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The People agt. Bruff.

pies the singular and impossible position of representing interests as receiver, which are in direct antagonism to his own as an individual (McArdle agt. Barney, 50 Howard Pr., 97; see pages 103, 104). Phelps had also signed a written agreement to resign as director whenever Bruff demanded it, thereby evidencing his subserviency to the very party towards whom he professes to occupy a position of antagonism.

Various parties had threatened legal proceedings when Mr. Keeler instituted his action with, as the facts fully satisfy me, the full consent, approbation and co-operation of Bruff. In that suit, as has been previously stated, Mr. Phelps, and afterwards Mr. Wagstaff was added, was made receiver. Of course, in making that appointment, the court was uninformed of Mr. Phelps and Mr. Keeler's connection with the very frauds which they alleged, and in utter ignorance thereof its order was made. Ought that order to be a bar to this application ?

It is true that, under section 1782 of the Code, Mr. Keeler, as a director of the corporation, could bring an action, not to suspend or remove a director, but to recover for the corporation the assets and property which its officers had wasted; but the attorney-general can also bring an action for that purpose, and for the additional one of suspending and removing directors. The action begun by Keeler can only afford partial relief at best; and though it was brought in good faith and for the purposes it professes, which I do not believe, I should be loath to hold that it was a bar to the one brought by the state, which alone can grant complete relief. Is a remedial statute, passed for grave and salutary reasons, to be nullified by any such narrow construction as that on which this objection rests? Is it possible that the officers who have defrauded a corporation can, when they fear action by the attorneygeneral, cause a suit to be instituted by one of their confederates, place all the property and assets of the corporation, by a formal order of the court, but made by a suppression of truth, into the hands of another confederate, and thus controlling all

The People agt. Bruff.

as much as ever, successfully defend an honest suit by the highest law officer of the state to protect honest creditors and shareholders? If this can be done, then justice is mockery and laws are mere waste paper. Besides, section 1808 of the Code requires the attorney-general, as we have already said, to bring this action. Upon that duty no restraint or limitation whatever is put, and that cannot be a sound construction of another section of the same statute giving permission to another person to bring an action for some of the same purposes, which makes one brought thereunder a bar to that which a high state official is imperatively commanded to institute.

Rule 87 of this court is also cited in opposition to this motion. That rule was adopted prior to the present Code. The latter, as has been already shown, gives the court full power to appoint a receiver in this action; and no rule of the court, prior or subsequent, can modify the statute.

Perhaps, if Rule 87 were literally construed, as the principal place of business of the corporation is at No. 48 Wall street, New York city, the appointment of receivers in the Keeler action, which was in Kings county, was bad. There is no occasion, however, so to hold. The rule does not abrogate the statute, and any construction thereof which would permit a collusive receivership and a collusive suit to bar a bona fide application by the attorney-general will not be adopted, even though its language, literally construed, favored the objection more strongly than it does, and though the Code had not since been enacted. Very clearly neither the spirit nor intent of the rule favors the defendants. It was adopted to promote justice and not injustice, and it requires a substantial and honest previous appointment to be a bar to a new application, and no fraudulent cover under the forms of law can prevent the recovery of a corporation's property from the possession of dishonest officers thereof.

No order is asked to remove receivers appointed in another action. What is demanded is an appointment in this action, and that relief must be granted. Which, whether those

Association for the Relief of Aged Indigent Females agt. Eagleson.

appointed in this or in the other action, shall hold and take the property is a question for another proceeding. A collusive suit, and a collusive prior appointment, cannot bar action looking to justice. The honest creditors must be protected, and such

person or persons as they may nominate will be appointed

for the trust.

No reflection whatever is intended to be made upon Mr. Wagstaff

. No complicity in past actions with the officers of the defendant corporation is shown, but he was appointed at their instance and by their request, with the intent, probably, on their part, to give a color of fairness to their proceeding. If he is continued he can only be with the consent of those who hold the honest obligations of the corporation, and by severing his connection with those with whom he is associated.

N. Y. SUPERIOR COURT.

AN ASSOCIATION FOR THE RELIEF OF RESPECTABLE AGED INDIGENT FEMALES, &c., agt. ALEXANDER EAGLESON and others.

Interest Effect of change of statute upon a contract which has matured

before such change.

Upon a contract for the payment of a sum certain on which interest at seren per cent was lawfully payable prior to January 1, 1880, by the terms of the contract, the rate agreed upon continues as part of the unimpairable obligation of the contract until judgment, notwithstanding the change in the statute and though the contract matured before such change.

Special Term, November, 1880.

Motion for the confirmation of the report of the referee computing amount due and for judgment of foreclosure.

VOL. LX 2

Association for the Relief of Aged Indigent Females agt. Eagleson.

William Venvill, attorney, and M. A. Kursheed, of counsel for motion.

J. W. Hawes, as guardian ad litem, for infant defendant Edward Eagleson.

one.

FREEDMAN, J. — The question as to the proper rate of interest to be allowed in this case upon the principal sum due upon the bond and mortgage, is a very important and novel

As such it has received careful attention. By chapter 538 of the Laws of 1879, it was provided that the rate of interest for the forbearance of any money, goods or things in action should be six per cent. That act, by its terms, took effect on the 1st of January, 1880, but it expressly provides that nothing contained therein shall be so construed as in any way to affect any contract or obligation made before the passage of the act.

The bond and mortgage in question were made in 1870 to secure the payment of the sum of $8,000 at the expiration of three years from the date thereof, together with interest thereon at the rate of seven per cent per annum, the then existing legal rate, to be computed from the date thereof and payable semi-annually thereafter.

As the act of 1879 was to have only a prospective operation, and especially under the saving clause contained therein, the rate of seven per cent was continued in force at least up to January 1, 1880. Whether it can be continued in this case until the entry of judgment depends upon the question whether the payment of interest after default made constitutes part of the unimpairable obligation of the contract, or of the remedy provided by law for its enforcement. The precise question does not seem to have been determined in this state. In Lee agt. Davis (1 A. K. Marshall [Ky.), 397) it was held that the rate of interest to be allowed on a promissory note relates to the right and not to the remedy, and is governed by the law as it stood at the date of the note.

Association for the Relief of Aged Indigent Females agt. Eagleson.

In Bates agt. Wernwag (4 Blackf. [Ind.], 272) the plaintiff, notwithstanding the change by statute, was held entitled to interest up to the time of the recovery at the rate mentioned

in the note.

Myrick agt. Battle (5 Florida, 345) was an action upon a note dated March 14, 1844, payable one day after date. At the date of the note the statute provided that where no rate of interest was expressed in the contract, no higher rate than eight per cent should be charged. On the day after the execution of the note the statute was altered by reducing the rate to six per cent. The court held: Upon both principle and authority the respondent is entitled, as of right, to recover eight per cent. All contracts for the payment of money bear interest after maturity, though silent on the subject, unless there is an express stipulation to the contrary. When the contract is silent as to the interest, as in this case, the law will imply an understanding on the part of the debtor to

рау the legal rate; and this implied understanding is not only supported by mercantile usage in all commercial instruments of a negotiable nature, but because interest is considered as a legal incident to every debt,certain in amount and payable at a certain time.

The interest, though an incident to the debt, is impliedly a part of the contract, and the contracting parties are to be presumed to have had reference to the law as it existed at the time the contract was made, and, as a consequence, no statute altering the rate of interest can be made to affect contracts entered into before its passage, otherwise the obligation of the contract would be impaired, for the Constitution in this respect recognizes no distinction between express and implied contracts.

But in the quite recent case of Wilson agt. Cobb (31 N. J. Eg. [4 Stewart], 91), which arose under a statute similar to our own, but containing no saving clause, the chancellor of the state of New Jersey came to and enforced the conclusion that where interest is given, not by the terms of the contract but by law, by way of damages for the detention of a debt, it will

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