text:
    *The Attorney-General v. The President, Directors and Company of the Bank of Columbia.
    Whenever a bank becomes insolvent and unable to pay its debts, the act of April, 1825, (Sess. Laws of 1825, ch. 325, sec. 11,) makes it the duty of the attorney-general to apply to the Court of Chancery for an injunction against the officers of the corporation, to restrain them from exercising any of the corporate franchises, and for the appointment of a receiver to take charge of the property and effects of the institution, and to collect and distribute the same among its fair and honest creditors.

    An information, verified by the oath of the attorney-general, setting forth that the bank had stopped payment, that a large amount of its bills were notoriously in circulation, and that it was reputed to be insolvent; and accompanied by the further statement of the attorney-general, under oath, that he believed the bank was insolvent, is sufficient to authorize the court to grant an injunction and appoint a receiver, where there is no denial by the corporation of the facts stated in the information.
    A party who cannot be presumed to have positive knowledge of a fact, may swear according to his information and belief; and if it be not denied by the adverse party, who can swear positively upon the subject, it will be deemed as admitted.
    Upon proceedings against a bank, under the statute for insolvency, an officer of the corporation is not a proper person to be appointed the receiver.
    Where the corporation appealed from the decision of the court both as to the appointment of a receiver and as'to the principle adopted of excluding its officers from the appointment, the court would not, pending the appeal, appoint a receiver, as long as there was no ground to apprehend danger to the fund before a decision could be had on the appeal.

      July 11th.
    In this case the court on a previous day had granted an injunction against the Bank of Columbia, upon the application of the attorney-general, and had made an order for the appointment of a receiver to tajee charge of its property and effects, and had referred it to a master to receive nominations of suitable persons as receiver, and to report as to the competency of the persons named and the sufficiency of the sureties offered by them respectively. And now, on behalf of the attorney-general, a motion was made for the appointment of such receiver; which motion was resisted upon the ground that the bank had appealed to the Court of Errors from the decision of the Chancellor both as to the appointment of a receiver of the bank and as to the principle of the order, by *which he had excluded the officers of the institution from being nominated as such receiver.

      A. Van Vechten for the bank:
    An appeal having been brought to the Court of Errors, all further proceedings are stayed. No steps can be taken, unless some necessity involving the preservation of the rights of the parties require it. All interlocutory orders of this court which involve the merits of the cause may be appealed from. (Buel v. Street, 9 John. R. 443; Beach v. Fulton Bank, 2 Wend. 225.) An appeal in the first instance stays all proceedings, and if further proceedings become necessary, a special application for that purpose must be made; notice of which should be given, to give the appealing party an opportunity of being heard.
    The present is a vital proceeding to the bank and its creditors. The court in case of an appeal never act except upon the urgency and necessity of the case, and in order to prevent injustice, as where the debt is in jeopardy; and then, the court offer an alternative to the party to bring the money into court or to give security. (Messionier v. Kauman, 3 John. Ch. R. 66.) This court cannot act except judicially upon facts proved. There is now before the court nothing to authorize them to proceed. The discre- . tian of this court to act is not a mere volition, but a sound and enlightened discretion; which is subordinate to the discretion of the Court of Errors. Nothing appears from the information of the attorney-general, to show that this is a case of urgent necessity. The attorney-general swears to the information from his belief. The only fact within his knowledge is that the bank has stopped payment. This is not conclusive as to its insolvency. The act only authorizes the attorney-general to proceed in case of the insolvency of the bank. On this fact there ought to be conclusive evidence, before the court proceeds. The affidavit of the attorqey-general as to his belief^ is not sufficient to authorize an injunction. If so, it cannot be sufficient to warrant the extraordinary proceedings of the appointment of a receiver. (Attorney-General v. Bank of Niagara, 1 Hopk. R. 354.) The act of April 21, 1825, secs. *6 and 17, recognizes the distinction between a temporary suspension of payment and an actual insolvency. The legislature did not intend that a mere non-payment of debts should be evidence of insolvency. Banks may be embarrassed; the public interest may require the suspension of specie payments. This was the case during the last war. It was not then deemed evidence of insolvency. No proceedings canbe had under the 17th section of the act for a mere temporary suspension of payment; but only in cases of actual insolvency. Such a construction must be given to the statute as will render effectual all its provisions.

      J. Sudam, contra:
    This case is distinguishable from all the cases cited by the opposite counsel. In those cases evidence of the facts which required proceedings subsequent to the appeal, did not accompany the appeal as in this case. It was therefore necessary in those cases to give notice to the opposite party, to afford him an opportunity of being heard. In this case the information states the charge of insolvency specifically; and the bank have had an opportunity of" answering that charge. The insolvency intended by the act, is where a corporation is unable to pay its debts. The information upon this point is conclusive until contradicted. A suspension of payment is evidence of insolvency. No fact alleged in the information has been denied by the Bank of Columbia. The question is, shall the funds of the bank be secured for the benefit of the creditors ? The appointment of a receiver is necessary for this purpose. It is in evidence that the bank is insolvent: would it then be proper to leave its property in the hands of the directors, under whose administration the bank has failed ?

      A. L. Jordan appeared for certain of the creditors and stockholders who had petitioned for the appointment of E. Williams, the president of the bank, as receiver.
    Mr. Jordan contended that the interest of the bill holders was made by the statute the paramount interest. Next to their interest was the interest of the stockholders. The policy of the act is to protect the creditors. This will be most effectually done by those who have an interest in the institution. If the failure *of a bank is not conclusive evidence of fraud, then its officers are not ineligible to the appointment of receiver. Until the case of the Franklin Bank, it was always the practice to refer it to the master not only to judge of the fitness of the person nominated as receiver, but to make the appointment. (Creuze v. Bishop of London, 2 Brown’s Ch. C. 253; Tharpe v. Tharpe, 12 Ves. 317; Thomas v. Dawkins, 3 Brown’s Ch. C. 509.) In Jenkins v. Jenkins, (1 Paige’s R. 243,) it was referred to a master to appoint a receiver. (Haggerty v. Pittman, 1 Paige’s R. 298.)

      J. S. Van Rensselaer, advocated the appointment of William B. Ludlow as receiver.

      J. Sudam, in reply, nominated on behalf of the attorney-general Rufus Reed.
    He contended that the interests of the bill-holders would be best consulted by the appointment of a person not interested in the hank. Such an ap • pointment would secure a fearless investigation of its affairs, which the public demanded.

       2 R. S. (4th ed.) 607, sec. 47; Verplank v. The Mercantile Ins. Co. of New York, 2 Paige, 438; Bank of Com’rs v. Bank of Buffalo, 6 Paige 498.

   The Chancellor :—By the act of April, 1825, (Sess. Laws of 1825, ch. 325, sec. 17,) it is made the duty of the attorney-general, whenever any incorporated bank is insolvent and unable to pay its debts, to apply to this court for an injunction, restraining the officers of the institution from exercising any of the privileges and franchises granted by their charter, and from collecting or receiving any debts, and from paying out or in any way transferring any of the moneys or effects of such company; and to appoint a receiver of its property, moneys and effects, and to distribute the same among its fair and honest creditors. About the 20th of May last, this bank stopped payment. This was a matter of public notoriety. It was also notorious that a large amount of its bills were in circulation; and the institution was reputed to be insolvent. It was therefore the imperative duty of the attorney-general to proceed in the manner directed by the statute.

On the 13th of June last, he filed the information in this case, setting forth the above facts, anti also that the state was a large stockholder in the institution. The informatian was *verified by his oath, and that of the comptroller; and they also stated their belief that the bank -was insolvent and unable to pay its debts; and thereupon an injunction was granted which still remains in full force. The attorney-general also caused a copy of the information and affidavits to be served on the officers of the bank, with a notice requiring them to show cause, if any they had, why a receiver should not be appointed. In the meantime similar infdrmation had been communicated to the court by the oath of certain creditors of the institution, who had applied and obtained injunctions in the city of Eew York. At the time assigned the parties appeared: but no cause was shown to induce the court to believe that the bank was able to pay its debts; and no information was given in re-lotion to its concerns, the probable amount of its debts, or its means of payment. The attorney-general had done all that could be done by him in any case, to satisfy the court that the bank was insolvent. No person could swear positively as to the insolvency of the institution, except its officers, against whom the proceedings were instituted; and the statement of the above facts was all that could reasonably be called for under this part of the statute. A violation of several provisions of the act of incorporation subjects the institution to similar proceedings. In those cases the particular violations of the charter complained of can and ought to be stated. These undoubtedly are the particular facts and circumstances, which by the statute are required to be stated in proceedings against the bank. Where a party cannot be presumed to have positive knowledge of a fact, it is the constant practice «of this, and of all other courts, to permit him to swear to his information and belief; and give the adverse party, who alone can swear positively on the subject, an opportunity to deny it on oath. If he does not deny it, or furnish some explanation to induce the court to think otherwise, the belief of the other party is to be taken as the fact. That the bank had stopped payment was not of itself conclusive evidence of its inability to pay its debts; but it was at least prima facie evidence of such inability or insolvency. And the evidence to explain the transaction and rebut that presumption should have been ^furnished by the officers of the institution. They could have shown the fact, if any thing but the insolvency of the corporation had induced or compelled them to adopt a measure which in its consequences produced so much individual suffering and distress. These were the reasons which made it the duty of the court to order a receiver to be appointed. The fact of insolvency being established, the court had no discretion on the subject.

Another important question presented to the court at that time was whether one of the officers of the insolvent institutian should, be appointed to investigate and close its concerns. Under the circumstances I thought there could be no rooin to doubt the decision which ought to take place on that question. The officers of the institution had made no expose of their concerns to the public. When called upon to show cause why a receiver should not be appointed, they produced no account, nor gave any information to the court as to the amount of their debts or their means of payment. They did not even state when, or by what means, their capital of one hundred and sixty-nine thousand dollars had been lost; so as to enable the court to form an opinion whether it would be right or proper to entrust the interest of their numerous creditors to the care or management of one of their number. It was impossible to ascertain, without a long and tedious examination of some weeks, and perhaps months, whether it might not be the duty of the receiver to institute proceedings against every officer of the corporation, under some of the provisions of the statute of 1825. If the property of the institution had been assigned by them to pay favored creditors, in contemplation of insolvency, or after they had stopped payment, it would be the duty of the receiver to prosecute them for the purpose of obtaining the amount for the benefit of the creditors generally. If they were indebted to the institution, it might be necessary to enforce the collection of such demands by suit. And if there had been fraud or mismanagement on the part of the officers of the institution, by which they had made themselves personally liable to the creditors, it would be the duty of the receiver to investigate the subject, and expose the fraud if any existed. *These remarks are not intended to apply personally to any of the officers of this institution except so far as relates to indebtedness. It was admitted by the gentleman proposed as receiver that he was a debtor; but whether to a large or small amount the court was not informed. Although the Chancellor, from a knowledge of the character of the gentleman who had controlled the affairs of this institution, was satisfied no fraud had been committed, yet he still had a duty to perform as regarded the public. Those creditors who had been stripped of their property by the failure of the bank, had a right to claim from the court the appointment of a receiver upon whose impartial investigations they might rely, and who could have no interest in opposition to theirs. So far as respected myself, I did not believe any thing improper had been done in that institution for many years past, to produce this calamity. I am induced to give credit to the suggestion of the counsel, that the death-blow was given to the institution long since, and that it has been sustained for many years only by a pledge of the personal responsibility of a majority of the directors. I was aware, from the report of certain proceedings made to the legislature in 1820, that as early as 1813, the officers of the bank had found it necessary to make provisions for a permanent loan of $150,000, from another institution; and for which a majority of the directors gave their own personal bonds, from year to year, as collateral security; and that the stipulated time of 15 years, for the continuance of that loan, had recently expired. It was to that circumstance I attributed the failure of the institution at this time, and not to any recent mismanagement of its concerns by any of the directors. The rule adopted in this case was the same which was adopted in the case of the Franklin Bank. I decided that it would be improper to appoint one of the officers of the institution receiver, and I referred it to a master for the purpose of enabling every person interested in the institution to name such person for that purpose, as he might think proper. The rule of exclusion adopted, I considered as based upon sound principles of public policy; and upon what I considered *the spirit and intent of the act under which these proceedings were instituted. If the law will not entrust the concerns of an insolvent institution in the hands of its directors jointly, as trustees for the creditors, certainly the court ought not to entrust them to a part only as receivers. Public policy requires that the directors shall understand distinctly that if they so manage the concerns of the institution as to produce insolvency, the property and effects of the institution will be taken from them entirely; and be placed in the hands of those who will investigate their conduct fearlessly and impartially.

The corporation appealed from the decision, both as to the appointment of a receiver, and as to the right of its officers to have the appointment if one is to be made. This objection is now interposed to prevent any further proceedings in this matter pending that appeal. It is undoubtedly correct, as suggested by the counsel who made this objection, that ordinarily, in this court, an appeal suspends, in the first instance, all further proceedings on the decree or order complained of. It may be doubtful whether this is a case where an appeal from the order directing a receiver to be appointed would prevent the court from proceeding so far as to designate the person to be appointed, that he might be prepared to act when the Court of Errors had disposed of the appeal. And'if there was in the mean time any danger to the fund, the court might, on a proper application, direct him to do everything necessary to protect the interest of all concerned, pending the appeal. But in this case a principle is involved in one part of the decision, which makes it proper for this court to forbear naming a receiver until the court of dernier resort have determined whether the officers of a bank which has become insolvent under their management, are proper persons to investigate the manner in which they have discharged their trust, and to close up the concern. If the interest of stockholders was to be consulted primarily, it would be proper to give to those indebted to the bank, and in doubtful circumstances, sufficient time to buy" up the bills from honest creditors, at a great discount, and thus restore the broken institution to a state of solvency. But in that *case the real creditors would lose the greatest part of their debts, although the stockholders in the end might save something on their stock. It is therefore necessary and proper, in every case of this kind, for the protection of the creditors, who have the first claim upon the property of the institution, to turn its effects into cash with the least delay which is consistent with their interest; so that a distribution may be made before their necessities or fears compel them to sacrifice their demands to speculators. As the Court of Errors will be in session very shortly, when this question can be disposed of, I do not think there will be such an injury resulting from the delay in this case as should induce the court to take any further steps in the matter until that time.

The attorney-general has furnished no evidence that the funds of the bank are unsafe in the hands of the present officers; and there is nothing before me to show that they have so far involved themselves in this concern as to make their own solvency depend upon that of the institution. I shall, therefore, suspend the appointment of a receiver until the meeting of the Court of Errors, unless some person interested in the institution brings the case again before me, upon a suggestion that something further is necessary to be done for the safety of the fund. If that should be the case, it may be necessary to proceed in the appointment, as no authority for that purpose can be given to the directors, pending this appeal.


source: Caselaw Access Project

license: Public Domain

text:
    Lee, Appellant, v. Hunter and Hallenbeck, Respondents.
    Where S. being indebted to several persons, was in September, 1811, sued • for a default in paying over moneys received as a commissioner of loans, and judgment was recovered against him on the 31st of January, 1818, and on the 1st of January, 1818, S. conveyed to L. his farm and all his personal property for the nominal consideration of $8,601 25, $4,000 of which was paid in Virginia lands which had been purchased by L. 20 years before, but which he had never seen or possessed, and there was no proof of the payment of the residue of the consideration, and S. continued in possession of the property so conveyed to I., it was held that this conveyance was fraudulent and void as against the creditors of S.
    August 4th.
    *Under the absconding and absent debtor act, an equitable interest of the debtor in real property can be attached by the sheriff, and the same passes to the assignee appointed under the act.
    The surplus of the debtor’s property, after all his just debts are paid, must be refunded to him.
    But before this can be done, the creditors must be notified to exhibit their claims pursuant to the directions of the act, or they must have an opportunity of being heard.
    The proper course for the debtor to obtain the surplus would be to file a bill and make the trustees parties; and if they had not given the requisite notices to the creditors, notice might be given under the decree of the court, in the manner adopted of calling in creditors under a decree.
    This was an appeal from the decree of the Equity Court of the third circuit, on a bill filed by Lee against the respondents, and a cross bill filed by them against Lee in that court.
    Stoddard Smith, the son in law of the appellant, was formerly the owner of a farm in the town of Greenville in the county of Greene. He, together with the respondent Hallenbeck, were the commissioners of loans for that county under the act of 1808. In 1817, Smith received the interest moneys on the mortgages, but made default in paying the same over to the treasurer. In consequence of this default a suit was commenced in September 1817, against the commissioners and their surety, upon their official bond. A judgment was obtained in that suit, in the Supreme Court, for $750 43, for the damages and costs, on account of the breach of the condition of the bond, which judgment was docketed on the 31st of January, 1818. In May term, 1817, P. Conine commenced a suit against Smith in the Supreme Court, upon a promissory note, which was tried in April, 1818, and a verdict found therein for the plaintiff, upon which a judgment for $667 84 was entered, and docketed on the 14th of May, in the same year. On the 1st of January, 1818, during the pendency of these suits, and a few days before the judgment in behalf of the state was entered, Smith conveyed to Lee all his personal property, and to him a deed of the farm. The consideration expressed in the deed was $8,000, and in the bill of sale, $501 25. On the 21st of May, 1818, an execution was issued by Conine, upon'his judgment, to the sheriff of Greene, who levied the execution upon the real and personal property sold by Smith to Lee. *The farm was sold on the execution to Conine on the 15th of September, in the same year, for the sum of $20. Lee replevied the personal property, and upon a trial at the circuit before Judge Van Ness, in December, 1819, a verdict was found therein in favor of the sheriff, upon a plea of justification under the execution. After the issuing of this execution, but before the sale of the farm, Lee made a compromise with Hallenbeck, by which he conveyed to the latter thirty-two acres of the farm, for the nominal consideration of $952 64, the amount of the judgment on the loan office bond, together with the costs which had accrued in that suit. Hallenbeck at the same time executed a written defeasance, reciting that the deed had been given by Lee to him only as security for the amount of such judgment and costs, which he thereby agreed to pay, and to indemnify Smith against. Hallenbeck by the defeasance also stipulated that Lee should enjoy and occupy the land; and if he paid the interest annually on the above amount, and the principal at the expiration of two years, he would reconvey to bim the thirty-tAvo acres. The deed was acknowledged on the day of its date, before Smith, and was recorded on the 10th of September, 1818, in the book of deeds; but the defeasance was never acknowledged or recorded.
    After the sale of the farm on the Conine judgment, and for the purpose of 'overreaching that sale, Hallenbeck presented a petition to the legislature, to which Smith annexed a written consent, setting forth the recovery of the judgment on the loan office bond, and requesting permission to enforce it against the separate property of Smith, upon his (Hallenbeck’s) paying or securing the payment of the amount due to the state. On the 13th of April, 1819, the legislature passed an act authorizing the comptroller to assign the judgment to Hallenbeck, upon his giving real security for the payment of the debt to the state; and also authorizing Hallenbeck to take out an execution upon the judgment, and to collect the amount out of the separate property of Smith.
    Two days after the verdict in the replevin suit, Lee and Smith compromised with Conine and his attorneys, and gave their joint and several sealed note to Conine for $790, payable *in one year with interest. They also gave to the attorneys, for the costs and counsel fees in the several suits which had grown out of the controversy, another joint and several sealed note for $410, payable in six months with interest. Conine at the same time gave to Lee an agreement, reciting the giving of these notes, and also reciting that Smith was indebted to Hallenbeck in the sum of $858, or thereabouts, being the amount for which Hallenbeck was responsible to the state, and which was the proper debt of Smith; by which agreement Conine covenanted that if Lee and Smith paid the notes when they became due, and secured Hallenbeck against the demand in favor of the state, then, and not until then, he (Canine) would quit claim to Lee, with covenants against his own acts, the farm which he purchased at the sheriff’s sale, and on which Smith resided. Before either of the notes fell due, Lee left this state and went to Vermont, where he has ever since resided. On the 8th of June, 1820, Hallenbeck applied to the comptroller and obtained an assignment of the judgment, in pursuance of the act. On the 10th of August an execution was issued thereon by the written consent of Smith, upon which the farm was sold on the 7th of October, 1820, and bid in by Brigham, the son in law of the latter, for $1,000. On the 14th of October, Brigham assigned his bid to Hallenbeck, in consideration of which the latter gave a receipt in full to the sheriff on the execution, and Smith gave a release to the sheriff for the surplus raiaeri on the sale. A certificate of the sale was given and filed according to law; and at the expiration of the fifteen months, the sheriff gave a deed of the farm to Hallenbeck, under the sale and assignment of Brigham’s bid. Soon after the sale proceedings were instituted against Lee by Conine and his attorneys, before Chief Justice Spencer, under the act for relief against absconding and absent debtors; and upon his warrant the sheriff of Greene attached the farm and certain personal property as the propty of Lee. The personal property was claimed by the son of Lee, and by Smith and another son in law; and upon a sheriff’s inquest, the jury decided in favor of their claims. The usual notices were published; and on the 25th of July, 1821, the chief justice *made an order appointing A. Van Bergen, William Gay and William Chancey, trustees for all the creditors of Lee, in pursuance of the directions of the statute. The trustees a few days thereafter assumed the execution of the trust and took the oath required by law. In March, 1822, Hallenbeck and wife conveyed the farm to the defendant, Hunter, for the sum of $4,100, out of which he received the amount due from Smith, and the costs and expenses which he had incurred. The two mortgages to the state and to Clowes also constituted a part of the $4,100; and the balance was given to the agent who effected the sale to Hunter for Hallenbeck.
    In 1824, one of the attorneys of Conine followed Lee to Vermont, but finding that he had no property there out of which their debts could be collected, a compromise with him was effected, by which he was discharged from personal liability on the notes, on his paying them $250. A release was thereupon executed by Conine and his attorneys, on the 24th of May, 1824,. by which they released and discharged Lee from the payment of the notes; but with an express provision that it should not operate to discharge Smith from the payment of the notes, except as to the $250, which was to be credited on the note of Conine. In 1825, Lee brought an ejectment suit against Hunter, for the recovery of the farm, which was tried at the April circuit in 1826. The proceeding under the act against Lee were produced in evidence, and the judge decided that by the appointment of trustees the interest of Lee, if he had any of the premises, became vested in them. The plaintiff thereupon submitted to a non-suit.
    Shortly afterwards the appellant filed the bill in this cause in the equity court of the third circuit, alleging that his purchase of the farm from Smith was honest and bona fide, and praying that the appointment of trustees might be vacated; that the sale and conveyance under the judgment assigned to Hallenbeck might be set aside and the judgment be declared satisfied; that he might be restored to the possession of the farm, and that the defendants might be compelled to account for the rents and profits thereof; and for general relief.
    *The respondents put in their answer, setting up the fraud in the conveyance from Smith to Lee, and alleging that the conveyance from Lee to Hallenbeck was not given in satisfaction of the debt due to the estate, but only as a security by way of mortgage; and that after the trial of the replevin suit that security was abandoned by the consent and understanding of the parties, on the ground that it had been defeated by the sale under the Oonine judgment. By their cross bill they prayed that the deed from Smith to Lee might be declared fraudulent and void, and that the same might be decreed to be delivered up and cancelled, and for farther relief against the appellant.
    The cause was brought to a hearing before Judge Duer, in his equity court, and in November, 1827, a decree was made therein, dismissing the appellant’s bill, with costs in the original suit and upon the cross bill, and setting aside the conveyance of January, 1818, as fraudulent and void.
    Opinion of Judge Duer :—From a full and deliberate consideration of the testimony in these causes, I am satisfied that the conveyance of the 1st of January, 1818, from Stoddard Smith to Noah Lee was not only a contrivance for defrauding certain creditors of Smith, but that its invalidity has been virtually admitted by both grantor and grantee. If I am right in this conclusion, upon the facts, it follows as a necessary legal consequence that nothing passed by that deed, inasmuch as it is void both at common law and by the statute of frauds, unless first, Lee acted in good faith, without any knowledge or co-operation in regard to the fradulent purposes of Smith; or secondly, Hallenbeck has subsequently affirmed the conveyance, or ceased to be a creditor of Smith, and is thereby precluded from impeaching the deed on the ground of fraud.
    I. In the case of Anderson v. Roberts, in Error, (18 John. R. 515,) it was held that a bona fide purchaser for a valuable consideration without notice of the fraud, whether the purchase be made from a fraudulent grantor or a fraudulent grantee, is equally protected by the proviso contained in the 6th section of our statute, as that proviso applies to the second *as, well as to the third section of the act. To bring the present case within that authority and within the terms of the proviso, it must, however, appear that the deed of the first of January, 1818, from Smith to Lee, was made upon good consideration, as well as without notice on the part of the grantee of the fraudulent intent of the grantor.
    Now, without entering into a minute examination of the various particulars set forth by Lee in his answer to the cross bill, as forming the consideration of the deed from Smith, I shall advert principally to the item of the Virginia land, conveyed in part payment by Lee to Smith, at the estimated value of $4,000, and shall barely enumerate the rest. The whole consideration of the conveyance from Smith is stated at $8,000, including two mortgages, by which the farm was incumbered to the amount of $1,850. Nearly two-thirds therefore of the balance of the considerar tian, deducting these mortgages, consisted of this land in Virginia, which, however regular the paper title, is described with no greater certainty than as one thousand acres lying upon a branch of James river, in the county of Botetourt, of which Lee was never in possession, and seems literally to know nothing beyond what his title deeds have revealed to him, and of which Smith knows no more, does not pretend to have obtained possession, or to have attempted even the location. The nominal amount indeed of the consideration greatly exceeds the average valuation affixed to the farm by the witnesses, and hence it is contended on the part of Lee, that if the estimated value of the Virginia land was deducted, there would still remain a sufficient consideration for his purchase. But Lee, in his answer, expressly swears, that though he does not believe that at the time the deed was executed the farm could have been sold for cash for $8,000, yet that he considered it worth that sum to him. If the estimated value of the Virginia lands be deducted from the consideration, there will remain a balance of $2,150, exclusive of the mortgages, composed of the following items, viz: 1st. A promissory note of one Abraham Acorn, for about $600, which was subsequently returned by Smith to Lee, and collected by him; 2d. A sum of $750 *ffir money from time to time advanced by Lee to Smith; and 3d. Of Lee’s bond or covenant to Smith for the balance of $850, payable by instalments. Now, although the farm was eventually sold under Hallenbeck’s execution for less than the aggregate amount of these last two items, yet Lee can derive no benefit from that circumstance, as he could not possibly have supposed that sum a sufficient consideration when he agreed to give so much more for it in his bargain with Smith, believing it, as he states, to be worth to him the full amount of $6,150, exclusive of the incumbrances." For $4,000 of this amount there has been, as I conceive, a failure of consideration, so that in reference to the alleged agreement between the parties, the remaining $2,150, reduced further by the amount of the Acorn note to $1,550, cannot certainly be deemed as sufficient consideration, and consequently cannot be regarded as a good one according to the spirit or the letter of the statute, as it was evidently not the consideration intended by the parties.
    In case, however, I should have mistaken the law on this point, I proceed to inquire whether in point of fact Lee had notice of the fraudulent designs of Smith in executing the conveyance in question ?
    Previous to and at the time of executing the conveyance, Smith declared to Lee his intention to provide for all his honest debts, referring particularly to Hallenbeck’s liability for him to the state, and Lee agreed to pay Hallenbeck whatever Smith should owe on that account. No specific provision was made for the purpose, nor was there any fund applicable to it, except the bond of $850, which was insufficient to have discharged the debt to the state together with the other demand against Smith, including Conine’s, of which last Lee swears that he knew nothing. Admit this to be true, and Lee not to be chargeable with notice in respect to that demand, he was nevertheless apprised of Smith’s defalcation as a commissioner of loans and of Hallenbeck’s liability on that account; and although he assented verbally to the justice of making provision to meet it, yet he neglected to do so at the time of the conveyance, but took from Smith, his son in *law, such a transfer of his whole estate, real as well as personal, as left Hallenbeck (until upon pressing.for security he afterwards obtained the conveyance from Lee) in no better situation than Conine or any other creditor of whose claim Lee might, have been ignorant, and whom Smith may have intended to defraud. It is impossible, therefore, in the face of these facts to maintain that Lee had no notice of this effect of the conveyance, which affords the best evidence of the intent of the parties to hinder and delay, if not actually to defraud the state in recovering its demand from Smith, whilst it deprived Hallenbeck of the means of his indemnity. Nor from succeeding and progressive steps in the transaction, the dubious character of Lee’s possession, the return of Smith to the premises, his disposition and removal of the personal property, his receipts of the rents and profits of the farm and the virtual abandonment of the conveyance upon the compromise with Conine, does it seem to me reasonable to believe that Lee could have entered into the arrangements with Smith in perfect good faith, notwithstanding the provision afterwards made for Hallenbeck’s security out of the farm itself, when he appears thus to have co-operated and acquiesced in all those subsequent measures so strongly indicative of fraud.
    If then the facts and circumstances of the case do not bring Lee within the protection afforded by the statute to a bona fide purchaser, it remains to consider:
    II. Whether Hallenbeck has, by any act or assent of his precluded himself from impeaching the deed in question on the ground of fraud ?
    It is contended that he is estopped from controverting its validity, first, because he has affirmed it by taking a conveyance from Lee of thirty-two acres of the land in satisfaction of his claim against Smith; and secondly, from having in consideration of that conveyance assumed to discharge the debt due to the state, and thus divested himself of his character and rights as a creditor of Smith.
    1st. The conveyance of the thirty-two acres, if not made upon the suggestion of Lee or Smith, seems to have been accepted by Hallenbeck in despair of obtaining any other *security; and he appears to have relied more on the covenants it contained than on the title it transferred to him. It was in fact a mortgage. No possession appears to have been taken under it. It was accompanied by an agreement in the nature of a defeasance, which expressly declares that the deed was given to secure Hallenbeck against the demand of the state, and some other advances he undertook to make for the benefit or account of Smith; and it became inoperative even as a security, in consequence of the invalidity of the deed from Smith to Lee, and the sale of the premises under the Conine judgment; on which ground it seems to have been ultimately abandoned by the consent of all parties. But ,
    2dly. It is alleged that Hallenbeck in consideration of this conveyance assumed to discharge the debt to the state, and thereby divested himself of his right as a creditor, to impeach the deed from Smith to Lee. It is true that Hallenbeck, by the instrument accompanying the conveyance from Lee, agreed to discharge the debt to the state, and this formed the 'greater part of the consideration of the deed. But Hallenbeck was jointly bound with Smith to the state: until therefore he had paid the debt, he could have maintained no action against his co-obligor, and consequently so far from divesting himself by accepting the deed from Lee of his right as a creditor of Smith to impeach the conveyance to Lee, he could not before the actual payment of the money to the state, have impeached it in that character, but only in virtue of the general terms of the statute which extends relief to “ creditors and others.” Besides, the agreement in question fell with the deed which it accompanied, upon the result of the trial with Conine and the compromise which ensued; and another provision was made for the indemnity of Hallenbeck by an assignment of the title acquired to Smith’s farm by Conine under his judgment, but this also fell through in consequence of the failure of Lee to perform his part of the agreement; and thus was Hallenbeck compelled to avail himself of the act passed with the consent of Smith in his favor, by satisfying in the manner permitted under its provisions the joint debt of Smith and himself, and thereupon ^procuring the assignment of the judgment recovered by the state, and proceeding to the sale of Smith’s farm under it.
    From the view I have taken of this case, it is unnecessary to pursue the subject further, or to enter into a discussion of the points raised at the hearing in regard either to Lee’s ignorance of the act passed for the relief of Hallenbeck on the one side, or to the effect of the proceedings against Lee as an absent or absconding debtor on the other. My opinion on the question already considered leads me at once to conclude that Lee’s bill must be dismissed with costs, and the relief prayed for by Hallenbeck and Hunter in their cross bill granted, by directing the deed from Smith and wife to Lee, of the first of January, 1818, to be delivered to the clerk to be cancelled, and that the costs of the cross bill be also paid by Lee.

      P. S. Parker and A. Van Vechten, for the appellant:
    The original bill was filed by the appellant for relief against the sale under the judgment in favor of the people. The act of the legislature passed upon the application of Hallenbeck was, on his part, a violation of the defeasence executed by him to Lee, the appellant. Hallenbeck was satisfied with the security given him by Lee, and Lee was fairly exonerated from the judgment in favor of the state. Hallenbeck made an improper use of this judgment. He should have paid it off according to his agreement, and not have enforced it against the lands upon which it was a lien. He accepted Lee’s conveyance of the 32 acres as his indemnity, and he has not shown that this indemnity failed. Co-nine’s judgment was never considered of any avail. If Hallenbeck had any right to sell under the judgment in favor of the state, it must either have been because the conveyance from Smith to Lee was fraudulent, or that the deed to him of the 32 acres was not effectual. The deed from Smith to Lee was given for an adequate consideration. The Virginia lands, a part of the consideration, can be located, as a survey has been made of them, which was recognized in Virginia. If the residue of the consideration was not paid it was satisfactorily secured. *No fraud was intended by Smith and Lee. All the debts of Smith were secured as far as was practicable. The decision of the replevin suit cannot affect the real property. The basis of the compromise of that suit was the stipulation of Hallenbeck.
    If, however, Smith did convey with intent to defraud, his creditors, such intent will not avoid the conveyance, if Lee was ignorant of the fraud. (Jackson v. Terry, 13 John. R. 473; Sands v. Hildreth, 14 John. R. 498.) And if both Smith and Lee combined in an attempt to defraud creditors, none but creditors can take advantage of the fraud. (Anderson v. Roberts, 18 Johns. R. 515. Hallenbeck is estopped from availing himself of the statute of frauds, in consequence of his having affirmed the conveyance by his acts. (White v. Stringer, 2 Levinz, 105; Rob. on Frau. Con. 162, 167.) The proceedings under the absconding debtor act against Lee were never effectual. No entry was ever made on the real property by the trustees, nor any possession taken by them. The attaching creditors subsequently released Lee from the debts, for which the attachment issued. The trustees having neglected during eight years to act are not now entitled to be made parties. If this ought to have been done, the respondents should have made them parties in their cross bill.

      J. L. Bronk, for the respondents:
    The deed from Smith and wife to Lee, the appellant, was fraudulent and void, having been given with intent to defraud Smith’s creditors. A relationship existed between the parties; suits were pending against Smith at the time of the conveyance, (Deming v. Smith & Judson, 3 John. Ch. R. 332,) and no consideration was paid by Lee for the same. The Virginia lands furnished no good consideration, as they cannot be located; and there is no proof of any real payments having been made by Lee to Smith. No change of possession accompanied the execution of the deed and bill of sale to Lee. This is a strong badge of fraud. If Smith attempted to defraud one creditor, any other creditor may take advantage of it and avoid the conveyance. (Read v. Livingston, 3 John. Ch. R. 501; Jackson v. Seward, 5 Cowen, 67 to 73.
    *The title of Lee (if any) is in the trustees appointed tinder the absconding debtor act, (1 R. L. 157, 159.) The appointment of the trustees cannot be vacated, as the appellant has not made them parties. Trustees should always be made parties. (Cooper’s Eq. Pl. 34; Movan v. Hays, 1 John. Ch. R. 339; Osgood v. Franklin, 2 id. 19; Sells v. Hubbell, 2 id. 394.)
    Lee admitted Conine’s title, by agreeing to take one under him. And Hallenbeek not being charged as trustee, no remedy can, in any way, be had against him. The act of the legislature was not only binding and valid, but equitable.
   The Chancellor:—The first question presented in this case is whether the conveyance from Smith and wife to the appellant, in January, 1818, was a fair and bona fide conveyance, or was intended to defraud creditors, or hinder or delay the collection of their debts.

The suit of Oonine was then pending, but could not be tried so as to have a judgment rendered therein previous to the May term. But the suit in behalf of the state, on the loan office bond, was in a situation that a judgment might be entered therein in a few days. Smith was also indebted to Losee and others. Under such circumstances he made a conveyance of all his property, both real and personal, to his father in law. And what did he get in exchange to pay his creditors, who were about to obtain judgments against him? He got $4,000 in Virginia lands, which had been conveyed to Lee, twenty years before, but which he had never seen. It is true a regular paper title to this land is produced, under a location made in 1786. But every person at all acquainted with the location of Virginia and Kentucky land warrants is aware that it frequently happened that several holders of these warrants, located upon and obtained patents for the same tract, without knowing it had before been granted to others. A patent, under such circumstances, is scarcely prima facie evidence of title. And when we take into consideration the fact that no attempt has been made to take possession of the land under this title for more than forty years, it is hardly credible that the appellant still believes it to be a valid and ^subsisting title, and that the lands are worth the price mentioned in the deed. But if the title had been known to the parties to be good, it is that kind of property which would be the least likely to enable a debtor in failing circumstances to raise money to pay his honest creditors. The Acorn note, for about $600, which also formed a part of the alleged consideration of the deed, was afterwards collected by Lee; and the bond, which is said to have been given for the balance, is not recollected by the subscribing witness to the deed, and no body has ever seen it. "In addition to this, the possession of the property was not actually changed, although it might have been nominally. On the whole I am perfectly satisfied, from the evidence, that the conveyance was fraudulent; and was intended not only to defeat the recovery of Conine’s debt, but also to protect the property of Smith from the operation of the judgment which was then about to be obtained on the loan office bond. Although the state could not probably be defrauded, as Hallenbeck and the surety had sufficient property to pay the debt, yet as they both stood in the relation of sureties to Smith, in respect to that debt, the effect of the conveyance was to defraud them, by removing the property of the real debtor beyond the reach of the execution, and leaving it to be satisfied out of the property of his sureties.

That a fraudulent use was made of this conveyance as regards Hallenbeck, is also evident from the pleadings and proofs in this case. The whole amount due to this state was received and misapplied by Smith; and Hallenbeck and his surety were entitled to full indemnity from him. In the appellant’s bill in this cause, he says that he agreed with Smith, as a part of the consideration of the conveyance of the farm, to pay and discharge the- amount due to the state for which the suit was brought on the bond. H such an. agreement was made, it was carefully concealed from the knowledge of Hallenbeck; and it appears from the testimony that Lee absolutely refused to become personally responsible therefor, and Hallenbeck was compelled to assume the payment of the whole amount himself, in order to obtain a mortgage upon a very small part of the farm for his indemnity. Even *that was no valid security, as the written defeasance was not acknowledged or recorded, and was left in the hands of Smith or Lee, so that Hallenbeck had no protection whatever against subsequent purchasers or incumbrancers.

Although the finding of the jury upon the sheriff’s inquest in August, 1818, as to the personal property which was conveyed simultaneously with the deed, and the more formal trial and verdict, which was given at the circuit in December, 1819, in the replevin suit for the same property, are not conclusive evidence of the fraudulent nature of this transaction; yet they are calculated to give me additional confidence as to the correctness of the conclusion at which I have arrived on this question from the pleadings and proofs before me in this cause. But the result of the replevin suit has an important bearing upon another point-in this case.

It is insisted on the part of the appellant that as Hallenbeck took a deed from him for the thirty-two acres, he is estopped from setting up the fraud in the original conveyance. On the part of the defendants it is alleged that by the finding of the jury in the replevin suit, all parties became satisfied the conveyance of the first of January, 1818, could not be sustained; and that the legal title to the whole farm was vested in Conine, under the sale upon his execution ; that in consequence thereof, the mortgage to Hallenbeck, and the agreement therein contained on his part, which had been made before the fraudulent nature of the original deed to Lee was known to him, were abandoned; and a new agreement was made for his indemnity. I think this allegation in the answer is abundantly established by the evidence in the case. There was no formal surrender of the deed and defeasance, but the recitals and stipulations contained in the written agreement made between Lee and Conine, in December, 1819, are wholly inconsistent with the idea that the agreement between Lee and Hallenbeck, in May, 1818, was to remain in force. Lee treated with Conine upon the basis of the.verdict which had been rendered two or three days before that time, by which the transactions of the first of January, 1818, were found to be fraudulent and void. He agreed *to become responsible to Conine for the whole amount of his debt and expenses, and to the attorneys for their costs and counsel fees. Conine on his part agreed that if the notes which were then given should be paid by Smith and Lee when the same fell due, and they should also secure Hallenbeck against the demand in favor of the state, he would convey the farm to Lee. This condition has never been complied with; and if the legal title to the farm is not in Hunter, under the sale upon the loan office execution, it is still in Conine. The release of all personal liability against Lee on the notes is not sufficient to authorize him to claim a conveyance under the agreement of December, 1819. That conveyance did not depend upon the personal responsibility of Lee. It was only to be made upon the payment of the whole amount of the notes by Smith and Lee. The principal part of these notes is still due from Smith, and Lee has no equitable claim to the land until the whole amount is paid. Conine is not a party to the suit, and no decree can be made affecting his rights. Hunter is not estopped from setting up an outstanding title in Conine. He did not go into possession under title derived from Lee, but in hostility to his claim. If he was in under the mortgage to Hallenbeck, it could not affect his right to set up an outstanding title in the residue of the farm beyond the thirty-two acres. And even if he was in possession of the thirty-two acres under the mortgage, the only right of Lee would be to redeem that part of the farm on payment of the amount secured by that mortgage and interest. But I have already showed that the mortgage security was considered as abandoned from the time of the compromise with Conine, and no person was ever in possession under the mortgage. The agreement of Conine recites that Smith was then residing on the farm.

If the original deed to Lee was fraudulent, and the mortgage security to Hallenbeck was abandoned by the agreement of December, 1819, the appellant has no right to complain of the proceedings under the act for the relief of Hallenbeck, passed in April, 1819, unless he thinks proper to comply with the conditions of the contract with Conine, and to make his claim under the equity of that agreement. But *if he had all the proper parties before the court, and was willing to comply with those conditions, his right to the farm in the hands of Hunter would be extremely doubtful, especially after such a lapse of time.

At the time of the compromise, in December, 1819, the people had a judgment which was a lien on the farm, and was prior in point of time to that under which Conine had purchased. The only question which can possibly arise in this case, is whether Hallenbeck was so far bound by that agreement as to preclude him from taking advantage of the law which had been passed for his relief. Although a condition was inserted in that agreement for the benefit of Hallenbeck, he was not technically a party thereto, and had no personal claim against any one except Smith, who was insolvent, for the payment of the debt for which he was responsible. He had an equitable claim to have the judgment of the state satisfied out of the property of Smith, on which it was a prior lien, instead of its being satisfied out of his own property. The legislature, in passing the act, divested no legal or equitable rights, and did nothing more than a court of equity might have done under like circumstances. At the time Hallenbeck took the assignment un ■ der that act, Lee had left the state, and probably without ever intending to comply with the conditions of the contract with Conine. It therefore became a struggle between two bona fide creditors of Smith for a preference against the estate which had been fraudulently conveyed to Lee. In this contest Smith took the side against Conine, and gave his assent to the issuing the execution, and released his claim to the surplus. At the sale under that execution the property was sold for much less than its real value; and Conine, in whom the legal title was then vested, had a right to redeem the property from this sale during the period of twelve months, and was also entitled to the surplus moneys which Smith released. Lee, who had contracted with Conine for the purchase of his right, might also, under the equity of the statute, have redeemed it from that sale. The property was in this situation when the proceedings were instituted against Lee as an absconding debtor. He had at that time an equitable interest *in the farm, subject to the payment of the notes to Conine and his attorneys, and the amount due on the bid. This right was attached by the sheriff, and passed to assignees, who were appointed in July, 1821. But as neither Conine or the trustees redeemed the premises from the sale, the whole title passed to Hallenbeck by the assignment of Brigham’s bid, and the sheriff’s deed in -January, 1822. If this was a valid sale as against Conine and Lee, which I am inclined to think it was, the whole legal and equitable title to the farm is in Hunter, under this deed from Hallenbeck. If this sale should be set aside as inequitable, then the legal title is in Conine; and the trustees of Lee, if they have any right to the property, can only avail themselves of it by paying the full amount of the notes to Conine and his attorneys, together with the amount which Hallenbeck has been obliged to pay on account of Smith. But those claims against the property, if any such exist, cannot be settled in this suit, as neither the trustees or Conine are parties. By the 10th section of the act, (1 Rev. Laws, 159,) the trustees from the time of their appointment, became vested with all the estate of the absent debtor; and by the 26th section (1 Rev. Laws, 163) the appointment is made conclusive proof in all courts that the debtor therein named was at the time absent, absconding or concealed, within the meaning of the act; and that the appointment and proceedings previous " thereto were regular. The surplus of the debtor’s property, after payment of all his just debts, is to be refunded to him. The statute has prescribed the mode of notifying the creditors to exhibit their claims; and the debtor is not entitled to a restoration of the surplus of his estate until those directions have been complied with, or the creditors have had a chance to be heard by their trustees, and by a public notice under a decree of this court. A decree that the defendants in this cause account to Lee, would not protect them from similar proceedings at the suit of the trustees. He alleges in his bill that there are no other creditors ; but the trustees have taken no steps to ascertain that fact, and it is impossible for the defendants to know whether that allegation is true or not. The proper course for the debtor to obtain a surplus *to which he might be entitled in such a case, would be to make the trustees parties; and if they had not already given the requisite notices to the creditors to exhibit their claims, notice might be given, under the decree of the court, in the usual manner of calling in creditors under a decree.

I am perfectly satisfied that this suit was improperly brought by the appellant; that no decree could be made in his favor against the defendants, and that the conveyance of the 1st of January, 1818, was fraudulent and void, not only as against Conine, but as against Hallenbeck, and the same ought to be set aside. The decree of the equity court is therefore affirmed, with costs; and the further proceedings to carry the same into effect may be had in this court.


text:
    Foster and Bouck, executors, &c. v. Wilber and Olmstead.
    August 4th.
    When executors or administrators are cited to account before a surrogate, it is the duty of the complainants, when required, to file a written allegation or libel stating the substance of their claims against the defendants.
    The defendants may call on the surrogate to reject the allegation for insufficiency, or they may take issue upon the facts propounded, or put in a counter allegation in the nature of a plea in bar.
    The surrogate before whom the will was proved, or by whom administration was granted, has power upon the application of the legatees or next of kin, to compel executors as well as administrators to account and to distribute the personal estate according to law or the directions of the testator.

    No surrogate can call executors or administrators to account, except where probate of the will or letters of administration were granted by him.
    Whether a surrogate can compel an account from the personal representatives of a deceased executor or administrator, although probate or administration of both estates were granted by him, unless some portion of the first estate actually came to the hands of such representatives ? Quaere.

    Where, to determine the liability of parties, it is necessaiy to require the accounts of several estates, it would seem that the Court of Chancery alone has jurisdiction.
    About twenty years since, John Wilber, of the county of Otsego, made his will, and appointed his son John, and A. Olmstead, D. Fuller andT. Murphy his executors. The testator died soon after, and the will was proved by the executors ^before the surrogate of Otsego. Fuller died in 1815, intestate, and his widow administered on his estate. Murphy resided in the county of Schoharie, and the only part of the estate which ever came to his hands, was a debt due from D. Olmstead; which he paid over to his co-executors, in 1813, and took their receipt for the same in full. Murphy died in Schoharie in 1817, and the appellants, his executors, proved his will before the surrogate of that county. In 1827, N. Wilber, one of the sons of John Wilber, and D. Olmstead, the assignee of another son, cited the surviving executors of John Wilber, the administratrix of Fuller, and the executors of Murphy, to appear before the surrogate of Otsego County to render an account of the execution of the will of John Wilber. The citation was served on one of the appellants only. When he appeared before the surrogate he objected to any further proceedings in the matter until his co-executor was cited. But the objection was overruled. Various other objections were also taken by the appellant who was cited. In December, 1827, the surrogate pronounced final sentence in the cause; by which, among other things, he declared and decreed that J. Wilber, Jr., one of the surviving executors of his father, the administratrix of Fuller, and the executors of Murphy were to be charged with the sum of $831 91, with interest thereon from the first of July, 1811; that being the amount of the Olmstead debt, received by Murphy, and paid by him over to his co-executors. And the surrogate ordered the defendants to pay over one-fourth of that amount, including interest, being $445 76, to D. Olmstead as the assignee of G-. Wilber; and also to pay into court $62 10, on account of the costs of the suit. From this sentence and decree of the surrogate the executors of Murphy appealed to this court.

      J. I. Danforth and A. Van Vechten, for appellants:
    The decree of the surrogate is erroneous and ought to be reversed. Both the executors of Murphy should have been cited before the surrogate; and also the residuary legatees of John Wilber. There were no pleadings before the surrogate. The complainants should have filed a written allegation of their claim against the defendants. The execu tors of Murphy *are not liable for the money received by their testator as executor of J. Wilber, and paid over by him to his co-executors. Murphy reposed only a necessary confidence in those persons in whom the testator had placed equal confidence. (Balchen v. Scott, 2 Ves. jun. 678; Bacon v. Bacon, 5 Ves. 331.) The executors of Murphy cannot be bound after such a lapse of time to make out a strict discharge as to the moneys received by their testator as the executor of Wilber. There is a distinction between the claims of legatees and creditors upon executors. (Churchill v. Lady Hobson, 1 Pr. Wms. 242, 243.) The surrogate of Otsego had no jurisdiction over the appellants, they being executors of a will made and proved in Schoharie. A case like this is only cognizable in Chancery. The surrogate had no power to decree the payment of costs to himself. The claim here of one brother is barred by the statute of limitations. (Kane v. Bloodgood, 7 John. Ch. R. 90.)

      W. A. Seelye, for respondents:
    The appellants are bound to give a legal account of the money received by Murphy their testator. The surrogate of one county has the power to call to account an executor in another county, provided the will is proved before the surrogate directing the account. The payment by Murphy to his co-executors was not a good discharge as to him. (Mumford v. Murray, 6 John. Ch. R. 1; Monell v. Monell, 5 John. Ch. R. 283, 294; Sadler v. Hobbs, 2 Brown’s Ch. Cas. 114.) The appellants are liable to the payment of interest. (Glen v. Fisher, 6 John. Ch. R. 33; Mumford v. Murray, id. 17; Green v. Winter, 1 John. Ch. R. 27; Manning v. Manning, 1 id. 527.) Advantage cannot now be taken of the statute of limitations, as it was not pleaded before the surrogate; and there being a trust in this case prevents the statute operating as a bar. (Goodrich v. Pendleton, 3 John. Ch. R. 390; Cooper v. Murray, 5 John. Ch. R. 622; Kane v. Bloodgood, 7 John. Ch. R. 127; Hammond v. Huntley, 4 Cowen, 494.)

       2 R. S. (4th ed.) 277, sec. 57; see also Dakin v. Demming, 6 Paige, 95; Stagg v. Jackson, 1 Comst. 206; Westervelt v. Greeg, 1 Barb. Ch. 469; Gratacap v. Phyfe, id. 485; Stagg v. Jackson, 2 id. 87; Smith v. Tan Kuren, id, 473, 475.

   *The Chancellor :—On the argument of this cause, the counsel for the appellants raised a great variety of objections to the proceedings before the surrogate. Some of these objections relate to the formality of the proceedings merely; but many of them go to the jurisdiction of the court, and to the merits of the final sentence and < decree pronounced by him. As to matters of form, the whole proceedings appear to have been very loose and irregular. The promoters of the suit were called upon to state the grounds of their claim against the executors of Murphy; but it was not done. It was their duty, when called on for that purpose, to file a written allegation or libel, propounding or stating the substance of their claim against the defendants respectively, and the nature and grounds thereof. If this allegation was insufficient, and showed no grounds for proceeding against the defendants, the court might be called upon to reject it; or they might take issue on the facts propounded; or put in a counter allegation in the nature of a plea in bar. Until some issue was joined in the cause, neither party could be prepared to go into the examination of testimony.

It was objected on the argument that the power of the surrogate to compel an account was confined to administrators, and did not extend to executors. Such undoubtedly was the ecclesiastical law of England at the time of the first settlement of this country, and as such was brought hither by our ancestors. And I have, not been able to find that it was altered in this state previous to the revolution. In the case of Sparrow v. Norfolk, in the 15th year of James the 1st, (Noyes’ Rep. 28, Godolph. Eccl. L. 116,) an executor being cited to account before the ordinary, a prohibition was granted, on the ground that the ecclesiastical courts had no jurisdiction in such cases; but it was admitted they had the power to compel such an account by an administrators. That such was the law in England, may also be fairly inferred from the statutes 22 and 23 Charles 2, ch. 10, and 1 James 2, ch. 17. But soon after the revolution provisions were introduced into the statutes of this state which evidently show an intention on the part of the legislature to extend the power of the Court of Probates so far as to enable them to call *executors to account in certain cases. That power has in a subsequent revision of the statutes been extended to the surrogate who grants probate of the will, or letters of administration on the estate. The first part of the eleventh section of the revised act of the 8th of April, 1813, (1 Rev. Laws, 448,) is undoubtedly taken from the statute 22 and 23 Charles 2, ch. 10, which gives express power to the ecclesiastical courts to call administrators to account. But the latter clause of the section, which authorizes the Court of Probates or surrogate to hear and determine all causes touching any legacy or bequest in any last will or testament, payable or coming out of the personal estate of the testator, and to decree and compel payment thereof, is not found in the British statute. But it was introduced into the revision of our laws in 1787. (2 Jon. & Var. ed. of Laws, 71.) The power to call the executor as well as the administrator to account before the Court of Probates or surrogate, is also recognized in the 3d section of the act of the 6th of April, 1813. (1 Rev. Laws, 311.) This section appears to have been taken from the 6th section of the statute 1 James 2, ch. 17, which extends to administrators only. But in our revision of 1787, it is found, as in the act of 1813, applicable to executors as well as to administrators. The conclusion to which I have arrived on this point is, that in this state, on the application of the legatees or next of kin, the surrogate before whom the will is proved, or by whom administration is granted, may compel the executor or administrator to account, and distribute the personal estate of the testator or intestate, according to law, or agreeably to the terms of the will.

There is, however, a difficulty in this case as to the jurisdiction of the surrogate, which is insurmountable. The appellants were not executors of Wilber, whose legatees were seeking for an account of his estate; neither were they bound to account to the surrogate of Otsego. By the act of the 8th of April, 1813, (1 Rev. Laws, 445,) the exclusive power to take proof of the will, or grant administration of the estate, is given to the surrogate of the county of which the testator or intestate was an inhabitant at the time of his death; *and the ninth section of the same act authorizes any such surrogate to call the administrator, &c., to account. It certainly never was the intention of the legislature to authorize a surrogate to exercise any control or authority over executors or administrators, except as to those who had made proof of the will or taken out administration before him. No such power was ever exercised by any ecclesiastical court in England; and there is nothing in our laws conferring any such jurisdiction here. It is very doubtful whether any surrogate has the right to compel the representatives of a deceased executor or administrator to account for the estate which came to the hands of such executor or administrator, even if probate or administration as to both estates were granted by him, unless some portion of the first estate actually came to the hands of such representatives. (1 Addams’ Rep. 153.) In this case, some of the executors of Wilber survived Murphy; the appellants, therefore, are not the executors of Wilber, and have nothing to do with his estate. If their testator had made himself liable by maladministration, they are liable as debtors to that estate, to the amount of the assets of Murphy in their hands, to be paid in a due course of administration. Although Murphy died solvent, it does not follow that his executors have sufficient assets in their hands to pay all his debts. This case is a strong elucidation of the impropriety of giving to the surrogate such a power. In order to determine the liability of the several parties cited before the surrogate, and to make a final settlement of the matter, it would require the accounts of three different estates to be taken. If the appellants are responsible to the heirs of Wilber in any event, it is clear that they ought not to be compelled to pay until the remedy of those heirs has been exhausted against the surviving executor, and the estate of Fuller. ' And yet the decree of the surrogate is joint as well as personal against the surviving executor of Wilber, the administratrix of Fuller, and one of the executors of Murphy. It would seem that in such a case the Court of Chancery alone was competent to make a decree settling all these conflicting rights so as to do justice between the parties. It is certain that in this case the surrogate of Otsego had no jurisdiction *to make this decree against the appellants who had taken out probate in the county of Schoharie.

In addition to the want of jurisdiction over these appellants and the estate of Murphy, so far as I can understand this case from the informal proceedings which have been sent up on this appeal, the decree of the surrogate cannot be sustained on the merits. By the will of Wilber the Olmstead debt was specifically appropriated to pay the demand due to Peter Smith, and all other debts of the testator; and the overplus only, if any there should be, was given to the four eldest sons. As early as 1813, Murphy received the Olmstead debt, and settled for the same with the acting executors and took their receipt. If either of those executors or Murphy have paid any debts of the estate, he had a right to insist that it should be deducted from the moneys paid over by him. As that was the fund appropriated for the payment of all the debts, whatever payments have been made by those who are accountable for that fund must be deducted; and the executors of Murphy can in no case be made answerable for any thing more than the surplus. It appears from the testimony that Murphy settled the Smith debt. If he settled it out of the proceeds of real estate when there was a special fund in his hands for the purpose, he may be liable to the owners of that real estate, and was entitled to retain an equal amount out of the fund to satisfy their claim. John Wilber, Jr., who received the money from Murphy, in 1813, also paid above $250 towards the debts for which that fund was particularly appropriated. And yet the appellants are charged with the whole amount of that fund, with interest from 1811.

The sentence and decree of the surrogate so far as it affects the rights of the appellants or either of them must he reversed. It is undoubtedly erroneous as to the administratrix of Fuller; but as she has not appealed, this court can make no order for her relief.


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    *Morgan v. Schermerhorn.
    August 4th.
    Where M. being in embarrassed circumstances and pressed with executions against Mm, applied to S. for a loan of $800, and S. refused the loan unless M. would consent to purchase from him 124 acres of wild land at $550, wMch was much above its real value, and M. finally accepted tMs proposition and gave S, a bond and mortgage for $1,350, payable in 12 equal annual instalments, with annual interest, it was held that this loan was usurious.
    A party who comes to Chancery for relief against an usurious contract must pay or offer to pay the amount actually due, before he will be entitled to an injunction to restrain proceedings at law, or to an answer as to the alleged usury.

    But if the defendant puts in his answer without making this objection, the court will not afterwards dissolve the injunction, if the complainant is still willing to pay the amount.
    The complainant being embarrassed with debts and executions, applied to the defendant for a loan of $800. The defendant refused to lend him the money unless he would consent to purchase from him 124 acres of wild land, in the north part of Montgomery County, for the sum of $550. The complainant „at first hesitated, but finally consented to take the loan on these terms. He gave to the defendant a bond and mortgage for $1,350, payable in twelve yearly instalments, with interest to be paid annually. In 1828, the defendant commenced a suit against the complainant upon the bond, and also instituted proceedings of foreclosure upon the mortgage under the statute. The complainant applied to the defendant by his attorney, and offered to pay or secure the payment of the sum of $800, with compound interest from the time of the loan, and to re-convey the 124 acres of wild land, free from taxes and incumbrances. The defendant declined this proposition, but offered to deduct $200, if the complainant would pay him the residue of the bond and mortgage. The complainant repeated his offer in the bill filed in this cause, and obtained an injunction restraining the proceedings at law upon the mortgage. The answer of the defendant having been put in, he now moved to dissolve the injunction.
    *A. Stewart for the complainant:
    This is a clear case of usury. The complainant being embarrassed with debt, was compelled to purchase from the defendant 124 acres of land of no value, at the sum of $550, in order to obtain from him a loan of $800. In Eagleson v. Shotwell, (1 John. Ch. R. 536,) which was a case like the present, the court granted relief to the debtor. It is a well settled rule, where the lender imposes upon the borrower the condition of taking some other thing above its value with the money loaned against the wishes of the borrower, but who submits to the condition from his necessities, that the same is usury both at law and equity. (Rose v. Dickson, 7 John. R. 196; Stuart v. The Mechanics' and Farmers' Bank, 19 John. R. 509.) If the debtor has offered to pay the sum actually due, which has been refused, the court will not require such sum to be brought into court, but will reduce the security to the sum really due. (Eagleson v. Shotwell, 1 John. Ch. R. 536; Fanning v. Dunham, 5 John. Ch. R. 144; Thompson v. Berry, 3 John. Ch. R. 398.) Even if there has been merely a mistake or ignorance as to the value of land, sold, and no fraud has been shown, Chancery will grant relief. (Bingham v. Bingham, 1 Ves. sen. 126, per Ld. Hardwicke; 1 Pr. Wms. 355.)

      L. Beardsley for the defendant:
    The contract in this case was not usurious. The defendant denies all intention to take usury; his only object was to dispose of his land at a fair price. Both parties at the time supposed the land worth the sum agreed to be paid for it. To constitute usury there must be a corrupt agreement. (Nourse v. Prime, 7 John. Ch. R. 77; New York Fire Ins. Co. v. Ely, 2 Cowen’s R. 678.) It is not denied that any device with a view of securing more than the legal interest is usury. (Rose v. Dickson, 7 John. Ch. R. 196; Eagleson v. Shotwell, 1 John. Ch. R. 536; Dunham v. Gould, 16 John. R. 367.) If the sale of property at the time of making a loan of money is bona fide, the contract is not usurious. To make it usurious a corrupt intention is necessary. (Clason v. Morris et al., 10 John. R. 525. The court will not presume, the contract *usurious without proof. (McGuire v. Parker's Exrs., 1 Wash. R. 268.) A bona fide sale of property at however high a price, cannot be usury. (Skipwith v. Gibson & Jefferson, 4 Hen. & Munf. 490; Greenhow's Administratrix v. Harris, 6 Munf. 472; Bull v. Douglass, 4 Munf. 303; West v. Belcher, 5 Munf. 187.) But if the lender impose upon the borrower goods, in part or in whole, at a higher value than they are worth, it is usury. (Stuart v. Farmers' and Mechanics' Bank, 19 John. R. 496, 508, 509; Lowe v. Walter, Doug. 708.) Even if the transaction was usurious, the injunction ought not to be sustained, because the complainant has not brought the money actually lent with interest into court; (Rogers v. Rathbun, 1 John. Ch. R. 367; (Tupper v. Powell, id. 439; Fanning v. Dunham, 5 id. 122.)

       Now by statute, see 2 R. S. (4th ed.) 182, see. 13. A borrower seeking relief or discovery, on account of usury, need not pay back, or offer to pay back any interest or principal to the lender. See Fulton Bank v. Beach, ante, 429 n.; Livingston v. Harris, 3 Paige, 528; S. C., 11 Wen. 329: see also Rexford v. Widger, id. 131.

   The Chancellor :—The objection that the complainant has not brought into court the amount admitted to be due with legal interest, cannot be received in this stage of the cause. As a general rule a party who comes here to seek relief against an usurious contract, must pay or offer to pay the amount actually due, before he will be entitled to an injunction, or to answer as to the alleged usury. But if he answers the bill without mating any objection on that ground, the court will not afterwards dissolve the injunction, if it appears there is usury, and if the defendant is then willing to pay the sum really due. If a party comes here to seek equity, the court will compel him to do equity. In this case the complainant offered to pay the whole amount loaned, with compound interest; and the defendant refused to receive it. Hnder such circumstances, it was not necessary to make a formal tender of the money. The same offer is repeated in the bill, and the court has power to compel him to make it good, whenever the defendant consents to accept of those terms. The actual payment of the money, under such circumstances, was not necessary.

The only question m this cause, therefore, is, whether the defendant is entitled to hold this mortgage for its whole nominal amount. It is alleged in the bill that this land, which was in a measure forced upon the complainant at nearly four and a *half dollars per acre, was not in fact worth one at the time of the sale. • The answer to this is, that the defendant knows nothing of its value, except what is contained in his father’s letter, &c., and he fixed it at a price not exceeding $3 per acre. If the defendant knew, or had reason to believe, he was getting more for bis land than any one would be willing to give him for it unconnected with a loan of money, he was in fact selling it for a price above its actual worth, whatever he might have considered its nominal value. From the answer in this case, no one can doubt that the necessities of the complainant induced him, for the sake of obtaining the loan, to give for this land a sum much beyond what it was actually worth to him. And the defendant, by this device, did in fact obtain more than seven per cent, advantage from the loan of his money. The statute cannot be evaded in •this way; and no device of this kind can be permitted to avail the lender, without in effect repealing the laws against usury. As to the policy of those laws the court have nothing to do. So long as the legislature thinks proper to continue them on the statute book, it is our duty to see them faithfully executed. It might perhaps be beneficial to the borrower, in some cases, if he were permitted to stipulate directly to allow a premium above the legal rate of interest; but some limitation is absolutely necessary to protect the necessitous against their own improvidence, and the cupidity of avarice.

The motion to dissolve the injunction must be denied with costs, unless the defendant consents to receive the money loaned, and legal interest, together with a re-conveyance of the land; and to pay the costs already accrued in this suit. If he consents to those terms, the complainant must pay the amount due and execute the conveyance within sixty days after notice of such acceptance, or the injunction must be dissolved.


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    *Whitney v. The Mayor, Aldermem, &c. of the city of New York.
    The power to review and correct the errors, abuses and mistakes of public officers and of inferior or subordinate jurisdictions, belongs exclusively to the Supreme Court.
    Illegality in the proceedings upon assessments for the purpose of regulating and improving streets in the city of Mew York, may be corrected by a certiorari to the Supreme Court.
    A motion to dismiss a bill for want of prosecution, can only be made where there are other defendants against whom the cause is not in readiness for a hearing in consequence of the neglect of the complainant to expedite the proceedings against them.

      August 4th.
    Where both parties have the right to bring the eanse to a hearing, a motion to dismiss the bill for want of prosecution is irregular.
    The bill in this cause was filed to restrain the defendants from selling two lots of the complainants, which had been assessed for a share of the expenses of regulating and improving Lombardy street, between Clinton and Walnut streets, in the city of New York, under the 175 th section of the act to reduce several laws relating particularly to the city of New York, into one act. (2 Rev. Laws, 407.) The alleged irregularity in the proceedings was that the improvement in the street had been made before the assessment for that purpose, and before the entry of the ordinance authorizing the assessment. - The assessment was made and confirmed by the Common Council in 1821.

      M. Ulshoeffer, for the defendants,
    on the bill and answer moved for a dissolution of the injunction, and that the bill be dismissed with caste.

      D. S. Jones, for the complainant.
   The Chancellor :—It is not necessary for me to express an opinion whether there is any legal objection to the assessment against the complainant’s property. If it is illegal, he has a full and perfect remedy at law, and this is not the proper tribunal for him to apply to for redress. In Mooers v. *Smedley, (6 John. Ch. Rep. 28,) this court decided that the review and correction of errors, abuses and mistakes in the exercise of the powers of inferior and subordinate jurisdictions, and in the official acts of public officers, belonged exclusively to the Supreme Court. That such a power exists in that court has been repeatedly recognized by the judges thereof. (2 Caines’ Rep. 169; 16 John. Rep. 50; 1 Wendell, 288.) And that the complainant may correct any illegal proceedings under the 175th section of this act, by a certiorari, was expressly decided by that court, in the case of Le Roy and others v. The Mayor, &c. (20 John. Rep. 430.) The injunction must therefore be dissolved. The application to dismiss the bill for want of prosecution is not the regular mode of getting rid of the suit, under the rule of June, 1828. The proper course is for the defendant to set it down on bill and answer, if the complainant neglects to file a replication. The motion to dismiss is only allowed where there other defendants, against whom the cause is not in readiness for hearing, in consequence of the neglect of the complainant to expedite the proceedings against them. By the English practice, the motion to dismiss was merely for the purpose of expediting the proceedings of the complainant; and there is no ground for such an application on the part of the defendant, where either party is at liberty to proceed in the cause. At law, if the plaintiff neglects to bring the cause to trial, judgment as in case of non-suit may be granted. But the defendant cannot move for such a judgment in replevin, because he has an equal right with the plaintiff to carry down the cause for trial.

The motion to dismiss the bill is denied.


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    *Scribner v. Williams and others.
    August 4th.
    Appellate courts which proceed according to the course of the civil law may allow the parties to introduce new allegations or further proofs.
    But it is not a matter of course to receive further proof upon an appeal.
    If the appellant wishes to offer new evidence, he should in his petition of appeal ask leave to produce further proofs, and state his excuse for not producing such evidence in the court below.
    Upon an appeal from the sentence of a surrogate disallowing a will, this court will not change the appellant, he being the executor who propounded the will before the surrogate, by substituting the legatee, in order to give the legatee the benefit of the executor’s testimony in favor of the will.
    The appellant applied to the surrogate of Westchester for probate of the will of Martha Williams deceased; and the same being contested, the surrogate pronounced against the validity of the will. From this sentence of the surrogate the executor appealed to this court.

      A. Ward now presented a petition in behalf of the appellant, and the husband of the principal legatee named in the will, praying that the name of the latter might be substituted as appellant;
    that the executor might be permitted to renounce the execution of the will, so as to become an admissible witness on the appeal; and that administration with the will annexed might be granted. To show that further proof could be introduced on the appeal, the counsel cited Consetio’s Pr. of Eccl. Courts, 116.

      Jas. Smith, for the respondents,
    insisted that the appellant could not be changed so as to make the executor a competent witness.
   The Chancellor :—There is no doubt of the power of appellate courts, proceeding according to the course of the civil law, to allow the parties to introduce new allegations or further proofs. Such is the settled practice of the ecclesiastical courts in England, and of the admiralty courts in this country. But from the organization of the Court of Errors, it is doubtful whether any such right exists on appeals from the sentences or decrees of this court in testamentary causes. *In those courts where the right does exist, it is not a matter of course to allow the parties to produce further proofs. (The Euphrates, 8 Cranch, 385; The Bizarro, 2 Wheat. 227; The St. Lawrence, 8 Cranch, 434.) It would not be a safe or convenient rule to allow parties who have had the benefit of plenary proof before the judge a quo, to introduce new proofs to the same point before the judge ad quern, without any excuse for not having produced the evidence in the court below. If the appellant wishes to have the facts reviewed on new evidence in the appellate court, it would be proper for him, in his petition of appeal, to ask leave to produce further proofs, and state his excuse for not having produced them before.

But a more serious difficulty is presented in this case. The witness that the petitioners now wish to have examined is the sole appellant, and for aught that appears was the only party who promoted the suit before the surrogate. He now asks to abandon his appeal and renounce the execution of the paper propounded as a will, for the purpose of giving the legateé the benefit of his testimony. Without expressing any opinion as to the effect of the sentence of the surrogate on the rights of the legatee, or whether he is in a situation to appeal from that sentence, I am satisfied the relief prayed for in this case ought not to be granted.

Petition dismissed.


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    White v. Moore and others.
    August 4th.
    A deed absolute on its face, if intended only as a mortgage or security for the payment of money, whether accompanied by a written defeasance or not must be recorded as a mortgage in order to protect the holder against a subsequent Iona fide mortgagee or purchaser of the premises.
    If no written defeasance was executed, the holder of the mortgage may comply with the requirement of the statute at any time afterwards by executing a defeasance according to the terms agreed upon by the parties, and then recording both instruments together as a mortgage.
    Blausius Moore was the owner of certain premises, which were mortgaged to the complainant in November, 1825. *Moore was indebted to the Hudson Insurance Company in about the sum of $4,000; and in order to secure this amount, among other securities, he gave to Mark Spencer, the president of that company, an absolute deed of five-sixths of the mortgaged premises. This deed was dated in 1826, but left blank as to the day and month. It was actually executed in April of that year, and was intended merely as a mortgage, although there was no written defeasance. On the 19th of July, 1826, the Hudson Insurance Company assigned the deed received from Moore, together with a large amount of other securities, to secure a debt of $700,000 due to the Fulton Bank. On the fifth of August, 1826, the deed to Spencer was recorded in the book of deeds in the city of New York, but has never been registered or recorded there as a mortgage. About the time Spencer conveyed the premises to the Fulton Bank; this ánd other securities were given to the bank in alsolute payment of a draft of $40,000 drawn by Spencer, and passed to the bank by the insurance company. The deed from Spencer was also recorded on the 5th of August, 1826. At the time of the execution of the deed to Spencer, the premises were subject to a mortgage to Kain. On the 9th of August, Mrs. Healy purchased the premises of Moore for $4,000, without any knowledge of the existence of the conveyance to Spencer. She paid $3,000, and reserved the residue until the Kain mortgage should be cancelled. On the 12th of September, Moore produced a certificate of the discharge of the Kain mortgage, and received from Mrs. Healy the balance of the purchase-money. The premises were sold under a decree in this cause, and produced a surplus of $1,257 74. A reference was made to a master to ascertain the facts, and report which of the defendants was entitled to the surplus. The master reported that it belonged to Mrs. Healey.

      H. W. Warner, for S. A. Healy and wife:
    The surplus funds in court belong to Healy and wife. The conveyance by Moore to Mark Spencer, which was assigned to the Fulton Bank, although absolute in its terms was intended only as a mortgage. It being a mortgage and not having been ^recorded in the book of mortgages, the deed to Mrs. Healy takes priority over it. (1 R. L. 372, sec. 2, 3.) That the deed to Spencer was intended as a mortgage, may be shown by paroi. (Marks v. Pell, 1 John. Ch. R. 594; James v. Johnson, 6 John. Ch. R. 417; Slee v. Manhattan Company, ante, p. 38.) The Eulton Bank received the deed from Spencer upon the same terms it was held by him, and acquired no greater rights than he possessed, and they had notice of all the circumstances under which it was given. (Coddington v. Bay, 20 John. R. 637.)

      J. Hoyt, for the Fulton Bank,
    contended that the act concerning mortgages, contemplated only such defeasances to deeds as were reduced to writing; and that unless the defeasance was in writing, it was not necessary to cause the deed to be recorded in the book of mortgages. He also insisted that a person taking without notice, would be protected although he took from one who had notice. (Jackson v. Given, 8 John. R. 137; Murray v. Ballou, 1 John. Ch. R. 573; Jacob’s Law Dic. tit. Defeasance.) And that Mrs. Healy had no other or greater equities than her grantor.
   The Chancellor :—The right of the bank to the surplus produced on the sale of the mortgaged premises, depends upon the question whether the absolute deed given to Spencer, but which was in fact nothing but a mortgage, ought to have been registered or recorded as a mortgage. There is no pretence that Mrs. Healy knew any thing of it at the time of her purchase, although it was recorded as a deed some days previous.

The second section of the act concerning mortgages (1 Rev. Laws, 373) provides, that no mortgage, nor any deed, conveyance or writing in the nature of a mortgage, shall defeat or prejudice the title or interest of any bona fide purchaser of any lands, tenements or hereditaments, unless the same shall have been duly registered, in the manner prescribed in that act. And the next section provides, that if there is a separate written defeasance, that shall also be recorded, in order to protect the instrument as a mortgage. The ^object of this statute undoubtedly was to require every deed or instrument which was in fact only a mortgage, to be recorded. If the construction of this statute was now for the first time to be settled, there might be a possible doubt whether the second section was so worded as to reach instruments which did not on their face purport to be mortgages, or conveyances in the nature of mortgages. But after the decisions of this court, sanctioned as they have been by the court of dernier resort, the construction of the statute is no longer to be questioned. In Day v. Dunham, (2 John. Ch. R. 188,) Chancellor Kent held, that a deed absolute on its face, but intended only as a security by way of mortgage, must be recorded as a mortgage, to protect the property against a hona, fide purchaser; and that a constructive notice, arising from its being recorded as a deed was not sufficient. It is true in that case there was a written defeasance; but it was not executed until six months after the recording of the absolute deed, and long after the conveyance to the adverse party. It therefore could not have altered his rights if the defeasance had continued in paroi. H the deed and defeasance had been recorded together as a mortgage the moment the defeasance was executed, it would not have protected the property against the intermediate conveyance. The decree in that cause was afterwards reversed in the Court of Errors, on the ground that the intermediate purchaser had actual notice, but the decision upon the point now under consideration was deemed correct. (15 John. R. 555.) The same question came before this court in James v. Johnson & Morey, (6 John. Ch. R. 417,) where there was no written defeasance, and was decided in the same way. When that case after-wards came before the Court of Errors, (2 Cowen’s R. 247,) the present chief justice examined that question and concurred in the construction of the statute given by Chancellor Kent. And the correctness of that construction was not questioned by any member of the court.

There can be no hardship or injustice in such a construetian; but on the contrary, it will more effectually carry into effect the intention of the legislature, and prevent fraudulent conveyances, and secret trusts. If a conveyance is intended *only as a mortgage, there can be no good reason why the terms on which it is to be defeasible should not appear on its face. If, through inadvertence, it is taken as an absolute deed, the holder may comply with the terms of the statute, by making a written defeasance, specifying the conditions on which it was intended to be given, and recording both together in the book of mortgages. If he does this before the rights of any third party have intervened, he will be protected. And if he neglects it, he will only be in the same situation of every other mortgagee who neglects to have his security recorded.

Having arrived at the conclusion that by the conveyance to Mrs. Healy, she took the property discharged of the mortgage to Spencer, it cannot be necessary to examine the other question raised in this cause. If her conveyance was good against the original mortgagee, it was also good against the bona fide assignees of the unregistered mortgage, who took it merely as security for an antecedent debt.

The whole of the surplus moneys must be paid over to Healy and his wife.

       2 R. S. (4th ed.) 162, sec. 3.