text:
    Egberts and others vs. Wood and others.
    Where several creditors or legatees are entitled to a rateable proportion of a common fund, which is insufficient for the payment of all their debts qr legacies, all the creditors or legatees should be made parties to a bilfifiled for the distribution of the fond; or the bill should be filed by a part of such creditors or legatees, in behalf of themselves and all others standing in a like situation in reference to the fund.
    If an express trust is created for the benefit of creditors, without conferring upon the trustee any authority to give a preference to any particular creditor, it will, both at law and in equity, be considered as a trust for all the creditors rateably.
    In cases of implied trusts for the benefit of creditors, if one of the creditors comes'into the court of chancery to enforce the execution of the trust, the court will act upon the principle that equality is equity ; except in cases where such creditor has acquired a specific lien upon the fund by his superior vigilance, or where he is entitled to a legal preference.
    The property of a copartnership, upon the insolvency of the firm, is considered, in equity, as a trust fund for the payment of the partnership creditors rateably.
    But either of the partners before the dissolution of the copartnership, or all the partners afterwards, may apply the partnership funds to the payment of one creditor in preference to another.
    The only restraint upon this right of giving a preference to one creditor over another, is the provision in the revised statutes, which deprives the insolvent debtor, who gives such preference, of the benefit of the insolvent laws.
    It seems that one of the partners, during the existence of a copartnership, may, without the consent of his copartners, make a valid assignment in the name of the firm, of all or any of the partnership effects, directly to a creditor of the firm, in payment of his debt. _
    Whether one partner can, without the consent of his copartners, assign the partnership effects to a trustee for the payment of the partnership debts, and can in such assignment give a preference to one set of creditors over another ? Q.uaere.
    Where one of several partners dies, the legal title to the debts and choses in action, belonging to the copartnership, vest in the surviving partners as joint tenants; and they alone are chargeable at law with the payment of tho partnership debts.
    And such surviving partners, without the assent of the personal representatives of the deceased partner, can appropriate the partnership property to the payment of the partnership debts, and may give such preferences in the payment of debts as they may think proper.
    The representatives of the deceased partner have the right to insist that the partnership effects shall be applied to the payment of the partnership, debts.

      Sept. 18.
    After the dissolution of a copartnership, one of two surviving partners cannot, without the consent of the other, assign the partnership effects to trustees for the benefit of preferred creditors.
    Partnership creditors are entitled to a priority of payment out of the partnership property ; and the separate creditors of the individual partners, to a priority of payment out of their separate property.
    This was an application on the part of the defendants, D. & B. R. Wood, for the dissolution of an injunction, on bill and answer. The bill alleged that several judgments had been recovered against the defendants C. Jessup and H. Vandenburgh, as surviving partners of G-. F. Lush deceased, on which judgments executions had been issued and returned unsatisfied. That Lush died on the 11th of December, 1828, whereby the partnership was dissolved; and that I. Keeler was appointed his administrator. That the firm of Edwin Jessup, under which name the partners had been doing business, stopped payment, about the first of January, 1829, and declared itself insolvent to a large amount. That after the death of Lush, the business of the firm was continued by Jessup and Vandenburgh, until the time of their failure, without any new or other agreement than that which had previously existed. That on the 8th of January the defendant Jessup, without the knowledge, consent or approbation of the defendant Vandenburgh, or of the personal representative of Lush, assigned to the defendí ants D. & B. R. Wood all the debts choses in action and securities of the copartnership, upon trust to pay certain preferred creditors; and that neither Vandenburgh, nor the personal representative of Lush had ever assented to the assignment. And the complainants therefore insisted that the assignment was illegal, fraudulent and void ; or that it only transferred the interest of Jessup, in the surplus of the assigned property, after payment of the partnership debts. The complainants further alleged that the assignees had paid the preferred creditors forty-two per cent, on the amount of their respective debts, out of the proceeds of the assigned property; and that a considerable sum still remained in the hands of the assignees. That the estate of Lush was insolvent, and that Vandenburgh had been discharged under the act to abolish imprisonment for debt in certain cases, and had executed an assignment, to J. J. Lansing, according to the statute. And the complainants prayed that the assignment executed by Jessup might be declared void ; that a receiver of the effects of the co-partnership might be appointed-.; that the assignees might be restrained from paying over the residue of the proceeds of the assigned property to the preferred creditors; and for general relief.
    By the answer of the assignees, all the material facts as stated in the bill were admitted; except that it was denied that the assignment was made without the knowledge or consent of Vandenburgh, and the personal representative of Lush, or that the copartnership, as between the surviving partners, was dissolved by the death of Lush. But, on the contraiy, the assignees alleged in their answer, one of them upon his own knowledge and the other upon his information and belief, that the assignment was made by Jessup with the knowledge and approbation both of Vandenburgh the surviving partner, and of Keeler, the personal representative of Lush; and that the assignment was not executed by Vandenburgh because it was not considered necessary to its validity, he having been a dormant partner only.

      A. Van Vechten & J. Edwards, for the complainants.

      B. F. Butler & B. R. Wood, for the assignees.
   The Chancellor.

Several questions were raised on the argument" of this case, which probably are not material to the decision of the present motion. It is urged, in behalf of these complainants, that upon the dissolution of a copartnership by the death of one of the partners, the survivors became trustees for all the creditors of an insolvent firm, and have no right to pay one creditor to the exclusion of another, but that all must be paid rateably. If the principle contended for is correct this suit is not properly instituted for the purpose of carrying that principle into effect. It is alleged in the bill that there were other creditors, not provided for in the assignment, to the amount of $25,GOO, including what is due to these complainants. To have enforced the principle of equality among creditors, it would therefore have been necessary and proper that this bill should have been filed by the complainants in behalf of themselves and of all other creditors of the firm who might choose to come in under the decree. But this suit is instituted by the complainants in behalf of themselves alone, as judgment and execution creditors of the surviving partners; and if they can reach the assigned property in this suit, they will probably be entitled to so much thereof as is sufficient to satisfy their judgments, to the exclusion of all other creditors of the firm. Where it appears upon the face of the bill that there will be a deficiency in the fund, and that there are other creditors or legatees who are entitled to a rateable distribution with the complainants, and who have a common interest with them, such creditors or legatees should be made parties to the bill, or the suit should be brought by the complainants in behalf of themselves and all others standing in a similar situation ; and it should be so stated in the bill. (Baldwin v. Lawrence, 2 Sim. & Stu. R. 18. Leigh v. Thomas, 2 Ves. sen. 311. Fish v. Howland, 1 Paige’s Rep. 20.) But as this objection might be obviated by an amendment of the bill, as was done in the case of Good v. Blewitt, (13 Vesey's Rep. 397,) it may be proper to inquire whether any such principle as is contended for does in fact exist.

Where an express trust is created for the benefit of creditors without any authority to the trustee to give a preference to any, it is, both at law and in equity, a trust for each' of the creditors rateably. And even in the case of implied trusts, where one of the creditors comes into this court to enforce the performance of the trust, except in those cases where he has acquired a specific lien by his superior vigilance, or where he is entitled to a legal preference, this court will act upon its favorite maxim that equality is equity. But although the principle of equality has always been a favorite with this court, it has not heretofore been adopted as a principle of the common law. On the contrary, by the common law, the property of an insolvent decedent in the hands of his personal representatives ás trustees for the payment of his debts, was in the first place to be applied to satisfy the demands of certain classes of privileged creditors to the exclusion of all others; and even as among creditors of the same class, the personal representative might exercise an arbitrary discretion in giving a preference to one creditor over another. It is true this inequitable principle of the common law has been modified, to a certain extent, in the recent revision of the statutes,But in one respect it has been extended, by giving a preference to one judgment against the decedent over another, on the ground of priority, when, by the common law, neither judgment was a lien upon the personal estate of the decedent, and neither was entitled to a preference in payment. So, by the law merchant, although the effects of a copartnership, upon the insolvency of the firm, were in equity considered a trust fund for the payment of the partnership debts, and any of the partners might apply to this court for the purpose of having the partnership funds thus appropriated rateably among all the creditors, yet either of the partners before the dissolution of the copartnership, or all of them afterwards, might unquestionably exercise the right of appropriating those funds to the payment of one creditor in preference to another. Here, too, the revised statutes have imposed a partial restriction upon this common law right, by depriving an insolvent debtor, who attempts to exercise that right, of the benefit of the insolvent laws. But if he is willing to subject himself to this disability, by giving a preference, the payment of one creditor to the exclusion of others is valid as against the other creditors. And if the partners after a voluntary dissolution of the firm may give such preference, I see no reason which would prevent the surviving partners, upon a dissolution of the firm by the death of one of the members thereof, from giving a similar preference with the consent of the personal representative of the decedent. Such is the present case, as presented by the answer of these assignees.. Although it is charged in the bill that the assignment was made without the knowledge or consent of Vandenburgh or of Keeler, the administrator, yet the defendants Jessup, and D. Wood the only assignee who has any personal knowledge on the subject, swear positively that the assignment was made with the imowledge and consent of both. And whatever may be the construction of the answer of Vandenburgh, it cannot on this application be evidence against the assignees.

As the decision of this question in favor of the defendants is sufficient to dispose of the motion now before me, it is not necessary that I should go further at this time. But as it has been requested by the counsel of one of the parties and may save the expense of talcing testimony and of further litigation, that I should express an opinion upon some of the other questions which were discussed on the argument, I will proceed to examine them.

I do not think the partnership articles will bear a construction that the business of the firm was to be continued for the benefit of the original partners and their representatives, after the death of one of the members of the firm. The clauses relied upon by the defendants’ counsel to support that construction are the clause which relates to the continuance of the partnership, and that which provides for the distribution of the profits of the concern, upon a dissolution of the fir mi It appears from the articles that this was a partnership of a peculiar character. Lush & Vandenburgh were already in partnership, as merchants, in a particular business; for the continuance of which an express provision was made in these articles. The new company purports to have been formed bétween Edwin Jessup of the one part, in whose name the business was to be conducted, and of Lush & Vandenburgh in their copartnership character of the other part; and provision • is made for the division of the surplus profits of the concern during the existence of the copartnership, the one half thereof to Jessup, and the other half to Vandenburgh & Lush, jointly. The capital of the company also appears to have been furnished in the" same proportions. The provision, as to the continuance of the company, is as follows : “ Which partnership is to continue from the date of these presents during and until the same shall be dissolved and put an end to, by and with the mutual consent of both the parties to these presents.” There is nothing in this clause from which an intention to continue the business of the firm after the death of one of the parties could be inferred. And the fact that it was a partnership between Jessup of the one part, and the pre-existing company of Vandenburgh & Lush of the other, is conclusive to -show that such could not have been the understanding of the parties. By the death of either Vandenburgh or Lush, the copartnership between them would be dissolved; and the affairs of that concern could not be settled until their share of the profits or loss in the new concern with Jessup, could be ascertained. And on the other hand, if Jessup should die, there could be no object in continuing a company which was to be carried on in his individual name only. The clause which provides for the distribution of the surplus upon the determination of the partnership, directs one moiety or half part to be given to Jessup, and the other moiety to Vandenburgh & Lush, or to the executors or administrators of either of the parties who might happen to die previous t© the dissolution or termination of the copartnership. The provision for the payment of the share of a deceased party to his personal representative does not .imply that the partnership is to be continued after his death ; because such a provision would be equally proper if the parties contemplated the event, which has actually happened, of a disolution occasioned by the death of one of the partners. And the expression, “ either of the said parties who may happen to die previous to the dissolution,” is equally appropriate when applied to the case of a dissolution by the death of one of the partners. The party, in such a case, does die previous to the dissolution of the copartnership according to the ordinary understanding of these terms, although the company is dissolved, eo instanti, by the death of such party.

It appears to be the better opinion, that one of the partners at any time during the existence of the partnership, may assign the partnership effects, in the name of the firm, for the payment of the debts of the company, although by such assignment a perference is given to one set of creditors over another. In the case of Dickinson v. Legare and others, cited, by the complainants’ counsel from the equity reports of South Carolina, (1 Dessaus, R. 537,) the court of chancery of that state decided against the validity of an assignment of all the partnership effects, made by one of the partners without the knowledge or consent of the other, to pay the debt óf a particular creditor. Chancellor Matthews, who delivered the opinion of the court in that case, admits that it was a question of the first impression, no case analogous to it having come under the view of the court. That assignment, however, was made under very peculiar circumstances. The company during the revolutionary war were doing business in this country. And while one of the partners was on a voyage to France, he was taken by a British ship of war and carried as a prisoner to England, where he was prevailed upon by a creditor residing there, to give him a general assignment of all the partnership funds, which funds were then in this country, to secure the payment of his particular debt against the firm. Although the decision was put upon the general ground that one partner had not the right to assign the partnership funds in this manner without the consent of his copartner, there is no doubt that the particular circumstances under which that assignment took place had a very considerable influence in bringing the mind of the chancellor to that result. The assignment in that case being made by a citizen of one of the United States during the existence of the war, to an alien enemy and in an enemy’s country, was probably void, by the laws of war, so far at least as to prevent its being carried into effect by any of the courts of this country. And certainly it could not be considered as made according to any mercantile usage. That decision, however, has been recently overruled by the court of appeals in the same state, in the case of Robinson v. Crowder, (4 McCord’s L. R. 519;) where it was held that an assignment by one partner of all the effects of the firm in payment of the partnership debts, was valid as against his co-partners. In Pierpont v. Graham, (4 Wash. C. C. Rep. 232,) in the circuit court of the United States for the district of Pennsylvania, Judge Washington doubted the right of one of the partners without the consent of the others, to assign the whole of the partnership effects in such a manner as to terminate the partnership. But he declined expressing any decided opinion upon this question, which he considered unnecessary to the decision of the cause then before him; as, in that case, the copartner had subsequently assented to the assignment. In Mills v. Barber, (4 Day’s R. 428,) the supreme court ¡of errors in Connecticut decided that one partner, without the knowledge of the other; might make a valid assignment of partnership funds to secure the payment of a debt due from the firm. And in Harrison v. Sterry, (5 Cranch's Rep. 300,) the supreme court of the United States decided that one of the partners might assign the partnership effects to a trustee for the security or payment of the creditors of the firm, without the concurrence of his copartners. I do not intend in this case to express any opinion in favor of the validity of.such an assignment of the partnership effects to a trustee by one partner, against the known wishes of his copartner, and in fraud of his right to participate in' the distribution of the partnership funds among the creditors or in the decision of the question which of those creditors should have a preference in payment out of the effects of an insolvent concern. As a court of equity, upon a proper application, would protect the rights of the several partners in this respect before an assignment had actually been made, and if they could not agree among themselves would appoint a receiver of the effects of the partnership and would apply them in payment of all the debts due from tire firm rateably, it might perhaps apply the same rule to the case of an assignment to a trustee for the payment of the favorite creditors of one of the partners only, where the equitable rights of the parties had not in fact been changed by any proceedings under the assignment.

In this case, however, the partnership was actually dissolved before the assignment by the death of one of the partners. The effect of that dissolution, as to this assigned property which consists of debts and choses in action only, was to vest the legal title to the whole in the surviving partners as joint tenants under the law merchant; that is, subject to the equitable right of each of those partners and of the representatives of the decedent, to have the proceeds applied in the first place to the satisfaction of the partnership debts, and to have-the surplus, if any, distributed rateably among the surviving partners and the representatives of the deceased partner, according to their several interests in the firm. The Legal interest in all the assigned property was in the surviving partners, and at law they alone were chargeable with all the debts of the firm. They had therefore the right, without the assent or concurrence of the representative of Lush, to appropriate this property for the payment of the debts of the firm in such manner and by giving such preferences as they might think proper. (1 Dallas’ Rep. 248. 2 Idem, 65, n. 7 Mass. Rep. 257.) When it is said that by the law merchant the jus accrescendi, or right of survivorship, doth not take place among partners in trade, it is meant that it does not take place for the exclusive benefit of the survivor, as it does in a joint tenancy at the common law ; but that the survivor holds the partnership fund for the payment of the partnership debts and the settlement of the partnership concerns, and the balance, if any, to be distributed equitably between the representative of the deceased partner and the survivor. It is only the decedent’s share of such balance which belongs to that representative as a part, of the estate. But he has a right to insist that the partnership effects shall be applied to the payment of the debts of the firm, as the separate estate of the decedent may eventually be made liable for any deficiency. He has, however, no interest in'the question as to what debts shall be paid first, in case the partnership effects are insufficient to pay the whole. And the legal title being vested in the survivor, he alone has the right, at law, to determine that question. The situation of the surviving partners is different in this respect. By the dissolution of the co-partnership they became joint tenants of the partnership securities, but without the right in either, against the consent of the other, to assign the whole interest in the partnership effects to trustees for the benefit of preferred creditors. And, in this case, if Vandenburgh neither consented to the assignment before hand nor did any act to ratify it afterwards, bis moiety of the assigned property did not pass to the defendants, D. &B."Wood, under the assignment.

I do not see, however, that the establishment of that fact would aid the complainants in this case. The assignment of one of the surviving partners for the payment of the partnership debts would transfer his moiety or share both of the legal and equitable interest in the fund to the assignee, so that the assignor would no longer have any interest in the property. Even by an assignment under the bankrupt act, upon a seporate commission taken out against one of the partners, the legal interest in his moiety of the partnership effects passes to the assignee, who holds it as a tenant in common with the other partner. (5 John. Ch. Rep. 70.) It appears then by the complainants’ bill in this case that at the time of the.commencement of this suit, neither Jessup nor Vandenburgh had any interest whatever in the partnership property now in controversy which could be reached either at law or in equity. Jessup had executed an assignment which either transferred the whole, or at least the half of the debts and securities of the partnership to the Woods, in trust for the payment of a part of the partnership creditors. And Vandenburgh had afterwards executed an assignment under the insolvent act, by which whatever interest remained in him, in this or any other property, was vested in Lansing his assignee. If the whole did hot pass to the Woods under the first assignment, Lansing as the assignee of Vandenburgh, is alone authorized to call upon the first assignees for a moiety of the property, to be distributed among all the creditors rateably. As neither Jessup nor Vandenburgh had any legal or equitable claim to call upon the Woods for any part of the assigned fund at the time of the commencement of this suit, these complainants have no claim upon that fund except as general creditors of the firm, and through the medium of Lansing, the assignee of Vandenburgh. If Lansing acquired any title to a moiety of these partnership effects under the assignment to him, the proceeds of that part of the fund must, upon equitable principles, be applied to satisfy the partnership debts, before any thing can be claimed by the separate creditors of Vandenburgh. The rule upon this subject is, that the partnership creditors are entitled to a, priority of payment out of the partnership effects, and the separate creditors of the individual partners may claim a priority of payment out of their separate effects. (Taylor v. Fields, 4 Ves. Rep. 396. M’Culloh v. Dashiell’s adm’r, 1 Harris Gill’s Rep. 96.) Situated as tills suit is, I can see no benefit which can be derived to the complainants from the prosecution of it against the assignees of Jessup. If there are any partnership effects not included in Jessup’s assignment, it may be necessary to continue the suit against the judgment debtors for the purpose of reach-in g his interest in those effects, and which did not pass by either of the assignments.

The' injunction so far as it affects the rights of D. & B, B-, Wood, as the assignees of Jessup, must be dissolved.


source: Caselaw Access Project

author: The Chancellor.

license: Public Domain

text:
    Livingston vs. Harris and Livingston.
    Sept. 18.
    Under the provisions of the revised statutes, it is not necessary for a complainant who applies to this court for relief against an usurious contract, either to pay or to offer to pay the principal or the interest of the money actually loaned ; provided the answer of the defendant, on oath, is waived by the bill.
    The complainant cannot call upon a defendant for a discovery as to the usury charged in the bill, unless he pays or offers to pay the amount equitably due, exclusive of the legal interest.
    Where a defendant cannot answer as to particular facts charged in the bill without criminating himself, or subjecting himself to a penalty or forfeiture, he may demur to the discovery and answer as to the relief.
    A defendant in his answer, may object to the discovery of any matters charged in the bill which will subject him to a criminal prosecution, or to a forfeiture or penalty.
    It is inconsistent with the spirit of the constitution to compel a party to be a witness against himself in a case where the effect of the disclosure which he is required to make will subject him to a penalty or a forfeiture,
    This was an application on the part of the defendant S, Harris, for the dissolution of an injunction. The bill stated that a suit at law had been brought by the defendant Harris, against the complainant, H. Livingston, and the defendant, R. L. Livingston, on a joint and several note -which the complainant had signed as surety for his brother, R. L. Livingston; and which the complainant had subsequently discovered was given to secure an usurious loan from Harris, to his co-defendant in this suit. The bill prayed a discovery of the usury; that the note might be delivered up and cancelled; and for an injunction to stay the proceedings at law. There was no offer on the part of the complainant to pay either the principal or the legal interest of the money actually loaned; no part of which had ever been repaid to the lender.

      J. Rhoades, for the complainant.
    It will be contended by the counsel for Harris, that the complainant is not the borrower, under 1 12. S. 773, § 8. We insist that he is the borrower, within the intent and meaning of the statute, i. e. he is the person from whom the plaintiff at law seeks to recover his money loaned. But this court will never compel the complainant, under the circumstances disclosed in the bill, to bring into court, or offer to pay, what he never received. He owes no debt or duty to S. Harris; he has never received any thing from him. If bound to pay him money, he is bound, not by the principles of equity, but in virtue of a contract, which if not tainted with usury is binding on him; but which, if the facts stated in the bill are true, is absolutely void.
    The provision of the statute is as broad as the rule of equity, on which the defendant relies, and the decisions founded thereon ; to wit, that he who seeks equity must first do equity. It was the object of the provision of the statute to discourage usury and impose a penalty upon the usurer. It was the intention of the legislature to do away with those very decisions upon which this motion is founded. (See 1 R. S. 773, § 8, and Reviser’s Notes, ch. 4, part 2, tit. 3, p. 14 to 17.) And will a court of equity say that by that act it was the intention of the legislature to release the defendant Livingston, who is bound in honor and good conscience to pay back the money in fact loaned to him, from the payment of any money whatever; and to compel the complainant who never received a particle of consideration for the note, or benefit from the loan, to bring into court the $1,800 as a condition precedent to seeking relief from the $200 usury 1 This construction of the statute cannot for a moment be tolerated.

      J. W. Edmonds, for the defendant Harris.
    The question is, how far the revised statuses, (1 R. S. 773, § 8,) have altered the rules by which this court was formerly governed, in granting relief, or compelling a discovery in cases of usury. The master, in allowing the injunction, has acted under the impression that those rules were entirely abrogated. In this he erred. The rule of this court, that a party who seeks equity must first do equity, has led to the doctrine that he who seeks a discovery in aid of a plea of usury must comply with two conditions: one, to bring into court the money fairly due, with legal interest; and the other to waive the forfeiture created by the statute, or in other words, offer to pay that money to the lender; and this court never granted relief in such cases, unless upon a compliance with both these requisites. (Tupper v. Powell, 1 John. Ch. Rep. 439. Rogers v. Rathbum, Id. 367. Taylor v. Bell, 2 Vern. 171. Fanning v. Dunham, 5 John. Ch. Rep. 142. Morgan v. Sckermerhorn, 1 Paige's Rep. 554. Fulton Bank v. Beach, 1 Id. 429. S. C. mi Appeal, 3 Wendell, 587.) In what respect has the statute altered this rule! Irt the first place, it dispenses with the payment of, or an offer to pay, any interest whatever on the sum borrowed; thereby depriving the lender of any profits from money loaned usuriously. And in the next place it dispenses with the necessity of a deposit of the principal, but is silent as to the offer to pay the principal; thus leaving that part of the rule of this court untouched and in full force. The offer to pay may be enforced by this court as a condition of granting relief; and if it had been intended to dispense with the offer to pay the principal, it would have been so declared in the statute.
    Again; this court relieves only against the usurious excess, and never enforces a forfeiture of the sum actually loaned, unless the lender comes into this court for his remedy and the borrower can make oiit the usury by other means than the oath of the lender. (Rogers v. Rathbum, 1 John. Ch. Rep. 367. Viner, tit. Usury, 315. Fanning v. Dunham, 5 John. Ch. Rep, 142.) This court never compels a discovery in aid of a forfeiture. (1 John. Ch. Rep. 367, and the cases there cited.) ' If the construction of the statute contended for by the complainant is correct, then the lender can be compelled to make a discovery of the usury, and the forfeiture of the whole money loaned can, under the 5th section of the statute, be enforced,, either by the complainant, .who may withdraw his suit, or, as in this case, by one of the defendants, who does not seek relief. Thus the lender would be compelled either to commit perjury, or to forfeit his whole demand; and the whole doctrine of this court in regard to the usurious contracts would be entirely overturned. (Cooper's Eq. 205. Redesd. Tr. Ch. Pl. 158.) This would be contrary to the spirit of the age, and cannot be done, unless required by an express and clear enactment of the legislature. The 6th section of the act, relatedonly to a discovery of things already “ taken, accepted, or received” usuriously, and does not apply to a bill in aid of a plea at law. (Tupper v. Powell, 1 John. Ch. Rep. 439.)

      Again; we contend that the complainant is bound to deposit, as well as to offer to pay, the principal. He sets up in his bill, that he is the surety only, and that the money was-loaned by one of the defendants to the other. He is not the borrower; and the 8th section of the statute dispenses with the deposit as a condition of granting relief to the borrower only.
    The bill prays for relief as well as a discovery. The remedy is complete at law. This is good ground of demurrer; but this objection, as well as the objection that there is no deposit of the money equitably due, may be taken advantage of by a motion to dissolve the injunction. (Minturn v. Seymour, 4 John. Ch. Rep. 173. Skinner v. Dayton, 2 John, Ch. Rep. 226.)
   The Chancellor.

In deciding this case it is necessary to give a construction to the eighth section of the title of the revised statutes which relates to the interest of money; which title embraces the existing usury laws of this state. (1 R. S. 772, § 8.) On the part of the complainant it is insisted, that, under the provisions of this section, the defendant is bound to answer on oath as to any usurious consideration contained in an existing security, and to forfeit the whole debt if the usury is admitted by such answer. That the complainant is not required to pay, or to offer to pay, any part of the principal or the legal interest of the money actually lent, to entitle him to án answer from the defendant, and to a decree declaring the security void. The counsel for the defendant Harris, on the other hand, contends that the provisions of this section of the statute were only intended to deprive the lender of money upon usury of the interest on the sum loaned, where the borrower is compelled to resort to this court for a discovery of the usurious contract; and also to relieve the complainant from the inconvenience of paying or depositing the sum actually due, in the first instance, as a condition of granting relief by compelling a discovery and granting an injunction to stay proceedings at law in the mean time. He also insists that this section is limited to the case of a suit brought by the borrower; and that it is not applicable to the case now under consideration, in which the complainant expressly alleges that he was not the borrower, and that he signed the note only as a surety for his brother to whom the loan was made.

This section of the revised statutes has undoubtedly introduced a new principle in the law of usury, as administered in this court. And to ascertain its true construction, it is necessary to enquire how the law previously stood and what change the legislature intended to introduce. The usury lavra having declared all bonds, bills, notes, contracts, and assurances, which were contaminated with usury, void, it followed of course, that no suit could be sustained by the usurer or his assignee, either at law or in equity, founded upon the usurious contract or security ; even to recover back the money actually lent with the legal interest thereon. This, however, was found by the courts to be an insufficient protection to the borrower, from his inability to establish the fact of usury by the ordinary modes of proof adopted in courts of common law. It was also found that in many cases where the borrower had the means of proving the usury, the nature of the security taken by the lender was such as to give the borrower no opportunity to plead and establish the fact in a court of law. A common case of this kind was the taking of a bond and warrant of attorney and entering a judgment thereon ; by which means the defendant was precluded from pleading the usurious consideration of the bond. And where the lender had taken a mortgage for the loan, containing the usual power of sale, he also had the right to foreclose the equity of redemption of the borrower.by advertising under the statute, and without applying to any court. In these and some other cases of a similar nature, it became necessary for the borrower to resort to the extraordinary jurisdiction of the court of chancery to obtain discovery or relief. But when he applied to this court as a complainant, or actor, he found himself differently situated in respect to his rights under the usury laws, from what he would have been when placed in the situation of a defendant, either at law, or in equity. Coming here as the complainant to ask the equitable interference of this court, he was met by the standing maxim of courts of equity, that “ he that v/ill have equity must do equity.” {Francis’ Max. 1.) And this court could not afford Mm any relief against the usurious premium included in the security which he sought to set aside, except upon the terms, or condition, that he should repay to the de'fendant the money actually lent, with legal interest thereon. If a discovery was necessary, either to aid him in a defence at law, or otherwise, he was also met by another settled principle of this court, that it will not extort from the defendant an answer on oath, and thus compel him to be a witness against himself, where such answer might subject him to a criminal proceeding, or to a penalty or forfeiture, or to any loss in the nature of a forfeiture.

In accordance with these two principles it had become the settled law of the court of chancery, previous to the adoption of the revised statutes, that a defendant was not bound to answer a bill seeking a discovery as to any usurious transactions, where a disclosure of the usury would, or might subject Mm to the forfeiture or loss of the whole, or any part, of the money actually lent, or of the legal interest thereon. And even in cases where the complainant could establish the usury without the aid of the defendant’s answer, no relief could be granted to him in this court, except upon the equitable terms, or condition, that he should pay to the defendant what was justly due. (Whittimore v. Francis, 8 Price’s Rep. 616. TUpper v. Powell, 1 John: Ch. Rep. 489. Scott v. Nesbit, 3 Cox’s C. C. 183. Fanning v. Dunham, 5 John. Ch. Rep. 133.) These two principles are distinct in their natures, although they were both applicable to the case of a complainant seeking discovery and relief in this court, against an usurious contract. And the last might be entirely abolished by the legislature, without interfering with any of the natural rights of the defendant, or doing any thing inconsistent with the spirit of our free institutions. The rule that this court will not lend its aid to a party to enforce a penalty or a forfeiture, and the maxin that a party coming here to ask equity must do equity, relates merely to the principles upon which this court acts in the exercise of its general jurisdiction.

And if the legislature may authorize courts of law to act on different principles, they may confer the same powers on this court also; provided the right of trial by jury is not infringed, and no other provision of the constitution is violated. The constitution, however, has wisely provided, that a party shall not be compelled in any criminal case to be a witness against himself. And this principle, by the common law, was extended to proceedings in civil cases where the witness was called upon to make a disclosure which might subject himself to a forfeiture, or penalty, or to any loss in the nature of a penalty. It would therefore be inconsistent with this principle of the common law, and with the spirit of the constitution, to compel a defendant to be a witness against himself, where the effect of the disclosure which he was required to make would be to subject him to a forfeiture of the money actually loaned, and to which no other person had any equitable claim. Interest not being recoverable at the common law, and the right to receive it depending upon the express or implied agreement of the parties, under the tacit sanction of the statute regulating the rate of interest, perhaps the legislature, in that statute, might provide for a discovery by the oath of the lender; which would prevent a recovery of interest, without violating the principle of the constitution and of the common law, to which I have before referred. Although a defendant could not be compelled to answer any allegation in a bill which might subject him to a forfeiture or penalty, yet where the complainant, only, was entitled to the penalty, or where he alone could take advantage of the forfeiture, if he expressly waived it in his bill, the defendant was bound to make a discovery, which might be necessary to establish some other right or claim of the complainant. For if the penalty or forfeiture was waived in the bill, the defendant could not expose himself to the same by making the discovery; as this court would, by injunction, restrain the complainant from claiming the same, or from insisting thereon, either in his defence to a suit at law, or otherwise. (1 Sch. & Lef. 441. 1 Ves. sen. 56. Mitford, 4 Lond. ed. 197.) Hence arose the practice, for the borrower, when he applied to this court for relief against the usurious premium, which he had paid or agreed to pay upon the loan, to waive the forfeiture, by offering or submitting to pay the amount actually loaned, with legal interest thereon. This offer was necessary in all cases, before the complainant was entitled to an answer, or to an injunction to stay proceedings at law ; whether the relief prayed for was a mere discovery in aid of a defence at law upon the usurious contract, or a decree declaring the contract or security void as to the excess. Otherwise, the complainant, after obtaining a discovery by the answer of the defendant, might dismiss his bill here, and might use that answer in the suit at law, or otherwise, in such a manner as to deprive the defendant of the whole debt. When, therefore, the legislature provided, in the first clause of the section of the revised statutes which is now under consideration, that it should not be necessary for the complainant to pay or offer to pay any interest whatever on the sum or thing loaned, it was only saying, in other words, that the defendant should be compelled to answer on oath as to the usury, although such answer might .have the effect to deprive him of interest on the loan. But if the object of the legislature, had been to compel the defendant to make a disclosure which might deprive him of the principal sum also, they would have gone further and would have said that it should not be necessary for the complainant to pay, or to offer to pay, either principal or interest, to entitle him either to a discovery, of relief. I am satisfied, therefore, that the complainant, under this statute, is not entitled to call upon the defendant to answer on oath as to the usury, unless he pays into court, or offers to pay, the amount of the principal sum actually loaned, or so much thereof as remains unpaid. 0 And even this offer would not be sufficient in a case where other persons than the complainant might take advantage of the discovery thus obtained, and might enforce the forfeiture against the defendant. In the case under consideration, as it is alleged that the actual borrower is insolvent, it is perhaps of very little consequence that he is made a defendant instead of a complainant; and that the offer of the present complainant, if made, would not prevent R L. Livingston from setting up the usury against his co-defendant, and using the answer of Harris against himself, to establish that fact. But if the circumstances of the parties were reversed, so that the co-defendant was in fact the only responsible person, or if there was any doubt as to the ability of the complainant to make good the offer contained in the bill, the court could not, upon principle, compel the defendant to make a discovery which would discharge a third person from his liability to pay the money actually loaned. In such a case the complainant should offer to bring the amount into court, or should be required to give security to pay the sum actually due for principal, agreeably to the offer contained in his bill, when that amount should be ascertained.

The construction of the last clause of this eighth section does not necessarily come under consideration on the present application ; except for the purpose of ascertaining whether it was intended to compel the defendant to put in an answer which might subject him to the loss of his whole debt. My first impression, upon reading the whole section together, soon after the passage of this chapter of the revised statutes, in 1827, was that the legislature intended merely to deprive the lender of the interest on his loan ; and to prevent the necessity of the complainant’s bringing into court the principal admitted to be due, in the first instance, instead of leaving the payment to be provided for in the final decree. Upon further examination of the subject, however, I am inclined to think they intended to go further, and to alter the principles upon which this court sets aside usurious contracts and securities where the complainant has the means of establishing the usury without, resorting to the oath of the defendant; so as to reach that class of cases where the nature of the security is such as to compel the borrower to resort to this court-for relief. Although such a change in the law which previously existed, may be considered inconsistent with the spirit of the age, which certainly is not in favor of an extension of the restraints of the usury laws, it was perfectly consistent with the determination of the legislature to reject the modifications of those laws which had been proposed by the revisors. If the restrictions were to be continued, it was right, in principle, to insert a provision in the statute which should render it impossible for the lender to obtain any species of security that could be made effectual against the borrower or his property, where the fact of the violation of the law could be established in the usual mode of proving facts in courts of justice. I can readily conceive that an enlightened legislature of this state might be willing to effect this object by abolishing the technical rule which forbids the borrower from applying to this court for relief except upon the condition of paying the money loaned, although I am unwilling to suppose they intended to enable him to enforce the forfeiture against a defendant, by compelling the latter either to commit perjury or to criminate himself and forfeit bis debt

If this is the correct construction of these new provisions introduced into the revised statutes, there is no difficulty whatever in carrying them into effect according to the settled practice of this court in other similar cases. Where the complainant wishes to examine the defendant, as a witness against himself, to establish the-fact of usury, he must in his bill offer to pay the amount of principal actually due or,loaned. And if the answer'of the defendant can be used by a third person to avoid the security, or to relieve himself from responsibility for that amount, the complainant must also bring into court the amount claimed to be due, or must give such security as the court may direct, for the payment of the principal sum according to the offer in his bill, whenever that sum shall have been ascertained. If there is no such offer in the complainant’s bill, and the subject is not of equitable jurisdiction, otherwise than for the purposes of a discovery and an injunction to stay proceedings at law, the defendant may demur both as to the discovery and relief on the ground that the complainant’s remedy, if any, is at law. Where a case of equity is made out by the bill which renders it necessary for the complainant to come into this court for relief, he may waive an answer from the defendant on oath, and may proceed to establish the facts by proof, as in other cases. Where an answer on oath is not waived, the defendant may demur to so much of the discovery as relates to the charge of usury, and may answer as to the relief, as in other cases where the complainant is entitled to relief, but where the defendant cannot make a discovery as to the facts upon which that relief is asked, without subjecting himself to a criminal prosecution, of a penalty ; leaving the complainant to establish the allegation of usury, if he can, by proof. (2 Ves. sen. 246. 1 Eq. Cas. Abr. 131, pl. 11. Prec. in Ch. 214.) The defendant in such a case may also in his answer insist that he is not bound to make any discovery which may subject lrimself to a forfeiture; (his being an exception to the general rule that the defendant cannot, by answer, object to answer as to any particular matter of which a discovery is sought by the bill. (Lube’s Eq. Pl. 324. JWitford, 4 Land. ed. 307, note h. 4 John. Ch. Rep. 432.) In the present case the complainant had a perfect defence at law, if he could establish the fact of usury without a discovery from the defendant Harris. And as he has not offered to pay what is admitted to have been actually loaned, he is not entitled either to a discovery or to relief in this court'.

Upon the argument of this motion, the complainant’s counsel asked to have the injunction retained, to enable him to apply for leave to amend his bill, if the court should be of opinion that it was defective in not offering to waive the forfeiture. It was suggested, however, on the other side, that the responsibility of the complainant was doubtful; and that the sureties taken by the master, upon granting the injunction, were insufficient to ensure the payment of the debt. As the complainant in this case is not the only person who might avail himself of the forfeiture if the usury were admitted by the answer, it is at least doubtful whether the amendment proposed would be sufficient to sustain the injunction, or to entitle the complainant to an answer. Neither have I thought it necessary at this time to examine the question whether the statute applies to the case of a bill filed by the surety only, and where the borrower is made a party defendant instead of being joined as a complainant in the suit.

The injunction in this case having been improperly granted, it must be dissolved, with the costs of this application. But such dissolution must be without prejudice to the right of the complainant to apply to the court, upon the usual notice to the adverse party, for leave to amend the bill by inserting therein an offer to pay the amount loaned with legal interest thereon, or an offer to pay the principal only, as he may be advised, and to renew the injunction, upon such terms and conditions as the complainant may be advised to propose. Upon the hearing of that application, the several questions which are material to a decision thereof, but which are'not necessarily embraced in the decision of the present motion, will be more deliberately examined,


text:
    Brockway & McFarland vs. Copp.
    Sept. 18.
    Where the owner of a negotiable note, who might have sued in his own name' caused a suit at law to be instituted in the name of a third person, for the purpose of depriving the defendant of his testimony ; upon a bill filed against such nominal plaintiff for a discovery, and for relief against the suit at law, he was not allowed to avail himself of the objection that the real owner of the note was not made a defendant.

      A fact charged in the bill, but which is neither admitted nor denied by the ■answer, cannot avail the complainant unless it«is established by proof.
    This was an appeal by the defendant from a decision of the vice chancellor of the seventh circuit, overruling the demurrer to the complainants’ bill. The facts sufficiently appear from the opinion of the court.

      H. Baldwin,
    for the complainants. The decision of the vice chancellor in overruling the demurrer was correct. The bill is for discovery to aid the defence of a suit at law. The complainant has no remedy or relief at law without a discovery. ■ Without a discovery, he cannot show that the note in question was usurious and void. No offer to pay the amount of the note was necessary, as the bill charges that the same has been paid, and seeks to avoid a second payment. The bill also charges that the fact of payment was known to Phillips only, and that he was the real plaintiff in the suit, and consequently could not be compelled to testify in a court of law. (Mauran v. Lamb, 2 Cowen’s Rep. 174.) The bill also expressly charges that the complainants cannot proceed to the ¿rial of the suit without a discovery; and it clearly shows that justice requires this court to interfere, to prevent an üncoñscíentious and fraudulent recovery. (Le Roy v. Veeder, 1 John. Ch. Rep. 417.) The demurrer also cannot be sustained, as it is to the whole bill, both to the discovery and the relief. The complainants being entitled to the discovery, if not to the relief, the demurrer must fail. (Kimberly v. Sills, 3 John. Ch. Rep. 467. Higgenbotham v. Burnet, 5 Id. 184. Livingston v. Livingston, 4 Id. 294. Laight v. Morgan, 1 Id. 429.) The facts charged in the bill make out a perfect defence, both at law and equity, against the note; and that it is impossible for the complainants to procure the proof of those facts without a discovery. It is said by the defendant’s counsel that this'cause is beneath the jurisdiction of the court. But the matter in controversy is the amount of the $100 note and interest, which is sought to be unconscientiously recovered at law. It is also said that Phillips and Brewster should have been made parties to this suit. The rule is that all persons should be made' parties whose interests are involved in the issue, and who must necessarily be affected by the decree. What is the issue 1 The right of Copp to recover on the note. And what is the decree, if any % A perpetual injunction as to the suit at law. In this issue and under this decree Phillips and Brewster are not necessary parties, as no decree would be made against them. (2 Maddock, 147.) Again, as this is a.bill of discovery to aid the defence of a suit at law, the defendant cannot demur as to the discovery for the want of parties. Although the complainants may ask' relief in their bill, it is no less a bill for discovery. The object of the bill is to defeat the suit at law in the name of Copp; and this court can as effectually do that as if Phillips and Brewster were parties. If the complainants are entitled to the discovery and not to the relief, still the defendant cannot demur to the whole bill for the want of parties. (Livingston v. Livingston, 4 John. Ch. Rep. 294. ) It is also said that the bill is multifarious, in that it sets up two distinct and substantial defences to the suit at law. This objection must be predicated upon the old principle of Syntax, that two negatives make an affirmative, or upon the defendant’s new principle of equity, that two legal defences make an equitable defence.

      E. W. Leavenworth,

    for the defendant. The bill in this cause is an ordinary bill for relief, with the usual prayer for a discovcry, and is not what is termed a bill of discovery. A bill of discovery is employed merely for the discovery of facts in' the knowledge of the defendant, or of deeds or writings, or other things, in his custody or power; but praying no further or other relief. This is the definitive -office of a bill of discovery. (Maddock’s Ch. 160. 2 Brown’s C. C. 471. Mitford’s Pl. 27, 42. Cooper’s Pl. 58. McDougal v. Miln, 2 Paige’s R. 325.) Cooper says, “If the plaintiff who is entitled to discovery, but not relief, prays for relief, a general demurrer may be put in to the whole bill.” (Cooper’s Pl. 58. 2 Brown’s C. C. 319. 4 Id. 480. 2 Ves. jun. 459, 514. 3 Id. 4, 343. 8 Id. 3. 11 Id. 509.)
    Considering this bill as a bill for relief, there is nothing in it making it a suitable subject for equitable jurisdiction ; and the complainants shew that they have a fit and adequate remedy at law. If a plaintiff can have as effectual and complete a remedy in a court of law as in a court of equity, and that remedy is clear and certain, a demurrer which is in truth a demurrer to the jurisdiction of the court, will hold. (Coop. Pl. 124. Kirb. R. 185. 4 Hen. & Munf. 491.) Usury is not a subject of equitable relief, but it is strictly a legal defence. A discovery may be asked for ; but that is merely to aid the legal defence, and not for the puspose of obtaining relief. With regard to payment, it is a defence which may be made at law, and is properly cognizable in a court of law, and certainly is not a matter of equity jurisdiction. The party may seek a discovery to aid the defence of payment at law, but he cannot ask the court of chancery for relief. (6 Vesey, 136. 3 Atk. 740. Ambler, 109. 1 Haywood, 368, 369.) In the case of Underhill v. Van Cortland, (2 John. Ch. R. 369,) the chancellor lays down the rule, that where the defendant puts in his answer instead of a demurrer, and the cause comes on to be heard on the merits, it is too late to object to the jurisdiction of the court on the ground that the plaintiff might have pursued his rem- * edy at law. The complainants are not entitled to a discovery. A bill of discovery, for matters material to the defence of the plaintiff in a suit at law against him, must state the naturc of that defence. (3 John. Ch. Rep. 45. 16 John. Rep. 592, S. C.) It ought to state enough.to enable the court to see that the ends of justice required its interposition ; that its aid is necessary, and the discovery material to the defence. For if the facts depend on the testimony of witnesses, and the court of law can compel their attendance, chancery will not interfere. (Gelston v. Hoyt, 1 John. Ch. Rep. 543. Leggett v. Postley, 2 Paige’s Rep. 601.) The complainant must shew affirmatively in his bill that his right or defence cannot be established at law by the testimony of witnesses, or without the aid of the discovery which he seeks. The court will not presume that it is material, or necessary for the complainant to have a discovery, merely to guard against anticipated perjury in a suit at law. (Leggett v. Postley, 2 Paige’s Rep. 602.) It is most manifest that a discovery is not necessary to the complainants’ defence against the note in question. If the note has been paid, as the complainants cannot avail themselves of the usury, and can only recover back the excess above legal interest, the amount to which they would be entitled would be less than $ 100, and the court could not entertain jurisdiction of the suit.
    The bill is also bad for multifariousness, inasmuch as it states two distinct matters of defence : 1. Usury in the note, and 2. Payment. (Coopers Pl. 119.) An information was filed against a corporation, stating that they were seised of their estates partly for purposes of public utility, and partly for the benefit of a private charity therein mentioned, and charging a misapplication of the funds. The defendants demurred for blending together different transactions, neither connected with nor dependant on each other; and the demurrer was allowed. (Cooper’s Pl. 183, 4.) . The double ground taken by the complainants here is not only multifarious but inconsistent.
    Phillips should have been made a defendant. The bill states that Phillips is the party in interest, and Copp only the .nominal party; and that Copp never had any interest, being always the agent of Brewster. (Cooper’s Pl. 119, 185.) The bill should embrace all the parties, so that the rights of all could be settled. (12 Ves. 58. 3 John. Cas. 311. Mitf.

      Pl. 145, 146, 133, 4.) Whenever a want of parties appears on the face of a bill, it is a good cause of demurrer. (1 John. Ch. Rep. 349, 437. 2 Id. 245, 7, 238. 2 Paige’s Rep. 289, 15.)
    If the law of the state previous to January 1st, 1830, is to govern this case, so far as the usury is concerned, then the complainants should have offered to pay the money due, with lawful interest. (1 John. Ch. Rep. 367, 439. 5 Id. 122.) But if the revised statutes are to control, then we insist that Phillips is the real plaintiff, and that the note was transferred to him without any notice of the usury, and that the defence of usury cannot be set up.
   The Chancellor.

The object of the bill in this case is to obtain a perpetual injunction against the prosecution of a suit at law on a note alleged to be usurious. As it appears upon the face of the bill that the complainants have no means of proving the usury, except by a discovery to be obtained by the answer of the appellant on oath, and there is no offer to pay the amount of the principal of the loan if it should appear that any thing was due, the complainants are not entitled to a discovery as to the usury charged in the bill. And if this was the only ground of equity set up by them, the demurrer would have been well taken. In the case of Livingston v. Harris Livingston, which has just been decided, I have had occasion to examine as to the true construction of the eighth section of that title of the revised statutes which regulates the interest of money, (1 R. S. 772,) and have arrived at the conclusion, that the defendant is not bound to make a discovery as to the usury, unless the complainant, in his bill, offers or submits to pay the amount of the principal sum which may be actually due exclusive of interest. It is no answer to the objection in this case, that it is alleged in the bill that the whole has been paid ; because, if the defendant should make a discovery as to the usury, he would subject himself to a forfeiture of the whole debt al« z though he should deny the fact of payment, and it should ultimately appear that the allegation of payment contained in the bill was untrue. If nothing is in fact due, the complainants could not be injured by a conditional offer to pay the money actually loaned, or such part thereof as may be due, if it should ultimately appear that any part thereof remained unpaid.

But there are other allegations in the bill to which the complainants are entitled to an answer, although the defendant is not bound to make a discovery as to the usury. It is alleged that the whole amount of the note has been actually paid; or rather, that the money was put into the hands of Phillips to pay the same, and that the present defendant has made such an arrangement with him as to discharge the complainants, in equity at least, from all further liability. That the suit at law is prosecuted for the benefit of Phillips, and that it is brought in the name of Copp for the purpose of depriving the complainants of the benefit of his testimony to establish those facts. The'complainants also allege that they cannot prove those facts without the testimony of the defendant Copp.

The objection that Phillips was a necessary party in this case cannot be sustained. Where a suit is brought by the assignee of a chose in action in the name of the assignor, as a general rule the assignee must be a party to a bill filed in this court to stay the proceedings at law. That principle, however, is only applicable to those cases where the real party is, by the rules of law, required to. bring his suit in the name of the assignor; and it cannot in justice be extended to a case where the assignee had the right to sue in his own name but has chosen to bring the suit in the name of a third person for the purpose of depriving the defendant of the benefit of his testimony. As the defendant in the suit at law has no right to object, in such a case, that the nominal plaintiff has no interest in the note or bill upon which the suit is brought, he has a right in this court to treat him as the real party where he files a bill here to stay his proceedings at law.

The overruling of the demurrer will not deprive the appellant of his right to resist the discovery as to the usurious nature, of the note; as this is an exception to the general rule that the defendant cannot in his answer object to answer any particular matter charged in the complainant’s bill. Where it appears that any part of the discovery called for by the bill may subject the defendant to a criminal prosecution, or to any loss or injury in the nature of a penalty or forfeiture, an exception will not lie to an answer on the ground that such discovery is not made. (3 Peer Wms. Rep. 238. 1 Meriv. 390. 1 Swanst. 192, 305. 19 Ves. 225. Lube’s Eq. Pl. 324.) And the facts charged in the bill, but which are neither admitted nor denied by the answer, will not upon the hearing be taken as admitted, being put in issue by the formal traverse at the conclusion of the answer. The allegations in the bill will not therefore aid the complainant, unless he is able to establish them by evidence. (Moffatt v. McDowall, 1 McCord’s Ch. R. 434. Young v. Grundy, 6 Cranch, 51. Hopkins v. Stump, 2 Har. & John. 304. Warfield v. Gambrill, 1 Gill. & John. 510.)

The order of the vice chancellor overruling the demurrer must be affirmed, with costs; but without prejudice to the right of the appellant, to insist in his answer that he is not bound to make any discovery as to the consideration of the note mentioned in the complainant’s bill, or as to any other fact which may enable them to enforce a forfeiture of the money loaned.

       Ante, p. 528.


text:
    Town vs. Needham and Harvey.
    Where G. and W., two brothers, were jointly interested in the real estate of their father, as tenants in common, and G. agreed to relinquish his interest in the property in exchange for a quantity of medicines and the good will of his brother’s business as a physician, in consequence of which agreement W. took possession of such real estate and made improvements thereon, and afterwards sold the same to T., who also made valuable improvements upon the property; Held, that this was sufficient in equity to take the case out of the statute of frauds, and that T, .was entitled to a conveyance of G.’s interest in the property, and to a perpetual injunction against a suit which had been instituted by G. for the recovery of the premises.
    Where one of several tenants in common, who is in possession of the premises held in common, claiming title to the whole, sells and convey* the same to.a third person, who enters under that conveyance claiming title to the whole, it is such an ouster of the other tenants in common- as to bar their right of entry after an adveres'possession of twenty years.

      Sept. 18.
    Whore the owner of real estate suffers another to purchase the estate from a third person, and to erect valuable buildings thereon, under the erroneous belief that he has a good title, and intentionally conceals from the purchaser his claim to the property, such owner will not afterwards be permitted to enforce his legal rights against such purchaser.
    One witness is sufficient to sustain an allegation in the bill which is only denied by the defendant according to his recollection and belief.
    Where land is conveyed with warranty, and a mortgage is given to the ' grantor to secure the unpaid purchase money, and the premises are after-wards sold under the mortgage, it seems that the covenants of warranty contained in the original conveyance are not merged, but that they pass to the purchaser of the land under the mortgage sale.
    Where the interest of a witness rs of such a nature that it can be released, and the adverse party suffers him to be examined without objection, and makes no objection to his testimony before the proofs in the cause are closed, it will be too late to object to the competency of the witness upon the hearing of the cause.
    If one tenant in common, who is in possession supposing himself legally entitled to the whole premises, erects valuable buildings thereon, he will bs ^entitled to an equitable partition of the premises, so as to give him the benefit of his improvements.
    ' This case came before the court on pleadings and proofs; The facts of the case, so far as they are material to the decision, are detailed in the opinion of the court.
    J. C. Parker, for the complainant.
    JY*. P. Randall, for the defendants.
   The Chancellor.

It appears by the pleadings and proofs in this cause that the premises in question, a small lot of ground in the town of Granville in the county of Washington, containing about thirty acres, belonged to John Need-ham, at the time of his death in December, 1798. By his will, he devised one half of his estate to his wife for life, and after her death, one half of the property devised to her, being one fourth of the whole, he gave to his grand son, the defendant, J. N. Harvey, in fee, and the residue of the estate, after the payment of two small legacies, he gave to Ms two sons, W. A. Needham and G. Needham; and the latter he appointed executor. At the time of the death of the testator, Harvey, the grand son, who was under age, was living with him in Granville, and G. Needham, the executor, lived at the same place. W. A. Needham, the other son of the testator, was married and settled in the county of Onondaga, and was in the practice of physic. In the spring of 1800, under an agreement between the two brothers the precise terms of which forms one of the subjects of controversy in this suit, W. A. Needham returned to Granville. He went into possession of the premises in question with his mother, and G. Needham went into the practice of physic in the county of Onondaga, near where his brother had resided. In October, 1805, W. A. Needham being in possession of the premises and claiming to be the owner thereof, sold and conveyed the same, with warranty, to S. M. Stewart. For some season which does not distinctly appear, the mortgage for the purchase money was not executed until January, 1807, when Stewart gave a mortgage to W. A. Needham to secure the payment of $800, the balance of the purchase money; which mortgage contained the usual power of sale. This mortgage was .foreclosed by W. A. Needham, in September, 3 808,"by a sale under the statute, and the premises were bid off by and conveyed to E. White, for $710. In April, 1810, White conveyed the premises to the complainant with warranty. It is objected on the part of the defendants that the deed from White only conveyed to the complainant a part of the premises in controversy; as it appears, from the deed, that the second course in the description of the premises therein varies from the description contained in the mortgage. And because, in the deed, the lot is described as 28 acres of land, although in the complainant’s bill, and in the mortgage, •the premises are described as containing 30 acres. Upon a particular examination of the two descriptions, however, I am satisfied that both are intended to embrace the same piece of land, and that such is the legal construction of the deed. All the witnesses speak of the premises as the same lot; and as the lot is bounded by known and visible landmarks, it is not material whether it is said to contain thirty acres, “ more or less,” as described in the complainant’s bill and in the mortgage, or twenty eight acres, “be the same more or less,” as mentioned in the deed from White. The first course in both descriptions runs “on the north side of the highway to Abraham Bishop’s west line.” In the bill and mortgage, the second course is thus described: Thence south on Abraham Bishop’s said west line, forty minutes west, twenty four chains to a white cedar stake and stonesand in the deed from White, it is thus: “ thence south, six degrees west, twenty four chains to a white cedar stake and stones.” The subsequent courses^ distances and monuments being the same, the white cedar stake and stones in the first description is undoubtedly the same which is also described in White’s deed-as the termination of the second course. The distance of the second line and the commencement and termination thereof being the same, and being also controlled by fixed monu- - ments, must necessarily include the same land, notwithstanding the difference of nearly six degrees in the supposed course of the line ; unless, indeed, Bishop’s west line between these two points was a crooked line, which from the evidence in this case cannot be presumed. If that line was crooked, the distance between the two points could not be the same. It must therefore, for the purposes of this'decision, be taken -as settled that the complainant is entitled, under the deed from White, to the whole of the premises described in the complainant’s bill and in the mortgage, to which White became entitled under the foreclosure and sale to him.

. By the will of J. Needham, his grand son, J. N. Harvey, became entitled to one fourth part of the premises, as a vested remainder in fee after the termination of the life estate of his grand mother. And the defendant, G. Needham, became seised of a similar estate in one eighth of the premises ; and also of an interest in possession in one fourth part thereof immediately on the death of the testator. As the premises had been held adversely, under the conveyance. to Stewart, for more than twenty years previous to the commencement of the ejectment suit, there is no doubt that the claim of G. Needham to this last mentioned quarter of the premises was barred by the statute of limitations. If one having only a right as tenant in common with others, but claiming to be owner of the whole premises, conveys the whole to a third person, who enters under such conveyance claiming title to the whole premises, it is such an ouster of the other tenants in common as to bar their right of entry after twenty years adverse possession. (Prescott v. Nevers, 4 Mason’s Rep. 327. Bradstreet v. Huntington, 5 Peters’ Rep. 402. Culler v. Motzer, 13 Serg. & Rawl. 356. Jackson v. Smith, 13 John. Rep. 406. Clapp v. Bromagham, 9 Cowen’s Rep. 530.) If, as pretended by the defendant, W. A. Needham was a mere tenant at will of his share of the premises, the moment he conveyed the whole property, with warranty, to Stewart who entered claiming adversely, the tenancy was at an end. G-. Needham might therefore have brought an ejectment to recover his fourth of the premises immediately; and having neglected to bring his suit, for twenty years, the remedy as to that part is barred by lapse of time. But his right of action as to his reversionary interest in the half of the premises which was devised to the mother for life, and the right of action of J. N. Harvey as to another portion thereof, did not accrue until after the termination of her life estate, in 1810. They are therefore entitled to recover their respective shares in that half of the premises, unless they have legally or equitably divested themselves of their rights. As the equitable claim of the complainant as against each defendant is separate and distinct, and as the facts and principles upon which each claim depends are different, I shall proceed to examine them separately.

First, as to the claim to equitable relief against G. Need-ham. The complainant insists that he has a right to a release of the legal interest of G. Needham in the premises, under the agreement between the two brothers ; by which agreement G. Needham was to relinquish to W. A. Needham all his interest in his father’s estate, in exchange for tire stand and medicines of the latter as a physician in the county of Onondaga, and W. A. Needham was to return to Granville, and take care of his mother and settle their father’s estate. G. Needham does not absolutely and positively deny this agreement, as he qualifies it by saying no such agreement was made according to the best of his knowledge recollection and belief. This method of denying a fact, which it is hardly possible that the party could have forgotten if it had ever existed, is always suspicious. And it will be presently seen that these expressions in this answer were probably not introduced as mere words of course. By the testimony of W. A. Needham and his wife, it appears that shortly after the death of the father, W. A. Needham received a letter from this defendant, inviting him to remove back to Granville to take charge of their mother and to settle up the affairs of the estate. That some time in the succeeding winter, the defendant came to Onondaga and manifested much solicitude to induce his brother to return to Granville. That he proposed to the witness to move back to Granville and settle the estate, to take care of their mother and the defendant J. N. Harvey, their nephew, who was then, under age, and to pay off the debts due from the estate, and that the witness should put him in possession of his practice as á physician at Onondaga, together with his medicines, &c.; for which he was to release to the witness all his interest in the estate. That W. A. Need-ham finally consented to the proposition, and removed back to Granville, relinquishing to his brother an extensive practice of physic, together with his medicines, shop, furniture, books, &c.; and the latter agreed to execute a release of his interest in the estate whenever it might be wanted. That about the time of the sale to Stewart, W. A. Needham wrote to his brother to execute a release of his claim to the land. In answer thereto, he received a letter from G. Needham, in which he relinquished his right to the land, and promised to execute a more formal release if it should be deemed necessary. And that upon this letter the sale to Stewart was finally closed and a part of the purchase money paid. It also appears that under the original agreement W. A. Needham went into possession of the premises and made some permanent improvements thereon; that Stewart, after his purchase, also built a bam upon the lot, and that the complainant has since erected a valuable two story dwelling house thereon. This is sufficient in equity to take the case out of the statute of frauds; as it would be a gross fraud upon the complainant for the defendant to refuse to convey the legal title, under such circumstances. The testimony of the brother and the sister-in-law of the defendant, G. Needham, is also corroborated by the deposition of Parker, who swears to the defendant’s admission, in 1800, that his brother ought to have his quit claim of the premises, and that he was willing to give him such a conveyance. It is no excuse for the conduct of this defendant, after lying by for twenty-seven years and allowing the complainant and those under whom he derived title to make substantial and lasting improvements on the premises under the supposition that they had a good title, that he has now suffered himself to be used as the tool of his nephew to perpetrate this fraud, as appears by the testimony of A. C. Corbin and W. A. Needham.

It is objected, however, in behalf of this defendant, that his brother and his sister-in-law are interested witnesses, in consequence of the covenant of warranty contained in the deed to Stewart. If that covenant was not merged by the giving back of the mortgage to W. A. Needham and by the subsequent foreclosure, which I am inclined to think it was not, it undoubtedly was a covenant running with the land and passed to the complainant under the conveyance upon.the mortgage sale and the subsequent deed of White. But this was an interest which the complainant was perfectly competent to release ; and the witness swears that, previous to his being examined as such witness, he was fully and -entirely released and discharged by the complainant from all actions or causes of action which he might or could have against him touching the suit or the land. If the wife had any right of dower in the estate which was never in fact conveyed to her husband, such right would only give her a contingent and remote interest in the question in controversy, and not an interest in the event of the suit. Such an interest could not disqualify her from being a witness. "But the question of interest in respect to these witnesses, even if there had been no release, could not be raised for the first time at the hearing. When the testimony in-this court was taken in secret, as was formerly the practice, if it appeared from the deposition of a witness that he was interested in the event of the suit, his testimony might be objected to and suppressed after the order to pass publication, or at the hearing. This mode of proceeding was then necessary, as the adverse party had no opportunity to object to the competency of the witness until the testimony in chief in the cause was closed. But after the statute authorizing and directing an open examination of the witnesses, a different practice was adopted, in analogy to the practice pursued in courts of law. And the party must now object to the testimony of the witness at the time of his examination, if his interest is then known, so as to enable the adverse party to show a release or discharge of the interest; or at least the objection should be made before the testimony in the cause is finally closed. Where the interest is of such a nature that it can be released, and the party suffers the witness to be examined without objection and waits until after the rule to close the proofs has been entered, it will then be too late for him to make the objection. (The Mohawk Bank v. Atwater, 2 Paige’s Rep. 54.) Here the defendants were apprised, by the testimony of Parker, nearly a month before the examination of W. A. Needham and wife, that the conveyance to Stewart contained a covenant of warranty; and yet they suffered these witnesses to be examined without objection. Again ; 'the annexing of the release to the deposition, or the production of it as an exhibit, was a matter, of faim which might be waived ; and as the defendants permitted secondary evidence to be given of the contents of the release without objection, it is now too late to object that the release should have been produced and proved. It would, under such circumstances, be permitting a party to entangle justice in the net of form, to allow him to surprise his adversary with such an objection at the hearing. (Vide Jackson v. Cody, 9 Cowen, 140.) Although this testimony was taken under a commission, the defendants had a right to be present by themselves or their agent., to make objections to the admission of illegal testimony ; or they might at least have given notice of an application to the court to suppress these depositions, which would have furnished the complainant with an opportunity of producing the release and showing that the witness’ competency had been restored. I am satisfied this objection ought not to avail the defendant at this time. 1 cannot, therefore, without violating every principle of justice and equity, permit the defendant G. Needham to continue his suit against the complainant to recover those parts of the premises which were devised to him by the will of his father. The injunction as against him must therefore be made perpetual; and he must release to the complainant all his interest in the premises according to the agreement as established by the proofs.

The allegation in the complainant’s bill as to his equitable rights against the defendant Harvey, is, that W. A. Needham also purchased and paid him for his interest in the estate of his grand father; and also that Harvey has suffered the complainant to go on and make valuable improvements upon the premises, without giving him any notice of his intention to assert a claim to the estate. There is no doubt that Stewart and Town made their improvements upon this property in good faith, believing they had the legal title to the whole. If therefore this court should arrive at the conclusion that Harvey was entitled to recover one fourth of the property, there should be a décree for an equitable partition, so that the complainant may have assigned to him that part' óf the premises on which the buildings have been erected. But I have arrived at the conclusion that Harvey ought not to be permitted to recover any part of the premises. As he had only a reversionary interest in the premises at the time his uncle bought and paid him for his share of the estate, the entry and possession during the existence of the life estate of the widow, which it appears was also purchased and paid for by W. A. Needham, could not, as to that half of the premises, be considered a possession taken and held under the agreement so as to constitute an adverse possession. This defendant might therefore avail himself of the statute of frauds as a defence, if he had not himself practiced a fraud upon the complainant, by suffering him to go on and make valuable erections and improvements upon the premises, without apprizing him of his claim, or that he intended to take advantage of the statute to recover back the land. The defendant Harvey, in his answer, denies all the material allegations in the bill as to the payment for his share of the estate, and all knowledge of the erecting of the house and making the other improvements on the premises. And he also denies that he ever executed release to W. A. Needham of his interest in the premises. But he swears that.if he did receive such payment, or execute a release, he was under age at the time, and that it is not binding upon him. There is no proof whatever as to the age of this defendant, except that he was a minor in 1800 when W. A. Needham removed back to Granville. The allegations in the answer as to his being under age when the place was paid for, and when the release, if any, was executed, are not responsive to any allegations in the bill, and are therefore not evidence in his favor. If he was an infant at that time, the burthen of proof to establish that fact lay on him, and he should have introduced or examined some witness to that point. The testimony of his uncle and aunt is positive that he received a horse, in addition to what had been done for him before, in full for his interest in the estate of his grand father. In answer to the sixth interrogatory, W. A. Needham says both of the defendants did sell to him all their right and title in and to the premises in question, and he has fully paid them for the same; and and that be paid for their shares more than they were really worth at the time. The fact that this defendant received a horse from his uncle is also proved by the testimony of Mrs. Brown. As neither of these defendants has thought it safe to deny the material allegations in the bill positively, but only according to their recollection and belief, the testimony of a single witness to the facts charged was sufficient to establish those facts as against this denial in the answer. It is probable, from the testimony of W. A. Needham, that Harvey actually executed to Stewart a release of his interest in the premises sufficient in law to pass the legal estate, but which cannot now be found, in consequence of Stewart’s having gone out of the country. He swears that the instrument executed by Harvey was prepared by the counsel of Stewart. It must therefore have been after the purchase of Stewart, and probably about the time that the mortgage was given for the purchase money, in 1807, as the giving of the mortgage appears to have been delayed for some reason until that time. The answer of Harvey is also contradicted in other particulars, by the testimony of Fross and Corbin. The testimony of these witnesses is material to show that the defendant Harvey was aware that the complainant was going on and making improvements and erections on the premises, and that he neglected to set up his claim, to enable him to derive an advantage from those improvements. Fross testifies that in 1824 or 1825 Harvey told him that the reason he had not set up his claim sooner was that they, the complainant and others, were making improvements on the land; and he said, “ let him go on, and I will have it before long.” He also stated to this witness that he had frequently been informed of the improvements which were being made on the land, by a person employed to attend to his interests therein. When this testimony is taken into consideration, in connection with the fact that he delayed asserting his claim to the premises for seventeen years after his right of action, if any, accrued to him by the termination of the life estate of his grand mother, and during which period these improvements were going on, from time to time, I think it is sufficient to bring the case clearly within the principle laid down by Chancellor Kent, in Wendell v. Van Rensselaer, (1 John. Ch. Rep. 354,) that if a man knowingly, though he does, it passively by looking on, suffers another to purchase and to expend money on land under an erroneous opinion as to the title, without making known his claim, he shall not afterwards be permitted to enforce his legal rights against such person. Lord Mansfield carried this principle so far that he would not suffer a man to recover even in a court of law, where he had stood by and seen the defendant build on his land in ignorance of his rights, and without mating any objection. (See 6 Durn. & East's Rep. 556.) But this case is much stronger; for here the interest of the defendant in the premises had been actually purchased and paid for by the person under whom the complainant derived title, if it had not been in fact conveyed.

The defendant Harvey and all persons claiming under him must therefore be perpetually enjoined from prosecuting at law, or otherwise, any action against the complainant, his heirs or assigns, for the recovery or partition of the premises in question or any part thereof. And both defendants must pay to the complainant his costs in this suit to be taxed.


author: The Chancellor

text:
    Eames vs. Sanger.
    October 2.
    Upon an appeal from a decree of a vice chancellor it is not necessary to obtain an order for the transfer of the papers in the cause to the register’s office, except in cases where the inspection of some original exhibit, or other paper on file, will be necessary on the hearing of the appeal.
    Where, upon an appeal, a transfer of the papers is necessary, the party applying for the transfer must, in the affidavit upon which such application is founded, state the particular reasons which render a removal of the papers necessary.
    Upon the hearing of an appeal, the appellant’s counsel should deliver to the court a copy of the notice of appeal, in addition to the papers required to be furnished by the 93d rule.
    The complainant in this cause having appealed from an interlocutory decree of the vice chancellor of the fifth circuit, her solicitor applied for an order directing the clerk of that circuit to transfer the pleadings and other papers in the cause to the office of the register of this court at Albany.
   The Chancellor

said, that from the frequent applications of this kind it was evident that many members of the profession had misapprehended the practice of the court in this respect, and were acting under an erroneous impression as to the meaning and intent of the 119th rule. That papers filed and remaining in the office of either of the clerks of this court were as much before the chancellor, for all the purposes of an appeal, as if they were actually transferred to the office of the ■ register or assist ant register. That upon an appeal from an order or decree of a vice chancellor, it was not necessary to obtain any order for the transfer of the papers, except in those cases where an actual inspection of some exhibit, or other original paper on file, would be necessary at the hearing; or where there were some other special circumstances which would render it. necessary or proper that the original papers ' should be actually in court upon the argument of the cause. That the object of the latter part of the 119th rule was to provide for the transfer of the necessary papers from one office to another, in such special cases. That in ordinary cases the original pleadings and papers were not wanted for the use of the chancellor; as the appellant was in all cases' required to furnish the court, upon the hearing, with copies of such pleadings and papers. That where an actual transfer of the papers was proper, the party applying for an order for that purpose, should state in his affidavit the particular reasons which rendered a removal of such papers necessary.

The chancellor further said, that upon the hearing of an appeal it was proper for the appellant’s counsel, in addition to the papers required to be furnished by the 93d rule, to deliver to the court a copy of the notice of appeal; to enable the court to understand the nature and extent of such appeal.