintiff's testator, and his brother, the defendant. The Appellate Division by a divided vote has affirmed the action of the trial court in refusing to charge defendant with a balance of $37,078.80, shown by the partnership books to be due from him for the purchase price of a stock exchange seat, and the only questions involved upon this appeal arise with reference to such refusal to charge said defendant with this item. After entry of the interlocutory judgment finding the copartnership between the parties and directing an accounting, such accounting was first had with the result of charging defendant with the item in question, and the final judgment was entered in favor of the plaintiff for an amount including the same. The Appellate Division (92 N. Y. Supp. 904), however, reversed such judgment by a divided vote, and upon the second and present accounting the referee, and upon the entry of final judgment the trial court, were necessarily controlled by such decision of the Appellate Division and compelled to exclude said item.
It may be observed at the outset, as bearing upon the equities of this litigation, that the copartnership or the testator concededly advanced about $30,000, exclusive of interest, with which to purchase a seat upon the Stock Exchange for the defendant; that said defendant received and became the owner of said seat, and that there is not the slightest evidence or claim that he has ever actually repaid said advance. If the judgment appealed from is to be affirmed, it must be on account of a technical release for an expressed nominal consideration, and without any evidence of a meritorious consideration or discharge of the indebtedness. It does not seem to me that it should be so affirmed, and, of course, I do not lose sight of the rule that its reversal involves the demonstration that there are no findings of fact to sustain it, or else if there are such findings, that there is no evidence to sustain them. The following material facts appear without any dispute whatever: The partnership between testator and defendant was formed in 1886 and continued until May 1, 1896, when it was dissolved by mutual consent. The testator furnished the entire capital. January 20, 1887, the defendant, upon the books of the copartnership was charged with $30,110 cash for a stock exchange seat in an account which was headed "A. K. Chapin, New York Stock Exchange Seat." This account was entered up
on the copartnership books by the defendant himself and there is no dispute that the charge in terms relates to the Stock Exchange seat in question. At this time it was a rule or custom of the Stock Exchange that before a person could be elected to membership he must show that there were no outstanding claims against him, and if he had borrowed the money with which to purchase his seat it was necessary to file with the exchange a release of this claim for the benefit of the other members of the exchange. It was the intention that a person should enter upon business as a member of the exchange without having any claim against him and that the person who had supplied money for the purchase of his seat could not make a claim against him to the exclusion of other creditors. January 6, 1887, the testator executed in form a general release whereby "for and in consideration of the sum of one dollar paid by Albert K. Chapin," he released said Chapin generally from all claims and demands which he had or might have for any cause, “and more particularly by reason of an advance of the sum of $29,000 made to the said Albert K. Chapin to enable him to purchase a membership in the New York Stock Exchange.” This release appears to have been delivered to and filed with the Stock Exchange which produced it upon the trial of this action. There is not the slightest evidence that it was ever delivered to or ever seen or heard of by the defendant. The above-mentioned account, opened against defendant several days after the execution of the above purported release, as above stated, was carried upon the books of the copartnership to the time of its dissolution, and in that account the defendant each year, exclusive of the one ending when the copartnership was dissolved, was charged with interest upon the balance shown to be due from him, and was credited with various payments, the balance at the date of the dissolution due from him being $37,078.80. In addition to this, upon August 5, 1889, more than two years and a half after the execution of the purported release, the defendant wrote to his brother a letter, which reads as follows: “Dear Brother Ed: Understanding that you are thinking of appointing me one of the executors or trustees under your will upon your decease, and being now indebted to you on account of the purchase money of my seat in the New York Stock Exchange, I do most cheerfully hereby agree to act as such executor or trustee, or both, under your will, if so appointed thereby, without any commission or compensation other than a release by your will or otherwise from so much of my said indebtedness as would equal the commission or compensation to which I should otherwise be entitled. Yours affectionately, A. K. Chapin."
It is urged that the testator at some time made statements which indicated that he had forgiven or intended to forgive this indebted
ness, and that the defendant should not be held thereupon. The record, however, absolutely fails to disclose any such testimony outside of a certain letter or statement which was excluded from the evidence and is not before us for consideration. It seems to me that this evidence presents no question of fact, but fairly and reasonably leads to the conclusion as matter of law that the defendant became indebted to the copartnership composed of his brother and himself for moneys advanced for the purchase of this Stock Exchange seat, and that this indebtedness has never been discharged. Perhaps I can best state the reasons which lead me to this opinion by discussing the propositions upon which the respondent bases his claim to a contrary judgment.
In the first place it is contended that the advance or loan was a transaction between defendant and the testator as individuals, and that it was not a copartnership transaction, and this contention is supported by a finding of the learned referee to the effect “that the sum of $30,078.80 appearing on the books as 'A. K. Chapin Stock Exchange seat' represented moneys advanced by the plaintiff's testator.” This contention is based solely upon the form of the release above quoted, which is executed by the testator individually, and refers to an advance of money for the purchase of the seat. In view of the fact that the testator supplied the entire copartnership capital, out of which must have been advanced the money for this purchase if a copartnership transaction, it would not have been strange or conclusive against plaintiff's claim if in a release not having that point in mind he had definitely recited that the advance was made by himself. But this he did not do. The release was by him of any claims which he might have "by reason of an advance of the sum of $29,000 made to the said Albert K. Chapin to enable him to purchase a membership in the New York Stock Exchange.” While it is very likely that a release by a copartnership would have been strictly more appropriate to cover a copartnership transaction, still there cannot be the slightest doubt that this instrument in the form adopted answered the requirements of The Stock Exchange and would have estopped and prevented the testator from ever urging against its members his rights either as an individual or as a partner on account of the advance. The recital is "of an advance" with no particulars added whether made by the individual or by the copartnership. It seems to me, therefore, that this piece of evidence standing by itself and without any other testimony explaining or elucidating it would be quite colorless and indecisive upon the question of the authorship of the loan. But when we consider the fact that subsequently to the execution of this instrument the parties, by an account with items extending over seven or eight
years, expressly and continuously admitted charged by it. And there is nothing unreasonthat the copartnership advanced the money able in this view, for the copartnership might with which to purchase this seat, and that very well at this later date come into the the defendant was indebted to such copart- transaction and advance the money and take nership for such advance, all uncertainty up an indebtedness which had theretofore vanishes and we have proof which is conclu- been carried elsewhere. What I emphasize sive upon this appeal that the matter was a co- is, that we have here the uncontradicted and partnership and not an individual transac- unexplained admission of the defendant by tion. This account and these entries repre- entries which are binding upon him that at a sented the last and deliberate agreement of certain date the copartnership advanced monthe parties that the copartnership advanced ey to or for him, and that this copartnership the money for the seat, assuming all the time indebtedness was not affected by a prior indifor the benefit of defendant that there was vidual release of one copartner. However, but one purchase. There is nothing contra- passing by this and assuming upon some dictory upon this point between the release vague and undefined theory, rather than in and the books. The former was executed for accordance with any proof that the release a certain purpose and it is indecisive upon might relate to the same transaction evidencthis question. The books contain the later ut- ed by the entries, and might possibly, thereterances of the parties and they are perfectly fore, affect the indebtedness proved thereby, I plain and explicit.
still do not think such result was, in fact, eiIt is suggested that these entries might re- ther intended or accomplished. I have allate to and evidence an individual transaction ready referred to the rule of the Stock Exbetween the brothers, an individual loan by change, which required an assurance that a one to the other, but of course this is at vari-proposed member was free from indebtedness ance with the fundamental principles of book- as a protection to the members against any keeping. The books of a copartnership repre- claim which any person might have for monsent the copartnership and every transaction eys advanced for the purchase of his seat. properly entered thereon must be one to which The defendant was about to become such the copartnership is a party. When the de- member. The testator, whether he did it as fendant was charged upon the books of this an individual or by means of his copartnercopartnership with the cash advanced for his ship capital which he had solely furnished, seat, it necessarily meant that the copartner- advanced the money for the purchase of the ship was the other party to the transaction seat. He executed the instrument in question and was entitled to credit for the advance which, as between him and the Stock Exthus made. It is also urged that the release change, would have operated to prevent any in question discharged any indebtedness and claim for this advance in whichever form that the account referred to evidenced a mere- made. It was delivered to, retained by, and ly moral and not a legal obligation. The lat- upon the hearing produced by, the Stock Exter suggestion is so utterly untenable as to re- change. So far as appears, the defendant quire little discussion. Merely moral obliga- never saw or heard of it, and it seems to me tions have no place upon the business books that upon this evidence alone the fair preof a copartnership. Such books contain a sumption would be that the testator executstatement of the legal assets and liabilities of ed the instrument simply for the limited the firm, and when men enter upon their purpose of complying with the rules of the books a debit or a credit balance of many Stock Exchange, and that otherwise said rethousands of dollars they are presumed to be lease was not intended to cancel any indealing with claims which are legally en- debtedness. And upon this point the findforceable and which do not rest upon mere ing of the learned referee seems not only option or morality. I, therefore, pass to the not to oppose, but expressly to sustain claim that the indebtedness was discharged. the theory whích I am urging. He finds
At the outset I am at much loss to find any "that thereafter and on the 6th day of Januevidence that the release can, if it was so in- ary, 1887, said release was delivered to the tended, properly affect or discharge the co- New York Stock Exchange for the purpose of partnership claim against defendant. It did enabling the defendant to obtain membership not purport to discharge any claims which in said exchange and so to be in a position to might accrue in the future to the testator, make use of his seat therein." much less to the firm. Many days after it But again we are not left to evidence which was executed the defendant charged himself standing by itself might be indecisive. In upon the copartnership books with cash ad- the natural order of things the release to the vanced for his seat. Those entries mean that Stock Exchange would first be executed to on that day the firm advanced the money and enable a person to become a member, and first became his creditor upon the transaction then some time thereafter the seat and memin question. Presumptively, and in the ab-bership would be granted, and so not unnatsence of evidence showing the contrary, the urally we find a few days after the date of money was advanced upon the date when it the release these entries made upon the cowas charged upon the books, and this claim partnership books which were binding upon now before us did not exist when the release the defendant not only because he was a was executed and could not have been dis- member of the partnership, but because they were actually made in his handwriting, against his coexecutor, individually and as which stated that on that day the copartner- such coexecutor, for a copartnership ac. ship had advanced upwards of $30,000 for counting. The only items in dispute brought the purchase of the seat. And still later upon up for review in this court appear upon the every year for seven years down to the dis- ledger for the firm under the head, "A. K. solution of the firm we find the defendant Chapin New York Stock Exchange Seat.” It regularly charged upon these bocks, thus commences with the charge under date of binding upon him, with interest upon this ad- January 20, 1887, "to cash, $30,110," then folvance, and still further in addition a letter lows the charging of interest and the crediting expressly acknowledging bis indebtedness. of payments made from time to time until It seems to me that such an account and such May 1, 1895, when the balance was $37,078.80. entries ought to mean something; that a man These entries in the book are in the handdoes not permit to be carried upon the busi- writing of the defendant, and it is, there. ness books of a copartnership of which he is fore, claimed on behalf of the plaintiff that a member an indebtedness of over $30,000, it establishes an indebtedness on his part likewise acknowedged by a letter written individually to the firm in the amount stated with reference to death and testamentary ad- in the account. Such, doubtless, would be ministration, unless he owes it, or that an the inference to be drawn from the fact that indebtedness which by the intention of the the account appears upon the books of the parties has been legally and fully discharged firm, had the case been rested upon this eviand canceled is thus thereafter entered and dence. But it appears that the defendant carried along in open and current account. was desirous of becoming a member of the It seems to me that these acts are so deliber- Stock Exchange, and that, under the rules ate and long continued, and are so utterly of the exchange, he was required to show inconsistent with and opposed to the idea that he had purchased a membership and that this indebtedness had been canceled, paid therefor, and that he did not owe anythat we ought not to permit such effect thing by reason of such purchase. It also apagainst an estate from a purported release pears that on the 6th day of January, 1887, executed for a merely nominal consideration, Edwin S. Chapin executed to him a general unless we are compelled to. I do not think release of all claims and demands whatsowe are thus compelled to, but that in the ever in law and equity, and "more particumanner indicated such effect may be given larly by reason of an advance of the sum of to both the release and the entries upon the $29,000 made to the said Albert K. Chapin books as will accomplish the true intent and to enable him to purchase a membership in understanding of the parties. The former,
the New York Stock Exchange." It further as found by the referee, was executed for the appears from the plaintiff's own showing limited purpose of assurance and protection that after the death of Edwin S. Chapin the to the Stock Exchange; the latter represent
defendant made a statement in the presence ed and confessed the true situation between of two or three persons to the effect that he the parties. In the discussion already had was owing his brother for the money advancI have referred to and considered the findings ed to him to purchase his seat on the Stock of the referee adopted by the courts so far Exchange, and also by a letter written by him as I desired to, with one exception. A finding to his brother before his death, in which he apparently as of fact has been made, being stated: “Understanding that you are thinkthe ninth one of the referee, that the execu- ing of appointing me one of the executors or tion of the release heretofore referred to, and trustees under your will upon your decease, the "delivery of the same to the New York and being now indebted to you on account of Stock Exchange, operated to release and dis- the purchase money of my seat in the New charge the defendant from any obligation to
York Stock Exchange, I do most cheerfully repay the amount so advanced to him by the hereby agree to act as such executor or trusplaintiff's testator for such purchase of a tee, or both, under your will, if so appointed seat in the said New York Stock Exchange.” thereby, without any commission or compenThis conclusion is one of law and adds no- sation other than a release by your will or thing to the findings already considered. otherwise from so much of my indebtedness
The judgment should be reversed, and a as would equal the commission or compensanew trial granted; costs to abide event. tion to which I should otherwise be entitled.
Yours affectionately, A. K. Chapin." HAIGHT, J. (dissenting). Edwin S. Chap- There is other evidence in the case, but in and Albert K. Chapin were brothers, and that to which I have called attention is suffifrom the year 1886 until the 1st day of May, cient to present the question which, I think, 1896, were copartners in business as stock- disposes of this case. The referee has found brokers, Edwin S. Chapin having contributed as a fact "that the sum of $37,078.80 appear $100,000, the entire capital of the firm. He ing on the books as 'A. K. Chapin Stock Exdied on the 3d day of September, 1901, leaving change Seat' represented moneys advanced a last will and testament, in which the plain- by the plaintiff's testator to the defendant tiff and the defendant were appointed exe- in the month of January, 1887, to enable him utors.
to purchase a seat in the New York Stock ExThis action was brought by the plaintiff change," and further, "that the Stock Ex
change seat so purchased by the defendant | partnership claim under the findings, the
(185 N. Y. 438) there was no evidence to sustain the find
DENISON et al. v. DENISON et al. ing. This, I think, cannot properly be held. (Court of Appeals of New York. June 19, The release to which we have referred re
1906.) cites the advancement of the money for the 1. WILLS-INVALIDITY OF GIFT OVER-EFFECT purchase of a membership in the Stock Ex- ON PRIMARY GIFT.
The invalidity of a gift over in default change by Edwin S. Chapin. It was signed
of issue surviving a life tenant does not affect by him individually and not by the firm. It the primary gift to that issue. was filed with the Stock Exchange. It was so [Ed. Note.-For cases in point, see vol. 49, executed and filed for the purpose of showing
Cent. Dig. Wills, $ 2171.] to the exchange that Albert K. Chapin was
2. PERPETUITIES-SUSPENSION OF POWER OF freed from any indebtedness by reason of the
Testator's will created a trust for the payloan, so as to qualify him to become a mem
ment of income to certain beneficiaries for life, ber of the exchange and thus make him solv- and on the death of any beneficiary in trust ent and able to perform financially bis obliga
for his children and the issue of any deceased
child who should be living at the time of his tions to his associates in the exchange. If the
decease, “his, her, or their executors, adminisloan bad been made to him by the firm and it trators, and assigns.” Held, that on the death was a firm obligation, then the indebtedness of a life tenant the corpus of his share vested was not discharged and the effect of the re- absolutely in his issue, as the trust was a dry
or passive one, involving no active duties on the lease would be to deceive the officers of the
part of the trustee, and hence there was no exchange with reference thereto. The ad- illegal suspension of alienation. missions proved by the plaintiff to have been Haight, J., dissenting. made by the defendant both orally and by his letter referred to are admissions of his
Appeal from Supreme Court, Appellate
Division, First Department.
Suit by John M. Denison, as executor, and edness to the firm. The entry upon the books
others, against Henry Marcus Denison and of the firm does not state it to be a firm
others, for the construction of the will. charge, but is entered under the name of
From a judgment of the Appellate Division,
(93 N. Y. Supp. 1128), affirming a judgment "A. K. Chapin New York Stock Exchange Seat," which, were it not for the fact that it
of the Special Term (86 N. Y. Supp. 604),
defendants Bessie M. Brown and another apappears upon the company's book, would be consistent with the findings of the referee.
peal. Affirmed. As we have seen, the capital for the copart- Franklin Bartlett, for appellants. William nership was wholly contributed by Edwin S. T. Read, Hollister Logan, and Everett MasChapin. It does not appear upon the gener- ten, for respondents. al account between the copartners that the sum of $29,000 or of $30,110 was ever drawn CULLEN, O. J. The action is for the from the assets of the firm by Albert K. construction of a will. The appellants are Chapin for the purpose of purchasing the certain of the testator's next of kin and Stock Exchange seat. The only reference heirs at law for whom he made no provision. o those items is in the account, to which ref- They assert the invalidity of the residuary erence has been made. The theory of the clause, and claim that as to the property referee apparently was that it was a special passing under it the deceased died intestate. account, entered for convenience upon the The great prolixity of the instrument and the books in order that the defendant's liability comparative unimportance of the questions to his brother might be perpetrated, and I presented, except to the parties to the litigathink it cannot be properly held that there tion, forbid our incumbering reports with a is no evidence or inferences to be drawn from literal statement of its provisions. The testhe facts shown to support this theory. tator, after creating a trust to provide an Whether or not the plaintiff can recover annuity for his wife, gave all the residue of the amount of the defendant upon an action his estate to his executors in trust for the brought by him for that purpose, as a claim
benefit of the children of a named brother owing by the defendant to the plaintiff's tes- and of a sister who might be living at his tator individually, it is not necessary to now decease to be divided into shares to be held determine. This action was for a copartner- for the "use and benefit” of the several ship accounting. The item, not being a co- beneficiaries during their respective lives