1. Held, the verdict is sustained by the evidence.

2. The statements of a third person in possession of property, as to whom he holds it for, or as to who is the owner of it, are not hearsay, but competent evidence to prove the facts stated. They are a part of the res gestæ, and characterize the possession.

3. Where an issue in the case has been submitted to the jury, and they have made a special finding on the same, which is conclusive of the rights of the parties, if that finding must stand, it is immaterial that the court may have erred in its manner of submitting to the jury another separate and distinct issue.

(Syllabus by the Court.)

Appeal from district court, Swift county; Gorham Powers, Judge.

Action by W. L. Elwood against S. S. Saterlie and others. Verdict for defendants. From an order refusing a new trial, plaintiff appeals. Affirmed.

F. M. Thornton and S. H. Hudson, for appellant. T. F. Young and M. A. Spooner, for respondents.

CANTY, J. This is an action on a promissory note made by defendants to the order of W. A. Godwin & Son, and by them indorsed to plaintiff. The defense is that the note was given for part of the purchase price of a stallion bought by defendants S. S. and L. S. Saterlie from Godwin & Son, who warranted the horse in several respects, and as to such horse fraudulently made certain false statements which the purchasers believed, and on which they relied, and were induced thereby to purchase the horse. There are further allegations in the answer which state a good counterclaim or recoupment as against Godwin & Son for damages to the full amount of the note, for breach of such warranty, and for such false representations. It is further alleged that at the time of such purchase plaintiff was in fact the owner of the horse, and Godwin & Son were merely his agents for the sale of the same, and that the note in suit was taken in the name of Godwin & Son, and indorsed to plaintiff, as a part of the scheme of Godwin & Son and plaintiff to defraud defendants, and that at the time he took said note plaintiff knew all of the facts as to such breach of warranty, false representations, and fraud. On the trial the jury returned a general verdict for defendants, and

also found the following special finding: "Question. At the time of the sale of the horse St. Hilaire to the defendants, was said horse owned by W. L. Elwood, the plaintiff? Answer. Yes." From an order denying a new trial, plaintiff appeals.

1. Both parties assume that the general verdict is controlled by the special finding, and that, if the latter is not sustained by the evidence, the former must fall. Whether or not this assumption is correct, we will not consider. Plaintiff has been for many years engaged in the business of importing, breeding, and selling horses at Dekalb, Ill. Godwin & Son were located at Benson, Minn. In 1891 plaintiff delivered to Godwin & Son, at Benson, seven stallions, one of them being the horse in question. It is claimed by plaintiff that these horses were sold to Godwin & Son wholly on credit, on open book account, pursuant to arrangements made between the parties at Dekalb. Godwin & Son sold these horses to different parties, took for the purchase price negotiable notes payable to themselves, and indorsed all of these notes over to plaintiff. In making these sales, Godwin & Son gave in their own name written warranties, the printed blanks for which contained the address and advertisement of plaintiff at Dekalb. One of these horses was sold by Godwin & Son to one Foix. The latter, being dissatisfied with his horse, wrote to plaintiff at Dekalb, and asked him to exchange the horse for another, pursuant to the terms of the warranty received by Foix from Godwin & Son. Plaintiff, writing from Dekalb, answered the letter, and advised Foix to keep the horse he had until such horse became more fully acclimated, and added: "We are pretty well closed out of horses here now, so that we would have nothing that we could exchange for him, even if you were determined to make the trade now, and the only thing that we could do would be to let you have one of the horses that Mr. Godwin has there, which I don't suppose would be satisfactory to you. If you will go on, and keep this horse another season, and he does not turn out any more satisfactory, we will then be willing to make an exchange with you in accordance with the terms of your guaranty." It is conceded that the Foix horse was delivered by plaintiff to Godwin & Son at the same time, in the same transaction, and on the same terms as the horse sold to defendants. We will not attempt to give all the circumstantial detail bearing on the question, or the explanations of plaintiff, but we are satisfied that the evidence warranted the jury in finding that at the time of the sale of the horse to defendants he was the property of plaintiff, for whom Godwin & Son acted as agents.

2. Against plaintiff's objection and excep tion, one Risum testified that in the summer of 1892 one of the firm of Godwin & Son told him that they were selling for plaintiff certain mares then in their barns at Benson.

This is assigned as error. We are of the opinion that the evidence was competent. When a third person is in the possession of property, his statements as to whom he holds the property for, or as to who is the owner of the property, are not hearsay, but competent evidence of the facts stated. They are a part of the res gestæ, and characterize the possession. Willies v. Farley, 3 Car. & P. 395; Peaceable v. Watson, 4 Taunt. 16; Davies v. Pierce, 2 Term R. 53; Hindly v. Rickarby, 5 Esp. 4; Williams v. Ensign, 4 Conn. 456; Oden v. Stubblefield, 4 Ala. 40; Bliss v. Winston, 1 Ala. 344; Jackson v. Vredenbergh, 1 Johns. 159; Wood, Prac. Ev. 444, § 152. True, the horses to which the statements in question related were not of the lot of seven from which the horse sold to defendants was taken, but of a lot that were received by Godwin & Son during the summer following the spring in which the horse was sold to the defendants. But plaintiff does not concede that Godwin & Son ever sold any horses for him, and the evidence was competent as one of the circumstances in the case going to show the course of dealing between them and plaintiff.

3. The court charged the jury that, even if they found that at the time of the sale to defendants plaintiff was not the owner of the horse, but Godwin & Son were, still, if the jury found that plaintiff had notice of certain enumerated facts when the notes in suit were indorsed to him, then the damages of defendants arising from breach of the warranty accompanying the sale could be set off against him in this action. Whether this part of the court's charge is erroneous, it is not necessary to consider. During the whole trial the paramount issue between the parties was whether or not plaintiff owned the horse, and Godwin & Son were merely his agents when the sale was made to defendants. As before stated, all parties treated the above-quoted special finding submitted to the jury as controlling the general verdict. The court charged the jury that this special finding included the finding that Godwin & Son acted as the agents of plaintiff in making the sale of the horse to defendants, and this was acquiesced in by all parties. The issue thus raised has been decided in favor of defendants, and the decision of that issue is conclusive of the rights of the parties. If that decision must stand, it is immaterial that the court has erred in the manner in which it submitted some other separate and distinct issue to the jury. This disposes of all the questions in the case having any merit, and the order appealed from is affirmed.

SHANNON v. DELWER et al. (Supreme Court of Minnesota. May 6, 1897.)

NEGLIGENCE-DANGEROUS PREMISES. Evidence considered, and held, that it sustains the verdict herein, to the effect that the

defendants were guilty of negligence, which was the proximate cause of the death of plaintiff's intestate, in leaving a ditch made by them in a public alley unguarded and unlighted, and that the deceased was not guilty of contributory negligence.

(Syllabus by the Court.)

Appeal from district court, Washington county; F. M. Crosby, Judge.

Action by Hannah Shannon, administratrix of John Shannon, against Louise Delwer and others. Verdict for plaintiff. From an order refusing a new trial, defendants appeal. Affirmed.

J. N. Searles, for appellants. Arctander & Arctander, for respondent.

START, C. J. Action to recover damages for the death of the plaintiff's husband and intestate, John Shannon, by the alleged negligence of the defendants. Verdict for the plaintiff for $2,000, and the defendants appeal from an order denying their motion for a new trial. The defendants here claim (a) that the verdict is not justified by the evidence, in that it does not show that the negligence of the defendants (conceding that they were negligent) was the proximate cause of the death of Shannon, but that it does conclusively show that he was guilty of contributory negligence; (b) that the trial court erred in refusing to give certain of their requests for instructions to the jury.

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1. The questions whether the negligence of the defendants was the proximate cause of Shannon's death, and whether he was guilty of contributory negligence, are so closely connected that they may be considered together. The evidence was practically undisputed, and tended to establish the facts following: ion alley, in the city of Stillwater, while it was never formally laid out as a public street or alley, had been traveled and used as such for many years prior to Shannon's death, and must, for the purposes of this case, be regarded as a public alley. It is 16 feet wide, and runs north and south, connecting Chestnut and Nelson streets. The defendant Delwer on and prior to Shannon's death owned a lot abutting on the west line of the alley, upon which she had a barn, set even with the line of the alley. At her request the defendant Peterson, shortly before the accident, raised the barn 26 inches, the sill thereof resting upon blocks and jackscrews. In the execution of this work, and as a part thereof, Peterson caused to be dug a ditch 20 inches wide and 26 inches deep in the alley, along and next to the east end of the barn. The ditch was as long as the barn was wide, and along its whole length, and, extending into the alley be yond the ditch for a distance of about 2 feet, a ridge of dirt from 8 to 10 inches high was thrown up in excavating the ditch. on this ridge there were scattered short pieces of 2 by 4 lumber. This was the condition of the ditch, ridge, and alley on the night that Shannon came to his death, October 24, 1895;

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and the defendants so left them unguarded by any fence or other barrier, and unlighted. There were no street lights in the alley, and it was so dark therein that the ditch could not be seen by a person passing it. Shannon was last seen alive between 10 and 11 o'clock p. m. of the night in question, and, as he separated from the person with whom he was then conversing, he said "he would take a short cut and go home," and then walked in the direction of this alley. He was found dead in the ditch about midnight. His feet rested on the bank of the ditch towards the alley, his hips were in the ditch, and his head was wedged under the sill of the barn, and thrown forward so that his chin rested upon his chest. He was facing the alley at a right angle, with his arms by his side. His hat was lying in the ditch near his left side. He was cold when found. His face and neck were congested and black. There was no appearance of a struggle, no marks of violence upon him, and there was nothing to indicate that he came to his death by foul play. The evidence warrants the conclusion that his death was due to suffocation caused by his head being forced and held against his chest by the sill of the barn. The evidence also justifies the finding of the jury that the defendants were guilty of negligence in leaving the ditch unguarded and unlighted. These propositions are not here seriously controverted by the defendants. Their claim is that the position of Shannon's body in the ditch when found tends to negative the idea that he fell into it while passing along the alley, but that it does show that he sat down on the side of the ditch, with his back to the barn, and then slipped or slid backward into the ditch; that the position of the body cannot be accounted for upon any other reasonable theory; hence, there was no evidence to justify the jury in finding that the defendants' negligence was the proximate cause of his death. While there was no direct evidence as to how Shannon came to his death (that is, how he came to be in the ditch in the peculiar position in which he was found), still we are of the opinion that the evidence was sufficient to justify the jury in finding that, at the time he fell into the ditch, he was using the alley for the purpose of lawful travel therein. His act in going in the direction of the alley when last seen alive, accompanied by the declaration that he was going home, supports this conclusion, and, in connection with the other evidence, the inference that the proximate cause of his death was the defendants' negligence in leaving the ditch unguarded. Speculate

as we may as to how he got into the ditch, the fact remains that he did get there, but not by his own voluntary act, or by the wrongful act of another. There is no evidence in the case to suggest suicide or murder. His death resulted by his getting into the ditch, and the reason or cause why he was there may well have been, and probably was, the defendants' negligence in leaving the ditch unguarded.

If it had been fenced, the probabilities are that he would not have fallen or slid into it. In any event, the evidence was such as to make it a question for the jury whether leaving the ditch unguarded and unlighted was the proximate cause of Shannon's death. The plaintiff was not bound to establish such cause by direct evidence. It was sufficient to do so by circumstantial evidence,-the only possible evidence on this point that could be given in this case. Neither was the plaintiff bound to negative contributory negligence on the part of her intestate in using the alley. This brings us to the question of such negligence on his part. There was evidence in the case tending to show that Shannon, for several years, was addicted to the drink habit, and occasionally would get drunk; that for a year before his death he did not drink, until the day of the accident, when he drank three or four times during the afternoon and evening. The claim of the defendants, briefly stated, is "that it is inconceivable that Shannon, while sober, permitted himself to get into the position in which he was found, while it is very probable that he might have done so under the stupefying effect of liquor"; hence contributory negligence, under the admitted circumstances, is the only conclusion possible. The evidence tends to show that Shannon was not intoxicated when last seen alive, and it clearly warrants the finding that he was not. But it must be conceded that his position in the ditch indicates that possibly he may have been so when he fell or slid into it. He may, as suggested by the defendants, have sat down, while intoxicated, on the ridge of the ditch, and slid backward into it, so as to bring his head under the side of the barn; so, too, he may, if sober, have sat down for some legitimate purpose or reason, not knowing of the existence of the ditch, and slid backward into it; or he may have been walking along the alley, and stumbled over the ridge or the pieces of lumber, and, in trying to regain his balance, turned halfway round, and fell backward into the ditch. No conclusive presumption of his negligence can be drawn from the admitted physical facts of the case. If he sat down on the side of the ditch, as claimed, the presumption is that it was for a legal and proper purpose, as the burden was upon the defendants to establish his contributory negligence. The inference to be drawn from his position in the ditch was a question of fact for the jury. We are not justified by the evidence in holding, as a question of law, that he was guilty of contributory negligence. 2. The defendants also assign as error the refusal of the trial court to give their fourth, fifth, and sixth requests for instructions. Each of these requests contained several distinct propositions, some of which did not state the law correctly. There was a general exception to the refusal to give each request. The exception was too general to present any question for review on this appeal. But, this aside, the trial court in its general charge

gave distinctly and emphatically so much of the requests as the defendants were entitled to have given. Order affirmed.

CANTY, J. If the verdict in this case could be sustained only on the hypothesis that, when the deceased was passing along the alley, he stumbled over the obstructions along the side of the ditch, and thereupon fell into the ditch in the position in which he was found, the verdict would, in my opinion, be built on an improbable conjecture, and could not be sustained. There is no reasonable probability that the accident occurred in that manner. The evidence tends to prove that the deceased entered this alley for the purpose of passing along through it, and that he was interrupted in his passage by some intervening cause besides the obstructions on the side of the ditch. What that intervening cause was, is left to conjecture. It might have been a stroke of apoplexy, or it might have been the assault of some unknown person, that caused him to stagger and fall into the position in which his body was found. But, even though there was some such intervening cause, the jury would, in my opinion, be justified in finding that the digging of the ditch and leaving it unguarded was the proximate cause, or at least one of the concurring causes, of the death. The defendants were guilty of negligence in digging the ditch and leaving it unguarded, and may be liable even though there was some such intervening cause. The cases collected in Clark. v. Chambers, 3 Q. B. Div. 327, 17 Alb. Law J. 505, illustrate this principle quite fully.

FRAUD-SURETIES-RELEASE.

1. A creditor not guilty of the fraud may ignore and repudiate a general composition settlement with a debtor, where another creditor, with the debtor's connivance, has secretly obtained an undue advantage and a preference in the settlement, and may recover of the debtor on the original claim.

2. A security given by a surety is voidable on the ground of fraud if there is, with the knowledge or assent of the creditor, such a misrepresentation to or concealment from the surety of the transaction between the creditor and his debtor that, but for the same having taken place, either the suretyship would not have been entered into at all, or, being entered into, the extent of the surety's liability might be thereby increased.

3. H. Bros., being insolvent, entered into a composition agreement with all of their creditors, among whom was P., a corporation, on the basis of 33% per cent. In accordance with the terms of the composition, other creditors were paid the agreed percentage in cash, while P. accepted and received promissory notes for the amount agreed upon,-three in number,-each secured by a surety. As a condition to concurring in the composition, and without the knowledge of the other creditors, P. demanded and received from the debtors a promissory note for

COLLINS, J. After defendants Harlin Bros. had made an assignment for the benefit of their creditors, among whom was plaintiff, a corporation, a composition agreement was made and entered into between the debtors and each of their creditors upon a basis of 33% per cent. of the entire indebtedness. In accordance with this agreement, plaintiff accepted and received the debtors' promissory notes, with sureties, as hereinafter stated, while all other creditors received their money immediately. Defendant Sederberg was one of the creditors signing the composition agreement, and, after it had been signed by all parties thereto, he became a surety upon one of these notes. At maturity this note was taken up by the execution and delivery of another note for the same sum executed and delivered by Harlin Bros. with Sederberg as surety. Defendant Hanson also became a surety upon one of the original notes, and so did defendant Nelson. When these three notes matured, separate actions were brought, and each of these sureties answered. Upon trial by the court without a jury, the court found that, before the composition agreement was signed by any of the creditors, plaintiff, as a condition to its signing the same, and without the knowledge of any of the other creditors of Harlin Bros., and without the knowledge of any of the parties who became sureties, demanded that Harlin Bros. give their written promise to pay plaintiff a larger percentage than was to be paid to the other creditors, and that pursuant to this demand, and before plaintiff signed the composition agreement, and as a condition to said signing, Harlin Bros. acceded to the demand, and thereupon executed and delivered to plaintiff three promissory notes for the balance due, 66% per cent. of plaintiff's entire claim, taking back from the plaintiff its written stipulation to discharge and surrender the note last mentioned upon payment of 25 per cent. of the same. The court also found that neither of these sureties had any knowledge of this secret agreement until long after the note on which Sederberg became surety had

been renewed, as before stated; that each of the sureties signed at the request of Harlin Bros., and upon their representations that they had made a valid and complete composition with all of their creditors on the basis of 33% per cent. of their total indebtedness; and, further, that neither of the sureties would have become such, had they known to the contrary. Later, Harlin Bros. again being insolvent, made another assignment for the benefit of their creditors. The question in this case is, must the secret agreement found by the trial court to have been made between plaintiff creditor and defendant debtors, and to have been executed as a condition for the plaintiff's signature to the composition agreement, by the delivery of the debtors' note for the balance of plaintiff's claim over and above the amount stipulated for in the composition agreement, be held to have discharged the sureties upon the notes given in accordance with the terms of the agreement last mentioned? The answer to this question turns, we think, upon whether or not the composition agreement itself was rendered invalid by the execution of the secret arrangement whereby the plaintiff secured the debtors' note before referred to.

While there are some decisions to the contrary, the weight of authority is clear that a creditor not guilty of the fraud may ignore and repudiate a general composition when another creditor has secretly obtained an undue advantage and a fraudulent preference in the composition, and may recover on the original claim. A large number of cases might be cited in support of this statement of the law, but prominent among them are Doughty v. Savage, 28 Conn. 146; Huntington v. Clark, 39 Conn. 540; Cobb v. Tirrell, 137 Mass. 143; Saul v. Buck, 72 Ga. 254; O'Brien v. Greenebaum, 92 Cal. 104, 28 Pac. 214; Zell Guano Co. v. Emry, 113 N. C. 85, 18 S. E. 89; Bank v. Hoeber, 88 Mo. 37. See, also, Musgat v. Wybro, 33 Wis. 516; Hefter v. Cahn, 73 Ill. 296; and, under the head "Constructive Fraud," 1 Story, Eq. Jur. § 378. The doctrine and the reasons therefor are well stated in Huntington v. Clark, supra, where it is said: "The rule and principle which govern contracts of compromise between an insolvent debtor and his creditors, whether in the form of 'composition deeds,' as they are usually styled, or otherwise, are very thoroughly established and very generally understood. The utmost good faith must be observed by all parties. Any fraud taints and makes void the agreement, however technical or solemn may have been its form or the mode of its execution. This, indeed, may be said of all contracts, but especially of those of this character. The nature of these transactions and the situation of the parties afford at once temptation and opportunity for committing fraud. The debtor, in his statement, is tempted to swell the amount of his liabilities or lessen the amount of his assets, or both, in order to make a settlement at the lowest 71 N.W.-2

figure; and the creditors, though purporting to act together, are found, not rarely, acting individually, and stipulating with the debtor for the payment of their claims, in whole or in part, over and above the amount of their dividend. It scarcely need be said that any misrepresentation or concealment on the part of the insolvent renders his release void; any contract by one creditor for a preference over his fellow creditors is not only void, but, as determined by the later authorities, such contract, in effect, works a forfeiture of the claim to an otherwise honest dividend. The parties necessarily repose special trust and confidence in each other, and, to repress the temptation to abuse or violate that trust and confidence, the rule requiring the observance of entire good faith-the 'uberrima fides' of the civilians-should be rigidly enforced." Nor do any of these authorities discriminate between cases where the preference is secured through an agreement fully executed by payment, and where no payment is made and the secret agreement itself may be adjudged void and nonenforceable. The rule thus laid down is one which commends itself to us. Its adoption will promote fair dealing and strict integrity of action upon the part of creditors when dealing with each other and with unfortunate debtors who are seeking to make a composition settlement upon an honest basis. Such a rule tends to prevent a creditor from decoying others into a composition by fraudulent practices and pretended releases upon what seems to be entire equality of payment, and it will also relieve the debtor from being driven into permitting an undue advantage to be taken over him by reason of his necessities. The doctrine contended for by counsel for plaintiff, that the secret agreement only is vitiated by the fraud, although supported by some authorities, does not commend itself to us. If it should be indorsed, a creditor could secure an undue advantage with impunity, for he would take no risk. If the secret agreement was repudiated by the debtor as tainted with fraud, the creditor would still have the full benefit of the composition agreement, and would simply fail to obtain the additional percentage. We cannot encourage and promote bad business morals by the adoption of such a rule of law.

We have stated that authorities may be found to support plaintiff's contention. Counsel have referred to three cases as sustaining their claim that the composition agreement must be upheld notwithstanding a fraud has been perpetrated by the connivance of the debtor himself with one or more of his creditors. One of these cases (Page v. Carter, 18 N. H. 254) decides that a debtor does not forfeit the benefits of a composition with his creditors by secretly paying or promising to pay one of such creditors a sum of money in order to secure the latter's concurrence to the composition. No authorities are cited in support of the position, and those opposed to it are silently ignored. The reasoning seems