McCaddon v. Central Trust Co.

Smith, J.:

The Mexican Packing Company was a corporation created by the laws of Mexico. Its plant was situated in Mexico. It issued $3,000,000 of bonds and secured the same by a mortgage executed to the defendant, the Central Trust Company of New York. Temporary bonds were first issued, to be thereafter exchanged for definitive bonds to be thereafter issued. Plaintiff is a holder of $100,000 of these temporary bonds. Thereafter $2,900,000 of definitive bonds were issued, separately numbered, which were sent to the company to be exchanged for temporary bonds of a corresponding number. This excluded this $100,000 temporary bond, which was owned by the plaintiff. Under the instructions, the Central Trust Company was authorized to exchange these $2,900,000 of definitive bonds for all the other temporary bonds that were out. The plaintiff has brought this action, alleging that the trust company has in its possession some of these definitive bonds and demanding that $100,000 of these definitive bonds be delivered to him by the trust company in the place of his $100,000 temporary bond. He alleges that only $2,900,000 of the definitive bonds were issued by reason of a fraudulent conspiracy to cheat him out of the benefit of his $100,000 bond, and that this was known to the trust company. The relief asked is equitable relief, that the trust company take $100,000 of these definitive bonds, which were given to it to replace other temporary bonds of like number, and deliver the same to plaintiff for the plaintiff’s temporary bond. Now this is all there is of the complaint. It is not claimed that any of these definitive bonds were the property of the Mexican Company. The complaint alleges the issuance of $3,000,000 of the temporary bonds and there is no evidence that these bonds are not held by the parties to whom they were issued. A temporary injunction was granted against the distribution of these definitive bonds by this trust company pending the action, but was reversed by this court (167 App. Div. 897) on the ground that the plaintiff could not ask that the holders of these other temporary bonds be deprived of the definitive bonds, which had been delivered to the trust company for them, and in effect that the plaintiff’s remedy was to compel the corporation to issue further definitive bonds to be substituted for his temporary bonds. It appears, however, that these $2,900,000 of definitive bonds that were given to the trust company for distribution to the other temporary bondholders were guaranteed by the Mexican government, and the trial court has found that all the property of this Mexican corporation was absorbed or taken by the Mexican government, which, in consideration therefor, guaranteed these $2,900,000 of definitive bonds. If it were true that the security of this mortgage had been divested by the appropriation by the Mexican government and this guaranty had been substituted as compensation to the Mexican Company and the bondholders for this appropriation, probably the trust company would hold these guaranty bonds as trustees for all the temporary bondholders, and the plaintiff might then have an equity action to be allowed to share ratably in these guaranteed bonds. But in the first place, I find no evidence whatever in the record to sustain the finding of the trial court that the Mexican government had appropriated the property of the Mexican Packing Company or had assumed to divest such property of the security of the mortgage, which the trustee holds to secure these bonds. The only evidence of such an act of the Mexican government is found in the certificate made apparently by the Mexican Packing Company of the minutes of the meeting of the board of directors in which it was stated: “ A general .discussion as to the position took place and it was resolved,' ment, to terminate at the end of July, 1914, as many officers of the company as possible not directly employed in the trading operations. It was resolved that the services of Mr. S. H. Buck and Mr. E. Biker should terminate at the end of the month, and the Chairman was authorized to notify them to this effect.”

This certificate was dated the 23d day of December, 1914, and recited the meeting as having been held on the 6th day of July, 1914. Assuming this certificate to be evidence of the facts therein stated, it falls far short of proving that the lien of the plaintiff’s mortgage security had been divested, or that the guaranty placed by the Mexican government upon this $2,900,000 of definitive bonds was the full compensation for the property taken, or any compensation therefor. In fact the plaintiff recognized this difficulty and made an application for a commission to issue to examine a witness in Mexico to take proof of these very facts. The Special Term granted the plaintiff’s motion, but the order was reversed by this court upon the ground that the evidence sought was not included in the issues raised by the pleadings. (173 App. Div. 927.) This is the order included in the notice of appeal as sought to be reviewed at this time upon the appeal from the judgment.

An examination of the complaint discloses no reference whatever, either to the fact that any of these definitive bonds were guaranteed by the Mexican government, or to the fact that the Mexican government had taken over either the business or the property of the Mexican Packing Company, or had given to the Mexican Packing Company or to the defendant trustee anything of value as compensation for any business or property appropriated, and the complaint itself alleges that the only property, of which the said packing company “ is possessed, is the property covered by the said mortgage given to secure the said bonds, including the plaintiff’s bond, which property is situated in the Bepublic of Mexico.” If the Mexican government had not appropriated this mortgage security and had not guaranteed these bonds, it would seem clear that the plaintiff’s remedy would only be to have further definitive bonds issued by the packing company, for which he might substitute his temporary bonds, and such was the position of this court upon the appeal from the order granting the temporary injunction. Not having pleaded these facts as grounds for the equitable interposition of the court, it would seem clear that the plaintiff is not entitled to any equitable relief, based thereupon, unless his complaint be amended so as to present these issues to the defendant for trial. Of this the plaintiff had due notice upon the reversal by this court of the order granting a commission to take evidence, on the facts upon which he now relies, as being not pertinent to the issues raised by the pleading. Moreover, at the close of the evidence, the plaintiff’s attorney claimed no equitable rights in this guaranty of the Mexican government. The plaintiff’s attorney then stated: “ The trustee has no right to impair the value of our bond by accepting any guaranty on it. The guaranty upon that bond guarantees certain rights, those rights impair our rights as the holder of 100 bonds, and the trustee has no'power under that mortgage to certify that that bond with that guaranty on it is one of the series referred to in the mortgage, unless at the same time it gives us a bond of the same kind. * * * It confers upon the guarantor certain rights which are prejudicial to us. That guarantor has certain rights under that mortgage by having guaranteed it.”

Assuming for the argument, however, that this finding of the trial court referred to was based upon sufficient evidence, nevertheless the rule is well settled that a recovery must be had secundum allegata. Even if the evidence came into the case without objection, there was no amendment of the complaint upon the trial which would present that issue for determination, and this court is without power to amend the pleadings here to conform to the proof. In Steinam v. Strauss (44 N. Y. St. Repr. 380) Presiding Justice Van Brunt, writing for the court, said: “ Two questions are raised upon this appeal. The first is whether the judgment was void upon its face, and the second whether as matter of fact and from proof of extraneous circumstances, it was invalid. The latter proposition it is not necessary to consider. No such issue was presented by the complaint and although evidence was taken in respect thereto and the learned judge seems to have passed upon the same, yet as it was not within the scope of the pleadings, and they never having been amended for the purpose of conforming the pleadings to the proof, this question was improperly considered by the court, and the result of the decision it is not necessary to review here. If it may be said that the court should amend the pleadings to conform the same to the proof, the proof having been taken without objection, it may be suggested in the first place that objections appear as to some of the proof, and also that a complaint is never amended for the purpose of reversing a judgment, although such amendments are made in some instances for the purpose of sustaining a judgment.” That case was affirmed by the Court of Appeals (137 N. Y. 561). This as I understand it is the settled rule of practice.

It follows from a lack of sufficient pleading to present the issue, that we are not allowed to consider the equities arising from any act of the Mexican government, either in appropriating the business of the packing company or in placing its guaranty upon these other definitive bonds, and without considering such equities, we are of opinion that no reason is presented to justify a decree to compel the defendant trust company to appropriate any of the definitive bonds specified for the redemption of the plaintiff’s temporary bond.

The judgment and order should, therefore, be affirmed, with costs.

Clarke, P. J., and Dowling, J., concurred; Laughlin and Shearn, JJ., dissented.