Hovey v. Elliott

• Decision Date: 26 February 1895
• Parties: HOVEY v. ELLIOTT et al.
• Court: New York Court of Appeals Court of Appeals

145 N.Y. 126

39 N.E. 841

HOVEY

v.ELLIOTT et al.

Court of Appeals of New York.

Feb. 26, 1895.

Appeal from superior court of New York city, general term.

Action by Charles E. Hovey, as survivor of William P. Dole, against George Elliott and George L. Elliott, executors of the estate of John Elliott, deceased. From a judgment of the general term (21 N. Y. Supp. 108) affirming a judgment dismissing the complaint, on report of a referee, plaintiff appeals. Affirmed.

Herbert B. Titus and Everett P. Wheeler, for appellant.

Wm. G. Choate and John Selden, for respondents.

HAIGHT, J.

This action was brought to have the defendants' testator adjudged to be a trustee of certain bonds for the benefit of the plaintiffs, and that they have a lien thereon, and that the defendants account to them therefor. In September, 1873, the mixed commission on British and American claims, sitting at the city of Washington, awarded to one Augustin R. McDonald the sum of $197,000, in satisfaction of his claim for cotton destroyed during the war of the Robellion. In the following October the plaintiffs filed in the supreme court of the District of Columbia a bill in equity against McDonald and one William White, his assignee, for the sum of $49,297.50, alleging therein that McDonald was indebted to them under an agreement whereby, in consideration of services to be rendered in the prosecution of such claim, they were to receive a sum equal to 25 per centum of the amount that should be recovered, and that they have a lien to the extent of such sum upon the award in his favor. Such proceedings were thereafter had that one George W. Riggs, a banker in the city of Washington, was appointed receiver, and one-half of the sum so awarded was paid over to him as such to meet the claim and lien of the plaintiffs. As such receiver, and pursuant to the directions of the court, he invested the funds in certain bonds of the District of Columbia guarantied by the United States, and payable at its treasury. The defendants then interposed a demurrer to the plaintiffs' bill, which was sustained, and on the 24th day of June, 1875, a decree was entered dismissing the plaintiffs' bill, with costs. On the same day the plaintiffs entered an appeal from the decree to the general term of the supreme court of the District of Columbia. On June 28, 1875, another decree was entered in precise conformity with the former decree, but supplemented by a direction to the receiver to pay to the defendants McDonald and White the funds in his hands as such receiver. On the same day McDonald and White called upon the receiver, and demanded the bonds in question. He thereupon first consulted with the judge holding the court in which the decree was entered, and, after being advised by such judge that the bonds should be surrendered, he delivered them over to McDonald and White, who on the same day sold and delivered the bonds for full value to the banking firm of Riggs & Co., of which the receiver was a partner. Riggs & Co. then surrendered the bonds to the treasury of the United States, receiving new bonds therefor, which were thereafter sold and delivered to various purchasers. On July 2, 1875, the plaintiffs took an appeal to the general term of the supreme court of the District of Columbia from the decree of June 28, 1875; and on March 4, 1876, that decree, as well as the one that preceded it, was reversed, and the cause was remanded to the special term, with leave to the defendants to answer. An answer was then interposed, and, upon the issues raised thereby, testimony was taken at divers times during the years 1876 and 1877. On the 15th day of June, 1877, plaintiffs obtained an order from the supreme court of the District of Columbia, requiring the defendants McDonald and White to pay over to the registry of the court the sum which had been delivered to them by the receiver. This order was not complied with, and thereupon the plaintiffs moved that the defendants McDonald and White show cause why they and each of them should not be punished as for a contempt; and such proceedings were thereupon had that they were adjudged to be guilty of a contempt, and that the answer filed by them in the cause be stricken out, and removed from the files of the court. Judgment was thereafter entered against them pro confesso adjudging that the plaintiffs had a lien upon the bonds. This action is based upon the judgment so entered, and is prosecuted upon the theory that notice to Riggs of the pendency of the action was notice to all of his partners. Weetjen v. Railroad Co., 4 Hun, 520; 3 Kent Comm. 105. The defendants' testator resided in the city of New York, and was one of the members of the banking firm of Riggs & Co. He only was served with summons in this action.

The referee has found, as conclusions of law: ‘First, that, in order to enable the plaintiffs to sustain this action, the decree rendered by the supreme court of the District of Columbia must be a valid decree, binding upon the defendants; second, that from the operation of that decree the defendants in this action enjoy exemption and immunity, under section 725 of the Revised Statutes of the United States; third, that from the effect and operation of the decree the defendants enjoy immunity and exemption, under that provision of the fifth amendment to the constitution of the United States which prohibits the deprivation of property without due process of law; fourth, that the supreme court of the District of Columbia had no jurisdiction to render the said decree, and that the same was and is null and void,’ etc.

As to the first conclusion of law the parties agree. The controversy is in reference to the other three. The third conclusion is based upon the fifth amendment to the constitution of the United States, which prohibits the deprivation of persons of property without due process of law. Inasmuch as the consideration of what is due process of law will to some extent be involved in the determination of the validity of the judgment upon which this action is based, we only deem it necessary to consider the second and fourth conclusions of law found by the referee. We shall also, for the purpose of this review, assume, without deciding the question, that Riggs & Co. were purchasers of the bonds pendente lite, with knowledge of the existence of the suit, although it appears that the purchase was made after judgment, for full value, in good faith, under the supposition that they had the right to purchase freed from all liens, and that they had no notice that an appeal had been taken.

Considering them as such purchasers, were they bound by the determination made in the action then pending? Section 725 of the United States Revised Statutes provides that ‘the said courts [referring to the courts of the United States] shall have power to impose and administer all necessary oaths, and to punish, by fine or imprisonment, at the discretion of the court, contempts of their authority: provided, that such power to punish contempts shall not be construed to extend to any cases except the misbehavior of any person in their presence, or so near thereto as to obstruct the administration of justice, the misbehavior of any of the officers of said courts in their official transactions, and the disobedience or resistance by any such officer, or by any party, juror, witnessor other person, to any lawful writ, process, order, rule, decree or command of the said courts.’ Under this statute the referee has reached the conclusion that the supreme court of the District of Columbia had no power to punish the defendants for a contempt by striking out their answer, and adjudging that the plaintiffs had a lien upon the bonds.

In Ex parte Robinson, 19 Wall. 512, Field, J., in delivering the opinion for the court, says: ‘The power to punish for contempts is inherent in all courts. Its existence is essential to the preservation of order in judicial proceedings, and to the enforcement of the judgments, orders, and writs of the courts, and consequently to the due administration of justice. The moment the courts of the United States were called into existence, and invested with jurisdiction over any subject, they became possessed of this power, but the power has been limited and defined by the act of congress of March 2, 1831. The act in terms applies to all courts. Whether it can be held to limit the authority of the supreme court, which derives its existence and powers from the constitution, may, perhaps, be a matter of doubt, but that it applies to the circuit and district courts there can be no question. These courts were created by an act of congress. Their powers and duties depend upon the act calling them into existence, or subsequent acts extending or limiting their jurisdiction. The act of 1831 is therefore to them the law specifying the cases in which summary punishment for contempt may be inflicted. It limits the power of these courts in this respect to three classes of cases. * * * The law happily prescribes the punishment which the court can impose for contempts. The seventeenth section of the judiciary act of 1789 declares that the courts shall have power to punish contempts of their authority in any cause or hearing before them by fine or imprisonment, at their discretion. The enactment is a limitation upon the manner in which the power shall be exercised, and must be held to be a negation of all other modes of punishment. The judgment of the court disbarring the petitioner, treating it as a punishment for a contempt, was therefore unauthorized and void.’ In Anderson v. Dunn, 6 Wheat. 204-227, Johnson, J., says: ‘It is true that the courts of justice of the United States are vested by express statute provision with power to find and imprison for contempt. * * * It is a legislative assertion of this right as incidental to the grander judicial power, and can only be considered authority as an instance of abundant caution, or a...