Εικόνες σελίδας
PDF
Ηλεκτρ. έκδοση

On this state of facts the parties have agreed to submit to this court the following question:

"Whether or not at the time of the tender by the plaintiff herein of the deed to the defendant herein of the premises described in this submission pursuant to the contract existing between the said plaintiff and defendant for the sale of said premises, which contract is also referred to in said submission, the plaintiff had a good and marketable title to said premises free and clear of the incumbrances mentioned and referred to in Exhibit B annexed to this submission" —and have stipulated for the appropriate judgment to be entered for plaintiff or defendant as an answer to said question shall require. The incumbrances referred to as contained in Exhibit B are the abovementioned mortgages to Lee H. Smith and the Colonial Trust Company, and the several judgments against the Demarest Pattern Company entered after the filing of the notice of pendency of action on October 27, 1904.

The provision for giving notice of the pendency of an action affecting real estate by filing a lis pendens is wholly of statutory creation. Formerly, both at common law and in equity, in case of an alienation pending a real action, the alienee took subject to the judgment which might be rendered therein (Hailey v. Ano., 136 N. Y. 569–574, 32 N. E. 1068, 32 Am. St. Rep. 764), and it was not until 1823. that this rule was changed by statute and provision made for giving notice of the pendency of such an action by filing a lis pendens. The subject is now regulated by sections 1670-1672 of the Code of Civil Procedure, which provide as follows: “Sec. 1670. In an action brought to recover a judgment affecting the title to

real property, if the complaint is verified, the plaintiff may, when be files his complaint or at any time afterwards before final judgment, file in the clerk's office of each county where the property is situated, a notice of the pendency of the action, stating the names of the parties and the object of the action, and containing a brief description of the property in that county af. fected thereby.

“Sec. 1071. Where a notice of the rendency of an action may be filed, as prescribed in the last section, the pendency of the action is constructive notice, from the time of so filing the notice only, to a purchaser or incumbrancer of the property affected thereby, from or against a defendant with respect to whom the notice is directed to be indexed, as prescribed in the next section. A person whose conveyance or incumbrance is subsequently executed, or subsequently recorded, is bound by all proceedings taken in the action, after the filing of the notice, to the same extent as if he was a party to the action.

“Sec. 1672. Each county clerk with whom such a notice is filed must immediately record it in a book kept in his office for that purpose, and index it to the name of each defendant, specified in a direction appended at the foot of the notice and subscribed by the attorney for the plaintiff.”

The declared object of these sections is to give constructive notice of the pendency of the action to a purchaser or incumbrancer of the property, who becomes such subsequent to the filing of the notice, from or against a defendant in the action with respect to whom the notice is directed to be indexed. The primary purpose of the notice is to indicate the parties defendant so that an alienee from a defendant may upon proper inquiry ascertain whether or not a real action has been

shall contain the names of the parties, and a statement of the object of the action, and the direction for indexing by the clerk is that it shall indicate the names of each defendant specified in a direction appended at the foot of the notice. The requirement as to description of the property affected is that the notice shall contain a “brief” description, which would be satisfied by something less precise and formal than that usually contained in deeds and mortgages, and will be satisfied by a description which indicates with sufficient certainty the property respecting which the action is brought.

So far as concerns the names of the defendants, the notice drawn in question upon this submission is unimpeachable, and there is no question as to the proper indexing. It was incumbent upon any person proposing to take a conveyance or incumbrance from any defendant to examine the index kept by the clerk. If he had done so he would have been apprised that an action had been begun against that defendant to foreclose a mortgage which was correctly described, as to the date, the names of the parties, and the record. Turning to the description of the property to be affected by the judgment, he would have found that, literally read, it contained an impossible description of a plot of land commencing on the southerly side of Grand street, an ancient and well-known public street, and then extended northerly so that for the width of the street it lay within and covered the bed of the street itself. Not only so, but the dimensions of the lot could not be made to fit one which began on the southerly side of Grand street and extended northerly. The boundaries of the lot began at the southerly side of Grand street and ran north 100 feet, a considerable part of which would be taken up by the width of Grand street. It then ran westerly and parallel with Grand street 25 feet, and thence southerly 100 feet, not to the southerly side of Grand street, but to Grand street. Such a description would indicate a lot of equal longitudinal dimensions in feet, but of very unequal dimensions in fact. That some mistake had been made in the description of the lot would be apparent to any one who examined the notice, but there was still enough to apprise him that an action had been commenced, that it affected land on Grand street, and who were the parties defendant in the action. It would also apprise him that the action was one to foreclose a specified mortgage, upon reference to which he could readily ascertain with accuracy the property to be affected.

The case is not different in principle from that presented in Brookman v. Kurzman, 94 N. Y. 272, wherein the starting point was described as being "on the westerly side of Second avenue distant 50 feet and 10 inches from the southeasterly corner of Second avenue and 111th street"; but the other parts of the description showed clearly that the corner meant was the southwesterly one. The Court of Appeals found no difficulty in construing the deed according to its intended, rather than to its literal, reading, and, so construing it, compelled an objecting purchaser to accept the title. A very different question would be presented if the description did not bear upon its face evidence of a mistake sufficient to put an inquirer upon his guard. If two lots had been mortgaged, and but one described, or if this description beginning at a point on the southerly side of Grand street had ex

tended the lot southerly, the description would have been perfect upon its face, and would contain nothing to warn a searcher that the wrong lot had been described, and he would be under no obligation to search further. It is this perfectly and manifest clerical error in this present case that saves the notice as a valid lis pendens.

The precise question here presented does not appear to have been judicially passed upon, but, considering the accurate details which the notice did give, and the perfectly manifest error in the description, which was of itself sufficient to put a purchaser upon further inquiry, we consider that the notice fell within the fair intention of the statute, and was sufficient to give subsequent assignees of the second mortgage and the mortgagee named in the $60,000 mortgage notice that an action for the foreclosure of the first mortgage had been commenced, and that any rights they might acquire would be subordinate to the judgment in such action. So far as subsequent judgment creditors were concerned, it made no difference whether the lis pendens was sufficient or not. If we deemed the question at all doubtful, we should hesitate to compel the purchaser to accept a title which might be made the subject of attack. We do not so consider it, however.

There must be judgment for the plaintiff in accordance with the terms of the submission. All concur.

MCCALLUM V. CORN PRODUCTS CO.

(Supreme Court, Appellate Division, First Department.

April 8, 1909.)

1. TAXATION ($ 119*)–CORPORATIONS IN PROGRESS OF REORGANIZATION-STOCK

HELD BY HOLDING COMPANY.

A part of the stock of corporations held by a holding company, pursuant to a plan of reorganization of the corporations, which is in progress, whereby the holding company is to acquire their entire stock is as much subject to a tax as is stock held by any other owner.

[Ed. Note.—For other cases, see Taxation, Cent. Dig. $ 215; Dec. Dig.

$ 119.*) 2. CONTRACTS ($ 280*)-PERFORMANCE OF AGREEMENT TO OBTAIN REDUCTION OF

Taxes.

A contract to secure a reduction in the assessment of corporate stock necessarily contemplates a reduction in the amount of the taxes erroneously assessed, or it is otherwise invalid, and hence it is not performed by obtaining a reduction, which defrauds the state of taxes to which it is entitled, and may be collected, though reduced amounts have been paid, and no proceedings are pending to correct the assessment and collect the further amount payable.

[Ed. Note.-For other cases, see Contracts, Cent. Dig. $ 1249; Dec. Dig.

$ 280.*] 3. APPEAL AND ERROR ($ 927*)—REVIEW-DIRECTED VERDICT.

On review of a directed verdict, the losing party is entitled to the most favorable inferences that can be drawn from the evidence, and contested facts must be deemed established in his favor.

(Ed. Note.--For other cases, see Appeal and Error, Cent. Dig. $$ 3748, 4024 : Dec. Dig. $ 927.*]

4. NOTICE ($ 5*)–CONSTRUCTIVE NOTICE.

Ignorance in law cannot exist when a party knowingly has at his command means of information which will dispel the same.

[Ed. Note.-For other cases, see Notice, Cent. Dig. $ 3; Dec. Dig. & 5.*] 5. CONTRACTS ($ 131*) – INVALIDITY OF CONTRACT TO SECURE REDUCTION OF

TAXES.

If the intention of the parties to a contract to secure a reduction of taxes is to make use of an acquaintance with public officers for the purpose of illegitimately influencing them, the contract is void.

(Ed. Note.-For other cases, see Contracts, Cent. Dig. $ 606; Dec. Dig. § 131.*) 6. CONTRACTS (8 141*)-INVALIDITY OF CONTRACT—EVIDENCE.

Evidence held to conclusively show that a party undertook to and did secure by improper methods a reduction of taxes against corporations to which they were not entitled, and so was not entitled to compensation therefor.

[Ed. Note.—For other cases, see Contracts, Cent. Dig. $ 1785; Dec. Dig. $ 141.*] Appeal from Trial Term, New York County.

Action by David McCallum against the Corn Products Company. From a judgment for defendant, and from an order denying a new trial, plaintiff appeals. Affirmed. · Argued before PATTERSON, P. J., and INGRAHAM, McLAUGHLIN, LAUGHLIN, and SCOTT, JJ.

William King Hall, for appellant.
Harold Otis, for respondent.

MCLAUGHLIN, J. The defendant is a foreign corporation organized under the laws of the state of New Jersey. In and prior to the year 1903, a reorganization was in progress whereby the defendant, which was what is called a "holding company," was acquiring the stock of five other New Jersey corporations. According to the plan of reorganization, holders of the stock of the other companies might surrender their stock to the bankers in charge of the reorganization and receive in exchange stock of the defendant. On January 1, 1903, the defendant had acquired, owned, and then held about nine-tenths of the aggregate stock of the five subsidiary or operating companies; the other one-tenth still being held by the independent holders, and this was referred to, at least by the bankers in charge of the plan, as "outstanding stock.”

The plaintiff was a salesman for one of the subsidiary companies and brings this action to recover upon an alleged contract with the defendant by which he undertook to secure for it a reduction of the amounts of the annual franchise taxes payable to the state of New Jersey by the five subsidiary companies referred to, in consideration of which defendant agreed to pay him one-half the amount of any reduction obtained for the year 1903 and one-third of such reduction and of any additional reductions for the years 1904 and 1905. The complaint alleges that through the plaintiff's efforts the amount of such taxes for the year 1903 was reduced from $11,731.34 to $3,031.85, and for the years 1904 and 1905 to $1,576.95—a reduction of $8,702.49 for *For other cases see same topic & $ NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

the year 1903, and $10,157.39 for each of the years 1904 and 1905. The judgment demanded is for one-half the former amount and onethird the amount last named for each year, with interest.

It seems that the statutes of the state of New Jersey require corporations organized in that state to file with the Secretary of State annual reports stating the amount of their capital stock issued and outstanding on the 1st of the preceding January, and the annual franchise taxes referred to are based upon a percentage of such stock. At the trial it appeared that the five subsidiary companies had duly filed such reports for the year 1903, in which the amounts of their capital stock issued and outstanding were correctly stated, and that taxes had been assessed accordingly, amounting in the aggregate, as already stated, to over $11,000. These reports were thereafter amended so as to state only the amount of the "outstanding stock"; that is, the stock not held by the defendant in this action, and the taxes were reassessed and paid, during the three years in question, upon such "outstanding stock” only, which was about one-tenth of the aggregate stock actually outstanding. At the close of the case the court directed a verdict for the defendant upon the ground that the fact was uncontradicted that the reductions had been obtained through a fraud perpetrated upon the state of New Jersey, and from the judgment entered thereon and an order denying a motion for a new trial, plaintiff appeals.

It cannot be seriously questioned that stock of any one of the five subsidiary companies held by the defendant at the time application was made for a reduction of the assessment was issued and outstanding and as much subject to a tax as was stock held by any other owner. Nor can it be seriously questioned upon the facts set out in the record that the reductions which form the basis of plaintiff's claim were secured by falsely representing to the state board of assessors of New Jersey, under whose direction the assessments were made, that the stock which was in fact held and owned by the defendant had been canceled and retired, and that the only stock issued and outstanding was that held by independent owners other than the defendant. The result of the method by which the reduction of the assessments was accomplished was unquestionably, as stated by the trial court in directing the verdict, to defraud the state of New Jersey of taxes to the amount of the reductions. It seems to me therefore that the plaintiff, even assuming that he was personally innocent in the matter, failed to establish the cause of action alleged in the complaint, and, while the defendant under such circumstances might be liable for the value of the services rendered by him, it cannot be held liable on the contract, which had not been performed. That contract must have contemplated—otherwise it was invalid—a reduction in the amount of the taxes which had been erroneously assessed. The plaintiff failed to prove there had been an erroneous assessment and that a valid reduction was obtained. It is true he did prove that the companies paid only the reduced amounts, that there were no unpaid taxes charged against any of them for the years in question, and that at the time of the trial no proceedings were pending to correct the assessments and collect any

« ΠροηγούμενηΣυνέχεια »