New York Law Review

Author: The New York Law Review

  • Amoskeag Savings Bank v. Purdy, 196 U.S. 42 (1904): U.S. Supreme Court Clarifies Grounds for Equitable Intervention in State Taxation

    Amoskeag Savings Bank v. Purdy, 196 U.S. 42 (1904)

    A federal court will not interfere with a state’s tax assessment unless there is a clear showing of fraud, discrimination, or a violation of constitutional rights; mere errors or inequalities in valuation are insufficient grounds for equitable intervention.

    Summary

    Amoskeag Savings Bank sued tax assessors in federal court, alleging that the assessors systematically undervalued real estate while assessing bank stock at full value, resulting in unequal taxation. The Supreme Court affirmed the dismissal of the suit, holding that equitable intervention was not warranted. The Court reasoned that absent a showing of fraudulent intent or a violation of federal law, mere inequalities or errors in judgment by state tax officials do not justify federal court interference with state tax administration. The Court emphasized principles of comity and the reluctance of federal courts to disrupt state fiscal affairs.

    Facts

    Amoskeag Savings Bank, acting on behalf of its shareholders, filed suit to prevent the collection of taxes assessed on its stock. The bank alleged that the tax assessors systematically undervalued real estate in the city at approximately 60% of its actual value, while assessing the bank’s stock at its full value. The bank argued this disparity resulted in an unfair and unequal tax burden on its shareholders. The bank sought an injunction to restrain the collection of the tax. The bank argued that this violated the state law requiring assessment at “full and true value.”

    Procedural History

    The case originated in a lower federal court. The lower court dismissed the bank’s suit. The Supreme Court affirmed the lower court’s decision, holding that the bank had not presented sufficient grounds to justify equitable intervention by a federal court in state tax matters.

    Issue(s)

    Whether a federal court can enjoin the collection of state taxes based on allegations of unequal valuation of property, absent a showing of fraud, intentional discrimination, or a violation of federal constitutional rights.

    Holding

    No, because mere errors or inequalities in valuation by state tax officials, without evidence of fraud, intentional discrimination, or violation of federal constitutional rights, do not justify equitable intervention by a federal court to enjoin the collection of state taxes.

    Court’s Reasoning

    The Supreme Court emphasized that federal courts should be hesitant to interfere with a state’s fiscal operations. The Court acknowledged the principle that taxation should be equal, but recognized that perfect equality is often unattainable. The Court noted the absence of any allegation of fraudulent intent or bad faith on the part of the assessors. The Court distinguished the case from prior cases where equitable relief was granted, noting that those cases involved intentional discrimination against a class of persons or species of property, or violations of federal law, like the National Banking Act. The Court stated, “Equity will go far to afford relief in cases of mistake; or for the prevention of fraud; or to secure to the citizen the equal protection of the laws; but it is not its province to interfere with the collection of a tax, in a case where the grievance assigned does not relate to some question of fraud, or of illegal discrimination, or classification.” The Court indicated that the bank’s grievance was essentially a challenge to the valuation methodology, which is within the discretion of state officials. The court held that absent a showing of fraud, discrimination, or other grounds for equitable intervention, federal courts should defer to state processes for resolving tax disputes.

  • Bank of Monongahela Valley v. Weston, 159 N.Y. 201 (1899): Partnership Liability for Unauthorized Indorsements

    159 N.Y. 201 (1899)

    A partner who knows of another partner’s continued unauthorized use of the firm’s name on accommodation paper, and fails to take reasonable steps to prevent it, may be estopped from denying liability to a bona fide holder who relied on the firm’s credit.

    Summary

    A West Virginia bank sued to collect on promissory notes indorsed by a partnership. One partner, Abijah Weston, claimed the indorsements were unauthorized after the firm’s dissolution, and the bank had notice. However, it was established that Weston knew his brother was using the firm name for accommodation purposes for years prior to the notes in question. The court held that the bank was entitled to a new trial. Weston’s failure to take public action to prevent the misuse of the firm name could estop him from denying liability to a bona fide holder.

    Facts

    Weston Bros., a partnership, was formally dissolved on January 5, 1892, but the dissolution was not published. The Bank of Monongahela Valley had previously discounted notes made by Edwin E. Curtis and indorsed by Weston Bros., based on assurances of the firm’s creditworthiness from another bank. Abijah Weston knew his brother was using the firm name for accommodation purposes for at least ten years prior to the notes in question and did not take adequate steps to stop it. The bank discounted two notes made by Curtis and indorsed by Weston Bros. after the purported dissolution date.

    Procedural History

    The trial court dismissed the complaint, but the Court of Appeals reversed. After a jury verdict for the defendant was unanimously affirmed by the lower court, the case was appealed again to the Court of Appeals, which reviewed questions of law properly raised at trial.

    Issue(s)

    1. Whether a partner has a duty to take public action to protect third parties when aware of another partner’s persistent misuse of the firm name for accommodation purposes.
    2. Whether discounting notes at a rate slightly above the legal interest rate is evidence of bad faith on the part of the holder.

    Holding

    1. Yes, because when a partner becomes aware of the persistent and continued use of the firm name by another partner outside the business, it becomes his duty to take some public action for the protection of outside parties.
    2. No, because a slightly higher discount rate alone is not sufficient evidence of bad faith to strip a holder of its bona fide status.

    Court’s Reasoning

    The court reasoned that partnership law is grounded in agency principles. A principal (the partnership) can be bound by an agent’s (a partner’s) actions exceeding actual authority, especially when the principal’s negligence enables the agent’s misconduct. The court emphasized the equitable principle that “when one of two innocent persons must suffer from the act of a third person, he shall sustain the loss who has enabled the third person to do the injury.” Because Abijah Weston knew of his brother’s actions for years and failed to take sufficient action to prevent it, he could be estopped from denying liability to a bona fide holder. Regarding the discount rate, the court found no evidence that a slightly higher rate, by itself, constitutes bad faith that would defeat a holder’s claim. The court cited Cheever v. Pittsburgh, S. & L. E. R. R. Co., 150 N.Y. 59, stating that good faith is tested by a simple rule of common honesty. The court held that because the defendant should have taken some public action, the lower court’s judgment was incorrect and a new trial was granted.

  • Wenk v. City of New York, 171 N.Y. 607 (1902): Taxpayer Standing to Sue Municipalities for Illegal Acts

    Wenk v. City of New York, 171 N.Y. 607 (1902)

    A taxpayer of a municipality has standing to sue to prevent illegal official acts or waste of municipal property, even if the official committing the act is not acting in bad faith, and the taxpayer does not reside in the specific area affected by the act.

    Summary

    A taxpayer brought suit against the City of New York and its comptroller to annul leases of marsh lands originally made by the town of Jamaica before its incorporation into New York City. The plaintiff alleged the leases were procured through collusion and fraud by the former town officials. The Court of Appeals held that the taxpayer had standing to bring the suit under a statute allowing taxpayers to sue to prevent illegal official acts or waste of municipal property. It clarified that the suit could be brought against current officials (like the comptroller) to prevent illegal acts, even if they were not the original wrongdoers and emphasized that residency within the specific affected area was not required for standing.

    Facts

    The town of Jamaica, prior to its incorporation into New York City, leased approximately 3,000 acres of marsh land to Alonzo E. Smith. It was alleged that Frederick W. Dunton, chairman of the town board, orchestrated the lease through a collusive scheme involving the United States Land & Improvement Company, Limited, and the Co-operative Society of New Jersey, placing control of the lands in his hands. A subsequent lease of the same land, to begin after the expiration of the first lease, was made to William H. Boynton. The plaintiff, a taxpayer in the City of New York, brought suit to annul these leases, alleging fraud, collusion, and inadequate rents, claiming they constituted waste of the city’s assets. Dunton controlled both the improvement company and the co-operative society.

    Procedural History

    The lower courts sustained a demurrer to the complaint, filed by the defendant, United States Land and Improvement Company, holding that the complaint did not state facts sufficient to constitute a cause of action. The Appellate Division certified the question of the complaint’s sufficiency to the Court of Appeals. The Court of Appeals reversed the lower courts’ decisions.

    Issue(s)

    Whether a taxpayer of the City of New York has standing to bring an action under Chapter 301 of the Laws of 1892 to annul leases made by the former town of Jamaica and to restrain the city comptroller from collecting rentals under those leases, based on allegations of fraud and collusion by the former town officials.

    Holding

    Yes, because the statute authorizes actions against municipal officers to prevent illegal acts or waste, and this includes actions against current officials to prevent the continuation of illegal acts, even if those officials were not the original wrongdoers. Also, residency in the specific affected area is not a prerequisite for taxpayer standing.

    Court’s Reasoning

    The Court reasoned that the statute (Chapter 301, Laws of 1892) allows actions against municipal officers to prevent illegal acts or waste. The Court rejected the argument that the suit must be brought solely against the original wrongdoers. The statute applied to officials “acting or who have acted,” meaning it extended to current officials whose actions perpetuated the alleged illegality. In this case, the comptroller’s collection of rents under the allegedly fraudulent leases would constitute an illegal act, even if the comptroller was unaware of the fraud. The Court emphasized the importance of preventing waste of municipal assets, stating that under the complaint’s allegations, “we must assume that the leases are invalid and illegal. In these conditions it is obvious that the proper parties defendant are not the defunct officers of the defunct town of Jamaica, but the proper official of the city of New York, which is the present owner of the land.” The court also held that residency within the specific geographic area affected by the leases was not required for standing; residency and taxpayer status within the City of New York were sufficient. The Court noted that it was only addressing the pleading stage, and the actual evidence presented might alter the case’s outcome.

  • Cornwell v. Sanford, 222 N.Y. 386 (1918): Re-entry Defined in Lease Agreements

    222 N.Y. 386 (1918)

    A covenant in a lease allowing the landlord to re-enter the premises upon the tenant’s default and re-let them at the tenant’s expense, holding the tenant liable for any deficiency, applies only to a common-law re-entry (i.e., ejectment) and not to a dispossessory proceeding.

    Summary

    This case concerns a dispute between a landlord (Sanford) and tenant (Cornwell). The lease allowed the landlord to re-enter and re-let the premises if the tenant defaulted, holding the tenant liable for any deficiency. After the tenant was dispossessed via summary proceedings for non-payment of rent, the tenant’s assignee sued to recover a security deposit, while the landlord counterclaimed for the rent deficiency. The court held that the “re-entry” clause in the lease only applied to a common-law re-entry (ejectment), not statutory dispossession, so the landlord couldn’t recover the deficiency. The tenant was entitled to the return of the security deposit, less the rent owed before dispossession, as the lease was fulfilled to that extent.

    Facts

    The lessors (Sanford) leased premises to the lessee (Cornwell) for a term of years. The lease contained a clause allowing the lessors to re-enter the premises upon any default in rent payment or other covenants. Furthermore, the lease stipulated that upon any such re-entry, the lessors could re-let the premises as agents of the lessee, applying the rent received to cover the lessee’s debt and holding the lessee liable for any deficiency. The lease also stipulated that the lessee deposited money as collateral for the last two months’ rent. The lessee defaulted on rent payments.

    Procedural History

    The lessors initiated summary proceedings in court and were awarded possession of the premises due to the lessee’s non-payment of rent. The lessee was dispossessed via warrant. The lessors re-let the premises at a lower rent. The plaintiff, as assignee of the lessee, sued to recover the deposit, less the rent for one month before dispossession. The lessors counterclaimed a deficiency in rent. The trial court directed a verdict for the lessors. The Appellate Division reversed and granted a new trial. The lessors appealed to the New York Court of Appeals.

    Issue(s)

    Whether the covenant in the lease allowing the lessors to re-enter the premises upon the lessee’s default and re-let them as the lessee’s agents, holding the lessee liable for any deficiency, applies to a removal of the lessee via statutory summary proceedings, or only to a common-law re-entry by ejectment.

    Holding

    No, because the term “re-enter” in the lease referred only to a common-law re-entry by ejectment, and not to the recovery of possession through statutory summary proceedings.

    Court’s Reasoning

    The court reasoned that “re-entry” is a technical term with a specific meaning at common law: the resumption of possession by the lessor through an action of ejectment, based on a right reserved in the lease. The court emphasized the historical context of re-entry, tracing its origins to feudal law and its evolution. It highlighted that, absent an express reservation in the lease, a lessor’s remedy is limited to an action on the covenant. The court found that the parties’ use of the term “re-enter” within the lease suggested they intended its strict, common-law meaning. The court noted that other terms such as “removal” and “dispossession” are used in statutes related to summary proceedings, further distinguishing the two concepts. Because the lease specified re-entry, the lessors were not entitled to damages for the deficiency as the lessee’s removal was not the result of a re-entry. The deposit was to be returned to the lessee upon completion of the lease, and the security only applied to rent owed up to the point of dispossession. The court noted, “When the plaintiff was thrown out of possession, the lease was terminated and no more rent could accrue thereunder, but the lessee was not thereby discharged from the payment of rent which had already become due.”

  • Muhlker v. New York & Harlem R.R. Co., 197 U.S. 544 (1905): When a Railroad Improvement Amounts to Taking of Abutting Owner’s Property Rights

    Muhlker v. New York & Harlem R.R. Co., 197 U.S. 544 (1905)

    When a state-mandated railroad improvement substantially impairs an abutting owner’s easements of light, air, and access, it can constitute a taking of private property requiring compensation, even if the railroad itself is not directly responsible for the project.

    Summary

    Muhlker, an owner of property abutting Park Avenue in New York City, sued the railroad for damages caused by the construction of an elevated viaduct pursuant to a state-mandated improvement project. The railroad argued that the viaduct, replacing a depressed cut, was a state project and thus they were not liable for any resulting damages. The Supreme Court held that the abutting owner had property rights in easements of light, air, and access, and the construction of the viaduct substantially impaired these rights. Even though the railroad did not initiate the project, the state action impaired the owner’s property rights, which required just compensation under the Fourteenth Amendment.

    Facts

    The plaintiff, Muhlker, owned a building on Park Avenue in New York City.
    Prior to 1897, the railroad operated in a depressed cut along Park Avenue.
    In 1892, New York passed a law mandating improvements to Park Avenue, including the construction of an elevated viaduct to replace the cut.
    The viaduct was constructed under the supervision of a public board and accepted by the railroad in 1897.
    Muhlker claimed the viaduct impaired his easements of light, air, and access, diminishing his property’s value.

    Procedural History

    The trial court found the railroad liable for trespass on Muhlker’s easements after February 16, 1897.
    The Appellate Division affirmed.
    The New York Court of Appeals reversed, holding the railroad not liable because the viaduct was a state project.
    The U.S. Supreme Court granted certiorari to review the decision.

    Issue(s)

    Whether the construction of an elevated viaduct by the state, which impaired an abutting owner’s easements of light, air, and access, constituted a taking of private property requiring just compensation under the Fourteenth Amendment, even if the railroad did not initiate the project.

    Holding

    Yes, because the abutting owner had property rights in easements of light, air, and access, and the construction of the viaduct substantially impaired these rights. The state action impaired those property rights requiring just compensation under the Fourteenth Amendment.

    Court’s Reasoning

    The Court reasoned that abutting property owners have easements of light, air, and access that are considered private property rights.
    The construction of the elevated viaduct substantially impaired these easements, diminishing the value of Muhlker’s property.
    The Court distinguished between consequential damages resulting from a public improvement (which are not compensable) and a direct appropriation of property rights (which are).
    Even though the railroad did not initiate the project, the state’s action in constructing the viaduct constituted a taking of Muhlker’s property rights.
    The Court emphasized that the state cannot take private property for public use without just compensation, as guaranteed by the Fourteenth Amendment.
    The Court cited previous New York cases establishing the existence and importance of these easements, including Story v. New York Elevated R.R. Co., and noted that these rights were part of the property owner’s title.
    The court notes the seeming paradox that the state mandated the project and the railroad followed suit, but yet the property owner suffered a loss. The Court states “[w]e do not, however, have to go beyond the decisions of the courts of New York to sustain the right of the plaintiff to recover. They are clear upon the existence and the extent of such rights, and we need only consider whether they are invaded by the construction and operation of the viaduct under the circumstances disclosed by the record.”
    The dissent argued that the state’s actions were a valid exercise of its police power to improve public infrastructure, and any resulting damages were consequential and non-compensable. The dissent further notes, “If the viaduct was lawfully constructed and existed in the street under the authority of law, it is impossible to conceive how the defendant could be guilty of a trespass in the operation of its trains upon it. It was constructed for that purpose and the defendant was obliged to use it in the exercise of its franchise and the discharge of the duties due to the public.”

  • In re Dows’ Estate, 167 N.Y. 227 (1901): Taxation of Property Transfers Under Powers of Appointment

    In re Dows’ Estate, 167 N.Y. 227 (1901)

    The exercise of a power of appointment by will is a taxable transfer, and the tax is determined by the form of the property at the time the power is exercised, not when the power was created; vested remainders are subject to present taxation even if enjoyment is postponed.

    Summary

    This case addresses whether the exercise of a power of appointment is a taxable transfer under New York’s Taxable Transfer Act, and when such taxes are due. The Court of Appeals held that the exercise of the power of appointment by will is a taxable event. The tax is applied to the property’s form at the time the power is exercised, not when the power was granted. Further, the court found that vested remainders are subject to present taxation, even if the actual possession is delayed. This decision clarifies the application of transfer taxes to property passing through powers of appointment and provides guidance on the timing of taxation for vested remainders.

    Facts

    David Dows, Sr., devised property in trust to his son, David Dows, Jr., for life, granting Dows, Jr., a power of appointment to designate his children as beneficiaries in his will. If Dows, Jr., died intestate, the property would pass to his surviving children. Dows, Jr., exercised this power in his will, granting life estates to three sons with shifting remainders to each other, effectively giving each son one-third of the property absolutely, but with staggered enjoyment. The surrogate imposed a tax on the property transferred under this power of appointment.

    Procedural History

    The Surrogate’s Court imposed a tax on the property passing under the power of appointment. The Appellate Division affirmed the Surrogate’s order. The case was then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the tax imposed on transfers made under a power of appointment is a tax on property or on the right of succession, and thus applicable to property invested in tax-exempt securities?
    2. Whether the property’s form at the time of David Dows, Sr.’s death (real estate, which was then exempt) or at the time of David Dows, Jr.’s exercise of the power (personalty) controls taxability?
    3. Whether the remainders created in David Dows, Jr.’s will are subject to taxation before the precedent life estates terminate and the remainders vest in possession?

    Holding

    1. Yes, because the tax is on the right of succession, not the property itself.
    2. No, because the form of the property at the time of the execution of the power of appointment controls.
    3. Yes, because the remainders are vested and their value can be readily computed.

    Court’s Reasoning

    The court reasoned that the tax imposed under the Taxable Transfer Act is a tax on the privilege of succeeding to property, not a direct tax on the property itself. Citing Magoun v. Illinois Trust & Sav. Bank, the court emphasized that “the right to take property by devise or descent is the creature of the law, and not a natural right—a privilege, and, therefore, the authority which confers it may impose conditions upon it.” Therefore, the tax applies even to assets that would otherwise be exempt from property tax.

    Regarding the timing and nature of the property, the court distinguished this case from Matter of Sutton, noting that here, at the time of the exercise of the power of appointment, the property was personalty. Since the taxable event is the execution of the power, the state of the property at that time governs.

    The court determined that the remainders created in David Dows, Jr.’s will were presently taxable because they were vested and their value could be readily computed using annuity tables. The court distinguished Matter of Hoffman, stating that those remainders were contingent. The remainders in this case were absolute and not subject to divestment. As such, they fell outside the exception for contingent interests and were subject to immediate taxation.

    The court emphasized the practical impact of its decision, noting that the remainders were alienable, devisable, and descendible, further solidifying their character as presently taxable interests.

  • Tradesmen’s National Bank v. Curtis, 167 N.Y. 194 (1901): Enforceability of Drafts Accepted on Executory Contracts

    Tradesmen’s National Bank v. Curtis, 167 N.Y. 194 (1901)

    A holder in due course can enforce a draft accepted in exchange for a promise of future performance, even if the holder knows of the underlying executory contract, unless the holder also knows of a breach of that contract at the time of purchase.

    Summary

    The Tradesmen’s National Bank discounted drafts accepted by Curtis & Blaisdell in exchange for the Natalie Anthracite Coal Company’s promise to deliver coal. Curtis & Blaisdell argued the drafts were unenforceable because the coal was never delivered, and the bank knew of this condition. The Court of Appeals held that the bank, as a holder in due course, could enforce the drafts because, at the time of the discount, there was no known breach of the coal delivery agreement. Knowledge of the underlying executory contract alone is insufficient to defeat holder in due course status; knowledge of a breach is required.

    Facts

    The Natalie Anthracite Coal Company arranged with Curtis & Blaisdell to deliver coal over four months. Curtis & Blaisdell accepted drafts drawn by the Coal Company, payable in four months. The Coal Company then sold these drafts to Tradesmen’s National Bank for value, before the drafts were overdue and before any dishonor. The Coal Company failed to deliver the coal. Curtis & Blaisdell refused to pay the drafts upon maturity, arguing a failure of consideration and the bank’s knowledge of the conditional agreement.

    Procedural History

    The Tradesmen’s National Bank sued Curtis & Blaisdell to enforce the accepted drafts. The lower court ruled in favor of Curtis & Blaisdell. The Appellate Division affirmed the lower court decision. The New York Court of Appeals reversed, holding the bank was a holder in due course and could enforce the drafts.

    Issue(s)

    1. Whether knowledge that a draft was accepted in consideration for an executory contract, without knowledge of a breach of that contract, prevents a purchaser of the draft from becoming a holder in due course?
    2. Whether a bank cashier’s knowledge, gained while acting as a director of the company that sold the drafts, can be imputed to the bank itself?

    Holding

    1. No, because knowledge of the underlying executory contract, without knowledge of its breach, does not defeat holder in due course status.
    2. The court assumed, without deciding, that the cashier’s knowledge was imputed to the bank for the sake of argument.

    Court’s Reasoning

    The Court reasoned that the drafts were facially valid and the bank took them for value before maturity and without notice of dishonor. The key legal principle is that “it would be no defense to these acceptances that they were given upon an executory contract for the sale of merchandise, even if the plaintiff knew that an agreement existed between the makers and the acceptors that the drafts were not to be enforced until the merchandise was delivered, unless the acceptances were discounted with knowledge of the breach.” The court emphasized that at the time of the discount, the Coal Company had not breached its promise to deliver coal. The promise to deliver coal was sufficient consideration for the acceptance of the drafts. The dissenting opinion in the Appellate Division was noted, but the Court of Appeals focused on the broader principle that knowledge of the executory contract alone is insufficient to defeat the bank’s claim as a holder in due course. The court found no evidence that the bank, through its cashier, agreed not to enforce the drafts if the coal was not delivered. The testimony suggested the Coal Company would take care of the drafts if the coal wasn’t delivered, not the bank. The Court directly quoted from the testimony: “If the coal is not delivered, the acceptance will be taken up.” This quote indicates the Coal Company’s responsibility, not the bank’s. Therefore, the bank was entitled to enforce the drafts against Curtis & Blaisdell.

  • Plimpton v. Bigelow, 93 N.Y. 592 (1883): Attachment of Stock in a Foreign Corporation

    Plimpton v. Bigelow, 93 N.Y. 592 (1883)

    Shares of stock in a foreign corporation are not subject to attachment in a state where the corporation is not domiciled, even if the certificates representing those shares are physically present within that state.

    Summary

    This case addresses whether shares of stock in a foreign corporation can be attached in New York when the certificates are held within the state. The Court of Appeals held that such an attachment is invalid because the stock itself is located in the state of incorporation, not where the certificates happen to be. The court reasoned that the shares represent an interest in the corporate assets held in the foreign state, and New York courts lack jurisdiction over those assets. This decision highlights the principle that jurisdiction over property generally requires the property itself to be located within the jurisdiction.

    Facts

    The plaintiff, Plimpton, sought to attach shares of stock owned by Bigelow, a non-resident, in a foreign (Pennsylvania) corporation. The certificates representing these shares were physically located in New York. Plimpton attempted to levy on the stock by serving a warrant of attachment on the individual in possession of the certificates in New York.

    Procedural History

    The lower court upheld the validity of the attachment. The General Term reversed this decision, holding the attachment invalid. The New York Court of Appeals affirmed the General Term’s decision, finding that the shares of stock were not properly subject to attachment in New York.

    Issue(s)

    Whether shares of stock in a foreign corporation are subject to attachment in New York simply because the certificates representing those shares are physically present in New York.

    Holding

    No, because the situs of the stock is in the state where the corporation is domiciled, and therefore, not subject to attachment in New York based solely on the presence of the stock certificates.

    Court’s Reasoning

    The Court of Appeals reasoned that shares of stock represent an ownership interest in the corporation, and that interest is tied to the corporation’s assets and domicile. The court stated: “The general rule that the situs of personal property is the domicile of the owner is subject to many exceptions, and it is clear that for the purposes of taxation, and for other purposes where the sovereignty of the state is to be exercised, personal property may have an actual or constructive situs within the state, although the domicile of the owner is elsewhere.” However, this principle does not automatically apply to attachments. The court distinguished between the certificates, which are merely evidence of ownership, and the shares themselves, which represent an interest in the corporation’s assets. The court emphasized that the corporation exists under the laws of Pennsylvania, and New York courts cannot exercise direct control over the corporation’s internal affairs or assets. The court noted, “The foreign corporation is not here; it has no property in this state which can be taken by virtue of the attachment. The certificates of stock are not the property itself, they are but evidence of property… The shares are held by the company in Pennsylvania.” The court further observed that to allow attachment based solely on the presence of the certificates would create significant practical problems, as multiple states could potentially claim jurisdiction over the same shares. The dissenting opinion argued that the certificates, when endorsed, effectively transfer the property they represent, and thus should be subject to attachment where found. The majority, however, rejected this argument, emphasizing the importance of the corporation’s domicile in determining the situs of the stock. The court relied on the principle that a state’s jurisdiction generally extends only to property located within its borders, and that shares of stock are deemed to be located in the state of incorporation.

  • Whitmyer v. New York, 186 N.Y. 25 (1906): Water Company’s Duty to Provide Adequate Supply

    Whitmyer v. New York, 186 N.Y. 25 (1906)

    A water company, as a quasi-public corporation, has an implied contractual duty to provide an adequate water supply to its customers, and cannot terminate service for non-payment when the company itself is in breach of that duty by failing to provide sufficient water.

    Summary

    Whitmyer sued the City of Kingston’s water provider, alleging insufficient water supply and seeking to prevent the company from shutting off his water service due to non-payment. The court found that the company had failed to provide an adequate water supply, breaching its implied contractual duty. The court held that a water company cannot terminate service for non-payment when it is in default of its contractual obligations to provide sufficient water. The court reasoned that allowing the company to do so would be unjust, as it would allow them to be the judge in their own case.

    Facts

    The plaintiff, Whitmyer, was a resident of Kingston, supplied with water by the defendant water company. The water company was incorporated to supply Kingston and its inhabitants with water. Prior to the lawsuit, the water supply to Whitmyer’s house had decreased in quantity and pressure, failing at times due to an increased number of consumers. This insufficient supply sometimes did not meet the plaintiff’s family’s needs, and the plaintiff had no other water source.

    Procedural History

    The trial court ruled in favor of the defendant, dismissing the complaint and vacating a preliminary injunction that prevented the water company from shutting off the water supply. The Appellate Division affirmed the trial court’s decision without opinion. Whitmyer appealed to the New York Court of Appeals.

    Issue(s)

    Whether a water company, failing to furnish a sufficient supply of water, can shut off the water from a customer’s house when the customer refuses to pay the bill.

    Holding

    No, because a water company, as a quasi-public corporation, has an implied contractual duty to provide an adequate water supply to its customers, and cannot terminate service for non-payment when the company itself is in breach of that duty.

    Court’s Reasoning

    The Court of Appeals determined that an implied contract existed between Whitmyer and the water company. The court emphasized that the water company was a quasi-public corporation with a duty to supply water to the city and its inhabitants. By connecting Whitmyer’s house to the water mains and providing water for years, the company entered into an implied agreement to provide water if Whitmyer paid the rates. The court stated, “The duties imposed upon a corporation raise an implied promise of performance.” The court distinguished the case from prior cases where companies shut off service due to non-payment, because in those cases, the companies had fully performed their contractual obligations. Here, the company was in default by failing to provide a sufficient water supply. The court reasoned that allowing the company to terminate service while it was in breach of contract would be unjust. “On the other hand, if the company is in default of its contract, express or implied, it would shock the sense of justice if it were to sit as a judge in its own case by cutting off the customer from his contract privileges. In such a situation the rights of the parties must be determined by the courts.” The Court of Appeals reversed the lower courts’ judgments and reinstated the injunction preventing the water company from shutting off the water supply, ordering a new trial.

  • Sturgis v. Sturgis, 164 N.Y. 485 (1900): Enforceability of Charitable Trust with Designated Trustees

    Sturgis v. Sturgis, 164 N.Y. 485 (1900)

    A charitable trust, valid under the laws of the relevant jurisdiction, will be enforced if the testator designates competent trustees, even if those trustees are identified by their official titles rather than their individual names.

    Summary

    This case concerns the validity of a charitable trust established in a will. The testatrix bequeathed funds to the selectmen of a specific parish in her hometown, to be used for the benefit of the poor in that parish. The lower courts found the trust invalid because the designated trustees were not competent to act. The New York Court of Appeals reversed, holding that the testatrix had indeed designated competent trustees by their official titles, and because the trust was valid under Massachusetts law, it should be enforced. The court emphasized that designating trustees by their official titles is equivalent to naming them individually and ensures a continuous line of successors.

    Facts

    Catharine Sturgis bequeathed $6,000 in her will to the selectmen (or other municipal authorities) of the East Parish of Barnstable, Massachusetts. The funds were to be held in trust and the interest used to benefit respectable persons in reduced circumstances within that parish. The will stipulated that beneficiaries should be native-born U.S. citizens or their descendants, but not dependent on the town for support. Sturgis died in 1881, and her sister received the income from this bequest until her death in 1896.

    Procedural History

    The Surrogate’s Court ruled that the bequest was void, finding no competent trustee designated in the will. The Appellate Division affirmed this ruling, with a divided court, based on the Surrogate’s opinion. The case was then appealed to the New York Court of Appeals.

    Issue(s)

    Whether the testatrix, Catharine Sturgis, successfully designated competent trustees to administer the charitable trust created in her will, given that she identified the trustees by their official titles (selectmen of the East Parish) rather than their individual names.

    Holding

    Yes, because designating trustees by their official character is equivalent to naming them by their proper names, as it provides a clear and continuous line of succession for administering the trust, and the trust itself is valid under Massachusetts law.

    Court’s Reasoning

    The Court of Appeals reasoned that the testatrix’s method of selecting trustees was practical and effective under the circumstances. By using the official description of the selectmen, she ensured a continuous line of successors to administer the trust. The court emphasized that this was not a gift to the town of Barnstable, but rather the appointment of private citizens (holding official positions) to act as trustees. The court drew an analogy to Inglis v. Trustees of the Sailors’ Snug Harbor, 3 Peters, 99, where the Supreme Court upheld a devise to trustees designated by their official titles. Quoting Inglis, the court stated: “The designation of the trustees, by their official character, is equivalent to naming them by their proper names…The trust was not to be executed by them in their official character, but in their private and individual capacities.” The court concluded that since the trust was valid under Massachusetts law and the testatrix had designated competent trustees, the funds should be paid over to those trustees. The court found no legal impediment to the selectmen acting in their individual capacities as trustees while holding their official positions, as their local knowledge would aid them in fulfilling their duties. The order of the Appellate Division and the surrogate’s decree were reversed, and the case was remanded to the Surrogate’s Court to modify the decree to direct the executor to surrender the fund to the selectmen as trustees.