Vail v. Knapp , 49 Barb. 299 ( 1867 )

Ingalls, J.

The foregoing are the leading facts presented upon this motion. Many of the details are omitted as not necessary to show the grounds upon which this decision is founded.

The first question which I consider is in regard to the validity of the chattel mortgages, which are attacked upon the sole ground that, in consequence of the omission to attach revenue stamps, they were and are void; so far, at least, as the attaching creditor is concerned, the seizure having been made by virtue of such attachment previous to the affixing of such stamps by the collector.

I am of opinion that if any stamps were required such mortgages were properly stamped by said collector, and thereby rendered valid and operative in this state against the attaching creditor. It is very clear that such stamps were not omitted with intent to evade the provisions of the revenue law, or to defraud the United States Grovernment, but for the reason before stated. By section 204, of the revenue law of the United States, as contained in a pamphlet prepared under the direction of the commissioner of internal revenue, the collector was clearly authorized to allow the stamps to he affixed to such mortgages, if any were required, and whenever affixed, the said instruments could he used in the same manner, and with like effect, as if they had been originally stamped, unless the following provision of said section excludes them: “ But no right acquired in good faith before the stamping of such instrument or copy thereof, and the recording thereof, as herein provided, if such record he required by law, shall in any manner be affected by such stamping as- aforesaid.” Chattel mortgages are not, in my judgment, included within such provision, as it contemplates mortgages which require to be recorded. Chattel mortgages are merely filed, and an entry made in a book kept by the clerk of the names of the parties, the amount secured, the date, time of filing, and when due. This cannot be regarded, in any proper sense, recording a mortgage. The statute is penal, and should not, even in a doubtful case, receive a construction which would invalidate the security. The cases cited by the counsel for the defendants, (Meech v. Patchin, 14 N. Y. Rep. 71; Gregory v. Thomas, 20 Wend. 19,) do not sustain the position assumed by the defendants; they merely decide that the effect of filing a chattel mortgage is the same as recording a real estate mortgage, in one particular, viz. to give notice. They do not decide that the terms filing and recording are synonymous, nor are they so understood. Again schedule “ B,” of the revenue law, found on page 105 of said pamphlet, prescribes the instruments which require to be stamped, and provides in regard to mortgages as follows : “Mortgage of lands, estate or property, real or personal, heritable or movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time, or previously due and owing or forborne to be paid, being payable.” The mortgages in question were executed to secure the mortgagees as drawers and indorsers of certain drafts, which were drawn for the benefit of the Troy and Boston Railroad Company, and payable subsequent to the execution of such mortgages. No money was lent at the time, nor had any become due and owing, nor was any forborne to be paid, being payable. I am, therefore, inclined to the opinion that the mortgages require no stamps whatever. The drafts mentioned in said mortgages were properly stamped.

It is further insisted by the counsel for the defendants, that the injunction should not be continued, because it in effect restrains proceedings in an action pending in a court in the state of Yermont.

The courts of this state, from motives of comity and public policy, have very properly refused, except in special cases, to restrain, by injunction, parties residing within its jurisdiction from proceeding in actions commenced in courts of a sister state. (Mead v. Merritt, 2 Paige, 402. Schuyler v. Pelissier, 3 Edw. Ch. 191. Williams v. Ayrault, 31 Barb. 364.) This rule is held very differently in England, and a review of the decisions is contained in Hoffman’s Provisional Remedies, 302. But is unnecessary to pursue the inquiry as to what the law or custom is elsewhere, as we must be governed by the law as established in the state of New York. In Willard’s Equity Jurisprudence, the learned author remarks, at page 348: “ The court will not, unless perhaps, in some very special case, exercise the power by injunction, restraining proceedings which have been commenced in another state.”

In Burgess v. Smith, (2 Barb. Oh. 276,) the Chancellor remarks : "Again, if the court has the power it must be a very special case, which will induce it to break over, the rule of comity, and of policy, which forbids the granting of an injunction to stay the proceedings in a suit which has already been commenced in a court of competent jurisdiction in a sister state.” While as a general rule, the propriety of which is apparent, the courts of this state decline to interfere by injunction, to restrain its citizens from proceeding in an action which has been commenced in the court of a sister state, yet there are exceptions to this rule, and when a case is presented, fairly constituting such' exception, extreme delicacy should not deter the court from controlling the conduct of a party within its jurisdiction to prevent oppression or fraud. No rule of comity or policy forbids it. It remains to be determined whether the facts presented upon this motion constitute an exception to such .general rule. It is not denied that the plaintiffs are bona fide creditors of the Troy and Boston Eailroad Company, having pledged their credit, and advanced their money to aid. the said company when embarrassed, thereby enabling it to proceed with its ordinary business, and also promoting a useful public enterprise.

The mortgages constitute the plaintiffs’ security, and as there was no actual change of possession of the mortgaged property previous to the seizure thereof by said attachment, the plaintiffs would not be allowed by the law of Vermont, (as I understand it,) to assert their mortgages successfully against the attaching creditor, and consequently any effort to obtain protection in the courts of that state would be fruitless, and hence adequate relief could not be there obtained. It is in substance alleged by the plaintiffs under oath, and not denied by the defendants, that Mr. Park, who is the president and main manager of the Bennington and Rutland Railroad Company, and who is actively engaged in conducting the proceedings in Vermont, in the name of the defendants, against the Troy and Boston Railroad Company, is actuated by feelings of hostility to said company, and has declared that he would do all in his power to embarrass and injure said company, and ruin it if possible. It is further stated that upon a demand being made upon the defendants to surrender the property attached, they stated that they did not believe there was any justice in the prosecution against the company, or any validity in the claim upon which the attachment was issued, but that they had given Mr.' Park permission to use their names in the proceedings, and he had agreed to’ indemnify them. It is true the defendants deny a portion of the statement, but do not deny that they consented to a use of their names, and that they were indemnified.

It is also alleged that said seizure of the property has seriously embarrassed the Troy and Boston Railroad Company in transacting its business, thereby materially decreasing its ability to pay the debt secured by such mortgages, and from the nature of said property being adapted to only one use, a hasty sale thereof would inevitably result in a great sacrifice. The said company is otherwise heavily in-deb ted, and the large amount which would be required to replace the said property, if sacrificed by such sale, would render payment of the mortgage debt almost, if not wholly hopeless.

It is quite evident that the mortgages are the main, if not the entire reliance of the plaintiffs, and if the property thus mortgaged is sacrificed, they must unavoidably sustain the loss. Although the proceeding by attachment in Vermont is in form, in the action prosecuted against the Troy and Boston Railroad Company to recover damages for such alleged violations of the covenant contained in the said lease, yet the proceedings to sell such property appear, by the law of Vermont, to be under the control of, and conducted by the person who executed the attachment, and he need not necessarily be a regular officer ; and I do not understand that the court in which the action is pending, gives any direction, or exercises any immediate control, over such proceeding.

• The plaintiffs do not seek, by injunction, to interfere with the action, or the court in which it is pending, but merely to restrain the defendants, who are citizens of the state of Hew York, from allowing in their names and through their agency, a sale of said property during the pendency of said action, in a proceeding to which the plaintiffs herein are not parties, and in which they cannot be heard.

It is true the defendants deny that they have participated in or have any control over such action or proceedings, and insist that by the law of Vermont they have no power to prevent the use of their names, and cite the case, The Farmers and Mechanics’ Bank v. Humphrey, (36 Vermont Rep. 554,) in support of such position. I am not, however, satisfied from the facts detailed, that the defendants are in fact so situated as to be unable to prevent the sale of said property, but, on the contrary, am inclined to think that their relation to Mr, Park and the Bennington and Rutland Railroad Company is such that they can prevent such sale if they are disposed so to do.' The defendants have1 consented to the use of their names in this action and proceeding against the Troy and Boston Bailroad Company, under an agreement hy which they are indemnified by Mr. Park, but the nature and extent of that indemnity is not stated by the defendants, and we may reasonably assume that it is commensurate with any loss or damage to which the defendants may be subjected on account of such proceedings, so that in no event are they likely to be prejudiced. It is further insisted by the defendants that the plaintiffs should seek protection from the courts of Vermont, where adequate relief can be granted them. It is by no means certain that the courts of Vermont, under the law which there prevails in regard to chattel mortgages, could protect the plaintiffs.

Again l the plaintiffs are not parties to the action or attachment proceedings, and therefore cannot be heard therein. It therefore seems improbable that the plaintiffs could secure adequate relief, not on account of any reluctance on the part of the courts in Vermont to accord to a citizen of this state the same rights and protection which would be extended to its own citizens, but on account of the embarrassment arising from a conflict in the laws of the said states in regard to the legal effect to be given to the securities under which the plaintiffs claim. In granting the injunction we deal with parties residing in this state, and do not seek to interfere with or attempt to control the action of the court in Vermont, in which the action is pending. We command our own citizens, not the court or parties residing in Vermont.

This distinction has long been recognized. In Story’s Equity Jurisprudence, (vol. 2, §899,) the learned commentator remarks ; ‘‘ But although the courts of one country have no authority to stay proceedings in the courts of another, they have an undoubted authority to control all persons and things within their own territorial limits. When, therefore, both parties to a suit in a foreign country are resident within the territorial limits of another country, the courts of equity in the latter may act -in personam upon those parties, and direct them, by injunction, to proceed no further in such suit. In such a case these courts act upon acknowledged principles of public law in regard to jdrisdiction. They do not pretend to direct or control the foreign court, but without regard to the situation of the subject matter of the dispute, they consider the equities between the parties and decree in personam, according to those equities, and enforce obedience to their decrees by process in personam.” In Dehon v. Foster, (4 Allen, 550,) Bigelow, Ch. J. remarks: “ The, authority of this court as a court of chancery, upon a proper case being made, to restrain persons within its jurisdiction from prosecuting suits either in the courts of this state, or of other states, or foreign countries, is clear and indisputable. In the execution of this power courts of equity proceed, not upon any claim of right to interfere, with or control the course of proceedings in other tribunals, or to prevent them from adjudicating on the rights of parties when drawn in controversy, and duly presented for their determination. But the jurisdiction is founded on the clear authority vested in courts of equity over persons within the limits of their jurisdiction, and amenable to process, to restrain them from doing acts which will work an injury to others, and are, therefore, contrary to equity and good conscience. As the decree of the court in such cases is pointed solely at the party, and does not extend to the tribunal where the suit or proceeding is pending, it is wholly immaterial that the party is prosecuting his action in the courts of a foreign state or country.” (See also Hilliard on Injunctions, p. 235 ; Dobson v. Pearce, 12 N. Y. Rep. 169 ; Field v. Holbrook, 3 Abbott, 377.)

It is evident that the action now pending in the court in Vermont cannot determine the rights of the plaintiffs in this action, for the obvious reason that they are not parties to the action in Vermont, and as to them no action is pending in that state ; but there is a proceeding between other parties who are residents of this state, by which the rights of the plaintiffs herein are endangered. If it is in the power of the defendants to prevent a sale of the property, every consideration of justice and propriety indicate that they should exercise their influence and authority in that direction. Certainly no material injury will be likely to result to the parties interested in the action pending in Vermont. The property cannot be removed from the state, nor can it reasonably be regarded so far perishable, or liable to deterioration, or subject to such expense for its protection and preservation, as demands a sale thereof before the determination of the action to protect'the rights of the attaching creditor.

Judging from the facts submitted upon this motion, an immediate sale would affect the plaintiffs in these actions very differently, as the result would probably be to jeopard if .not wholly destroy these securities. The rights of these plaintiffs as mortgage creditors, in the relief sought, should not be confounded with those of the Troy and Boston Railroad Company. Whatever rights that company may have, can safely and appropriately be submitted to the protection of the court in Vermont in which the action is pending, and to which such company is a party. It is further insisted that the plaintiffs have an adequate remedy, by action, to recover damages, and, therefore, an injunction should not be granted. I do not think this proposition is sound as applied to the facts of this case ; and the reasons for this conclusion have been already stated in discussing the other questions involved in this motion.

The case presented is peculiar in many of its features, and may very appropriately, in my judgment, be denominated special, within the decisions of the courts of this state, and as such, fully justifies the continuance of the injunction without violating any principle of law, comity, or policy. The following propositions are deducible :

The parties to the record in.the action and-attachment proceedings in Vermont, are citizens of the state of New York.

The plaintiffs herein are not parties to such action and attachment proceedings, and cannot properly be heard therein. . „

[Rensselaer Special Term, February 28, 1867.

' The mortgages, which constitute the plaintiffs’ only security, being unaccompanied by actual possession of the mortgaged property by the mortgagees, are not, as against creditors, recognized as valid by the courts of Vermont, but are by the courts of the state of Hew'York.

. The defendants have voluntarily consented to the use of their names as parties to the action and proceedings' in Vermont, and ■ have received indemnity from Mr. Park, who is confessedly the prominent person in conducting such action and proceedings.

It is alleged, and not contradicted, that such action and proceedings were prompted by hostility to, and a desire to embarrass and injure the Troy and Boston Bailroad Company, which, if successful, by causing a sacrifice of the property in question, will seriously affect the plaintiffs, by impairing, if not wholly destroying their securities.

I am, therefore, of opinion that the injunction should be continued, and that no rule of comity or public policy will be violated thereby, nor can it be urged with .propriety that any want of réspect is exhibited for the courts of a sister state.

Ingalls, Justice.]