Subrogation On A Lien For Assessments or Taxes

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3I8 MICHIGAN LAW REVIEW
single count of it,may be so framed with a double, treble, or any number

of aspects, looking to so many distinct and incongruous causes of action,
in order to hit the exigencies of the plaintiff's case or any possible demands
of his proofs at the trial, we must say, strikes us as something exceedingly
novel in the rules of pleading. We do not think it is the law, and, unless
the legislature compels us by some new statutory regulation, shall hereafter
be very slow to change this conclusion."
In view of the statement in the syllabus of the principal case that under
the code all distinctive forms of civil action are abolished and which seems
to be relied upon as a basis for the decision, we may be justified in quoting
further from Supervisors of Kewaunee County v. Decker as follows: "We
have often held that the inherent and essential differences and peculiar prop-
erties of actions have not been destroyed, and from their very nature cannot
be. * * * These distinctions continuing, they must be regarded by the courts
now as formerly, and now no more than then, except under the peculiar cir-
cumstances above noted, can any one complaint or count, be made to sub-
serve the purposes of two or more distinct and dissimilar causes of action
at the option of the party presenting it. It cannot be 'fish, flesh, or fowl'
according to the appetite of the attorney preparing the dish set before the
court. If counsel disagree as to the nature of the action or purpose of the
pleading it is the province of the court to settle the dispute. It is a ques-
tion when properly raised which cannot be left in doubt, and the court must
determine with precision and certainty upon inspection of the pleadings to
what class of actions it belongs or was intended, whether of tort, upon con-
tract, or in equity, and, if necessary or material, even the exact kind of it
within the class must be determined."
Evidently should the plaintiff state that he relies upon contract and after-
wards seek to recover upon tort, the Wisconsin court would not consider
the statement immaterial even though it was mistakenly made.
In this comment we have not overlooked the fact that the demurrer sus-
tained by the court below was interposed to the evidence; and it is admitted
that Supervisors of Kewaunee County v. Decker recognizes a difference in
the situation when the question arises after issue joined upon the merits and
that presented when it arises upon demurrer to the complaint; and, hence,
no criticism is offered respecting the conclusion reached in the case. Our
purpose is only to challenge the sweeping statements of the syllabus and of
the opinion. T. A. B.
SUBROGATION TO A LIEN FOR ASSESSMENTSOR TAXES-CONSTRUCTION O'I

THE NEGOTIABLE INSTRUMENTSLAW.-The right of a person ever to clairi
subrogation to the rights of the state as respects a lien for taxes has been
doubted, but whether such right has ever been denied independent of other
consideration, such, for example, as the acceptance of something in ;ie.1 of
cash, does not clearly appear. Such doubt was expressed in Mercantile
Trust Company v. Hart, 76 Fed. 673, 22 C. C. A. 473, 35 L. R. A. 352, and
in Wallace's Estate, 59 Pa. St. 40I. In the former of these cases the tax
collector, the county treasurer, accepted checks in payment of taxes due the
NOTE AND COMMENT 319
state of Colorado, the city of Denver, and the board of education of said
city. The checks turning out to be worthless and their drawers insolvent,
the tax collector, appellee, intervened in a suit brought by the complainant to
foreclose a deed of trust, in the nature of a mortgage, and prayed that he
might be subrogated to all the rights of the state of Colorado, the city of
Denver, and the board of education of said city, as if said taxes had neither
been paid nor receipted for, and that the lien declared in his favor might
be adjudged to be superior to that of the mortgage bondholders, and thlat
said lien might be satisfied out of the current income of the mortgaged prop-
erty; in the latter of these cases, taxes due from a property owner had been
advanced and paid by the collector of taxes, and subsequently the owner,
had confessed a judgment in favor of the collector for the taxes so advanced.
The collector claimed the right to be subrogated to the lien of the state.
The right to subrogation was denied in both cases. THAYER,J., in the for-
mer case intimated that it might well be doubted whether a person could ever
claim subrogation to the rights of the state as respects a lien for taxes.
Is the doubt thus suggested supported by the authorities? The precise
question recently came under the review of the New York court of appeals
in two cases: Title Guarantee & Trust Company v. Haven et al., 89 N. E.
1082, case No .1; Id. Io85, case No. 2, and with that question was connected
the proper construction of that provision of the negotiable instruments law,
reading as follows: "The acceptor * * * admits the existence of the drawer,
the genuineness of his signature, and his capacity and authority to draw the
instrument." N. I. L. ? 64 (Mich.). Both questions are deemed of such
general interest to the profession as to warrant special attention being drawn
to their consideration in the cases last above cited. The facts material to
be considered are these: The defendants were the owners of certain lands
in the city of New York, acquired by devise, which were subject to a lien
for assessments by the city of New York in the sum of $9,953.83 for regu-
lating and grading an avenue. The owners agreed to sell said lands free
and clear of all liens and incumbrances. Under the contract of sale, pay-
ment was to be made in three instalments. Before the last payment on the
land, the assessments were paid by means of a check for the amount thereof,
drawn upon the plaintiff, corporation; to the order of the collector of assess-
ments and arrears of New York city. The defendants had no concern with
said payment. The check purported to be signed by William 0. Green,
trustee, who had authority to draw checks against a deposit with the plaintiff
to the credit of the estate of Andrew H. Green. The check was forged, but
the plaintiff paid it, believing it to be genuine. There was no evidence as to
the identity of the forger or that the defendants had any knowledge, until
after the event, of the payment of the assessments by means of the check.
After ascertaining the forgery, the plaintiff restored to the credit of the es-
tate of Andrew H. Green, in its deposit account, the amount of the forged
check, which had previously been charged against it. Upon these facts the
plaintiff brought this suit (Case No. 2), praying judgment that upon the
payment of the assessments the plaintiff became subrogated to the lien of
the assessments upon the lands subject thereto, that such lien remains in
320 MICHIGAN LAW REVIEW
full force as between the parties to the action, that the lien attached to the
moneys received by defendants as the purchase price, which in equity repre-
sents the land, and that the plaintiff recover the amount of the assessments
from the defendant.
The defendant resisted the plaintiff's claim, first, on the ground that,
having paid the check, it was estopped, by the provision of the negotiable
instruments law above quoted from disputing the validity of said check, and,
second, that in no event could it be subrogated to the lien of the city for
assessments, because subrogation as to such liens was discountenanced by
the law. As to the first defense, the court held that the provision of the
negotiable instruments law above quoted is merely declaratory of the com-
mon law and the common law rule that he who accepts a negotiable instru-
ment, to which the drawer's name is forged, is bound by the act and can
neither repudiate the acceptance nor recover the money paid, is the rule of
the statute. Price v. Neal, 3 Burr. 1354; National Park Bank v Ninth Na-
tional Bank, 46 N. Y. 77, 7 Am. Rep. 3Io. Neither rule has any application
in behalf of one who has acquired the paper in the absence of any consid-
eration therefor either present or past. The forged check in suit was not
given in payment of any existing or antecedent indebtedness either on the
part of the drawer, estate, or on the part of the forger. And so it was held
that the provision of the statute, upon which defendant's first defense was
based, "has nothing to do with the question." Consequently there was noth-
ing in the law of commercial paper which constituted an obstacle to the
plaintiff's recovery.
The theory upon which the plaintiff brought its suit was that the pay-
ment made by it, operated as between the defendants and the city, to dis-
charge the city's lien which rested upon the defendant's land, that the lien
under the circumstances was still alive for its benefit and, inasmuch as the
defendants had conveyed away the land, the lien was transferred to and at-
tached to the proceeds of the land in the hands of the defendants. The
court disapproves those holdings referred to in the beginning of this note
and declares them to be unsupported by authority. In support of its con-
clusion that the plaintiff is entitled to be subrogated to the lien of the city
for the assessments discharged by its payment of the forged check, the court
cites with approval: Cockrum v. West, 122 Ind. 372, 23 N. E. 140; Sharp v.
Thompson, 00ooIll. 447, 39 Am. Rep. 6I; McNish v. Perrine, I4 Neb. 582,
I6 N. W. 837; John v. Connell, 6I Neb. 267, 85 N. W. 82; Fiacre v. Chapman,
32 N. J. Eq. 463. The case of Emmoertv. Thompson, 49 Minn. 386, 52 N. W.
31, is of like effect.
It thus appears from what is apparently the great weight of authority
that there is nothing in the nature of a lien for taxes or assessments or in
the fact that such lien exists in favor of a sovereign taxing power to prevent
the equitable doctrine of subrogation, when justice demands it. But there
are limitations upon the right of subrogation. One who claims the right
must make it appear that he has not officiously interfered with the affairs
of the defendant. He must show as a condition precedent, that granting it
would not prejudice the rights of innocent third parties.
NOTE AND COMMENT 321
In the case which is the subject of this comment, case No. 2, the lien
of the city of New York was terminated as to the city by the payment of the
assessments, nevertheless it could be regarded as still existent for the pur-
pose of doing justice between the party who had paid them and the owners
of the land. The land having been converted into money in the pockets of
the defendants, the lien attaches to the money and is enforceable against it.
The conclusion thus reached is predicated upon the assumption that the pay-
ment of the assessments was purely gratuitous and in no wise in discharge
of any real or supposed obligation on the part of the estate of Andrew H.
Green or of the unknown forger, but was brought about solely by the mis-
take induced by the forgery. Case No. I, supra, is in all respects the same
as case No. 2, supra, save that the taxes had been levied within the lifetime
of the defendants' testatrix and were for her personal debts chargeable
against her estate; wherefore the money represented by the forged check
could not be regarded as having been applied to relieve the devised premises
from the lien. This fact differentiates case No. I from case No. 2. The
equitable doctrine of subrogation was held unavailable to the plaintiff under
the facts in case No. I. R E. B.
WHAT ARE THE RIGHTSOF THE VENDOROF GOODWILL?-Various attempts

have been made to answer this question by defining the term "good will"
and in this way determining what passes to the vendee and, e converso, what
rights are left to the vendor. Lindley, however, says, "the term good will
can hardly be said to have any precise signification." LINDLEY-EWELL, 2nd
Ed., 439. Though indefinable the term is said to be divisible, as in the
case of Foss v. Roby (1907), 195 Mass. 297 ,where it is said, following pre-
vious decisions, that in a commercial partnership the good will is largely
local in character whereas in a professional partnership it follows the person
not the place. The courts have attempted to answer the larger question by
resolving it into a number of smaller ones based on the varying states of
fact. May the vendor set up again in a similar business? Answered in the
affirmative in Churton v. Douglas (1859), I Johns, I74, I88. May he adver-
tise? Answered in the affirmative in Cottrell v. Manufacturing Co. (I886),
54 Conn. 138. May he' solicit old customers? Answered in the negative in
Trego v. Hunt [I896], I A C. 7. The decision in this last case has been fre-
quently quoted as the English Rule The case of Williams v. Farrand (I891),
88 Mich. 473, had said the retiring partner might solicit old customers,
though in this case only "the right, title and interest" had passed, good will
not being expressly mentioned.
A recent Massachusetts case, Marshall Engine Co. v. New Marshall En-
gine Co. (I9o9), 89 N. E. 548, answers this question without reference to the
so-called English Rule, above referred to, and also without appealing to
any of the American cases which are spoken of as being directly opposed to
the principle of the English Rule.
The facts of the Massachusetts case are somewhat complicated but the
real defendant is one F. J. Marshall who, in September, 1902, sold to the
plaintiff corporation, called the Marshall Engine Co., the "good will of the

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single count of it,may be so framed with a double, treble, or any number

SUBROGATION TO A LIEN FOR ASSESSMENTSOR TAXES-CONSTRUCTION O'I

WHAT ARE THE RIGHTSOF THE VENDOROF GOODWILL?-Various attempts

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Subrogation On A Lien For Assessments or Taxes

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Subrogation On A Lien For Assessments or Taxes

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single count of it,may be so framed with a double, treble, or any number

SUBROGATION TO A LIEN FOR ASSESSMENTSOR TAXES-CONSTRUCTION O'I

WHAT ARE THE RIGHTSOF THE VENDOROF GOODWILL?-Various attempts

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