text:
    Norton vs. Stone and others.
    Where the owner of premises, which were subject to the lien of a mortgage, sold the same and took back a mortgage for the purchase money, payable in three instalments, and assigned such mortgage to M., who subsequently' filed a bill to foreclose the same, and during the pendency of that suit, sold and assigned the second instalment, and guarantied the collection thereof, and the premises were afterwards sold under the decree of foreclosure and bid in by M. for the amount of the two first instalments with interest and costs, and were subsequently purchased by J. under a judgment against M. and the prior mortgage upon the premises was afterwards foreclosed : Held, that J. was entitled to the whole surplus moneys upon the sale under the last decree of foreclosure, to the exclusion of the assignee of the second instalment of the junior mortgage; although at the time of the assignment of that instalment, M. had agreed to bid to the amount of both instalments, on the sale under his decree, and that the sale should be for the benefit of the assignee after paying the first instalment, and interest, J. being ignorant of that agreement at the time he purchased in the premises under Jiis judgment against M.
    Where real estate is purchased by one person with the moneys of another, and a conveyance is taken in his own name with the consent of the owner of the fund, there is no resulting trust in favor of the latter, under the provisions of the revised statutes ; but the person to whom the conveyance is given is entitled to the premises absolutely as against him.
    April 7.
    This was an appeal from a decision of the vice chancellor of the eighth circuit, relative to the surplus moneys raised upon the foreclosure and sale of mortgaged premises which were sold under the decree in this cause. The premises originally belonged to Norton, the complainant, who sold the same to the defendant Stone in 1834, and took back the mortgage which was foreclosed in this suit, to secure the payment of the purchase money. Upon the sale under this decree, in June, 1839, the premises sold for $416,82 more than the complainant’s debt and costs; which surplus was claimed by L. C. Woodruff the appellant, and also by J. & W. James the respondents, under the following circumstances, as stated by the master in his report : In March, 1836, Stone, who then owned the premises subject to the payment of the complainant’s mortgage, sold and conveyed them to J. Paige for $4000, and took back a mortgage for the purchase money payable in three equal yearly instalments, with annual interest on the whole sum from the date of that mortgage. The first instalment not having been paid by Paige, his bond and mortgage was placed by Mitchell, the assignee thereof, in the hands of his solicitor to be foreclosed ; and in January, 1838, the premises were sold under a decree upon the Paige mortgage, and were bid in by Mitchell, the assignee, for $3196,57 ; the amount of the two first instalments which had then become due, with interest and the costs of foreclosure, and were duly conveyed to him by the master. In May, 1837, J. & W. James, the respondents, recovered two judgments in the supreme court against Mitchell; and after he became the purchaser of the mortgaged premises at the master’s sale under his decree upon the Paige mortgage, they caused their executions to be levied on the premises, and the same were sold by the sheriff, in November, 1838, and purchased by the respondents for the sum of $700 5 and were never redeemed from that sale. By virtue of that purchase of Mitchell’s interest in the mortgaged premises, which he acquired under the master’s deed to him upon the Paige mortgage, the respondents claimed the whole surplus moneys in the present suit; which moneys were insufficient to satisfy the $700 and the interest thereon from the time of the sale by the sheriff.
    During the pendency of Mitchell’s suit to foreclose the Paige mortgage, he sold and assigned the second instalment of $1333,33 of that mortgage, which was not then due, together with the interest thereon after the first year, to N. T. Rosseter, and guarantied the collection thereof. This assignment to Rosseter was dated the 6th of July, 1837, and was duly recorded in the book of mortgages the same day. Mitchell also made a further agreement at the same time, relative to the second instalment, which did not appear by the master’s report to have been recorded ; by which he stipulated that no sale should take place under the decree of foreclosure to be obtained on the bond and mortgage, or in any other manner, until the second instalment should become due; and that any sale that should be made of the mortgaged premises should be for the whole amount of the two first instalments, and should be for the use and benefit of Rosseter the assignee, to the amount of the $1333,33 and interest thereon from the 24th of March, 1837, after satisfaction of the first payment due on the bond and mortgage. The next day after the assignment to Rosseter, he assigned the second instalment to S. Murch, who in August thereafter assigned the same to J. C. Morse ; who thus became and was the owner thereof at the time of the master’s sale of the mortgaged premises to Mitchell, in January, 1838. About three weeks after that sale, Morse re-assigned the second instalment to Murch ; which assignment was also recorded in the book of mortgages. And in March, 1839, about four months after the purchase of the premises by the respondents at the sheriff’s sale, Murch assigned and quit-claimed to Woodruff, the appellant, that instalment and all his right, title and interest in and to the proceeds of the master’s sale under the Paige mortgage, or the mortgaged premises by virtue of that sale or foreclosure.
    The master decided that Woodruff was entitled to a portion of the surplus moneys raised upon the foreclosure of the original mortgage given to the complainant in this suit, in proportion to the amount which the second instalment and interest thereon, at the time of the purchase by Mitchell, bore to the whole amount bid by the latter at the master’s sale, exclusive of the costs of foreclosure. But upon an informal exception to the report, the case being brought before the court by consent of the parties without any written exceptions, upon the facts as stated in the report itself, the vice chancellor overruled the decision of the master, and directed the whole surplus moneys to be paid to the respondents. From this decision Woodruff' appealed.

      John L. Curtenius, for the appellant.

      H. Gardner & A. C. Bradley, for the respondents.
   The Chancellor.

It is stated in the report of the master that Woodruff, the appellant, procured the assignment of this second instalment on the Paige bond and mortgage to be made to Rosseter. But it does not appear that such assignment was held by Rosseter, or by any of the subsequent assignees, in trust for the appellant. On the contrary, the first, as well as the subsequent assignment, appears to be an assignment for the sole benefit of the assignee. The appellant can claim no interest in the surplus moneys, therefore, except such as he is entitled to under the last assignment, and. which Murch would have had the right to claim as against the respondents, at the time of that assignment, in March, 1839. I am not aware that this fact can have any bearing upon- the decision of the cause, and I only advert to it because the appellant’s counsel appears to suppose that Rosseter, and the subsequent assignees of this second instalment, were mere naked trustees for the appellant.

It does not appear in this case that Mitchell bid off the premises at the master’s sale, and took the conveyance to himself absolutely, without the consent of Morse who was then the assignee of the second instalment, or in violation of any trust; unless the agreement of July, 1837, accompanying the assignment to Rosseter, is of itself a valid stipulation that Mitchell shall bid in the property and hold it upon the trusts specified in that agreement. There could not, therefore, be a resulting trust in favor of the assignee, merely on the ground that the second instalment, which formed a part of the consideration of the master’s deed, was paid by such assignee. For the revised statutes do not permit a resulting trust in real estate to be raised in that manner, except in favor of the creditors of the person who pays the purchase money. (1 R. S. 728, § 51, 52, 53.) The assignment itself, which was the instrument put on record, contained no stipulation as to the bidding in of the property, at the sale under the decree. And the guaranty that the second instalment should be collectable was a mere personal agreement, which would authorize the assignee io bid upon the property, to the extent of the second instalment, beyond the amount of the first instalment and interest and costs ; and to have that amount paid to him. out of the purchase money, under the direction of the court. To have protected such an interest against subsequent purchasers of the legal estate -which might be conveyed by the master’s deed, the assignee should' have given notice of his rights to the master who made the sale, and requested such master not to give the deed to Mitchell until that amount of the purchase money was paid to su h assignee. And he might, if necessary, have applied to the court under whore direction the sale was made, to protect his rights as assignee; by directing the master to pay over to him the amount of that instalment and interest, out of the purchase money. If the respondents stood in the situation of mere judgment creditors of Mitchell, having only a general lien upon the land in the hands of their debt- or, it might not perhaps be too late to consider the unpaid purchase money, upon the master’s sale, and which ought independent of the special agreement to have been paid to the assignee of the second instalment, as a subsisting equitable lien in favor of such assignee upon the lands in the hands of Mitchell, so as to give it a preference over the general legal lien of the judgments against him. But the subsequent sale under those judgments turned’ what was before a mere general lien into a specific lien upon the premises, in behalf of the purchasers at the sheriff’s sale, to the extent of their purchase money and interest. And in the absence of any allegation to the contrary, the respondents must be considered as bona fide purchasers without notice of the equitable rights of the assignee. Even if the registry of this assignment to Rosseter, in the book of mortgages, would be constructive notice to a purchaser, under a decree of foreclosure in a suit commenced before that assignment was made, which I am inclined to think it would not be, (as no one thinks of searching the book of mortgages subsequent to the commencement of the foreclosure suit under which he purchases, unless it appears that the complainant has neglected to file the notice of the lis pendens which he is required to file b.y the 133d rule,) it clearly would not be notice to a subsequent purchaser, that the original purchaser at the master’s sale had not paid the full amount of the purchase money to the master before he 'obtained his deed. It does not appear from the report of the master whether the amount bid at the sheriff’s sale was more or less than the amount of the respondents’ judgments. But that purchase discharged the lien of their judgments upon any other real estate which then belonged to their judgment debtor, to the extent of their bid, and all personal claim against him pro tanto. I cannot, therefore, in the absence of any allegation that they were not in any way injured by that bid, deprive them of the protection of bona fide purchasers, without notice of any equitable lien upon the property for the unpaid purchase money on the master’s sale.

I do not think, however, this case turns upon that question. The agreement, which was made at the same time with the assignment to Rosseter, although separate therefrom, must be taken as a part of the same transaction, for the purpose of ascertaining what the parties intended. And taking both instruments together, I think it is evident they intended to give to the first instalment a preference in payment out of the proceeds of the sale of the mortgaged premises ; though they undoubtedly supposed the property was sufficient to pay both instalments, and the prior incumbrance of the Norton mortgage, if they knew that mortgage was still a subsisting lien. By that agreement the property was not to be sold until the second instalment became due, and then was not to be sold for less than the amount of both instalments. And such sale was to be for the use and benefit of the assignee of the second instalment, to the extent of that instalment and interest, after the satisfaction of the first payment due on said mortgage. The only rational construction I can give to this latter clause of the agreement is, that Mitchell should not let the property be sacrificed, at the master’s sale, for the amount of the first instalment merely ; in case the assignee should not then be able to raise the amount of that instalment and costs. But that Mitchell should see that it was bid up to the amount of both instalments, at least. And that if in so doing he was compelled to bid in the property, he should hold it in trust to pay the assignee out of the proceeds of the premises, upon a subsequent sale, the amount of this second instalment, after deducting from such proceeds the amount of the first instalment; or in trust to convey the same to the assignee upon being paid the amount of the first instalment, with interest and the costs of the foreclosure. Whether a deed from the master conveying the property to Mitchell upon such a trust would have been valid, under the provisions of the revised statutes relative to uses and trusts, is not material to consider ; as the master’s deed appears to have been an absolute conveyance. And all the appellant had a right to claim in any event, as against the legal lien of the respondents under their purchase at the sheriff’s sale, was that this agreement should be carried into effect, so far as it could be, according to the intention of the parties to it. That intention I think was, that the first instalment should be first satisfied out of the proceeds of the property that Mitchell might be compelled to bid in, at the master’s sale, to prevent a sacrifice thereof. And as the respondents had a legal lien upon Mitchell’s title under the master’s deed, and a preferable equitable lien to the extent of the first instalment, they would as judgment creditors merely have been entitled to the whole surplus money now in controversy ; even if they had not become such bona fide purchasers at the sheriff’s sale without notice of any of these equitable rights of other parties.

The order of the vice chancellor which is appealed from must therefore be affirmed with costs.


source: Caselaw Access Project

author: The Chancellor.

license: Public Domain

text:
    Hosack & Blunt, executors, vs. Rogers and others.
    Where a firm consisting of three persons became insolvent and assigned the effects of the copartnership for the benefit of their creditors, who agreed to release the two junior members of the firm, and the senior member covenanted with the creditors to pay their debts out of another fund if the assigned property was found to be insufficient for that purpose; Held, that the release and covenant operated as a novation or extinguishment of the original debts as to all the copartners; and that upon the death of the senior member of the firm all the creditors must claim as specialty creditors against his estate under the covenant, although some of them had recovered judgments against the firm previous to the execution of the release and covenant.
    Upon a joint judgment against two or more persons, if one of them dies, the debt, except so far as it is a lien upon real estate, survives as against the other only, and the representatives of the decedent cannot be sued thereon at law; and if the judgment creditor in such a case comes into the court of chancery to obtain satisfaction of his debt out of the personal estate of the decedent, that court, acting upon the principle that, equality among creditors is equity, will not give him a preference in payment over other creditors.
    A release of one of two joint debtors discharges the original debt as to both; and a covenant not to sue both has the same effect as a release of both, to'avoid circuity of action. But a covenant not to sue one of them does not, at law, operate as a release of the debt as to cither; so that the original indebtedness remains unchanged at law.
    Where a party consents to examine a witness upon his voir dire, and the witness declares he has no interest in favor of the party calling him, it is too lato for the party so examining him to object to his testimony after-wards, upon the evidence of others that he is interested.
    A creditor who has a claim upon the estate of a deceased person whose estate is not sufficient to pay all his debts, is not a competent witness to diminish the claim of another creditor of the estate who is entitled to priority in payment. Nor can a husband be a witness, in such a case, where his wife is interested in diminishing the amount of the claim of the prior creditor upon the fund, although the husband has no personal interest in the question.
    April 7.
    This case came before the chancellor for hearing upon the pleadings and proofs. The facts in the case, so far as they are necessary to understand the decision, are stated in his opinion and in the previous reports of the case in this court, and in the court for the correction of errors.

      J. Blunt & S. Stevens, for the complainants.
    Nehemiah Rogers, as executor, must be decreed to account for all the assets of his testator, A. Gracie, according to a legal course of administration as the law was prior to 1830. The assignment and release of the 27th April, 1824, did not change the original indebtedness of A. Gracie, whether consisting of judgments, bonds, or parol contract. The judgment of A. Hosack is entitled to priority over the demand of N. Rogers, which is upon a parol contract. If the covenant in the assignment of April 27, 1824, be resorted to by N. Rogers to raise his debt to the rank of a specialty, it is still but a covenant debt, and inferior in rank to the judgment in favor of A. Hosack. Samuel Rogers is a party defendant in the suit and interested in its results, being entitled to call upon N. Rogers to account for any sums recovered from the estate of A. Gracie ; and his deposition must be suppressed. (Allen v. Blanchard, 9 Cowen, 631.) The tranfers to Samuel Rogers by A. Gracie can be sustained only by being deemed payments on the debts due to N. Rogers & Sons, and ought to be deducted from the am'ount thereof; and if not so sustained, then Samuel Rogers was accountable to N. Rogers as executor for the sum paid under the Spanish treaty, and the latter should be charged with this debt w'hich he has suffered to become irrecoverable under the statute of limilatations. N. Rogers, as executor, claiming a right of retainer, is to be charged -with the receipts by his partner Samuel Rogers, from the estate of A. Gracie, i. e. Nov. 11, 1824, $6544,41, and the Spanish claim, say, $3500. N. Rogers having admitted that he has in his hands a large surplus of funds belonging to the estate of A. Gracie beyond any debt claimed by him, he ought to be decreed forthwith to bring into court the amount of the judgment of A. Hosack, to abide the event of the suit. (Blake v. Blake, 2 Sch. & Lef. 26. Yare v. Harrison, 2 Coxe’s Ch. Cases, 377. Vigross v. Binfield, 3 Mad. R. 62. 2 Sim. & Stu. 217.) The English creditors did not become parties to the assignment of 1824, and their debts are now barred by the statute of limitations. If they be deemed parties to said assignment, they are only creditors under covenant, and must be postponed to the judgment of A. Hosack.

      A. G. Rogers & J. I. Roosevelt, for N. Rogers.
    The testator, A. Hosack, having become a party to the assignment which was based upon the debts as they stood at its date, and having also accepted a dividend computed upon the footing of the schedule debts, waived the judgment recovered by him in the interval between the preparation of the instrument and its final execution, and his executors cannot now set it up merely to give to his claim the character of a judgment debt in the distribution of A. Grade’s estate. If not waived by thus accepting the assignment, it was discharged by executing the release to two of the defendants against whom it had been recovered. (1 Bos. & Pul. 630. 10 John. Rep. 518. 7 Id. 209. 9 Cowen, 37. 2 John. Rep. 228. 2 Saund. 48, n. (a.) 6 Taunt. 289. 1 Mars. 603, S. C. 12 Mod. 548. 1 Atk. 294. Solly v. Forbes, 2 Brod. & Bing. 38. 18 John. Rep. 459. 16 Id. 172.) If neither waived nor discharged by these acts,, it was extinguished as against the personal estate of Mr. Grade by his death, leaving his co-defendants surviving, and could only be enforced, if at all, against his representatives in a court of" equity, and of course without any right of priority. Such of the creditors as became parties to the assignment must in judgment of law be deemed to have-accepted its provisions as a substitute for their existing demands, and must therefore be confined to the assigned fund, and’to the personal covenant of Mr. Grade ultimately to make up the deficiency. The only condition upon which his engagements for such deficiency were made to depend was, the bona fide adjustment and recovery of the French claims, whatever might be the sum allowed for their settlement—it not being the intention of Mr. Gracie to compound with his creditors, but merely to postpone the time-of payment; in other words, when that period arrived, he intended to stand in the same situation as to the amount of his indebtedness as if he had not been discharged, by taking on himself the risk (which he considered nothing) of its sufficiency, and guaranteeing such sufficiency. (3 John. Rep. 375. 16 Id. 172. 8 Id. 394.) All the creditors, therefore, who became parties to the instrument, stand, so far as the dignity of their demand is concerned, upon the equal footing of specialty creditors, for the full amount of the balance of their debts. Mr. Rogers, consequently, as executor, is entitled to retain the balance due him as against all the rest, all being of the same degree; and even if the covenant of A. Gracie was to pay his debts only to the extent of the moneys he might recover from France, still Mr. Rogers would be entitled to retain to the full amount of his claim, if it did not exceed the whole amount of the French recovery, his right being also established by the decree of the court of errors in the most express terms.
    William Gracie claiming to be a creditor of the estate of his father in the triple capacity of bond holder, and administrator and legatee of Miss Rogers, (an alleged creditor,) and of next of kin of his mother, who was the residuary legatee of his father, and being also responsible as debtor in his character of heir of his mother, who as executrix had received and appropriated part of the assets of his father’s estate, is palpably interested in reducing the claim of Mr. Rogers, and is therefore an incompetent witness. Charles King, being a creditor in his character of executor of Rufus King, is also an incompetent witness. James G. King, being a creditor, both in his own- right and as executor of Rufus King, is also an incompetent witness. Samuel Rogers is a competent witness, and the objection to him, if otherwise valid, is now too late. (20 John. Rep. 357. Phil. Ev. 96. 1 Dal. 272. 1 Mass. R. 219. Peake’s Ev. 186. 10 Mod. 193. 2 Hayw. 145. 3 Day, 214. 15 East, 57.) The English creditors having neglected to execute the articles of 27th April, 1824, cannot claim the benefit of the covenant contained in them. And if they could, being merely simple contract creditors, they are barred by the statute of limitations. The two sums received by Samuel Rogers were received on his individual account, and cannot therefore be charged as payments on the debt of N. Rogers & Sons. The special promise made by A. Grade to pay the debt of N, Rogers out of the first moneys, from any Source, that he could ever command, was a valid and binding engagement.

      S. J. Wilkin, for the English creditors.
    James G. King is a competent witness to prove the facts which would admit other creditors to participate under the bond of April 27, 1824. As creditor, if entitled himself under the bond, his interest is against those who call him, and he is competent.
    If not entitled himself, he has no interest in the suit, and he is competent. As interested in the estate of Rufus King, also, his interest is against those who call him, Besides, he has no interest under his father’s will. His father appearing to have made a will, those who object to this witness as interested under it, must show the interest, by producing the will.
    The creditors who signed the release of June 26th, 1824, are entitled to the benefits of the covenant of April 27th,-1824, on the following grounds : That deed names these creditors in the schedule A., annexed thereto ; and it only precludes them upon their neglect or refusal. Neglect and refusal require notice and request; none such is proved. (2 Paige, 490.) The creditors in question by signing the release of June 24th, 1824, fulfilled the substantial condition of the indenture of April 27th, 1824 ; and any mere informality, varying from a literal compliance, will not be permitted in a court of equity to forfeit its provisions. These creditors, the assignees under the deed of April 27th, 1824, and the other creditors provided for in that deed, have treated these creditors as fully entitled under that deed. All parties have acted in compliance with the arrangement of which that deed was part. These creditors are therefore to be deemed parties to it, both as bound by it and entitled under it. (Spotswood v. Stocksdale, Cooper’s Rep. 102.) Under the provisions of the deed of April 27th, 1824, all the debts of the parties thereto (including the signers of the release of June 26th, 1824,) released their debts at law, and come in as specialty creditors under the covenant in the deed of April 27th, 1824, and are all entitled to stand as specialty creditors to the extent only of their rateable share of the recovery of the French funds. If the releases above mentioned do not discharge A. Grade at law, and do leave the debts undischarged, still as to the debts not originally under seal, each creditor (originally by simple contract) is entitled to stand as specialty creditor according to the rateable proportion of the French recovery ; and they must rank on these amounts both as to a retainer by the executor and a payment to themselves. That covenant would not authorize a recovery by every creditor of his full debt, when only enough was realized from the French funds to cover one debt. And it would not require each creditor to wait until enough was realized to pay the whole. The true construction is, that upon each recovery from the French funds, each creditor is entitled to a recovery for his share of it, if not paid over in reasonable time ; and this is the extent and limit of each creditor’s right as a covenant creditor. (Newl. on Con. 414. Ellis on Debtor and Creditor, 204. 1 Story’s Eq. 370, 378, 379. 4 East, 372.) Nehemiah Rogers as executor claiming a right at retainer is to be charged with all his receipts from the estate to the extent of his retainer. And the creditors are entitled to an inquiry as to his use or investment of the funds and to interest, if on such inquiry it shall be just.

      D. Lord, jr. for Don Zavala.
    Nehemiah Rogers, as executor, must be decreed to account for all the assets of his testator, A. Grade, according to a legal course of administration as the law was prior to 1830. In taking such account,, the specialty debts are entitled to a preference next after judgment debts, and before simple contract debts. The debt to Don Zavala is a specialty debt, and although not .yet proved as such, may be so proved before the master. If the covenant in the deed of April 27th, 1824, is resorted to by the defendant N. Rogers, to raise his debt to the rank of a specialty, it is only so elevated according to the legal effect of that covenant. Under that covenant, which is several to each creditor in respect of his debt, the creditor can only recover his rateable proportion of the money received from the French claims mentioned in the assignment. Nehemiah Rogers can only rank as a specialty creditor to that amount, and his retainer as such is so limited until all the specialty debts are satisfied, and this should be so declared in the decree. Against the amount to which this right of retainer of N. Rogers, as a specialty creditor, is limited, all the previous receipts from A. Grade’s estate must be applied-. And as to the residue of if. Rogers’ debt, it must be treated as a simple contract debt, and postponed until all the judgment and bond debts are paid out of the general assets of A. Grade’s estate. The transfers by way of gift to Samuel Rogers by A. Grade, can only be sustained by being deemed payments on the debts of N. Rogers & Sons, and ought to be deducted from the amount of their debt at the date of the covenant.
   The Chancellor.

This case has frequently been before the court in various shapes, and the facts upon which the principal question between the complainants and Nehemiah Rogers, the surviving executor of Archibald Grade, as to the right of priority of payment rests, are stated in the reports of the case in this court, and in the court for the correction of errors. (6 Paige’s Rep. 415, and 18 Wendell’s Rep. 319) It is not necessary, therefore, to recapitulate them here. As the court for the correction of errors decided that there was no specific appropriation of the French fund for the payment of the debts of such of the creditors of the copartnership as should consent to release the two junior members of the firm, the whole of that fund as well as other funds of the estate of Archibald Grade, which have come to the hands of N. Rogers, as his cxecu tor, must be considered as general assets belonging to the estate ; and must be accounted for and distributed in the due course of administration, according to the legal priorities of the several creditors as they existed at the death of A. Gracie. The question to be decided on this part of the case, therefore is, whether after the release of the íavo junior members of the firm and the death of the senior member, the personal representative of A. Gracie, the senior member, could have been sued at law and a recovery had thereon against him upon the original joint contracts, or debts of the three copartners ; or whether the remedy must not be sought upon the new contract made by A. Gracie with the several creditors at the time he consented to the arrangement for the release of his copartners, and that he would himself continue responsible for the debts. This, in itself, is a mere technical question, as there is no doubt that in equity A. Gracie was still liable to the creditors in some form, independent of his express covenant to pay the debts out of the French fund. Upon that technical question, however, the important right of the complainants, to a priority of payment before all other creditors, depends. For the doctrine of this court is, that equality among creditors is equity. And even before the revised statutes, if for any cause the creditor could not secure his common law preference, either by retainer or by a suit at law against the personal representative of the deceased debtor, upon a security of a higher class, this court Avould only aid him so far as necessary to give him his rateable share in the distribution of the estate in common with other creditors. The question then arises, whether these complainants after the death of A. Gracie, could have brought an action of debt at law, or a scire facias, against his personal representative, upon the original judgment recovered against him and the two junior members of the firm jointly ; or whether the remedy must not have been founded upon the new contract as altered by the release, and the agreement for the continuing liability of the senior member of the firm. It may be proper here to remark that upon a motion in a former stage of this suit the judgment in favor of these complainants appeared to have been recovered against all three of the copartners, subsequent to the execution of the release. If that were in fact so, the right of action upon the judgment would of course have survived against the junior partners only, at law, and no relief could, have been obtained against the personal representative of A. txracie, the defendant, except in equity. That, of course, would in this court put an end to all claim of priority on the part of the complainants. It is now alleged by them, however, and I think they have succeeded in showing the fact to be, that they actually signed the agreement, which operated as a release of the two junior partners, subsequent to the recovery of the judgment; although it was dated and was executed by other creditors before that time.

It is a general principle that the release of one of two joint debtors discharges the original contract as to both; and that a covenant not to sue both has the same effect, to avoid circuity of action. A covenant not to sue one of two joint debtors, however, unless it clearly appears from the instrument that it was intended to discharge both, does not at law discharge either. So that a suit may be brought at law upon the original contract against both, if it was a joint contract, and against the one to whom the covenant was not given, if the contract was joint and several. In other words, it is in such cases construed to be a covenant merely, and not a release; so that the original contract against both debtors remains unchanged at law. (Hatton v. Eyre, 1 C. Marshall’s Rep. 603. Dean v. Newhall, 8 Term Rep. 168. Claggett v. Salman, 5 Gill & John. Rep. 314. Garnett v. Macon, 6 Call’s Rep. 341.) The cases in which the release of one joint debtor has been held to be a release of the original contract as to both, has indeed generally arisen when there was no agreement by the other party for his continuing liability. And I have not been able to find any case, decided in a court of law, where the question has directly arisen as to the effect of such a release of one debtor, with the consent of his co-obligor, under an agreement for the continuing liability of the latter, upon the original contract itself. Upon principle, however, it seems to me. such an arrangement, which necessarily turns what was originally a joint contract by two parties into a separate liability of one of them, 'actually forms a new contract as a substitute for the old one; so as to give to the creditor his right of action upon this new contract, whether such new contract is express or implied. It is, in fact, what in the civil law is called a novation, or the substituting a new contract, between seme or all of the parties, in the place of the old one ; which operates as an extinguishment of the old contract, and leaves the creditor to his remedy upon the new contract only. The case of Benson v. Kincaid, (3 Pennsylv. Rep. 57,) does not decide this point. For a question of mere legal right, as contradistinguished from the equity of the case, cannot well arise in the courts of Pennsylvania ; where the legal and equitable jurisdictions are so blended together that no distinction is made between the legal and equitable rights of parties in a suit. Besides, in that case, as the deceased debtor was merely a surety for the survivor, who might, as survivor, be proceeded against separately, upon the judgment, to enforce the lien of such judgment, even his assent was not necessary to prevent the release of his surety’s property from operating against him as survivor. The creditor having the technical right to proceed against his property alone, as the surviving debtor, and he having assented to the agreement to release the property of the other, the only question which arose was upon the technical effect of the release, upon the lien of the judgment on the property of the survivor. And certainly it could not have the technical effect to prevent the releasor from proceeding against the survivor, in the same manner that he could have done if the release had never been executed. In the present case, however, if the release of the two junior partners had not been executed, and no new agreement had been made, it is clear the executor of the senior partner could- not have been sued at all In a court of law. And the complainants must either have proceeded against the survivors and their property solely in a court of law, or he must have come into this court, upon an allegation of their insolvency, to reach the estate of A. Grade, in the hands of his personal representative ; in which case, as they would have had no legal preference in payment, this court would not have given them a preference here. My conclusion, therefore, is, that the original joint contracts of the three copartners were novated or extinguished by the release, and were turned into new contracts against A. Grade, the senior partner, solely and individually. And that all the creditors who executed the release, were at his death specialty creditors, under his covenant to pay the balance of their debts which should not be satisfied by the proceeds of the assigned property. The effect of that covenant was, that A. Grade, upon the recovery of the French fund, would pay to each creditor the whole balance due him ; and not. merely to pay it out of the French fund if that should be sufficient for that purpose. At least I can give no other construction to that covenant consistently with the decision of the court for the correction of errors, by which I am bound in this case. For if the intention of the parties was merely to appropriate that fund, and that alone, to the payment of the balances of all the creditors who released the junior partners, and not to stipulate with each for the sufficiency of that fund, it was a specific appropriation which would have given to each a pro rata distribution according to the settled principles of equity.

The question whether the English creditors can come in also as specialty creditors, by virtue of this covenant, depends upon the question whether they could have sued Archibald Grade upon the covenant if he was now living. And upon a careful examination of the terms of the assignment, and considering it as a personal covenant with each creditor, and not an assignment of the fund to such as should actually sign the instrument, so as to make it a specific appropriation, I see no difficulty in the English creditors sustaining an action upon the covenant, if not in their own names at least in the names of the assignees. The funds assigned to Wilkes, Goodhue and J. G. King, were not to be paid over by them to the creditors who should neglect or refuse to become parties to the assignment within the times prescribed therein. And the English creditors did not in fact sign their names to the original assignment; though if the testimony of J. G. King, can be received as legal evidence in their favor, they did what was tantamount to it, and actually received their dividends under the assignment. And as all parties appear to have acquiesced in this manner of transacting the business, an d in the distribution of the assigned fund, for more than ten years before the present controversy commenced, I think it must be considered as a substantial compliance with the agreement, and as an acceptance of an assignment on the part of the English creditors. The difficulty however of their being able to sue upon this covenant of Archibald Gracte in their own names, is that the covenant is not made with all the creditors of A. Grade and sons, mentioned in schedule A., who should assent to the assignment and accept dividends under the same. But he covenants with the parties of the second and third parts, which parties of the third part are declared to be such of the creditors mentioned in the schedule A., who should become parties to the indenture ; that is, as I understand it, who should actually sign and seal the name. J. G. King, however, is expressly covenanted with, as one of the parties of the second part, and that of itself would have enabled him to have sued upon the covenant either in his own name or in the names of himself and Wilkes and Goodhue, for the balance due to the firm of King & Gracie. And as this covenant to pay the balances to all of the creditors mentioned in Schedule A., is made with the parties of the second part as well as parties of the third part, I think the parties of the second part might also sue upon the covenant as trustees for the other English creditors who came in under the assignment, and released the two. junior members of the firm • and who neither neglected or refused to become formal parties thereto, as they never had the opportunity to see or sign it. Upon this ground therefore I shall hold the English creditors entitled to the privileges of specialty creditors also, in the administration of the estate of Archibald Grade.

The result is, in conformity with the decision of the court for the correction of errors, that N. Rogers is not to be put upon a perfect equality with other creditors with respect to the French fund. He is to be permitted to retain for the debts in which he had an interest, as mentioned in schedule A., in preference to any of the other creditors mentioned in that schedule, and in preference to other specialty creditors of A. Grade. And the other creditors mentioned in schedule A., are to be paid pro rata as between themselves and other specialtyr creditors, and in preference to creditors by simple contract.

A reference must therefore be made to master Ullman or master Sidell, to take an account of the debts due to any of the parties to this suit, or any other creditors of the estate of A. Grade, whether by judgment or decree, by spedalty, or otherwise, and to state the class to which such debts belong; placing the debts of the parties to this suit in the classes to which they belong as above declared ; and directing the several creditors to come in and prove their debts within the time fixed by the master, in conformity to the statute on that subject. And the master is also to state the account of the executor Hehemiali Rogers, charging him with interest as shall be equitable: with liberty to make a special report as to the fund in his hands, and of the amount due for which he is entitled to retain ; to the end that the surplus, if any, may he brought into court and invested to abide the event of the suit.

The motion to suppress the testimony of Samuel Rogers must be denied. The complainants’ counsel having consented to his examination on his voir dire and he stating that lie had no interest in behalf of the party- calling him, it was too lato to make an objection to him afterwards, founded upon the testimony of others. His testimony must, therefore, be retained, subject to all proper objections to his credibility. I see no legal objection to Charles King as a witness, as he does not appear to have any personal interest whatever in these conflicting claims, or in increasing or diminishing the fund in the hands of N. Rogers, the executor. William Gracie shows that he would have an interest in increasing the fund if the amount of the estate was sufficient to pay off the debts so as to leave any thing for distribution. He also has a claim as a bond creditor of A. Gracie, which claim had not been released to the defendant Nehemiah Rogers, the executor, when he was examined as a witness. He had therefore a direct interest in reducing the amount which N. Rogers was to retain for his debt, and to increase the fund in the hands of the executor. His deposition must therefore be suppressed. James G. King was a competent witness in relation to the English creditors having accepted the terms of the assignment and discharged the junior members of the firm ; as in testifying in support of their claims to come in as specialty creditors, under the covenant, he was testifying against his interest. But as his wife is interested in reducing the claim of N. Rogers, he cannot be a witness as to any matter which is for her benefit, although he has no personal interest in the estate of Rufus King. He has also an interest against Rogers, as one of the former firm of King & Gracie of Liverpool. So much of his testimony therefore as relates to moneys supposed to have been received under the Spanish claim, or for the freight of the ship America, by N. Rogers, or any member of the firm of Nehemiah Rogers & Sons, must be suppressed.

In relation to the freight claim, received by S. Rogers, I see nothing at present to charge N. Rogers with it, or the firm with which he was once connected. It appears to have been received by Samuel Rogers as an individual. But if the firm was in any way benefitted by that money it ought to go to reduce the claim of N. Rogers to retain beyond the amount of the time and expenditures necessary for the collection of the money. A. Gracie was insolvent and had no right to give away his property to the injury of his creditors. I shall therefore permit the piaster to take further testimony in relation to that money, and to reduce the claim of N. Rogers accordingly if it shall appear that he should be charged with it, either on the ground that he or his firm received it, or that he could have legally collected it of Samuel Rogers in his character of executor of Archibald Gracie.

The question of costs, and all other questions and dir rections are reserved until the coming in of the master’s rereport,

       Affirmed, upon appeal to the court for the correction of errors, in De« cember, 1840.


author: Denio, Y. C.

text:
    Holmes vs. Grant and another.
    Where a debtor conveyed his farm to his creditor for the amount of his debt which was about the value of the farm, by an absolute deed with covenants of warranty, and the creditor gave up and discharged the securities which he held for his debt, and on the same day gave to the grantor a writing to the effect that if such grantor could find a purchaser for the farm within one year, he should be entitled to all the surplus which he could obtain for the same beyond the amount of the debt, for which it had been conveyed, and the interest thereon j Held, that the writing thus given was not such a defeasance of the conveyance as necessarily to constitute it a mortgage; even if it was given at the time of the execution of the deed and in pursuance of a previous agreement to that effect.
    As a general rule, where a contract and conveyance arc made upon a negotiation for the loan of money, a court of equity will construe the conveyance to be a mortgage whatever may be the form of the contract, if the person to whom the application for the loan is made agrees to receive back his money with legal interest, or a larger amount, within a specified time thereafter, and to re-convey the property; where it is apparent that the real transaction was a loan of money. And gross inadequacy of price is always a strong circumstance in favor of the supposition that a sale of the property was not intended.
    Where a sale is made with an agreement for a repurchase within a specified time, if the consideration paid upon the sale is near the cash value of the property conveyed, the absence of any agreement on the part of the vendor to repay the purchase money, so as to make his right to re-purchase and the vendee’s corresponding right to recover back his money mutual and reciprocal, is a strong circumstance in favor of construing the contract to be a conditional sale and not a mortgage.
    April 7.
    This was an appeal from a. decree of the vice chancellor of the fifth circuit, declaring an absolute deed from the complainant to the defendant M. Grant a security in the nature of a mortgage merely. The answer of the defendants on oath was waived, and the case therefore depended upon the evidence in the cause ; except so far as the factse were admitted in the answer of the defendants. Previous to the 8th of September, 1820, the complainant Marcus Holmes held the legal title to a farm in Vernon in the county of Oneida, which had before that time been conveyed to him by his father, Seth Holmes, either for his own benefit or on some secret trust for the benefit of the grantor. And he was also indebted to the defendant M. Grant, Ms uncle, residing in the state of Connecticut, in the sum of §4277,65, either for an indebtedness on his own account, or one which he had contracted to pay on account of his father, Seth Holmes. On the day last mentioned, the conveyance in question was given by him of the farm. That conveyance upon its face purported to be an absolute deed in fee of the farm, with covenants of warranty, and was duly acknowledged by the complainant and his wife on the day of its date ; and was recorded as a deed in the clerk’s office of the county of Oneida. And at the time of the execution and delivery of the deed to him, the defendant M. Grant delivered up to the complainant the several notes and securities which he held against the latter for the debt in payment of which the farm was thus conveyed. On the game day on which the conveyance was made, M. Grant signed and delivered to the complainant a written memorandum in the words and figures following, which the vice chancellor held to operate as a defeasance of the deed ; upon the presumption that it was executed at the same time with the deed, and as a part of the same agreement. “ Know ye that 1 do hereby authorize Marcus Holmes to make a sale of the farm that Seth Holmes, Esq, now lives on, if he does find a purchaser within one year from this date he the said Marcus shall be entitled to what, he may get over and above the sum of $4277,65, with interest on the same until the Lime he may make the sale; hut if he should not make sale of the premises, he is not entitled to the improvement of said farm. Vernon, Sept. Stli, 1820. Matthew Grant.” The complainant alleged in his bill that this instrument was executed simultaneously with the deed, and was intended by the parties as a defeasance thereof. But the defendant M. Grant in his answer, which was put in under oath although his oath was waived by the bill, denied that there was any negotiation for a mortgage or a defeasible deed of the premises, or that upon the executing of a deed he agreed that he would give back to the complainant a writing to re-convey or give up the farm, upon payment of the debt for the satisfaction of which the deed was to be given. On the contrary, he alleged that the conveyance was made to him, by the complainant and his wife, for the express purpose of vesting the absolute title to the farm in him as the grantee, and in that way of paying, extinguishing and satisfying the debts owing by the complainant and his father. lie also denied that the writing which was claimed to he a defeasance was made at the time of the execution of the deed; but said that after the execution and delivery of the deed, and after he had become both at law and in equity the lawful owner of the farm in fee simple without any- let or condition, he staled in the presence of several persons besides the complainant, that he would rather have the money than the land, as he resided in another state and did not want the land ; and then told the complainant if he could find a purchaser who wouklpay for the farm more than the amount due him, and for ^^payment. of which he had taken the conveyance, he would sell the farm to such purchaser and let the complainant have the overplus ; that although such offer was perfectly gratuitous, he was sincere in making it at that time. The defendant further stated that he had no recollection of having given the complainant the writing as stated in the bill, and that if he ever did give it, the same was made after such offer, and solely and simply to put that offer in writing as a memorandum thereof.
   The following opinion was delivered by the vice chancellor as the ground of the decree appealed from.

Denio, Y. C.

The bill seeks to redeem a farm situated in Vernon, from an alleged mortgage incumbrance resulting from an absolute conveyance made by the complainant to the defendant Matthew Grant, in September, 1820, and an instrument executed by Matthew Grant to the complainant, bearing the same date with the deed, which is claimed to be a defeasance.

The answer insists that the transaction was a purchase and not a mortgage, but as the oath to the answer was waived by the complainant, such answer is not evidence ; and these particular allegations therefore do not seem to be material, further than to shew that an issue is taken to the complainant’s allegation in regard to the character of the transaction. (Rule 40. 2 R. S. 175, & 44.) It was indeed made a question upon the argument whether, notwithstanding (he late statute and the rules made in pursuance of it, the answer if in fact put in on oath and suffered to remain in that shape without objection by the complainant, is not evidence for the defendant. It is argued that it is optional with the defendant whether he will accept the waiver or not, and that if he declines to do so, and swears to his answer, it has the same force as matter of evidence as heretofore.

The inconvenience which led to the adoption of the statutory provision in question doubtless was that, by the former practice, where the complainant proceeded in this court on account of the equitable leFe of his claim, and not from a want of evidence leading him to seek a discovery from the defendant; if his adversary was hardy enough to put in a denial of the facts on oath, he was obliged in addition to proof which would otherwise be satisfactory, to produce evidence to overcome that furnished by the answer. And thus, if his case depended on the testimony of a single witness, however disinterested and credible, he was liable to be defeated by the oath of his interested opponent ; without the right of balancing it -with his own. The obvious remedy was to enable the complainant to dispense with the defendent’s oath, where he deemed a discovery unnecessary. And yet if the argument addressed to me on this point is well founded, it is at the election of the defendant whether in a given case the old rule shall still prevail. To my mind it is clear that the act does not admit of this construction. I should infer from the 37th rule which is cited by the defendant, that the chancellor did not consider the effect of an answer on oath changed where it was to be used on a motion to dissolve an injunction in a common case; and hence "the provision of that rule allowing the plaintiff to fortify himself by the affidavits of «witnesses attached to his bill, and then by receiving the defendant’s oath, to make the question on the motion to dissolve the injunction, though the answer should be put in on oath, one to be decided upon the whole evidence and not according to the rule which requires the injunction to be dissolved where the whole equity is denied. I see no necessity for excepting, or moving to take the answer off the file. The defendant is not by the statute prohibited from answering on oath ; but the provision is that the oath shall not avail him on the hearing. The answer is regularly put in. In a case thus circumstanced, and where a replication is put in, the pleadings are to be looked into to ascertain what matters are put in issue; and as to those, and also as to any matters alleged and not met by the answer, they must be solved by the testimony, and the onus probandi rests on the plaintiff.

In examining this case upon these principles, it appears to be satisfactorily established, that on the occasion of giving the deed for the premises in question the complainant was indebted to the defendant M. Grant in the sum of $4277, 65; a portion of which, it is probable, had been the debt of the complainant’s father, which the complainant on that occasion assumed ; and that this debt was arranged by the execution of the con rey anee of the farm. On the same day the defendant M. Grant executed under his hand without seal a writing, agreeing that if the complainant should find a purchaser for the farm, within one year, he should be entitled to the balance which the farm should sell for above the sum before mentioned with interest. The instrument declares that if the complainant should not make sale of the premises, he should not he entitled to the improvement of them ; leaving it to be inferred that if he did sell within the year, he and not. the defendant should receive the avails of the intermediate occupation of the farm. It is a material inquiry whether this writing was made at the same time with the execution of the conveyance. For although a defeasance strictly so called, executed after a conveyance absolute In its terms, would he valid and would relate to the time of the execution of the first conveyance, (4 Kent’s Com. 141,) such an agreement as the one in question, which does not purport to be a defeasance but a distinct and independent contract, might not have the same retrospective effect.

It appears from the evidence that the defendant, resided in Connecticut, and when the conveyance was executed came to this county ; and that the business was transacted at the house on the premises, occupied by the complainant’s father. The dates show that the deed and agreement were executed in the same day. It also appears that the person who drew the agreement, and who is since deceased, is a subscribing witness to the deed ; and that at the time it was executed, he took the acknowledgment of its execution as a commissioner. These facts raise a presumption, which can only be overthrown by clear proof to the contrary, that both instruments were executed on the same occasion and were parcel of the same transaction ; and I do not think that the testimony of H. N. Grant furnishes such satisfactory proof. He came up from Connecticut with his father, M. Grant, and was present at the execution of the deed and was one of the subscribing witnesses ; and he testifies to certain declarations which are said to be inconsistent with the idea that the agreement was cotemporaneous with the deed. It should be remarked that the transaction'was one of fourteen years’ standing, and that the witness was then a lad of twenty years old. He admits that he was not present at the negotiations which led to the signing of the conveyance, and is therefore unable to say whether or not the substance of this agreement was embraced in the bargain made before the writings were drawn. He neither saw nor heard any think/ about the written agreement. But he professes to recollect that after the deed was executed, and after the defendant had taken it into his hands, the defendant said to the complainant that he did not want the land, and that if the complainant would sell it within a year, he should have what he could get over the amount of the price which the defendant had given ; and that he, the witness, left the room without hearing anything further which passed. Without imputing any thing intentionally wrong to the witness, this does not seem to me very probable. It is much more likely that such a conversation should have preceded than followed the execution of the deed. And in my judgment very little reliance can be placed upon the recollection of the witness as to particular expressions, or the order in which they were uttered considered in reference to other transactions, at this distance of time, when there was no circumstance tending to impress them upon his memory ; and when he could then have known nothing of the principle upon which the order of the conversation is now deemed to be important. In my mind, this testimony does not in the least diminish the force of the presumption arising from the other circumstances, to which I have adverted to show that these papers were executed on the same occasion. The amount due the complainant was a low price for the farm, according to the testimony of a majority of the witnesses, and those who appear to me to have been the best qualified for judging. I think, from the testimony, the •farm could not have be.en worth less than $20 per acre 5 which would bring the amount some hundreds more than the defendant’s debt. The difference is not so considerable as to lay any foundation for the interference of this court on the ground of fraud. But I think it adds some force to the presumption that the owner would not willingly have parted with it absolutely at the price mentioned ; and that the defendant would not have been the first to propose that the complainant should retain the right to redeem, or to re-purchase.

For the reasons already mentioned, I have not regarded as of any weight the declaration, imputed to the complainant, that the defendant had got his. pay. If the expression, was in truth used, in regard to which there is no certainty, it would prove nothing more than that the defendant supposed that such an arrangement as he had made might well enough be called a payment of the demand ; as in some sense it might. It was in the evening of the day of the execution of the papers that the expression is said to have been used, and in all probability after the agreement had been given. No parol declarations, therefore, could control the effect of the arrangement which was then wholly in writing.

Assuming it to be established that the complainant executed the agreement at the time he received the deed, it is well settled that they must be construed together ; and that the whole transaction amounts to a mortgage, in terms redeemable in one year, upon the payment of the amount of the debt and the interest. No principle rests upon better authority in this court, than that the giving of the absolute deed on account of a present loan, or a precedent debt, with a concurrent agreement in writing, or by parol, for a redemption at any future time upon payment of the debt, is a mortgage, (Strong v. Stewart, 4 John. Ch. R. 167, Henry v. Davis, 7 Idem, 40. 2 Cowen’s Rep. 324, S. C. Rock v. Cozine, 9 Wend. Rep. 227. Slee v. The Manhattan Co., 1 Paige’s Rep. 48.)

I am far from thinking that the parties to this transac-r tipn supposed that it was a mortgage interest which was created. They, I am satisfied, supposed that the agreement xvas to be construed according to its terms ; and that if the condition was not performed within the year, the defendant’s estate would become absolute to all intents. It is only in consequence of the peculiar principles which courts have now for a long time applied to this species of contract that such is not the case. The natural import of the terms used in an ordinary indenture of mortgage, import that upon non-payment the estate belongs absolutely to the mortgagee ; but the maxim of this court is, that the estate cannot be a mortgage at one time and an absolute purchase at another. If the conveyance be a mortgage in the beginning, the right of redemption is inseparable from it. Even an express covenant inserted in the indenture, that in case the redemption should not be made within a given time the estate should be thereafter irredeemable, would not destroy the equity of redemption, but it would continue to exist until it should be foreclosed. (Clark v. Henry, 2 Cowen’s Rep. 327.) This rule is indispensible to guard the necessitous and improvident against the cupidity of the designing; and although, in a particular case, we may not see all the mischief exemplified for which the rule was intended, the principle being general must still be applied.

I do not appreciate the force of the argument, that because the notes were given up, the debt was extinguished. Eor the purpose of regulating the amount to be paid on the redemption the debt was to be kept on foot, and the amount is specified in the agreement. It is not essential that the personal remedy against the mortgagor should be preserved. There is a debt quoad the redemption, but not in respect to the personal remedy.

The letters which passed between the parties and between the defendant and Seth W. Holmes, do not seem to me very material upon this part of the case. The defendant, in one written by him in December, 1833, seems disposed to consent to a redemption. But whether he supposed himself bound to do so or not does not distinctly appear ; though I should infer from some expressions in it, that he considered the farm absolutely his. Such seems to have been the complainant’s views of the matter in the letter written by him ; but I have already stated that the parties were obviously ignorant of the light in which the transaction is regarded in equity. The possession is not inconsistent with the idea of a mortgage payable in one year. The farm was occupied under the defendant for the first year, but in case of redemption the defendant did not expect to receive, and was not to receive the profits of the occupation. It is probable that the complainant held the title for the farm in trust altogether, or in part for his father, but this does not affect the question between these parties. The trustee, for all the purposes of this suit, sufficiently represents the beneficial owners. (Van Vechten v. Terry, 2 Johns. Ch. Rep. 197.) I shall accordingly declare that the defendant holds only the interest of a mortgagee in the premises, and that the complainant is entitled to redeem.

The defendant G. Grant has not shown enough to entitle him to claim the protection due to a bona fide purchaser without notice. He has not shown that he has either paid or engaged to pay any thing to the other defendant upon his purchase. The decree will accordingly declare his title to the premises to be subject to the complainant’s equity of redemption. (Dickinson v. Tillinghast, 4 Paige’s Rep. 215.)

In settling the principles upon which the account is to be taken, I have had regard to the peculiar features of this case. Though by the construction which equity puts upon the act of these parties this conveyance is decreed to be a mortgage, the parties have, during a considerable period, regarded the defendant as the owner of the estate. He has been supposed so to treat the premises, and in such a case he should be paid for improvements which in the case of an acknowledged mortgage he would not be permitted to claim. A mortgagee in possession is sometimes refused an allowance for expensive improvements ; on the ground that he might, if allowed to improve at his pleasure and at the expense of the mortgagor, embarrass the equity of redemption. That principle cannot apply to a case circumstanced like this. (Moore v. Cable, 1 Johns. Ch. R. 385. 4 Kent's Comm. 166, 167, and note. Benedict v. Gillman, 4 Paige’s Rep. 58.) I shall accordingly direct a master to compute the principal and interest upon the debt to M. Grant mentioned in the pleadings and proofs, and that he charge him with the net amount of rents and profits received by him and by G. Grant; and that he allow for the expense of repairs, and for the permanent improvements upon the premises, and also for the interest paid by the defendants upon the prior mortgage mentioned in the pleadings and proofs ; and that if necessary he make annual rests for the purpose of applying any excess beyond the interest received by the defendants towards principal, but not for the purpose of charging the complainant with compound interest.

P. Gridley, for the appellant.

The evidence does not show that the deed and agreement were simultaneously executed. Even if simultaneously executed, the transaction amounts only to an absolute sale with a power to sell, and not to a mortgage. Or rather.the agreement was a conditional power to make a sale, provided it should be done in one year ; and the condition not having been performed within the time specified could not be enforced afterwards. (2 Jac. L. Dic. 229, 230. 1 Ves. 405. 3 Ball & Beat. 279. 19 Ves. 412. 7 Ves. sen. 406. 1 Powell on Mort. 138. Co. Lift. 205, a. note.) The whole evidence must be resorted to to ascertain the intention of the parties. (4 Kent’s Comm. 2d ed. p. 142. 1 Paige’s Rep. 56.) The parties intended that the deed should operate as a payment of the debt, and as a present conveyance of the farm. A mortgage is an instrument to secure a debt, not to pay it. The debt is the principal and the mortgage the incident, (9 Cowen, 369. 7 Id. 662. 2 Id. 195. 5 Id. 202. 2 Ball & Beat. 272. 7 Cranch, 218. 2 Edw. Rep. 144. 4 Kent’s Comm. 2d, ed. p. 144.) Such an agreement as the one given by the defendant, M. Grant, to the complainant does not turn a deed into a mortgage. (2 Edw. Rep. 143. 4 Kent’s Comm. 142. 15 Viner’s Abr. 468, pl. 8, tit. Mortgage & Redemption. 1 Vernon, 268. Cas. Tem. Talbot, 61. 2 Sch. & Leff. 293. 19 Ves. 412. 4 Breton’s Par. Cases, 142. 1 Powell on Mort. 133, a. Boston ed. of 1828. 2 Mass. Rep. 294.) The surrender of the securities is evidence that the debt secured by them was paid. (Arnold v. Camp, 12 Johns. Rep. 411.) Possession followed the deed. This of itself is almost decisive against the idea that the deed is a mortgage. The proof to convert a deed into a mortgage should be affirmative, clear and decisive. (1 Johns. Ch. Rep. 598.) The agreement at most was only a contract for a re-purchase. (4 Kent’s Comm. 142. Ham. Ch. Dig. 363. 2 Ball & Beat. 279.)

The extent to which the mortgage has been satisfied ought to have an influence upon the question of costs. That question therefore and all others not herein adjusted are reserved.

E. Smith Lee, for the respondent.

The deed and the agreement operated as a mortgage and not as an absolute sale of the premises. Although separate instruments they are to be construed as if they were incorporated in one instrument. The facts show that the parties intended the deed should be a mortgage. The deed and agreement are of even date. They were given as a security for the debt; not in payment of it. (7 Johns. Ch. Rep. 42. 2 Cowen, 324.) The object was to give the grantor a.right to redeem, (4 Johns. Ch. Rep. 167. 9 Wendell, 227. 1 Paige’s Rep. 48.) If the deed was a mortgage the time limited by the agreement for payment was immaterial; for once a mortgage always a mortgage. (2 Cowen, 331. 7 Johns. Ch. Rep. 43. 4 Paige’s Rep. 227.)

The Chancellor. I think the vice chancellor erred in this case in the conclusion at which he arrived, that the deed and the written agreement which he held to be a defeasance thereof were made simultaneously and constituted but one agreement. If the latter was in fact a defeasance, so that it could not have any sensible interpretation except upon the presumption that it must have been intended to control the absolute terms of the deed itself, and both instruments bore date on the same day, the legal presumption would unquestionably be that they were but different parts of the same agreement, and were intended to take effeet in connection with each other. Here, however, the instrument claimed to be a defeasance xx’as not necessarily such; but on the contrary is entirely consistent with the idea that it was a mere gratuitous offer on the part of the grantee in the deed, after he had become the owner of the farm in full payment and satisfaction of his debt, as stated in his answer. Indeed as he lived at a distance and could not well attend to the sale of this farm, which had been in some measure forced upon him, by his brother-in-law and nephexv, instead of the money xvhich he was entitled to, such an offer might very well have been made to any other person who xvould have'taken the trouble to find a purchaser xvithin the year. The fact that this instrument was in the hand writing of the person who took the acknowledgment of the deed is no evidence that it was drawn or agreed to be drawn before the deed became absolute. It is evident from the answer that the offer there stated must have been within a short time after the consummation of the sale. And if Mr. Gridley, who took that acknowledgment, had not yet left at the time that offer was made it was perfectly natural that Grant should have asked him to draw up this memorandum of the offer ; for the purpose of satisfying his relatives that he was sincere in his declaration that he did not want the land, and that if the complainant supposed he could sell it for more within the year he should have the benefit of the surplus. The complainant having given an absolute conveyance, and this writing not being in terms a defeasance thereof, the onus of showing that both were executed at the same time, and in pursuance of the same agreement, so as to constitute in law a single transaction, was unquestionably thrown upon the complainant. And having waited twelve years before he filed his bill, and until Gridley who drew the writing, and who probably was the only person who could have proved the circumstances under which it was given, was dead, he should now be held to strict proof. He should not be permitted to establish this allegation of his bill by mere inference, while he deprives the defendant of the opportunity cf explaining the transaction by his answer responsive to the bill.

I think, however, the defendants succeeded in disproving the allegation that this instrument was a part of the original agreement, and was executed with the deed as a condition or defeasance thereof, so far as it was possible for them to give any evidence on the subject after this lapse of time. H. N. Grant, the son of the defendant to whom the deed was given, and who with Gridley were the only subscribing witnesses to the same, proves the transaction to have taken place substantially as stated by the defendant, M. Grant, in his answer. After proving the execution and delivery of the deed, and the giving up of the notes and securities for the debts which formed the consideration of the conveyance, the witness swears his father said to the complainant, “Marcus I don’t want this land. I have already more land than I want. Now Marcus if you will take this land and sell it within one year you may have all you will get over what I have paid for it, for I want the money.” And his father also spoke at the same time of its being so far from home that he could not take care of it. The witness says he soon after left the room, and that he heard nothing said about this right of sale until this remark of his father; that he never heard any thing said about the deed’s being a security for the debt only, or any thing else than an absolute deed ; and thar no other writing was executed in his presence except the deed, nor did he hear a Word said about any other writing being executed. I agree with the defendants’ counsel that the age of this witness, who was then 20 years old, and the circumstances in which he was placed were such that the occurrences as to which he was called to testify would be very likely to make a stronger and more lasting impression upon his mind than perhaps at any other period of his life. This was probably his first visit to this state and possibly the first time he had been at any considerable distance from home. Every thing that occurred therefore of importance, during this journey, would he likely to be remembered by him longer than any similar occurrences at a more advanced period of life. And in so important a matter as the purchase of such a farm by his father, while they were remaining there in his uncle’s family, and when he was called upon as a subscribing witness to the deed, if any thing had been said upon the subject of this transaction being a mere security for the money, and not a sale of the farm, it is hardly possible that he should have forgotten it. I think then that there is very little room to doubt that this transaction was in substance that which it is stated to have been by the defendant, M. Grant, in his sworn answer ; although the vice chancellor was right in supposing that answer was a mere pleading and not legal evidence of the fact. Such being the case, the written stipulation to give to the complainant the benefit of any sale he could make of the property, within one year, beyond the amount of the consideration of the deed and the interest thereon, ought not either at law or in equity to be construed to be a defeasance of the absolute conveyance which had been previously executed. It would indeed be permitting the complainant to take an unconscientious advantage of what was a mere act of generosity or benevolence on the part of the grantee in the deed, for the purpose of depriving him of his property. Upon this ground alone I think the decision of the vice chancellor was erroneous.

Again ; if the complainant had succeeded in showing that this instrument had been executed at the same moment, and in pursuance of a previous agreement for that purpose, I do not think the stipulation would have had the legal ef-

feet to convert this absolute deed into a mortgage. There is frequently great difficulty in determining whether a conveyance was intended by the parties as a mortgage or mere security for money, or as a conditional sale. But as a general rule, where the contract and conveyance are made upon an application for the loan of money, this court for the purpose of preventing usury and extortion will construe it to be a mortgage, whenever the person to whom the application for the loan is made agrees to receive back the money advanced, with legal interest, or a larger amount, and to reconvey the property within a specified time thereafter, whatever may be the form of the written contract; if it is apparent that the real transaction was a loan of money. And gross inadequacy of price is always a strong circumstance in favor of the supposition that a sale of the property was not intended. On the contrary, if the consideration paid is about the fair cash value of the property, the fact that there was no contract for the re-payment of the purchase money and interest which was binding upon the person making the conveyance, so as to make his general right to redeem as a mortgagor, and the corresponding right of the grantee to recover back his money instead of keeping the land, mutual and reciprocal, is a strong circumstance in favor of construing the contract to be a conditional sale and not a mortgage.

In this case there is nothing in the writings which were executed, or in the evidence, from which it can be inferred that the complainant even supposed he was under any legal or equitable liability to pay the debts, which previously existed against him and his father, after he had executed an cl delivered this deed. The notes were given up and nothing else taken in their stead and the complainant himself subsequently declared that the debt to his uncle was now paid—alluding to the payment thereof by the execution of this conveyance, which he now insists was a mere mortgage. I have therefore looked into the evidence of the value of the farm at that time, for the purpose of seeing whether the amount paid for this conveyance was materially less than the cash value of the land. The witnesses vary in their estimates of what it was worth per acre in 1820 ; as it is very natural they should when speaking as to the value of property fourteen years previous to the time they were called upon to testify in relation to it; and without having been called upon in 1820 to form any opinion on the subject. But they testify to facts which are sufficient to satisfy any one, who has witnessed the fluctuations in the money market and the rise and fall of property for the last thirty years, that those witnesses who fix its cash value in 1820 at about §18 per acre are the most likely to be correct in their opinions as to its then value. Of the eight or nine farmers who speak of the. value of this farm in 1834, I believe, with a single exception, they estimate it then to be worth'not more than §26 per acre ; and only one puts it as high as that. And the weight of testimony clearly is in favor of the supposition that the farm had been very much improved in its general situation, its fences, and fitness for cultivation in other respects, subsequent to 1820. It is also a well known historical fact, which must be deeply impressed upon the memory of every one who was obliged to raise money by the sale of his lands in 1820, that the price of real property in this state was lower at that time than it has been at any other period since the commencement of the late war ; that from the close of the war, the prices of produce, and with them the prices of farming lands, continued to go down until 1820, when it was almost impossible to sell at all for cash ¡ and that about 1821 or 1822, prices began to improve, and continued to rise until about three years since. The value of farming lands in the county of Oneida and farther west, were still further enhanced by the completion of the eastern section of the Erie canal in the fall of 1823. I think, therefore, there is very little room to doubt that the actual cash value of such lands in the town of Vernon, and other places which were peculiarly benefitted by the opening of that canal, was nearly if not quite one-third more in 1834 than it was at the time this deed was given in 1820. Taking all these facts into consideration, I am entirely satisfied that the defendant did not obtain the conveyance of the farm for less than its cash value at the time that deed was given • and that he was sincere in his declaration which he made to the complainant after the purchase, that he did not want the land. In other words, that he had' rather have the money than the land at that price.

In the case of Robinson v. Cropsey, (2 Edw. Ch. Rep. 138,) the vice chancellor of the first circuit held an agreement to be a conditional sale and not a mortgage, although there was an express agreement that the vendor should have the privilege of redeeming the premises by the payment of a specified sum within one year, and the costs of the improvements, if any, which should be put upon the buildings in the meantime ; upon the ground that it was evident from the whole transaction that the parties intended that the grantor’s indebtedness should be entirely discharged ; the debt thus relinquished, being the full value of his interest in the lands conveyed, as such value was at the time of the conveyance. And that decision of the vice chancellor was affirmed, upon appeal, in May, 1837; although the decision upon the appeal is not reported. The recent decision of the supreme court in the case of Glover v. Payne, (19 Wendell, 518,) is also an authority in favor of the principle that a mere agreement to re-convey the premises within a limited period, upon the re-payment of the consideration money, or any other sum, where there is no subsisting debt or continuing liability of the grantor for the payment of the money, either express or implied, is not sufficient to convert such a conditional sale into a mortgage.

The present case, however, is much stronger against the complainant than either of the cases alluded to ; as there is no agreement that the grantee in the deed will re-convey the premises to the grantor upon the payment of a fixed sum, or the consideration money and interest. Here was a mere proposition to the complainant to endeavor to find a purchaser for the farm, which the grantee did not wish to keep at. that price. And as a compensation for his services, and as an inducement to the complainant to exert himself to precure such a purchaser, Grant promises to give him -whatever surplus he should be able to get, upon the sale. The concluding clause of the stipulation also excludes the idea that it was intended to convert the deed into a mere mortgage; as it expressly declares that the complainant is not entitled to the improvement of the farm if he should not make a sale of the premises. That is, that he was not to have the use of the farm for the next, year, unless it was sold ; but that the defendant was to be entitled to the possession and the rents and profits thereof immediately, or probably the next spring, when we find that a man is sent to the defendant to take the farm upon shares. The subsequent correspondence also shows that it was treated by the complainant as the farm of his uncle ; although the latter, with a commendable magnanimity, appears to have tried for a year or two longer to get a beneficial sale of the farm, by which he could, if possible, get back his purchase money and interest, and save something more to give to his brother-in-law, who probably was in need.

In either view which I have taken of this case, I am satisfied the decision or decree appealed from is erroneous. It must therefore be reversed, with costs ; and the complainant’s bill must be dismissed with costs.