FOLLETT, J. When this action was before this court on the appeal from the first interlocutory judgment sustaining a demurrer to the matter pleaded in avoidance in the original answer, it was held that the facts so pleaded were insufficient to constitute a defense, but leave was given to serve an amended answer. 69 Hun, 264, 23 N. Y. Supp. 496. Subsequently the Atlantic Trust Company served an amended answer pleading further facts by way of avoidance, to which the plaintiff demurred on the ground that they were insufficient to constitute a defense. The demurrer was sustained, and an interlocutory judgment entered, which granted leave to the defendant to plead anew; of.which privilege the defendant availed itself, and filed and served a second amended answer. Upon the issues so joined the action was tried, and a judgment ordered for the plaintiff.

A demurrer runs through all the pleadings, and the effect of the interlocutory judgments is that the facts alleged in the complaint, unless successfully controverted or avoided, are sufficient to constitute a cause of action, and that the facts pleaded in the original and first amended answer by way of avoidance are insufficient to constitute a defense. The facts alleged in the complaint were proved on the trial, and thus, under our former decision, a cause of action was established, unless a valid plea in avoidance was proved.

The Atlantic Trust Company, by way of a defense, proved that April 28, 1890, the United Electric Traction Company pledged to the trust company said 60,000 shares of stock as security for the repayment of all moneys loaned by the trust company on the promissory notes of the United Electric Traction Company; and that April 28, 1890, the date of the contract of guaranty, and after the trust company had indorsed its receipt thereon and delivered it to the plaintiff, it loaned from time to time to the United Electric Traction Company large sums of money secured to be paid by 11 promissory notes, the first dated May 12, 1890, and the eleventh November 10, 1890, given by the traction company to the trust company, which have not been paid, and that by reason of these facts the trust company has a lien on the shares. It is not alleged in the answer of the trust company, nor was it proved on the trial, that the plaintiff or the bondholders, for which it acted as trustee, had notice that the shares were so pledged; and the Atlantic Trust Company, having contracted to hold the 30,000 shares as security for the 102 bonds, cannot now avail itself of the secret contract by which it received the shares in pledge as a defense to an action to compel it to perform its contract to hold them as security for the 102 bonds.

By reference to the contract of guaranty, it will be seen that it contains this covenant:

"And the United Electric Traction Company aforesaid does hereby, for itself, its successors and assigns, covenant, stipulate, and agree that the United Electric Traction Company aforesaid will not make, nor allow to be made or issued, any mortgage, mortgage bonds, debentures, or any preference securities, other than the $2,000,000 in preferred stock provided for in

the said the United Electric Traction Company's articles of incorporation, until all of the said 102 bonds above referred to, both principal and interest, shall have been paid or redeemed pursuant to the terms of said bonds."

December 8, 1890, the United Electric Traction Company mortgaged its property to the Mercantile Trust Company (the plaintiff), as trustee, to secure the payment of 1,800 bonds, amounting to $700,000. As a defense, the Atlantic Trust Company alleges that the execution of the mortgage was a violation of the above covenant, and that the plaintiff, being a party to the mortgage, cannot compel the defendant to deliver the 30,000 shares, which it alleges it has the right to retain as security for the payment of said 11 promissory notes. The answer to this is that the Atlantic Trust Company knew before the mortgage was executed that it was to be given, and its president advised that it should be executed to the Mercantile Trust Company as trustee. These facts were proved on the trial, and were not disputed, though the president of the Atlantic Trust Company was a witness. More than this, he corroborated the testimony of the witnesses who testified to these facts. This appellant, having waived the performance of the covenant, is estopped from urging its nonperformance as a defense to this action. The defendant gave no evidence of any defense not pleaded in its original and first amended answer; and it seems quite unnecessary further to discuss the propositions which were considered at general term (69 Hun, 264, 23 N. Y. Supp. 496), and subsequently at special term, on a demurrer to the first amended

answer.

As a ground of error, the learned counsel for the appellant insists that the execution by the United Electric Traction Company of the guaranty was not legally established. It is urged that this contract is one which the officers of the corporation could not execute without the authority of the board of trustees. On this trial it was proved, and not denied, that the contract was executed by the president of the corporation, and that its corporate seal was affixed. This, the defendant insists, was not sufficient, and asserts that the plaintiff should have gone further, and proved that it was executed by the authority of the board of directors. We think the defendant is not in a position to raise this question. It is not a surety nor guarantor, but a mere depositary of the shares, under an agreement that it would hold them as security for the performance of the contract of guaranty. The fact that there may have been some informality in the execution of the contract of guaranty is not available as a defense to this defendant. It is in the same position as an agent who collects money for his principal, which the principal could not have collected in an action against the person who pays it. In such a case the agent cannot interpose as a defense, when called on to pay over the money to his principal, that he could not have enforced the demand as against the person from whom collected. It is like the case of a public officer who collects money upon an execution or a warrant which could not have been enforced had the person against whom it was issued resisted. The officer is bound to pay over the money collected in

accordance with the command of his warrant, and a defense which might have been available to the person from whom the money was collected is not available to the officer. People v. Brown, 55 N. Y. 180. It was not necessary for the plaintiff to prove that the board of directors authorized the execution of the guaranty in order to lay the foundation for a judgment against the defendant requiring it to deliver the 30,000 shares of stock in accordance with its agreement. The judgment should be affirmed, with costs. All concur.

(86 Hun, 232.)

In re HUNT'S ESTATE.

(Supreme Court, General Term, First Department. April 11, 1895.) TRANSFER-TAX-EXEMPTIONS MUTUAL ACKNOWLEDGMENT OF RELATIONSHIP. Laws 1892, c. 399, § 2, exempts from taxation a transfer to the transferror's child, lawfully adopted child, person to whom he has for not less than 10 years "stood in the mutually acknowledged relation of parent," or to any lineal descendant of such transferror "born in lawful wedlock." Held, that the provision in regard to persons to whom the transferror has stood in the "mutually acknowledged relation of a parent" refers only to his illegitimate children.

Appeal from surrogate's court, New York county.

Appraisal, under the act in relation to taxable transfers, of property of the estate of Wilson G. Hunt. From an order fixing the amount of the tax on the legacy given to one Ellen D. Hunt, she appeals. Affirmed.

JJ.

Argued before VAN BRUNT, P. J., and O'BRIEN and PARKER,

D. B. Ogden, for appellant.

Emmet R. Olcott, for respondent.

VAN BRUNT, P. J. The legatee in this case was the niece of the testator; but it is claimed upon the part of the appellant that the testator stood to her in the mutually acknowledged relation of parent at the time of his death; and that, therefore, the gift to her should be taxed at 1 per cent. instead of 5 per cent. The surrogate, in the court below, assessed the tax at 5 per cent., and from the order thereupon entered this appeal is taken.

The section of the act which governs the question involved is section 2 of chapter 399 of the Laws of 1892, and, so far as it affects the question here, is as follows:

"When the property or any beneficial interest therein passes by any such transfer to or for the use of any father, mother, husband, wife, child, brother, sister, wife or widow of a son or the husband of a daughter, or any child or children adopted as such in conformity with the laws of this state, of the decedent, grantor, donor or vendor, or to any person to whom any such decedent, grantor, donor or vendor for not less than ten years prior to such transfer stood in the mutually acknowledged relation of a parent or to any lineal descendant of such decedent, grantor, donor or vendor born in lawful wedlock, such transfer of property shall not be taxable under this act, unless it is personal property of the value of ten thousand dollars or more, in which case it shall be taxable under this act at the rate of one per centum upon the clear market value of such property."

It is admitted that the legatee was not a child of the testator, nor was she a child who had been legally adopted by the testator; but it is urged that she comes under the third class mentioned in the section above quoted, which refers to persons who, while neither actual children nor adopted children, have sustained to the testator such a relation that they are entitled to the same consideration in the eye of the law as if they had been of his flesh and blood; in other words, that a person who has been treated as a child by the testator-whether he or she has been adopted as provided by law, or whether he or she is of the testator's blood or not-is entitled to the benefit of the statute. It is urged that the legatee in the case at bar was treated by the testator as his child, and that she lived with him as his daughter, and that, therefore, she is entitled to the exemption. Upon the other hand, it is claimed upon the part of the respondents that she was not acknowledged as his daughter by the testator, but that he in his will speaks of her as his niece, and that whatever services were rendered by the legatee to the testator were not those rendered by a child to a parent, but rather those of a relation who expected to be compensated by the last will and testament of her relative. It seems to us, however, that an examination of the act clearly shows what the mutual acknowledgment of the relationship referred to in the act is intended to cover. First is mentioned the legitimate child; next is mentioned the adopted child; and next, we think, is intended to be mentioned the illegitimate child who has been for 10 years acknowledged as the testator's child, and such acknowledgment has been mutual. That the question of legitimacy was in the mind of the framers of the statute is manifest from the next clause of the section in question. It says: "Or to any lineal descendant of such decedent, grantor, donor, or vendor, born in lawful wedlock;" thereby excluding from lineal descendants any other person except those descending from the legitimate child. It is significant that the words "lawful wedlock" are used in respect to this matter of lineal descendants immediately after the mutual acknowledgment, and that it had not been at all considered necessary to refer to it when a child or children were spoken of in the previous part of the section. It is evident that it was intended to limit the exemption of illegitimate descendants to the child, and not to extend the same to the descendants of such child. Furthermore, what do the words "mutually acknowledged" mean? The word "acknowledged" is never applied to the admission of a fiction. It is only used in relation to a fact. When a fact is spoken of as being acknowledged, it means that the fact exists, and its existence is admitted. So, when the statute speaks of parentage being acknowledged, or of relationship being acknowledged, it means that the relationship existed, and has been openly acknowledged, and that yet the child acknowledged had not the rights of a child because born out of wedlock.

It is urged upon the part of the appellant that it seems clear that the only object the legislature could have in view in providing that the relation must be one which is mutually acknowledged was

v.33N.Y.s.no.3-17

to declare the character and degree of evidence which the claimant must produce in order to sustain the claim; that mutual acknowledgment does not create the relation, as it sometimes will the relation of husband and wife. The learned counsel is seemingly mistaken in regard to his assumption that the acknowledg ment of the relation of husband and wife will create the same; whereas the law is well established that no amount of acknowledgment can make a contract of marriage. Such acknowledgment may be used as evidence for the purpose of establishing the fact that a contract of marriage had previously been entered into, but it cannot create such contract. If such contract did not exist, no amount of acknowledgment could bring it into being. And this view is entirely applicable to the case at bar. If the relationship does not exist, no amount of acknowledgment can create it, and was not intended so to do by the statute. All that the clause in question seems to have been intended to cover was the case where an illegitimate child had been recognized by its parents, and such recognizance was mutual and had continued for 10 years. In such a case it was intended that the legatee should have the benefit of the statute. We cannot imagine how it could have been the intent of the legislature to have made it possible to acknowledge or recognize a relationship which had no foundation in fact. One of the lexicographers says:

"Acknowledge' is opposed to 'keep back' or 'conceal,' and supposes that something had been previously known to us, though perhaps not to others, which we now feel bound to lay open or make public. Thus, a man acknowledges a secret marriage; one who has done wrong acknowledges his fault; an author acknowledges his obligations to those who have aided him.”

So, in the statute, the parent acknowledges his illegitimate child, and the child acknowledges his parent, and the mutual acknowledgment provided for by the statute takes place. The order should be affirmed, with costs.

All concur.

(86 Hun, 241.)

PHILLIPS v. LEWIS.

(Supreme Court, General Term, First Department. April 11, 1895.) TRIAL LITIGATING ISSUES NOT WITHIN PLEADING.

Where evidence not within the pleadings is admitted without objection from the adverse party, who does not claim to have been surprised thereby, and who introduced evidence to contradict it, it is error to refuse to submit to the jury the issues raised thereby.

Appeal from circuit court, New York county.

Action by Mary Phillips against Margaret Lewis to recover the sum of $650, with interest from May 1, 1888, for the alleged agreed price of board and lodging furnished by plaintiff to defendant. verdict was rendered in favor of plaintiff for part of the amount elaimed, and from the judgment entered thereon, and from an order denying a motion for a new trial, plaintiff appeals. Reversed.

JJ.

Argued before VAN BRUNT, P. J., and O'BRIEN and FOLLETT,