Buchanan v. Morrell — 14 N.Y. Super. Ct. 601

Majority

p. 601

Buchanan & Kilmer, Plaintiffs and Appellants, v. Morrell, O’Hara, and Campbell & Smith, Respondents.

Headnote

In all actions, whether of contract or tort, whenever a plaintiff calls one of several defendants, and by examining him gives evidence tending to establish a canse of action against all jointly, and by establishing which all may be charged with the same amount for which either, on the same facts, would be liable if sued alone, the other defendants may be examined, as witnesses in their own behalf, to the same cause of action.

p. 602

It will make no difference, that the Court may be competent in such action and on such facts, in the exercise of its equitable jurisdiction, to charge the defendants so offering themselves in then’ own behalf to pay a part only of the whole sum claimed, or if charged with the whole, to direct that they be so charged only in the event that all cannot be collected of their co-defendant, and to order that they pay only so much as may not be collected by execution against him.

■Defendants may be “united in interest,” in respect to a matter involved in the issues, within the meaning of those words as used in § 391 of the Code, though not sued as partners or joint-contractors, and though sued upon a cause of action on which a separate suit against each could be maintained.

(Before Bosworth and Woodruff, J.J.)

Argued, June 8;

decided, Oct. 17, 1857.

This action comes before the Court on an appeal by the plaintiffs from a judgment in favor of the defendants. The only questions presented by the appeal relate to decisions of the Court at the trial, permitting the defendants Smith & O'Hara to be examined as witnesses in their own behalf. The action was tried in October, 1856, before Bosworth, J., without a jury.

The plaintiffs, before commencing this action, had recovered a judgment against the defendant Morrell, and had purchased other judgments recovered against him by third persons, on all of which executions had been returned unsatisfied.

This action was brought by them as such creditors, to procure transfers of property made by Morrell to O’Hara, to be set aside as fraudulent and void, and for other relief, as hereinafter stated. The complaint states, the recovery of the judgments, the issuing of executions thereon, and the return of the same unsatisfied, and the assignment to the plaintiffs, of those recovered by other persons as plaintiffs.

That Morrell was a manufacturer of blank books and stationery in the city of Hew York, having a store containing blank books and stationery, worth from $10,000 to $12,000, and machinery and stock in his factory worth about $14,000, the machinery being subject to a chattel mortgage for $5,500, held by John Campbell & Co. (a firm composed of the defendants Campbell & Smith), and being worth some $1500 less than the mortgage upon it.

That after Morrell contracted the debts on which the judgments were recovered, and in or about October, 1852, he failed in business and stopped payment.

p. 603

In anticipation of and shortly previous to such failure, “he conspired with the defendants Smith & O’Hara, to dispose of his property in fraud of his creditors, and to conceal or cover up the same so that his creditors could not reach it, and” * * “in

pursuance of this scheme, and with intent to delay and defraud the said creditors, the said Smith and O’Hara mutually arranged and agreed, that after the transfer should be made to O’Hara, as hereinafter mentioned,” the chattel mortgage should be foreclosed and the property sold and bid in by Smith; and O’Hara should pay Smith the difference between the price at which the property sold and the amount of the mortgage.

“ The defendants Smith, O’Hara, and Morrell, further arranged and agreed that all the property in the store and factory should be transferred and delivered to O’Hara, at the nominal price of $8,000, which the said O’Hara should pay in notes, and which notes Morrell should use in effecting favorable compromises with his creditors.” * * “ It was further arranged and agreed between the defendants, that the defendant O’Hara should go on, in his own name, with the business previously conducted by Morrell, and should employ Morrell as managing agent, at a nominal salary of $1,000 a year; that the business should be thus continued for two years, to give Morrell an opportunity to buy up at a low rate the claims against him held by his creditors, and at the end of that time O’Hara should pay over and re-deliver to Morrell all the residue of the property and effects, and the proceeds and profits thereof, after deducting $4,000 a year for his own compensation, and the amount of the notes so given by him as aforesaid;” and “if Morrell could procure a purchaser of said property at a fair price, the said O’Hara should sell the same to said purchaser in his own name, and after making the deductions above mentioned, should pay over the balance to said Morrell.”

“In pursuance of this arrangement,” Smith foreclosed the mortgage and bought the property for $4,000, and immediately transferred it to O'Hara, who paid Smith $5,500 therefor, and Smith paid over this money to said firm of John Campbell & Co.

“Also, in pursuance of said arrangement,” the other property of Morrell in the factory, and that in the store, were transferred

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by Morrell to O’Hara for said sum of $8,000, paid in notes as aforesaid, who continued in the business, employing Morrell as managing agent, and the said O’Hara has made a large profit thereon, at least $5,000 a year; and the said O’Hara still continues in said business, and in possession of the said goods and property, or the proceeds and profits thereof.

Wherefore, the plaintiffs demanded judgment, that the transfer made by Morrell to O’Hara be adjudged fraudulent and void, that a receiver be appointed to tahe-possession of the said property, and the proceeds and profits thereof '; that O’Hara account to the receiver for the profits of said stock and manufactory, and that Campbell and Smith be compelled to pay to the Receiver the $1,500 which Morrell had paid to Smith,- and that the receiver apply the property he might receive, to pay the said judgments held by the plaintiffs.

Campbell and Smith answered jointly, and O’Hara put in a separate answer, denying the conspiracy and all fraud. Morrell did not answer the complaint.

On the trial the plaintiffs examined Morrell as a witness in their behalf, and be gave evidence tending to establish all the allegations of the complaint, except as to the recovery of the judgments, the issuing of executions thereon, and. the return of the same unsatisfied. And he also “ gave evidence tending to prove that the transfers of property alleged in the complaint to have been made by Morrell to O’Hara were made in .pursuance of a preconcerted scheme between Morrell and the defendants Smith and O’Hara, thereby to defraud the creditors of Morrell, and hinder and delay them in the collection from him of their just claims and demands against him.”

“After the plaintiffs had rested their case, the defendant, Augustine Smith, offered himself as a witness, whereupon the plaintiffs’ counsel enquired, in whose behalf he was offered? To this, it was answered, that he was offered for the defendants generally, including Augustine Smith, and excluding the defendant Morrell. The plaintiffs’ counsel objected to said Smith being examined in his own behalf, and also to his being examined for the defendants generally.”

The Court overruled each of said objections, and to such deci- ’ sion the plaintiffs’ counsel then and there duly excepted.

p. 605

O’Hara was also offered, when the same proceedings were had as when Smith was offered, and the same decision was made and exception taken.

Smith, and O’Hara, were severally sworn and examined, on behalf of all the defendants, including himself, and excluding the defendant Morrell.

The Court gave judgment for. the defendants, O’Hara, Campbell, and. Smith, dismissing the complaint as to them. From that judgment the plaintiffs appealed to the General Term.

D. D. Field, for appellants,

Insisted that, the defendants, O’Hara and Smith, were not competent witnesses for themselves. They were not united in interest with Morrell so as to make them competent, because he had been examined.

The test, under section 397 of the Code, is this: Could Morrell have been called by his co-defendant as a witness for them, or could they have been called for him? If this could have been done then he is not “ united in interest” with them. That they could have been called for each other is clear, under section 397, 10 Barb. 112 ; 1 Kern. 131; 3 Kern. 266.

The expression “ united in interest” is used in section 119,157 and 306. Under section 119, it is clear that if either Morrell, O’Hara or Smith, had commenced an action in respect to the assigned property, he need not have joined the others with him. Under section 156, it is clear that Morrell could not have verified an answer for O’Hara and Smith. And under section 306, it is clear that the Court could give costs against Morrell, and for O’Hara and Smith. Indeed that was done in this very judgment.

Indeed, the union of interest intended by section 397, is such as must necessarily make the judgment a joint one, whatever it be.

C. O' Conor, for respondents,

made and argued the following points.

First Point.—The 397th section of the Code covers this case. The part in italics was passed in 1849, and sections 390 and 391 are original sections. The case of Comstock v. Doc & Roe, 2 Code

p. 606

Rep. 140 , shows that it is not whether a party be a joint contractor or joint conspirator, that allows him to be a witness, but the fact that he is sued as such.

Second Point.—The exception rests upon a criticism upon the words, “united in interest.” This criticism will not avail: because—■

1. The word conspiracy denotes being united in interest, and a joint design, 18 Wendell, 343.

2. Morrell did swear to a joint fraud, a joint illegal act; - and before the Code, to have permitted such testimony would have been against fundamental principles, 19 Wendell, 293.

3. It being clear that the defendants were charged to have been united in a fraud; this is being united in interest.

See Webster. Definitions:

To interest—means, to concern, to affect.

Interest (noun)—concern.

Interested—made a sharer; affected; concerned in a cause, or in consequences.

Third Point.—The Legislature never could have intended to allow a defendant, to conspire with the plaintiffs to charge himself and selected co-defendants with frauds, and prevent such co-defendants from denying such a charge. If they did, there is no protection under the Code for life, liberty or property.

Whenever one, of several defendants, “ who are joint contractors, or are united in interest, is examined by the adverse party,” the other of such defendants may offer himself as a witness to the same cause of action or defence, and shall be so received. (Code, § 397, 390.)

Were the defendants, Morrell, O’Hara, and Smith, “ united in interest,” within the meaning of those words as used in § 397 of the Code, as they stood before the Court when O’Hara and Smith were permitted to be sworn ?

It is quite clear that those words do not denote and include those defendants only, against all of whom, a plaintiff, prior to the Code, must have recovered, or recover against none.

Uor do they designate and include only such defendants as are jointly liable on contract. In actions of assault and battery, trespass, trover, and other actions of tort, which in their nature

p. 607

may be joint or several, and which, before the Code, might have been brought against each wrong-doer separately, or against all jointly, and in which, if several were joined as defendants, the plaintiff might recover against some, although he failed to recover against others; one defendant cannot be a witness for his co-defendant, after evidence has been given by the plaintiff, which is sufficient to charge all as joint wrong-doers; to prove any fact, which, if true, and if proved by competent testimony, would exonerate all from liability, or which would mitigate damages.

The reason is, that as to such matter he is jointly interested with his co-defendants, and all being joint wrong-doers when sufficient evidence has been given to establish a joint liability; whatever damages the plaintiff has sustained, he is entitled to recover against all. In such an action, after proof of such facts, there cannot be separate verdicts, in favor of the plaintiff, against the different defendants. (Dean v. Thornton and Dutton, 3 Kern. 266.)

This case decides, that if the plaintiff had proved by witnesses, not parties to the record, that Morrell, O’Hara, and Smith, had concocted and agreed between themselves upon a scheme by which the property of Morrell should be transferred to one of their number for the purpose of defrauding Morrell’s creditors, and in pursuance and execution of such scheme, and with that intent it had been so disposed of by Morrell; neither of such defendants could have been a witness for the others to disprove such cause of action. Such evidence, if given by a third person, would,as effectually exonerate all, as either, and as to such matter, they would be jointly interested. (Beal v. Finch, 1 Kern. 135-6.)

When a combination among several to commit, a wrong is established, each is responsible for the acts of the other, which are done in execution of, and pursuant to the agreement or scheme, in which they united to do the wrong.

It can make no difference, that the pecuniary interest of Morrell to prove the fraud, was greater than his interest to disprove the conspiracy.

This proposition may be illustrate4 by a variety of cases. One will suffice.

p. 608

A plaintiff sues A. B. and C. D. on a note bearing the signature, “ A. B. & Co.,” and signed in the firm’s name by A. B., alleging that the defendants were partners doing business under the name of A. B. & Co., and that they made the note in their co-partnership name.

In such an action, before the Code, the plaintiff must have recovered against both defendants or neither.

On the trial, the plaintiff may now call A. B., and prove by him that C. t). was his partner when the note was given, and that it was given in the due course of the partnership business. In such a case, C. D. would be clearly admissible in his own behalf to disprove the cause of action, which A. B. had been examined to establish.

And yet in such a case, A. B.’s pecuniary interest would be in favor of the plaintiff, because by establishing the fact that C. D. was his partner, he would be benefited by subjecting him to a liability to pay the debt.

And yet, in such an action, if C. D. had put in an answer, under which the evidence was admissible, A. B. might be called by him to prove that C. D. was a minor, or a married woman, and therefore not liable at all, although an actual joint contractor.

Brumskill v. James & Eaglesum, 1 Kern. 294; Marquat v. Marquat, 2 Kern. 336: This shows, that whether the action be contract or tort, the pleadings alone, and the cause of action which they state, are not the exclusive tests by which to determine whether several defendants are united in interest, in respect to matters in relation to which the testimony of some oj;None of them has been given or may be offered.

This Court has decided, at General Term, that in an action against the members of a firm, upon a guaranty of the debt of a third person in the firm’s name, where one defendant plead that it was signed by the other partner without his knowledge or consent, and in a matter not relating to the partnership business, he might call the partner who signed the firm’s name, to prove the facts, and that, the proof being satisfactory, the defendant so pleading was entitled to a verdict, and the plaintiff could have a verdict and judgment against the other defendant. (Claflin v. Butterly, 5 Duer, 237 .)

p. 609

But such an action as the pleadings state it, and the plaintiff seeks to enforce it, is one in which the defendants are joint contractors, or partners.

Hence it is obvious that it does not depend solely upon the nature of the action, nor upon the fact that several defendants are sued as joint contractors, or joint wrong-doers, whether one can be called as a witness for the other, or in other words, whether they are united ^in interest—as to the matter, in respect to which, one may be called to testify for the other.

In all actions, whether of contract or tort, one defendant may be a witness for his co-defendant, to prove that the latter was never hable, when that proof consists of facts which, though true, could be of no benefit to the testifying defendant, when proved by witnesses other than himself.

So in all actions, whether of contract or tort, there may be matters of defence which neither defendant is competent to prove on behalf of the other.

But in all actions, whether they be actions of contract or tort, whenever a plaintiff calls a defendant, and, by examining him, gives evidence tending to establish a cause of action against all jointly, and by establishing which all may be charged with the whole amount for which either would be liable on the same facts, if sued alone, the other defendants may be examined as witnesses to the same cause of action.

That disproving that cause of action will wholly defeat the right of the plaintiff to recover against either defendant, is no answer to the right of such a co-defendant to offer himself, and to be received. Such a result will follow in all cases in which neither defendant was guilty of a fraud, unless all had conspired to commit one.

We think the defendants Smith and O’Hara were “united in interest” with Morrell, within the meaning of those words, as" used in § 397 of the Code, as to the cause of action, which Morrell had been examined to prove, and which the evidence given by him tended to establish, and that, in consequence of his having been so examined by the plaintiffs, they severally had the right to offer themselves as witness to the same cause of action, and to be examined accordingly.

The judgment must be affirmed.

Cases cited

Munson v. Hegeman 10 Barb. 112 N.Y. Sup. Ct. p. 605