Klein v. East River Electric Light Co.

O’Brien, J.:

The action was brought to recover upon five interest coupons of the sum of thirty dollars each detached from bonds issued by the defendant, the East River Electric Light Company, which was, organized in 1887. In 1892 its name was changed to the Thomson-Houston .Electric Light'Company. ' The. assets of this company were sold upon a mortgage foreclosure in December, 1894, and subsequently purchased by the Madison Square Light Company. The latter company had been organized in December, 1894, pursuant to, an agreement or plan dated September 25, 1894. In' August, 1896, the Madison Square Light Company was consolidated with, the Manhattan Electric Light Company, which is the company upon which the original summons and complaint herein were served. An answer was interposed by it and thereafter the Manhattan Company became merged in the Edison Electric Illuminating Company. An amended complaint was served, to which an answer was interposed for the defendant, the Manhattan Electric Light Company, “ by its. successor, the Edison Electric Illuminating Company.” When the ease was reached for trial the plaintiff moved for judgment upon the ground that the answer of the Edison Company was not an answer on behalf of the defendants named in the complaint, which motion was granted and a verdict directed for the plaintiff. From, the judgment thereupon entered an appeal was taken, which resulted in a reversal, the case being sent back so that the jury could pass, upon the defendant’s liability. (37 Misc. Rep. 490.) Upon the new trial the jury returned a verdict for the plaintiff for the full amount ($276), and from the judgment thereupon entered the defendant appealed first to the General Term of the City Court, which affirmed the judgment of the Trial Term, and then to the Appellate Term, and from the judgment and order affirming the General Term.judgment this appeal is taken.

The issue as originally presented related solely to the question of whether or not interest should be allowed on the coupons, it being conceded, as shown not alone by the letter of the attorneys, but by the admissions contained in the original answer, that no point was made but that the defendant was liable for the principal amount represented by the coupons. It was only in the amended answer that the defense was interposed denying that the coupons were payable and averring that they were void and not issued for a valuable consideration and never became independent negotiable instruments, and that while the bonds were in the possession of the East River Company the coupons became due and were detached, if at all, by said owner prior to the time when said bonds were sold or negotiated by it, and that the plaintiff is not an . owner or holder for value before maturity, and payment has never been demanded except with demand for interest.

With respect, however, to the liability of the defendant for the principal amount represented by the coupons, we have in the original answer the following significant admissions ; “ Defendant further answering admits that it was and is the lawful successor of the East River Electric Light Company, and that it acquired its franchises and properties subject to the said mortgage and the payment by it of the said bonds and coupons. Defendant further answering denies that it has knowledge or information sufficient to form a belief that plaintiff is the holder and owner of the coupon which was issued and attached to one of said bonds, to wit, No. 154, wherein and whereby the said East River Electric Light Company promised and agreed to pay to bearer or the holder of said coupon on the first day of September, 1888, Thirty dollars in gold coin of the United States at the office of the treasurer of. the said company in the City of New York, being six months interest then due on its first mortgage bond, or that the bond therein referred to was one of the series of first mortgage bonds thereinbefore referred to. Defendant further answering denies that when the said coupon became due and payable the East River Electric Light Company or its successor companies failed and neglected to pay the same. Defendant further answering denies that the said coupon was duly presented for payment at the place therein named as the place of payment and payment thereof refused. Defendant further answering denies that the defendants have failed or refused to pay the said coupon or any part thereof. Defendant further answering denies that the whole amount of said coupon; to wit, $30, is due and owing from' the defendant to the plaintiff, with interest: Defendant further answering alleges thát it-3 as the successor of the said East River Electric Light Company; and its said predecessor companies were, are and have heen at all times ready and willing to pay the amount of said coupon to the lawful owner and holder thereof when presented; that'the same never has heen presented for payment or payment thereof demanded, except when accompanied with a demand for interest, which said demand has heen refused, but defendants have at all times been ready and willing to pay the face of the said coupon and still are ready and willing to pay the same.”

The plaintiff, therefore, alleges, as against the defendant sought to be held, that the latter acquired the franchises and property of the' East River' Company and assumed the payment' of the bonds and coupons which were secured by a mortgage théreon; and we have, in the answer the express admissions, as already pointed out, that, such defendant alleges that they “ were, are and have been at all times ready and willing to pay the amount of said coupon to the lawful owner and holder thereof when presented; that the same never has been presented for payment or payment thereof demanded, except when accompanied with a demand for interest, which said demand has been refused, but defendants have at all times been ready- and willing to pay the face of the said coupon, and still are ready and willing to pay the same.”

The plaintiff, in support of his case, offered in evidence the answer originally interposed by the Manhattan Eléctric Light-Company, also a letter delivered to a representative of the plaintiff by the attorney for the Manhattan Electric Light - Company, which read as follows:

“ The bearer' Mr. Baltes has five coupons of the East River Electric Light Company’s bonds which seem to-be all right. We advise that they be paid if there is no record that like numbers -have already be'én paid.”

It further appeared that the Manhattan Electric Light Company had paid"coupons detá,ched'‘'from't'he bbMs’of''the'East1Ri'ver*Electfic Light Company- to the time of the commencement of this action, other than the five in suit.

We thus have, in support of the plaintiff’s case, as pointed out by the respondent: “First, the sworn admission in the original answer of the Manhattan Company that it did assume the payment . of the bonds and coupons issued by the East River Company under its mortgage to the Knickerbocker Trust Company; second, a sworn declaration that it was ready and willing to pay the principal of the coupons in suit, but simply objected to its liability for interest thereon; third, the letter of the attorneys of the Company advising the payment of these coupons; fourth, the recognized liability of the Manhattan Company indicated by its payment of every coupon detached from the bonds of the East River Company down to the . commencement of this action, February, 1900, excepting only the five in suit.’’

We think that taking into consideration all these facts, there was made out a prima facie case, and assuming that the plaintiff has made out a prima facie case, there is sufficient to support the verdict of the jury, because it will be noticed that the defendant did not meet it; nor did it put in any evidence to destroy the effect of the inferences which might have been drawn from the testimony .as presented by the plaintiff favorable to his contention. In other words, the defendant relied upon the weakness of the plaintiff’s case rather than upon any defense which it attempted to support by evidence.

This is significant, because with respect to the question of whether the Manhattan Company did or did not assume the payment of these •coupons we have the allegation by the plaintiff to that effect, and though it was made to appear that an agreement or plan of organi.zation was entered into in September, 1894, in pursuance of which the Madison Square Light Company was to be incorporated and to acquire the assets of the Thomson-Houston Electric Light Company (the successor of the East River Electric Company) and did thereafter acquire them, and that the Madison Square Light Company was subsequently consolidated with the defendant the Manhattan Electric Company, the latter company studiously avoided pro-ducing upon the trial such agreement. It is fair to assume that if produced it would not have been unfavorable to the plaintiff’s contention, that there was in its provisions an express assumption of the debts of the prior company, which. upon the foreclosure was brought to a termination. It is true that there were introduced upon the trial the articles of incorporation of the Madison S„quare Light Company, and that therein it is stated that pursuant to the agreement of September 25, 1894, it was planned to organize such company and purchase the assets sold under the foreclosure sale of the Thomson-Houston Company and issue stock for various purposes, and such purposes as set forth do not include payment'or asssumption of any debts or obligations of the East River Company, secured or unsecured. These articles do not, however, stand in the place of the agreement and are not conclusive as to its terms and hence are not controlling. . It was entirely proper for the new company to have assumed the indebtedness in its plan of organization. By section 3 of the Stock Corporation Law (Laws of 1892, chap. 688) provision is made for' the reorganization of a corporation upon a sale of its corporate property and franchises by virtue of a mortgage or deed of trust; and section 4 provides that the purchasers, at or previous to the sale, may arrange a plan of reorganization for the readjustment of the respective interests of creditors, mortgagees and stockholders. Just what terms, if any, were made for the assumption of outstanding debts and obligations, the agreement' or plan of organization would have shown, but, as stated, the defendant failed to produce this upon the trial. Apart, however, from such' agreement and the inferences to be drawn from its absence, we think that the plaintiff made out & prima facie case sufficient to support the verdict.

It follows that the determination appealed from should be affirmed, with costs.

Van Brunt, P. J., and Hatch, J., concurred; Ingraham and McLaughlin, JJ., dissented.