Hull o. Ely.

HULL v. ELY.

N. Y. Supreme Court, First Department; Chambers, August, 1877.

INJUNCTION.-TAX-PAYER'S ACTION AGAINST MUNICIPAL OFFICER TO PREVENT WASTE.

Application to a court of equity for relief, must be made in good faith for the purpose of redressing an appreciable wrong, or to prevent the infliction of a substantial injury upon the plaintiff, or the persons whom he legally represents.

A court of equity will not entertain a bill, where its equitable powers are used as a mere pretense to give jurisdiction. Hence, where a tax-payer brought an action pursuant to 1. L. 1872, c. 161, p. 467, to prevent waste or injury by the sale of certain ferry franchises in the city of New York, but it appeared from the circumstances surrounding the case that the plaintiff was not the real party in interest, nor had brought the action to protect his interests as a tax-payer,-Held, that he had no right to call upon the court for the exercise of its equitable powers to enjoin the sale.

Motion by plaintiff for an injunction.

This action was brought by James C. Hull against Smith Ely, Jr., mayor, &c. of the city of New York, and others. The plaintiff was a resident of the city of New York, and a tax-payer therein, and as such brought this action, pursuant to 1 L. 1872, c. 161, to prevent certain alleged waste or injury to the property of the said city. The said waste consisting in the sale of certain ferry franchises, as was alleged by the plaintiff, in a manner contrary to law.

It was claimed upon the part of the defendants, and was virtually admitted by the plaintiff, that this action was not brought for the protection of the plaintiff and the other tax-payers of the city of New York; but that it had been instituted at the instigation and expense of the parties then using and enjoying the benefits of the ferry franchises, the sale of which it

Hull v. Ely.

was sought to enjoin. In fact, one of the counsel for the plaintiff upon the argument of the motion spoke of the ferry companies, whom he represented.

John M. Scribner, Jr., and Joseph Larocque (Shipman, Barlow, Larocque & Macfarland, attorneys), for plaintiff.

George P. Andrews (William C. Whitney, attorney), for defendant.

VAN BRUNT, J.-[After stating the facts.]—One of the first elements of an application to a court of equity is, that the application is made in good faith for the purpose of redressing an appreciable wrong, or to prevent the infliction of a substantial injury upon the plaintiff or the persons whom he may be said to legally represent.

In other words, the bill must be filed in good faith, and the court will not entertain a bill where the equitable powers of the court are used as a mere pretense to give jurisdiction (Story's Eq. Jurisp. § 74).

But it is claimed upon the part of the plaintiff, that he being a tax-payer, the act of 1872 gives him the absolute right to maintain this action. The provision of this act is, that actions may be prosecuted by a tax-payer to prevent waste or injury to the property of the corporation; hence, it is apparent from the language of the statute, that if such is not the object of the action, viz.: to prevent waste or injury to the property of the corporation, no power is conferred upon the court to entertain the suit. The evident intent of the act was to give a tax-payer a standing in court for the protection of the interests of the tax-payers, to prevent waste or injury to the property of the corporation, but not the furtherance of the schemes of parties who have no right, either legal or equitable, to claim the protection of the court.

It is apparent from the circumstances surrounding

Whitney v. Welch.

this case, that the plaintiff has not commenced the present action to protect his interests as a tax-payer in the city of New York, but that the real parties in interest are the persons now using the ferry franchises as above mentioned, and consequently, he has no right to call upon the court for this exercise of its equitable powers.

The motion to continue the injunction must be denied, with costs, and the temporary injunction dissolved.

WHITNEY v. WELCH.

N. Y. Supreme Court, First Department; Chambers, October, 1877.

EVIDENCE. -NOTICE. - NON-RESIDENT JUDGMENT DEBTOR.-RECEIVER.-SUPPLEMENTARY PROCEEDINGS.-SECTION 294 of CODE OF PRO.-SECTION 714 or CODE OF CIV. Pro.

In analogy to section 714 of the Code of Civil Procedure a non-resident judgment debtor is entitled to notice of application for appointment of a receiver in proceedings under section 294 of the Code of Procedure.

In such a case the plaintiff can take an order to show cause with a proper provision as to the mode of service, upon a disclosure of the defendant's residence.

As a matter of discretion under section 294 of the Code of Procedure the defendant should have some notice.

Application for receiver in supplementary proceedings under section 204, Code of Procedure.

Charles M. Whitney obtained a judgment against Solomon Welch and William Welch, on August 13, 1877, for $1,661.04. The defendants were non-residents, and it did not appear in the moving papers whether they had appeared in the action or not. Execution

Whitney v. Welch.

having been issued and returned wholly unsatisfied, one John H. Platt, assignee in bankruptcy of the firm of William Mills, surviving partner of the firm of Thomas H. Bate & Co., was examined as a third party in supplementary proceedings. On this examination it was disclosed that the defendants were creditors to a large amount of the bankrupt estate, but had not proved their claim, although notices of the bankruptcy had been sent to them and the assignee had funds in his hands belonging to the bankrupt estate amounting to several hundred dollars, and had declared a dividend.

Upon the judgment and execution, the said supplementary proceedings, and also an affidavit of the plaintiff, stating that the defendants did not reside in the United States, and since the commencement of this action had transferred their interest in a certain mortgage for $6,000, upon property in Kings county, to one Francis A. Osbourn, who resided in Philadelphia, the plaintiff's attorney moved ex parte for the appointment of a receiver of all the debts, property, equitable interests, &c., of the judgment debtors.

Francis Lawton, Jr., for motion urged:-I. That a receiver could be appointed in proceedings, under section 294, and cited sections 292-299, of Code of Pro. Durand v. Hankerson, 39 N. Y. 287, 206; West Side Bank v. Pugsley, 47 N. Y. 368, 372; Barnard v. Kobbe, 54 N. Y. 516; Rodman v. Henry, 17 N. Y. 482, 484.

:

II. That section 204 left the matter of notice to the discretion of the judge, and that a receiver could be appointed in proceedings under that section, ex parte, and without notice to the judgment debtor (sections 244, 208, of Code of Pro.; Gibson v. Haggerty, 37 N. Y. 555).

BARRETT, J.-The papers show that the defendants

Hazard v. Wells.

do not reside in the United States, but that is all. The defendants are entitled to notice (see section 714, Code of Civ. Pro.). The plaintiff may take an order to show cause, with a proper provision as to the mode of service. This provision can only be made upon a disclosure of the defendants' residence. Even as a matter of discretion, under section 294 Code of Pro., they should have some notice.

HAZARD v. WELLS.

Superior Court of Buffalo; General Term, October,

A creditor who receives from his debtor the notes or bills of third parties, as security for his debt, is bound to the excercise of such diligence as is required of a bailee for hire, and is liable to the debtor for any loss or deterioration in the value of the security which may occur, whether through neglect to fix the liability of the parties to such paper, by due demand of payment and notice of non-payment, or to enforce the collection of the paper with proper diligence.*

Where a bank accepted from a debtor the promissory note of its president to the debtor, as collateral security for his debt, and at that time and for several years subsequent the president, the maker of the note held as collateral, was solvent, and it could at any time have been casily collected, and the debtor, the payee of the note, repeatedly urged the president of the bank to require payment of the note, but he neglected so to do, and meanwhile became insolvent and died, and the note became worthless,-IIeld, that the bank was guilty of such negligence that it became liable to make good to the debtor the amount of the note as damages therefor.

* Compare Cory v. Leonard, 56 N. Y. 494; affi'g 1 Supreme Ct. (T. & C.) 183; Lewis v. Mott, 36 N. Y. 395; Giblin v. McMullen, L. R. 2 P. C. 317; United Service Co. Case, L. R. 6 Ch. 212.