by them, when at the same time the deduction was disallowed to him. The answer is that upon a true construction of this clause of the act, the meaning and intent of the lawmakers were that the rate of taxation of the shares should be the same or not greater than upon the moneyed capital of the individual citizen, which is subject or liable to taxation; that is, no greater proportion or percentage of tax, in the valuation of the shares, should be levied than upon other moneyed taxable capital in the hands of the citizens." The learned judge, further on in the opinion, says: "Another objection taken is that the taxation of the shares of the relator is illegal on account of this deduction, it being a departure from the rate of assessment prescribed in the clause already cited. The answer is that this clause does not refer to the rate of assessments upon insurance companies as a test by which to prevent discrimination against the shares. That is confined to the rate of assessments upon moneyed capital in the hands of individual citizens. These institutions are not within the words or the contemplation of congress; but, even if they were, the answer we have already given to the deduction of these securities in the assessment of the property of individual citizens is equally applicable to them. These companies are taxed on their capital, and not on the shareholder, at the same rate as other personal property in the state. There is not much danger to be apprehended of a discriminating tax in their favor, prejudicial to the rights or property of a citizen, and, of course, to the rights of the shareholders in these national banks, who stand on the same footing."

In Mercantile Bank v. City of New York, 121 U. S. 138, 7 Sup. Ct. 826, 30 L. Ed. 895, the bill was filed by the complainant as a national bank. It sought to restrain the collection of taxes assessed upon its stockholders in respect of their shares therein, on the ground that the taxes to be collected by the defendants were illegal and void under section 5219 of the Revised Statutes of the United States, being at a greater rate than those assessed under the laws of New York upon other moneyed capital in the hands of individual citizens of that state. It was claimed that there were a large number of unlawful exemptions under the laws of the state of New York in violation of the statute, to which reference has been made; among others, trust companies and life insurance companies were named. Mr. Justice Matthews, in delivering the opinion of the court, said: "It is accordingly contended on behalf of the appellees in the present case: First, that the shares of stock in the various companies incorporated by the laws of New York as moneyed or stock corporations, deriving an income or profit from their capital or otherwise, including trust companies, life insurance companies, and

*

savings banks, are not moneyed capital in the hands of the individual citizen, within the meaning of the act of congress; second, that, if any of them are, then the corporations themselves are taxed under the laws of New York in such a manner and to such an extent that the shares of stock therein are in fact subject to a tax equal to that which is assessed upon shares of national banks; and, third, that, if there are any exceptions, they are immaterial in amount, and based upon considerations which exclude them from the operation of the rule relative to taxation intended by the act of congress." The learned judge, after reviewing a number of authorities in the supreme court of the United States, and discussing the question generally, said: "It follows as a deduction from these decisions that 'moneyed capital in the hands of individual citizens' does not necessarily embrace shares of stock held by them in all corporations whose capital is employed, according to their respective corporate powers and privileges, in business carried on for the pecuniary profit of shareholders, although shares in some corporations, according to the nature of their business, may be such moneyed capital. * The key to the proper interpretation of the act of congress is its policy and purpose. The object of the law was to establish a system of national banking institutions in order to provide a uniform and secure currency for the people, and to facilitate the operations of the treasury of the United States. It was deemed consistent with these national uses, and otherwise expedient, to grant to the states the authority to tax them within the limits of a rule prescribed by the law. In fixing those limits it became necessary to prohibit the states from imposing such a burden as would prevent the capital of individuals from freely seeking investment in institutions which it was the express object of the law to establish and promote. * The business of banking, as defined by law and custom, consists in the issue of notes payable on demand, intended to circulate as money where the banks are banks of issue; in receiving deposits, payable on demand; in discounting commercial paper; making loans of money on collateral security; buying and selling bills of exchange; negotiating loans, and dealing in negotiable securities issued by the government, state and national, and municipal and other corporations. These are the operations in which the capital invested in national banks is employed, and it is the nature of that employment which constitutes it in the eye of this statute 'moneyed capital.' Corporations and individuals carrying on these operations do come into competition with the business of national banks, and capital in the hands of individuals thus employed is what is intended to be described by the act of congress. That the words of the law

*

must be so limited appears from another consideration. They do not embrace any moneyed capital in the sense just defined, except that in the hands of individual citizens. This excludes moneyed capital in the hands of corporations, although the business of some corporations may be such as to make the shares therein belonging to individuals moneyed capital in their hands, as in the case of banks." The opinion takes up the matter of trust companies. After commenting upon certain legislation of the state of New York in respect to them, and not material to consider at this time, the court said: "Trust companies, however, in New York, according to the powers conferred upon them by their charters, and habitually exercised, are in no proper sense of the word banking institutions." After enumerating the general powers of trust companies, the court said: "It is evident, from this enumeration of powers, that trust companies are not banks in the commercial sense of that word, and do not perform the functions of banks in carrying on the exchanges of commerce."

In the case at bar the appellants' counsel contends that, since the decision of the case last cited, the powers of trust companies have been increased by the banking law of 1892 (chapter 689, § 156), as it confers upon them all the powers prescribed by the statute laws of the state of New York to banks created thereunder, except the power to emit bills which circulate as money. While this statement is unintentionally much broader than the detailed provisions of the statute referred to warrant, yet it is true that trust companies exercise the powers conferred upon individual banks and bankers by section 55 of the banking act, and subject to its restrictions. This section fixes the rate of interest to be charged, and imposes penalty for violation of its provisions. It is, however, to be remembered that trust companies are very much limited as to the money they can use for these purposes. Their capital must be invested in United States bonds, state or municipal bonds, or first mortgage bonds on improved real estate, and is thereby separated from the surplus and deposits of the company that may be used for the purposes to which reference has been made. A trust company accepts and executes all trusts of every description committed to it by any person or corporation, or any courts of record; receives the title to real or personal estate on trusts created in accordance with the laws of the state, and executes such trusts; acts as agent for corporations in reference to the issuing, registering, and transferring certificates of stock and bonds and other evidences of debt; accepts and executes trusts for married women in respect to their separate property, and acts as guardian for the estates of infants. It is very obvious that trust companies are not, in the legal or commercial sense, engaged in the business of banking.

A national bank is authorized to issue notes payable on demand intended to circulate as money, and, while compelled to secure its circulation by the deposit of United States securities, it can employ the balance of its capital for business purposes, thereby securing a profitable return for its stockholders. A national bank occupies a distinct field of operation as compared with a trust company, and enjoys privileges that are not accorded to the latter, which are the source of great profit.

It is also to be borne in mind that the federal government imposes a tax of 10 per cent.. on the bills issued by state banks, which practically prevents them from competing with national banks in putting out circulation, which is greatly to the advantage of the latter.

In the case of Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 19 Sup. Ct. 537, 43 L. Ed. 851, the supreme court of the United States referred to section 5219 of the United States Revised Statutes, and held, reviewing some of the former cases, that it is the measure of power of the state to tax national banks; that power being confined to a taxation of the shares of stock in the names of the shareholders and to an assessment of the real estate of the bank. Mr. Justice White uses this language (page 677, 173 U. S., page 540, 19 Sup. Ct., and page 856, 43 L. Ed.): "This question was examined, and it was decided that, as the shares of stock in the hands of the shareholders were distinct and different subjects-matter of taxation from the property or rights of the bank, that therefore the power conferred by congress could be exercised so as to tax the shareholders, even although the property of the bank was invested in nontaxable bonds of the United States, because the two were distinct and different things. * * cases [referring to Van Allen v. Assessors, and other cases], interpreting the act of congress, have never been questioned, and, indeed, form the basis upon which the taxation of the shares of stock in the names of the shareholders allowed by the act of congress have been made efficacious for the purpose of bringing a vast amount of property within the taxing power of the states which would have been excluded had not the principles which the cases announced been established."

These

We have not deemed it necessary to consider in detail the various points argued by the appellants. It is sufficient to say that, after an examination of them, we see no reason to disturb the order of the appellate division. The order appealed from should be affirmed, with costs.

PARKER, C. J., and O'BRIEN, MARTIN, VANN, and LANDON, JJ., concur. HAIGHT, J., not voting.

Order affirmed.

1. Since Code Civ. Proc. § 1338, provides that, on an appeal to the court of appeals from a reversal of a judgment on a referee's report, it must be presumed that the judgment was not reversed on a question of fact unless the contrary appears in the record, where it appears from the appellate division's opinion that it was its intention to reverse the judgment on the facts as well as the law, but the order of reversal is silent on the subject, the only errors open to consideration by the court of appeals are whether, on the facts found by the referee, his conclusion of law is correct, whether an essential fact was found without any evidence which, according to any reasonable view, would warrant it, and whether a material error was committed in receiving or rejecting evidence.

2. In an action by a building contractor for a balance due him on the contract, the burden is on the plaintiff to prove the cost of remedying unsubstantial defects where substantial performance is shown; and a finding that plaintiff was entitled to judgment for the reason that defendant did not prove the cost of remedying such defects was error.

3. Where a building contract provided that girders of a certain length should be properly placed, and that a wooden partition should be placed on a brick wall in the basement, a failure to put in such girders and partition constituted a substantial deviation from the general plan of the work, which precluded a finding of substantial performance of the contract. Appeal from supreme court, appellate division, Third department.

Action by George Spence against Albert W. Ham for balance due on a building contract. From a judgment of the appellate division (50 N. Y. Supp. 960) reversing a judgment in favor of plaintiff, plaintiff appeals. Affirmed.

This action was brought to recover a balance alleged to be due the plaintiff from the defendant upon a building contract entered into by them on the 15th of September, 1888. The plaintiff alleged performance, admitted the payment of $2,500 on account, and sought to recover a balance of $2,044.97, which inIcluded the sum of $644.97 claimed to be due for extra work. The defendant, among other defenses, denied that the contract had been performed on the part of the plaintiff. The referee before whom the action was tried found generally that the contract had been substantially performed, but he also found specifically as follows: "There were slight omissions and deviations in the performance of the contract and specifications by the plaintiff from the strict letter of the contract, but such omissions and deviations were through inadvertence on the plaintiff's part, and were not willful or intentional. Some of said omissions and deviations were at the request and with the consent of the defendant. Other omissions and deviations were necessary or desirable if the building was to be properly constructed, and such

omissions would be usual and customary in a house built on the plan of the house in question. Such omissions and deviations did not prevent a substantial performance of the contract, and were in no wise repugnant to it. Such omissions and deviations of the work, arising neither from the consent of the owner nor necessity, consisted chiefly as follows: Failure to place bridging in certain places provided by the contract; failure to supply certain collar braces; failure to have girders of certain length, and properly placed; failure to have trimmers and headers double instead of single according to the contract; failure to put drawers and shelves in closets, pursuant to plans and specifications; failure to place wooden partition on a brick wall in basement. Such defects and other small defects appearing in the building, proved to be due to any fault on the part of the plaintiff, could be remedied for fifty dollars, which is an adequate allowance for the same under the evidence. The defendant might have been entitled to a greater allowance on account of the defective performance if he had proved and claimed what it would have cost to complete the contract strictly according to its terms. But he did not give such proof, and hence there is no basis for such allowance." He found, as a conclusion of law, that the plaintiff was entitled to recover the sum of $202.32 for extra work, together with the balance unpaid upon the original contract, after deducting $50 on account of "immaterial defects in the plaintiff's work." The judgment entered accordingly was reversed by the appellate division; the order of reversal being general in form, with no statement that the judgment was reversed or the new trial granted upon a question of fact.

George B. Wellington, for appellant. Charles E. Patterson, for respondent.

VANN, J. (after stating the facts). According to the opinion of the appellate division, it was the intention of that court to reverse the judgment upon the facts as well as the law; but, as the order of reversal is silent upon the subject, the statute compels us to presume that the judgment was not reversed upon a question of fact. Code Civ. Proc. 1338; Bomeisler v. Forster, 154 N. Y. 229, 48 N. E. 534, 39 L. R. A. 240; Koehler v. Hughes, 148 N. Y. 507, 42 N. E. 1051. It is important for counsel, in preparing a judgment or order to carry into effect the decision of an appellate division, to see that it is so drawn as to properly express what the court actually decided. We have repeatedly called attention to the necessity, when the reversal is on the facts or when the affirmance is unanimous, of so stating in the order or judgment, yet cases are constantly coming before us in which the rights of parties are sacrificed by a disregard of the practice established by the legislature or the court.

The condition of the record leaves only three classes of errors open to our consideration: (1) Whether, upon the facts found by the referee, his conclusion of law is correct; (2) whether an essential fact was found without any evidence which, according to any reasonable view, would warrant it; (3) whether a material error was committed in receiving or rejecting evidence. Gannon v. McGuire, 160 N. Y. 476, 55 N. E. 7; Petrie v. Trustees, 158 N. Y. 458, 53 N. E. 216; Edson v. Bartow, 154 N. Y. 199, 48 N. E. 541; Otten v. Railway Co., 150 N. Y. 395, 44 N. E. 1033. If the referee committed one or more errors under this classification, the order of the appellate division reversing his judgment upon a question of law only should be affirmed; otherwise, it should be reversed.

The referee found that the contract in question had been substantially performed by the plaintiff, yet he also found certain omissions and defects for which he allowed compensation to the defendant, and certain other omissions and defects for which he allowed no compensation because the defendant did not prove what it would cost to complete the contract in this regard. Thus, upon the face of the report, the question arises whether the burden was upon the contractor or the owner to show what it would cost to remedy defects. The question, as presented by the record, is the same as if the plaintiff had alleged substantial instead of complete performance, because that is the basis upon which he recovered. In order to recover at all, he was obliged to show either full or substantial performance. Upon showing full performance he could recover the full contract price, but upon showing substantial, which is but partial, performance, he could only recover the contract price after deducting the sum required to remedy the omissions which, when remedied, would make performance complete. Each party would thus get what he was equitably entitled to,-the plaintiff, payment for all that he did; and the defendant, compensation for all that the plaintiff omitted to do. Clearly, there should be no recovery for what the plaintiff agreed to do but did not do, yet such is the effect of the decision we are reviewing. Substantial performance is performance except as to unsubstantial omissions, with compensation therefor. When the omission is slight and unintentional, in order to prevent the hardship of a failure to recover even for that which was well done, compensation is substituted, pro tanto, for performance. This is the modern rule, adopted upon the theory that the parties are presumed to have impliedly agreed to do what was reasonable under all the circumstances with reference to the subject of performance. Thus, it was said in Woodward v. Fuller, 80 N. Y. 312, 315: "If the plaintiff is to be held strictly to the terms of his contract, he must fail to recover thereon, and that he should be is the effect of the earlier cases in this state. See those cited in the opinion of Com

stock, J., in Smith v. Brady, 17 N. Y. 185. But there has been a relaxation of that rule, and now on such a contract there may be a recovery without a literal or exact performance of it. It is now the rule that where a builder has in good faith intended to comply with the contract, and has substantially complied with it, although there may be slight defects, caused by inadvertence or unintentional omissions, he may recover the contract price, less the damages on account of such defects." So, in Nolan v. Whitney, 88 N. Y. 648, 649, the court announced that: "It is a general rule of law that a party must perform his contract before he can claim the consideration due him upon performance, but the performance need not in all cases be literal and exact. It is sufficient if the party bound to perform, acting in good faith, and intending and attempting to perform his contract, does so substantially; and then he may recover for his work, notwithstanding slight or trivial defects in performance, for which compensation may be made by an allowance to the other party." We quote from still another case as follows: "The question of substantial performance depends somewhat on the good faith of the contractor. If he has intended and tried to comply with the contract, and has succeeded, except as to some slight things omitted by inadvertence, he will be allowed to recover the contract price, less the amount necessary to fully compensate the owner for the damages sustained by the omission. Woodward v. Fuller, 80 N. Y. 312; Nolan v. Whitney, 88 N. Y. 648; Phillip v. Gallant, 62 N. Y. 256, 264; Glacius v. Black, 50 N. Y. 145, s. c. 67 N. Y. 563, 566; Johnson v. De Peyster, 50 N. Y. 666; Sinclair v. Tallmadge, 35 Barb. 602." Van Clief v. Van Vechten, 130 N. Y. 571, 579, 29 N. E. 1017.

He who relies upon substantial as contrasted with complete performance must prove the expense of supplying the omissions, or he fails in his proof; for he cannot recover for full performance when a part of the contract is still unperformed. The doctrine of substantial performance necessarily includes compensation for all defects which are not so slight and insignificant as to be safely "overlooked on the principle of de minimis non curat lex." Van Clief v. Van Vechten, supra. Unsubstantial defects may be cured, but at the expense of the contractor, not of the owner. The contractor cannot recover the entire contract price when defects or omissions appear; for he must show, not only that they were unsubstantial and unintentional, but also the amount needed to make them good, so that it can be deducted from the contract price, and a recovery had for the balance only. This is an essential part of substantial performance, and hence the proof should be furnished by the one who claims substantial performance. Zimmermann v. Jourgensen, 14 N. Y. Supp. 548; Id., 70 Hun, 222, 228, 24 N. Y. Supp. 170; affirmed in 144 N. Y. 656, 39 N. E. 859; Cutler v.

Close, 5 Car. & P. 337; Chit. Cont. (13th Ed.) 520; 1 Huds. Bldg. Cont. p. 394. There was nothing decided in Heckmann v. Pinkney, 81 N. Y. 211, which is relied upon by the plaintiff, that is in conflict with these views; for in that case the referee found that the "defendant had waived performance as to the items wherein there was not perfect performance." When the plaintiff shows that he performed his contract, he is entitled to judgment for the contract price; but when he shows that he performed his contract, except that through inadvertence he omitted to do some unsubstantial things, he is not entitled to recover anything until he shows that the things omitted, if worthy of any attention whatever, can be supplied for a comparatively small sum, in which event he can recover the contract price after deducting that sum. This rule is liberal to the contractor, for it allows him to recover when he has not fully performed, and it cannot be extended without danger to the integrity of the contract. As he does not show full performance, it is not requiring too much of him to show what it will cost to remedy the defects, in order to permit him to recover the contract price, less the sum allowed for defective performance. It is for him to show this; for otherwise the owner could say, "Am I to pay according to my promise, when the contractor does not perform according to his?" The one who fails in fully performing, and who invokes the doctrine of substantial performance, must furnish the evidence to measure the compensation for the defects, as that is the substitute for his failure to do as he agreed. The learned referee therefore inadvertently committed an error of law when he found that the defendant would have been entitled to a greater allowance on account of defective performance if he had proved and claimed what it would cost to complete the contract strictly according to its terms, as it was for the plaintiff, not for the defendant, to furnish the evidence to measure the allowance for omissions and defects.

We are also of the opinion that he fell into further error when he found that the defects "for which the plaintiff is held to be responsible were not pervasive, and did not constitute a deviation from the general plan, and were not so essential that the objects of the parties in making the contract and its purpose have not, without difficulty, been accomplished." We find no evidence which, according to any reasonable view, supports this finding, so far as the "failure to have girders of certain length and properly placed," and the "failure to place wooden partition on a brick wall in basement," are concerned. These were structural defects, which affected the solidity of the building, and tended to defeat the object of the contract. They were deviations from the general plan of so essential a character that they cannot be remedied without partially reconstructing the building,

and hence do not come within the rule of substantial performance, with compensation for unsubstantial omissions. Crouch v. Gutmann, 134 N. Y. 45, 31 N. E. 271. The law is not satisfied by allowing the expense of a new girder, for instance, considered simply as a stick of timber of the right size; for the defective girder, which partially supports the building, must be removed, and another put in its place, in order to remedy the defect. While it may be possible to make the substitution, the process is difficult and apt to injure the structure, and hence the defect cannot be regarded as unsubstantial. The order appealed from should be affirmed, and judgment absolute, with costs, directed against the plaintiff, in accordance with the stipulation given upon bringing the appeal.

PARKER, C. J., and O'BRIEN, BARTLETT (HAIGHT, J., on last ground stated in opinion), and MARTIN, JJ., concur. LANDON, J., not sitting.

Order affirmed, etc.

(185 Ill. 527)

STEVENSON et ux. v. CAMPBELL et al.1 (Supreme Court of Illinois. April 17, 1900.) VENDOR AND PURCHASER - BONA FIDE PURCHASER EVIDENCE POSSESSION OF DEFRAUDED VENDOR-NOTICE-ESTOPPEL.

1. Complainant was induced to convey his house and lot for a worthless note and mortgage by false representations of the agent of the owner thereof. The deed was made to a day laborer who had no property. He conveyed to defendant, who, though he lived but 2 blocks from the house, had never been in it when he bought it, did not know the number of rooms or improvements it contained, the condition of its interior, or the size of the lot, and did not inquire about the taxes. The consideration paid by defendant was much less than the house and lot were worth. Defendant made no inquiry of complainant, who remained in possession after learning that he had been swindled. Held, that defendant was not a bona fide purchaser without notice.

2. Though the continued possession of defrauded vendor may not operate as absolute notice of the fraud to a purchaser from the vendee, it is a circumstance to be considered in connection with other facts on the question of notice and good faith.

3. A compromise agreement between one in possession of land, claiming title, and that he was induced by fraud to convey it, and one claiming to be a bona fide purchaser from the grantee, whereby they were to have a kind of joint possession until the controversy was settled, though in the form of a lease, will not estop the former from denying such purchaser's title.

Error to circuit court, Champaign county; Francis M. Wright, Judge.

Bill by Harry E. Stevenson and wife against David L. Campbell and others. From a decree dismissing the bill, plaintiff's bring error. Reversed.

White & Dobbins, for plaintiffs in error Lewis & Lewis, T. J. Smith, Roy Wright,

1 Rehearing denied June 8, 1900.