source: Caselaw Access Project

author: Selden, J.

license: Public Domain

text:
    Olcott v. Tioga Railroad Company: Same v. Same.
    The president of a railroad corporation was allowed for three years to purchase locomotives, giving bills for them purporting to bind- the company, and to run them upon the road, which he managed in his discretion. Afterwards, the directors resumed the charge of the road and of the property thus obtained, and for some years, though they did not ' settle, did not question, the accounts rendered by the president of these transactions. This acquiescence is such a ratification as to be evidence of the president’s original authority to bind the corporation by bills given for the locomotives.
    A bill dated at the office of the corporation, signed with the name of the president, with the addition of his title of office, abbreviated, and directing the contents to be charged “ to motive power and account,” purports on its face to be the bill of the corporation, and not that of the signer individually.
    A corporation owning and operating a railroad making a continuous line with that of another corporation may, it seems, irrespective of any special provision in its charter, lawfully contract with the latter company for the joint purchase and ownership of locomotives to be used on both roads. If otherwise, the power is implied in a legislative provision for the connection of the first railroad with a point at the further end of the second, “ by railroad, canal, or slackwater navigation.”
    Evidence is admissible in support of the president’s authority to draw the bill in question that he had, on various occasions, as well after as before, executed similar bills and notes which had been paid, and the sums thus expended entered into the accounts of the corporation which were before its managers for years without objection.
    A coal company indebted to the railroad corporation for freights gave its notes for a less amount, which the latter indorsed and procured to be discounted. There being no evidence that the coal company received the avails of the notes, it is immaterial, in respect to the objection that the notes were indorsed for its accommodation, that it did not appear whether these notes were given to apply on the coal company’s indebtedness. If so, the railroad corporation was the owner; if not, the notes were lent for its accommodation.
    In the absence of an express finding on the point, and if necessary to sapport the judgment against an objection that it was ultra vires for the railroad corporation to borrow notes, it would be assumed that the notes were given to apply on the coal company’s indebtedness.

      A single seal appended to a notary’s certificate of protest is a sufficient authentication of his certificate beneath the seal, and on the same page, of the service of notice of non-payment.
    The mortgagee of a chattel may, it seems, purchase at public sale and hold it for his own benefit and free from any equity of redemption. If otherwise, the purchase is good at law, and is in equity not void but voidable only at the election of the mortgagor. The purchase cannot be im- „ peached in a suit to which the mortgagor is not a party.
    These actions were tried before the same referee, and argued in this court together. Though the causes of action were entirely distinct, the evidence was, in a great measure,' the same, and the questions presented for decision to some extent the same, in both actions. It is, therefore, convenient to present them together.
    The,first action was brought to recover the amount of a bill of exchange, of which this is a copy:
    “ Office of the Tioga Navigation Company,
    “ Philadelphia, May 19, 1841. “Dolls. 9,064-Ay. Twelve months after date, pay to the order of Messrs. Rogers, Ketchum and Grosvenor, nine thousand sixty-four Ty_ dollars, at No. 65 Liberty street, in the city of New York, value received, which charge to motive power and account, and oblige
    “Yours, &c.,
    “ James R. Wilson,
    “Prest. T. N. Co.
    “ To Hiram Bostwick, Esq., - ■
    “ Treas. Tioga Coal, Iron Mining and Manufacturing Co., Corning, N. Y.”
    In the complaint it was alleged that, at the date of the bill, the defendant, a corporation created by and under the laws of the State of Pennsylvania, by its then name of The Tioga Navigation Company (since changed by the legislature of that State to The Tioga Railroad Company), for value received, made the said bill of exchange; that it was duly accepted “by the said Hiram W. Bostwick, treasurer, as aforesaid;” and was duly indorsed by Rogers, Ketchum and Grrosvenor to the plaintiff, and. when due, after demand of payment, and refusal, was duly protested and notice given to the defendant. The defendant, by its answer, put in issue all the allegations of the complaint.
    The second action was brought to recover the amount of eight promissory notes made in September, October and November, 1841, by the Arbon Goal Company, payable to the order of the Tioga Navigation Company, three months after date, indorsed by the Tioga Navigation Company to the plaintiff, which notes, it was alleged, were duly protested for nonpayment, and notice thereof given to the defendant. The defendant put in issue the statements of the complaint, and alleged that the notes were indorsed in its name by James E. Wilson, without authority; that he was not, at the time of such indorsement, the president, or an officer or stockholder, of the company; that, by the act of incorporation, the president, secretary and treasurer of the company were required to be residents of the State of Pennsylvania; that, at the time of making the indorsement, Wilson was not a resident of Pennsylvania, but was, and for a long time had been, a resident and citizen of New York; also, that' the notes were indorsed for the accommodation of'the Arbon Coal Company without consideration, and not in any respect for the benefit of the defendant; also, that the payment of the notes was secured by a mortgage upon real estate in Pennsylvania, executed by the Arbon Coal Company to three trustees (Ketehum, Alstyne and Thompson), and a mortgage upon personal property to Ketehum alone, as trustee, for the use of the holders of the notes and other creditors of the mortgagors; and that, after default in making payment, the mortgages were foreclosed, and the property sold for the benefit of the holders of the notes, and'that the same were thereby paid and satisfied. It was also alleged that, before the plaintiff became the owner or holder of the notes, they were owned and held by Ketehum, Eogers and Bement, who received from the makers of the notes a large amount of property to be applied to their payment and satisfaction; that the property so received by them was of more than sufficient value to pay the notes; that such property had never been returned or accounted for by them, but the same, or its avails, were still held and retained by •them; and that, while the property and notes were so held by them, the makers became and still remained insolvent; that the notes were transferred to the plaintiff long after they became due; that he neither paid nor advanced anything for or on the credit of them, and received them with full notice of the foregoing facts.
    On the trial, the incorporation of the Tioga Navigation Company, by the legislature of Pennsylvania, and by the proclamation of the governor of that State, "in pursuance of the act of the legislature, was shown, the original act having been passed in 1826. The primary object of the corporation^ as shown in the act under which it was created, was the construction of a navigable canal, or slackwater navigation, along the line of the Tioga river, from the State line of New York, at or near Lawrenceville, to certain coal beds at Blossburgh, in the State of Pennsylvania, with power to collect tolls, subject to regulation by the legislature of that State. The charter provided for the choice, annually, by the stockholders, of a president, ten managers, a treasurer, and such other officers as should be deemed necessary; the president and managers to conduct the business of the company, and to hold their offices for one year, and until others should be chosen. By a sup-, plement passed in 1828, the company was authorized to construct a railway, in lieu of a canal or slackwater navigation ; and in 1850, the name of the company was changed to “ The Tioga Bailroad Company.” By an act passed in 1835, the State guaranteed the payment of five per cent interest on a loan of $150,000 for twenty years, in aid of the company, with a proviso that the act should not take effect until one year after the road should have been completed and in full operation, or until the same should have been-connected with the Chemung canal, by railroad, canal or slackwater navigation.
    In January, 1837, James B. Wilson was chosen one of the managers of the company, and continued in that post until 1850. • In January, 1838, he was chosen president; was reelected in January, 1839, and continued to act as president until January, 1844, no meeting of the stockholders having been held in the intermediate time.
    In January, 1837., the board of managers appointed an executive committee, composed of three managers, together with the president, “ with power," as declared in their resolution, “ to enter into and conclude any engagement, negotiations or course of proceedings, which shall be final as much as if done by the board of managers.” In January, 1838, a like committee was appointed, with the same powers. On the 2d of April, 1838, the board of managers passed the two following resolutions:
    “ Resolved, That the executive committee shall be and are hereby invested with full, power to enter into and conclude any arrangements and contracts for 'the reciprocal and convenient use of the road of the Tioga Coal, Iron Mining and Manufacturing- Company, or the road of the Williamsport and Elmira Railroad Company, or for other purposes, on such terms as to said committee may appear advisable.
    “ Resolved, That in the interval between the quarterly meetings of the board, the said executive committee shall exércise and enjoy the full powers of the board to act for and to bind the company.”
    On the 17th of May, in the same yéar, by the executive committee, it was resolved “ that James R. Wilson, the president, be authorized and empowered to negotiate the loan of one hundred and fifty thousand dollars, on the best terms which may offer, and that he be invested with the'powers of the executive committee.”
    On the 1st of October, 1839, the same committee resolved “ that James R. Wilson, president, be authorized to purchase of Baldwin, Vail and Hufty, a locomotive and tender, for the sum of $7,000, and to give the notes of the company at six months for the same;” “that the president be authorized and empowered to act in all the ordinary business of the company, as' fully as this committee may do.”

      At a meeting of the managers, held on the 20th of February, 1841, which -was the last meeting of that board prior to January, 1844, an agreement which had been entered into between the Tioga Navigation Company and the Tioga Coal, ¡Iron Mining and Manufacturing Company, executed by their , respective presidents and secretaries in the previous September, ' was submitted to and ratified by the board. o It provided for uniting the roads at the State line, so as to “form one continuous road from Blossburgh to Corning,” and allowing to the locomotives and cars of either company the right of uninterrupted passage over the whole line, subject to regulations to be established by the Tioga Navigation Company, and subject to the tolls of the respective roads. At the same meeting the executive, committee was reduced to three (George Bundle, H. W. Bostwick, and the president), and it was resolved “ that the executive committee, or a majority, be and are hereby fully authorized to act for and bind the company." The minutes showed nothing further of the proceedings of stockholders, managers or committee, until January, 1844.
    Prior to the time when Mr. Wilson became president of the company, very little had been done toward the construction of the road. A part of the grading had been done, the right of way had been generally secured, and some 40 or 50,000 dollars had been expended. From that time the management of the business of the company appears to have devolved mainly upon the president, and, after February, 1841, almost exclusively, aided occasionally by Mr. Bostwick, one of his associates on the executive committee, who was also the treasurer of the Tioga Coal, Iron Mining and Manufacturing Company, a company chartered in the State of New York, with authority to construct a railroad from the State line of Pennsylvania to Corning in the State of New York. Under the authority given to him by the executive committee, Mr. Wilson negotiated the loan of $150,000,. or a large part of it, and with the proceeds of that loan and other means of the company, and its credit, as far as such credit could be made available, the road was completed and put in use in July or August, 1840. It was done under the general direction and superintendence of the president,- who was constantly Occupied with its affairs, naanaging its finances, making purchases of materials and furniture, embracing locomotives and cars, and paying for labor performed for the company, and attending generally to everything pertaining to the construction and equipment of th,e road.
    Prior to any of the transactions involved-in either of the present suits, an arrangement had been made between the Tioga Navigation Company and the Tioga Co'al and Iron Mining and Manufacturing Company for the purchase of locomotives together, to be owned by the two companies, five-eighths by the former and -three-eighths by the latter, which was in proportion to 'the length of their respective roads. Under this, arrangement four locomotives were -procured and placed upon the road, three of which were purchased by -the -president of the Tioga Navigation Company, -and were paid for by notes and drafts drawn by him in behalf Of the -company, which were paid by the company. At the time of the meeting of the managers, -in February, 1-841, three of such locomotives and a considerable number-of cars were on the toad, which had been purchased by the president, -and for which -he had given notes or draft's in behalf of the company; and other Similar drafts and notes wer.e outstanding, to a considerable amount, which had been given by him for money borrowed, and in payment for work done and property purchased for the company. This -indebtedness, and the necessity of providing means for its payment, was a subject of discussion at that meeting; but-the particular transactions do not appear, to-have been separately or Specially alluded to.
    • The bill -of exchange which was sought -to be collected in the' first abtion was given -in payment for a locomotive and' tender, constructed by the payees named in the bill, in pursuance of a contract in writing made with -them -on the -11th day of January, 1841, executed by “ James -B. Wilson, President of the Tioga Navigation Company, and Hiram W. Bostwick, Treasurer of'-the Tioga Coal and Iron Mining and Manufactaring Company,” by which the said payees agreed to build “for said companies” a locomotive and tender [as described], and deliver them at Jersey City, on the first day of May then next, for $7,920, “payable in the city of New York, in the draft of J. R. Wilson, President, .accepted by H. W. Bostwick, Treasurer, at twelve months from delivery, interest being added at seven per cent per annum.” Some alteration was made in the plan of the locomotive, at the request of the purchasers, after the date of the contract, which increased the price to the amount for which the draft was given. The locomotive was placed upon the road, under the arrangement before mentioned between the two companies, and in December,- 1841, was mortgaged by the defendant, with other property, to the Bank of Corning, to secure a debt of $35,000, which the company owed to that bank. It continued to be used on the road as late as 1843, when the other property mortgaged was repurchased by the defendant on a foreclosure of the mortgage.
    No accounts were rendered by Wilson, of his transactions in behalf of the company, after February, 1841, until 1844, after he ceased to be president. He then rendered accounts, containing the details of those transactions, which do not appear to have been finally settled; nor does it appear that any particular objection was made to them. He was re-elected as a manager annually from 1844 to 1849, inclusive, and during some of the years acted as superintendent of the road.
    On the proof, of which the foregoing is a brief outline, together with proof that the bill was duly protested, and notice of its dishonor, at maturity, given to the drawers, and that it was assigned by the payees to the plaintiff in January, 1844, the plaintiff relied for a recovery in the first action
    The defendant’s counsel moved for a dismissal of the complaint, on the grounds (with others not here relied upon): 1. That the draft was the obligation of Wilson, and not of the defendants; 2. That the use of the locomotive upon the road -furnished no evidence of ratification; that such use was the act of Wilson, and itself needed ratifying; 3. That tha draft Was-'drawn in contravention of the charter and by-laws of -the defendant, and was incapable of-ratification; 4. That if the defendant was liable at all, it could only be upon an implied assumpsit for the value of the engine, and that jointly with the New York company. The referee denied the motion, • and the defendant’s counsel excepted.
    Several exceptions were taken by the defendant’s counsel to the introduction of evidence, which are noticed in the following opinion.
    . The defendant introduced, some testimony, not materially varying the case, so far as relates to the questions in controversy here. A chattel mortgage was introduced, given by .the Arbon Coal Company, to secure the amount of the draft in controversy, with other demands, a part of the proceeds of which were applied by the referee in reduction of the amount due on the draft.
    The referee found: 1. That the defendant made the draft . upon which the action was brought; 2. That the draft was duly protested for non-payment; 3. That $2,926.17 of the amount made on the mortgage of the Arbon Coal Company should be credited as payment on the draft, as of' August 14, 1843 ; 4. That the amount remaining due on the draft, after the reduction, at the date of the report (February 28, Í861), was $15,415.20; 5. That, as a conclusion of law, the plaintiff should have judgment for that sum, and costs.
    In the second action, it was shown that the notes mentioned in the complaint were made by the Arbon Coal Company, six of them being executed in the name of the company, by James E. Wilson, treasurer, and two by the president of the company; that, at the time when they were made, the coal company was largely indebted to the defendant for freight on coal which had been carried over the defendant’s road; that the defendant was embarrassed and in bad credit, and needed money to meet its obligations; that the coal company was in good credit, with ample means for the payment of its debts, but such means consisted in coal and not in cash. Under these circumstances the notes were made, without, so far as the proof showed, any specific agreement whether they should apply upon the indebtedness of the coal company for freight or not. They were, however, given to enable the defendant to raise money upon them, for its own use. They were all indorsed by the Tioga Navigation Company, by James R Wilson, president, and procured to be discounted by him and Mr. Bostwick, one of the executive committee, for the benefit of that company. What became of the money after the notes were discounted, was not shown. It was proved that-Mr. Wilson moved, in the fall of 1841, with his family, from Pennsylvania to Albany,- in the State of New York, and continued to reside there until the fall of 1842.
    The evidence of the protest of all the notes, excepting one, consisted of the usual certificate of protest by a notary public, signed and sealed by him, with his seal of office attached to each note, and immediately beneath each certificate of protest; and on the same sheet was a certificate of the mailing of notices of protest, on the same days of the respective protests, properly addressed to the indorsers, which certificates were signed by the notary officially, but were not separately sealed. The reading of the notices was objected to, on account of the want of seals ; the objection was overruled, and the defendant's counsel excepted.
    The transfer of the notes to the plaintiff, in 1844, was proved.
    The defendant’s counsel moved to dismiss the complaint, on the grounds: 1. That Wilson had no power to bind the company by the indorsement of the notes; 2. That Wilson was not president of the company, because his term of office bad expired, and because he had removed out of the State of Pennsylvania; 3. That the indorsement was in contravention of the charter and by-laws of the company; 4. For the insufficiency of the notice of protest. The motion was denied, and the defendant’s counsel excepted.
    The defendant then proved the execution, by the Arbon Coal Company, in 1842, of the mortgages mentioned in their answer; that in August, 1843, the personal mortgage was foreclosed, and the property bid off at the foreclosure by the mortgagee, and taken possession of by him for the benefit of the holders of the demands intended to be secured, the whole proceeds of such sale 'being $14,074. It then offered proof of the value of the property, which was excluded by the referee, and its counsel excepted to the ruling.
    The referee found: 1. That the notes were indorsed by the defendant; 2. That they were duly protested for non-payment, and notice of protest served on the defendant; 3. That $6,946.90 should be credited on account of the proceeds of the mortgage of the Arbon Coal Company, as of August 14, 1843; 4. That the amount remaining due on the notes at the date of the report (February 28,1841), was $36,596; 5. That the plaintiff was entitled to judgment for that sum, with costs.
    Judgments entered in pursuance of those reports were affirmed at the general term of the Supreme Court; and from those judgments the defendant brought the present appeals.

      H. M Hyde and John H, Reynolds, for the appellant.

      George T. Spencer and John K. Porter, for the respondent.
   Selden, J.

The referee has found, as a fact, that the draft upon which the first action was brought was executed by the defendant; and that finding includes an affirmation of the authority of Wilson, the president of the company, to make the draft in its behalf. If there was any evidence proper to be considered by the referee, tending to sustain this finding, sufficient to justify the denial of the defendant’s motion to dismiss the-complaint, the'finding cannot be disturbed on appeal to this court. I -think there was not only some evidence to justify the conclusion of the referee, but do not see how he could-have arrived at a different result. .It was within the power of the board of managers to clothe the president with authority to make the purchase of the locomotive, and to give the obligation of the company in payment for it. The language of- the charter is, “ the president and managers shr.il conduct the business of said companyand there is nothing in the charter, or any of its supplements, to restrain this extensive power, so far as relates to the present question. The purchase of locomotives was a part of the legitimate “ business of the companyand it cannot be questioned that the president and managers could appoint an agent with full powers to make such purchases, whether the agent was one of their number or a stranger (Ang. & Ames on Corp., ch. 8, § 1; ch. 9, § 2); and to execute bills or notes of the corporation in payment of debts thus incurred. (Curtis v. Leavitt, 15 N. Y., 9, 66, 67.) “All acts within the powers of a corporation may be performed by agents of its own selection." (Barnes v. Ontario Bank, 19 N. Y., 158.) Mr. Wilson was clearly invested with power to make the bill. He was the president of the company, not only de facto, but de jure. He was properly elected in January,. 1839, and, without any special provision in the charter to that effect, would have held over until another president was elected (Strange, 625; 10 Mod., 146; 9 Johns., 158); and the fourth section of the charter expressly provides, that the officers elected by the stockholders,' among which is the president, “ shall continue in office for one year, and until others are chosen.” He had not removed to Hew York when he made the bill, and it is therefore unnecessary to consider what effect such removal had upon his powers or tenure of office. By virtue of his office, if nothing further appeared in regard to his powers, I think he would not have been authorized to purchase the locomotive, or to execute the bill. Those were duties which belonged to the board of managers, and could only be conferred upon other officers or agents with their consent (McCullough v. Moss, 5 Denio, 575; Hoyt v. Thompson, 1 Sold., 320.)

The managers, prior to the 2d of April, 1838, appointed an executive committee, and by a resolution of that date invested the committee, so far as their-act could do it, during the intervals between the meetings of the board, with “ the full powers of the board to act for, and to bind the company.” That committee, in October, 1839, authorized the president to purchase a locomotive and tender, and to give the notes of the company for them; and also “ to act in all the ordinary business of the company as fully as the committee.” might do. It does not appear that these powers were ever recalled; and if neither the board of managers nor the committee were acting beyond the scope of their own authority, the president had the express warrant of the corporation for everything which he did. The managers might, undoubtedly, clothe a committee, in the intervals betweeti the sittings of the board, with all their own authority to conduct the ordinary business of the company (Hoyt v. Thompson's Executor, 19 N. Y., 207-216); but it does not follow that the committee could delegate that power to one of their number. I doubt their authority to do so, as they had no express power of substitution; but it is unnecessary to pass upon that question, as there is another ground on which the power of the president to bind the company must be sustained. The board of managers, designedly, as it must be presumed, relinquished to the president, for a period of three years (embracing the time of all the transactions involved in the present actions), the exclusive management of the business of the corporation; allowing him", at his own discretion, to employ and pay the workmen constructing the road; to purchase and lay the iron constituting the track; to borrow money in large and small sums, giving the notes or bills of the corporation therefor, as well as other securities j to purchase locomotives and cars, and to put them in use on the road, paying for them in like bills and notes; and when, at the end of the three'years, the managers again resumed the discharge of their appropriate duties, they took possession of the road and of all the property thus procured by the president, and continued to use such property for several years, without question as to the manner in which it had been obtained. Under such circumstances, the acts of the assumed agent cannot be repudiated* The powers of the agent of a corporation are such as he is allowed by the directors or managers of the corporation to exercise within the limits of the charter; and the silent acquiescence of the directors or managers may be as effectual to clothe the agent with power as an express letter of attorney. Judge Story says, in Bank of United States v. Dandridge (12 Wheat., 64): “If officers of a corporation openly exercise a power which presupposes a delegated authority for the purpose, and other corporate acts show that the corporation must have contemplated the legal existence of such .authority, the acts of such officers shall be deemed rightful, and the delegated authority will be presumed.” This doctrine has often been confirmed (Melledge v. The Boston Iron Co., 5 Cush., 175; Bridenbecker v. Lowell, 32 Barb., 18; Perkins v. Washington Ins. Co., 4 Cow., 645, 659, 661; Hoyt v. Thompson's Executor, 19 N. Y., 208, 219; Ang. & Ames on Corp., 3d ed., 269); and, applied to the present case, shows that the authority of Wilson cannot now be denied.

But it is insisted that the bill purports on its face to be the bill of Wilson, and not of the defendant, and does not, therefore, bind the defendant. The evidence shows that it was drawn for the debt of the company, by an agent authorized to draw it, and, according to well-settled rules, the company is bound by it, if, upon the whole instrument, it can be collected that- such was the intention. (Story on Agency, § 154; Rathbone v. Budlong, 15 Johns., 1; Many v. Beekman Iron Co., 9 Paige, 189; Safford v. Wyckoff, 1 Hill, 11; S. C, 4 id., 442; Fuller v. Hooper, 3 Gray, 334.) There was clearly sufficient upon the face of the bill to indicate an intention to bind the company. In this respect the case cannot be distinguished from those of Safford v. Wyckoff, and Fuller v. Hooper (supra). The defendant’s counsel' claims that the contract for * building the locomotive was not binding on the company, and that for that reason the president had no right to execute the bill on behalf of the company. Two grounds are relied upon to sustain this position: 1. That the contract was, on its face, the private contract of Wilson and Bostwick; and, 2. That the defendants had no power to make the contract jointly with the Hew York company, and that it could not, therefore, bind them. The first ground is answered by what is said in regard to the bill. The evidence is equally as clear on the face of the contract, as it is on the face of the bill, that it was made for the corporation. In regard to the other ground, I think the companies, if there were nothing special on the subject’in their charters, would have been authorized to make the arrangement which existed between them, for a joint ownership of locomotives to run over both their roads. (4 Seld., 37; 14 Barb., 471; 24 id., 382; 29 id., 56, 57; 6 Gray, 539; Redfield on Railways, pp. 281, 287, §§ 135, 136.) But whether that would be so or not, the supplement to the defendant’s charter, passed in 1835, providing for the connection of their road “ with the Chemung canal by railroad, canal or slackwater navigation,” would justify them in making that arrangement.

The defendant’s counsel excepted to rulings of the referee, allowing the president of the company to testify that on various occasions, both before and after the date of the bill in question, he made drafts and promissory notes in the name of the company; that they were honored, and that the amounts entered into the accounts of the company. I think this evidence was admissible. The cases above referred to show that the limits of an agent’s ¿uthority may be determined by the power which he is allowed to exercise, and that silent acquiescence of the principal may be equivalent to express assent. In other words, that the authority may be shown by circumstances. The recognition by a corporation of acts on the part of an agent, similar in character to those which may be in dispute, tends strongly to establish the agent’s authority. (15 Johns., 54; 1 Hill, 501; 4 Seld., 160.) It does not appear that the board of managers had any direct agency in the payment of the bills or notes made by the ■ president, and it is a fair presumption, from the manner .in which all the business was done, that the payments were made by the president, without any communication at the time with the other officers or the managers of the company, and if nothing further appeared, such payments would have been circumstances of no importance; but the subsequent rendering of accounts to the board of managers, containing entries of such payments, unobjected to on the part of the board, affords a strong presumption of a ratification of those acts. At all events, such evidence could not be rejected, even if its bearing should be regarded as slight or remote.

It is insisted that evidenceof themaking of bills and notes subsequent to the date of the bill in suit, was specially objectionable; but I think the authority to make the bill might be shown by the approval of similar acts after as well as before the bill was drawn. The proof related to a continuous series of acts, embracing the time of the act in contrnversy, and was, all of it, competent as bearing upon the authority to perform that act. The objection goes to the weight and not to the admissibility of the evidence; later acts might be less decisive than prior ones, but evidence of them could not properly be excluded.

Exceptions were also taken to testimony showing that the transactions and financial affairs of the company during the presidency of Mr. Wilson, his making of loans, purchasing property and giving negotiable paper for the company, were the subject of conversation at the meeting of the board of managers, in February, 1841. What took place before the board of managers, when engaged in the business of the company, in regard to the doings of the president, was undoubtedly admissible, as notice to the corporation of the powers which its officer was exercising. Notice to the board was notice to the corporation. (19 N. Y., 216.) It is, however, insisted that the evidence excepted to related to conversations with individual members of the board, which would doubtless have been inadmissible; but the case does not admit of that interpretation, especially as it appears that the referee had, before this testimony was offered, refused to hear evidence of such conversations.

These are all the objections which are made to the judgment upon the bill of exchange, and I think none of them are such as to require its reversal.

In the second case it appears that, in the fall of 1841, the Arbon Coal Company, being indebted to the defendants for freights upon coals carried over the defendants’-road, to an amount exceeding the amount of the notes which form the subject of the suit, made the notes payable to the defendants’ order, and delivered them .to Mr. Wilson, their president, to enable them to raise money to meet their accruing liabilities. No specific application was made of the notes upon the indebtedness of the coal company, nor is it shown that any particular arrangement was made. as to the manner in which they ■should be accounted for by the defendant.

Mr. Wilson indorsed the notes in the name of the defenants, and, with the aid of Mr. Bostwick, one of his associates on the executive committee, procured them to be discounted in behalf of the defendants. What became of the money, does not appear.

It is insisted, on the part of the defendants, that the indorsement of the notes was made for the accommodation of the Arbon •Coal Company, and was, therefore, not binding upon them. It is a sufficient answer to this position to say, that the referee has not so found the fact, and that the burden of proof upon that point, if the defendants relied upon it, rested with them. I have, however, discovered nothing in the evidence which tends to show that the indorsements were made for the accommodation of the coal company. If the notes were given to apply on the indebtedness of that company for freights, they became the property of the defendants, and in transferring them,, they occupied the position of ordinary indorsers transferring business paper. If they were not to apply on the indebtedness of the coal company, then they would appear to have been made for the accommodation of the defendants, and, after their discount, the defendants were the principal debtors and the Arbon Coal Company their sureties. Neither view can aid the defendants, and no other view is admissible, in the absence of evidence that the coal company received the avails of the notes.

If the right of the defendants to borrow notes admits of question (1 Sandf. S. C., 53; 15 N. Y., 219), we should be bound, in support of the judgment, to presume that the referee found the notes to have been given on account of the indebtedness, inasmuch as there was evidence from which he might have so found. (21 N. Y., 551, 552; 22 id., 324.)

' The question which is made as to the authority of Wilson to bind the corporation by his indorsements of the notes, is governed by the same principles as that in regard to his right to make the draft, which has already been considered and decided in the other case, and must receive in this the same determination.

With some hesitation, I have come to the conclusion that the evidence of the service of notice of protest was sufficient. The statute contemplates but a single certificate as evidence of the presentment of a note or bill for payment, its protest, and the giving of notice of its dishonor. The language of the statute is this: The certificate of a notary, under his hand and seal of office, of the presentment by him of any promissory note or bill of exchange for acceptance or payment, and of any protest of such bill or note for non-acceptance or non-payment, and of the service of notice thereof on any or all of the parties,” &c., shall be presumptive evidence of the facts contained in such certificate.” (3 R. S., 5th ed., 474.) The notary may undoubtedly certify to each of the acts separately, but he may also, by one certificate, verify them' all. If the certificate be under his hand and seal of office,” it is sufficient, and it cannot be of any importance where the seal is affixed. It may be at the beginning, at the end, or anywhere upon the margin, or it might be appended by a ribbon, after the manner of the sealing of ancient charters. The officer is not required to certify to the sealing, but it is sufficient if the seal, be, in fact, affixed, and the name signed. Unquestionably, therefore, if the seal had been placed where it is, and the signature only at the bottom of the last part of the certificate, the whole would have been sufficiently verified. I do not think it is any the less so by reason of the words, “ In testimonium veritatis,” with the signature opposite the seal, between the two parts of the certificate. The whole may, with propriety, be regarded as one certificate, once sealed and twice signed. I adopt this conclusion the more readily, because the objection is merely formal, the certificate, in its present form, furnishing all the security against error, and imposing upon the notary all the responsibility which it could do' if another seal were added. A single private seal has often been held to bind several parties (Mackay v. Bloodgood, 9 Johns., 285; Van Alstyne v. Van Slyck, 10 Barb., 887); a seal in the space between the penal part of a bond and its condition, makes the condition a part of the sealed instrument (Reed v. Drake, 7 Wend., 345); conditions of insurance annexed to a policy are regarded as a part of the policy (Roberts v. The Chenango Mut Ins. Co., 3 Hill, 501); anda seal at the foot of a deed, absolute on its face, is applicable to a defeasance indorsed upon the back of the deed, without date or signature. (Stocking v. Fairchild, 5 Pick., 181; Emerson v. Murray, 4 N. H., 171. The case, however, most nearly resembling the present, of any to which our attention has been called, is that of The State v. Coyle (33 Maine, 427). In that case a complaint and justice’s warrant in pursuance of it, were written on the same piece of paper, and the only seal was at the end of the justice’s signature to the complaint, the warrant being written beneath it. It was held that the warrant was sufficiently sealed. These authorities, particularly the last, justify the admission of the certificate of the notary, especially as such certificate furnishes presumptive proof only of the facts contained in it,, concluding neither of the parties.

The evidence which was offered, as to the value of the property mortgaged by the Arbon Coal Company to Ketchum, as security for the -payment of the notes in suit and other demands, was properly excluded. The mortgage contained a provision that, in case default should be made in the payment of the sum which it was made to secure, the mortgagee might take immediate possession of the property, and, after giving reasonable, notice, might expose the same to sale at public vendue to the highest bidder, and apply the proceeds of such sale towards the payment-of said sum and the interest, rendering the surplus, if any, to the said Arbon Coal Company. In pursuance of this power the property was sold at auction in August, 1843, and all, or' the greater part of it, bid off by Mr. Ketchum, the mortgagee, for the benefit of the creditors whose demands the mortgage was intended to secure. It was not attempted to be shown that the sale was. not conducted in good faith, or that reasonable notice was not given, according to the terms of the mortgage; but it was insisted that the trustee could not purchase for his own use, or for the use of • the creditors of the mortgagor, at the sale conducted under his direction, and that, consequently, the right of the parties remained the same as if the mortgagee had taken and retained possession of the property, without a sale. If that was the correct view of the position of the parties, the defendants were entitled to the benefit of the proof which they offered, as in such case the mortgagee would be chargeable with the value of the property, to be applied in the reduction of the amount due on the mortgage. (Spencer v. Harford, 4 Wend., 385, 387; Morgan v. Plumb, 9 id., 292; Case v. Boughton, 11 id., 106; Carter v. Stevens, 3 Denio, 35; Craig v. Tappen, 2 Sandf. Ch., 88.) Ketchum was a trustee of the mortgagor, as well as of the creditors whose demands were secured by the mortgage. In his character of trustee, he owed to all those parties the duty of so managing the sale as to obtain the highest price which the property would bring. Under such circumstances, if he occupied that character only, he could not become a purchaser for his own benefit. A trustee or agent will not be allowed to assume a position in which his interest will come in conflict with his duty (Davove v. Fanning, 2 Johns. Ch., 252; De Caters v. Chaumont, 3 Paige, 179; Van Epps v. Van Epps, 9 id., 238; Iddings v. Bruen, 4 Sandf. Ch., 223-263; Moore v. Moore, 1 Seld., 256); and this rule is equally applicable to transactions in real, and in personal estate. (Cook v. Collingridge, Jacob, 607; Wedderburn v. Wedderburn, 2 Kern., 731; Hall v. Hallett, 1 Cox, 134; Anon., 1 Salk., 155; Ames v. Downing, 1 Bradf., 321; White & Tudor’s L. C., 111.) As trustee, merely, he wóuld be equally prohibited from purchasing for the benefit of a part of those interested in the sale. (3 Paige, 178.) He was, however, a creditor, whose demand, in common with others, was secured by the mortgage, and his purchase was made in behalf of- all such creditors. If, in any case, a mortgagee of chattels, selling them at auction in pursuance of a power of sale contained in the mortgage, can become the purchaser of the mortgaged property and hold it discharged from any right of redemption, -the purchase by Ketchum was effectual for that purpose. It has, if I am not in error, been generally supposed that the power of sale, given to a mortgagee of chattels, whether given expressly, or left to be implied by law, authorized the mortgagee to purchase the property, at a fair sale under such power, for his own use; that express notice to the mortgagor which is required to make the foreclosure effectual (Hart v. Ten Eyck, 2 Johns. Ch., 100; Patchin v. Pierce, 12 Wend., 63; Charter v. Stevens, 3 Denio, 35,) came in place of a decree authorizing the parties to purchase; and that persons having such notice were bound to attend and protect their interests by bidding, if protection were necessary. (Bergen v. Bennett., 1 Caines’ Cases, 1-14-19; Slee v. The Manhattan Company, 1 Paige, 52-74.)

A different opinion was expressed in the case of The Buffalo Steam Engine Works v. The Sun Mutual Insurance Company (17 N. Y., 401); but the case was disposed of on other grounds, and the point still remains undetermined. The inconvenience and expense of a resort to the equity powers of courts to effect such foreclosures, which would be the probable consequence of denying to mortgagees the right to purchase, might be productive of greater oppression to mortgagors than could result from'maintaining that right. Unfortunately, injustice cannot always be prevented by subjecting sales to the direct control of courts, and such control should not be assumed unless experience has demonstrated its necessity. The practice has prevailed in this state from a very early day of allowing mortgagees to become purchasers at sales conducted by them, under powers contained in mortgages of real estate; and that course was sanctioned by a statute passed in 1808, in consequence of a doubt having been expressed in the Court for the Correction of Errors, as to the validity of such purchases. (1 Paige, 73; 1 Caines Cas., 3-19; 2 R. S., 546, § 7.) The long continuance of this practice, and the approbation which it has received from' the legislature, afford strong evidence that no great inconvenience or injustice arises from it; and it is not perceived why a similar course, in sales under 'mortgages of chattels, would be attended with greater danger. It is unnecessary, however, - in the present case, to decide this question, as there are other grounds upon which the purchase by Ketchum must be sustained. A purchase of trust property by a trustee at public sale, has always been held valid at law, and is voidable only and not void in equity. It is voidable only at the election of the persons whose interests are affected by the purchase. (Jackson v. Van Dalfson, 5 Johns., 47; Jackson v. Walsh, 14 id., 207; Wilson v. Troup, 2 Cow., 196-238; Mackintosh v. Barber, 8 Eng. C. L., 1st ed., 247; Campbell v. Walker, 5 Ves., 678, and note a, Sumner’s ed. ; Whichcote v. Lawrence, 3 Ves., 740, note a.) The defendants here are not competent to make that election. The mortgagor (The Arbon Coal Company) is the party most directly interested in the question, and the validity of the sale cannot be impeached without its consent, or at least without giving it ah opportunity to be heard. (Davoue v. Fanning, 2 Johns. Ch., 267, 268; Munro v. Allaire, 2 Caines Cas., 194; Whelpdale v. Cookson, 1 Ves., Sen., 9; S. C., 5 Ves., 682; Harrington v. Brown, 5 Pick., 519.) The proper parties not being before the court,the question which it was the design of the defendants, by the evidence offered, to present, could not be considered, and the evidence was properly rejected. Possibly, the delay which had occurred since the sale would, of itself, as was claimed by the plaintiff’s counsel, have justified the exclusion of the evidence (Hawley v. Cramer, 4 Cow., 718-743); but there are equitable considerations on the other side -bearing upon that question, and I express no opinion upon it, the other ground being entirely sufficient to justify the decision of the referee. The judgment of the Supreme Court in both cases should be affirmed.

All the judges concurring,

Judgment affirmed.


author: Denio, Ch. J.

text:
    Thompson v. Van Vechten et al.

    A chattel mortgage is extinguished by payment made, with the mortgagor’s money, by one who purchased the chattel at sheriff’s sale to aid the debtor in defrauding his creditors.
    Though the purchaser bought on his own credit, an assignment to him of the mortgage is ineffectual to preserve its lien against subsequent existing incumbrances even for moneys paid out by him to complete the purchase and protect his title to the chattel.
    A precedent debt does not qualify the mortgagee of a chattel ,as one in' good faith, under ch. 279 of 1883, so as to entitle him to question a prior mortgage for a default in re-filing it.
    A mortgage not filed, of a chattel not delivered, is void as to a creditor at large whose claim accrues while the default in filing continues, though such creditor is not in a position to raise the question until he has obtained judgment or process against the property.
    The right to a preference over the unfiled mortgage attaches itself to the debt, and accompanies it when transferred by the negotiation of commercial paper.
    Though a mortgagee cannot avail himself, of the omission to refile unless he became such during the continuance of the default, it is otherwise of a general creditor, who may take advantage of such omission though his right accrued previous to the default.
    A statement held sufficient to support a judgment by confession, that “ the indebtedness arose on the sale and conveyance by the plaintiff to the defendant of his interest" in certain partnership property, though it did not show how the plaintiff was connected with the firm, or what was his interest, of, otherwise than by the words quoted, that the sum confessed was for the price of the interest sold.
    Any party having a lien on a chattel may avoid for usury a .mortgage claiming priority.
    Appeal from a judgment of the 'Superior Court of the city of New York. The plaintiff was the holder of a chattel mortgage upon the steam vessel Alida, which ordinarily ran on the Hudson river between Kingston and New York, executed by John Van Vechten, the 21st day of March, 1855, to secure the due payment, by the mortgagor, of certain promissory notes, amounting to $16,000, which had been before then made by the firm of Mills & Thompson, of which the plaintiff was a partner, for the accommodation of the mortgagor, and which had been negotiated by him. The complaint alleged that a number of persons, who were made defendants, claimed to have liens upon the vessel by means of mortgages and executions on judgments, and suggested that a separate sale upon any one of them would be injurious to the interests of all, on account of the uncertainty which would arise respecting the title. The plaintiff therefore prayed for an injunction, for the appointment,of a receiver to sell the mortgaged property, that the money might be brought into court for distribution, and that the plaintiff might be paid the amount due to him and for general relief.
    The defendants answered, setting up their respective liens, and each of them alleged, among other defences against the plaintiff’s mortgage, that it was given to secure an usurious loan, and was void for that reason. The answer of Elmore, a mortgagee, set up his mortgage as a counterclaim and by way of cross bill.
    Among the liens stated in the pleadings were attachments in admiralty for repairs upon the vessel.
    Pending the suit, a receiver was appointed, as prayed for, and the vessel was sold under the process of the district court of the United States in admiralty, with the concurrence of the receiver .appointed in this action, and the net proceeds which came into the hands of the receiver, applicable to the securities claimed by the parties in this suit or some of them,- was the sum of $10,840.95.
    The case was tried before a justice of the Superior Court, without a jury, whose conclusions of. fact were substantially as follows:
    The vessel was originally owned by one Daniel Drew, who, on the 30th October, 1852, sold her to the firm of William Hasten & Company, the partners of which were William Mas-ten, Nicholas Elmendorf and Marius Schoonmaker, for $30,-000, and received from the purchasers three promissory notes for $10,000 each, payable respectively in six, twelve and eighteen months from date, and a mortgage on the vessel, conditioned for the payment of the notes, with a provision that the purchasers might remain in possession until default. The mortgage was duly filed in the clerk’s office of Ulster county, where the mortgagors resided, and was duly re-filed, with a proper statement of the amount remaining due, on the 25th October, 1853; but was not again renewed. The first two notes, were paid, but the third was unpaid. The defendant Abraham Van Vechten claimed to have the first lien upon the proceeds of the sale, as an assignee of this mortgage, as afterwards mentioned.
    On the 9th day of January, 1854, Hasten and Schoonmaker sold and transferred their respective interests in the vessel, to Elmendorf, he assuming the payment of the debts of Hasten & Co.', and agreeing to pay to Schoonmaker the advances he had made, over and above his receipts, on account of the firm.
    On the 25th day of February following, Elmendorf mortgaged the vessel to the defendant Prosper P. Shaw, to secure $12,000 then borrowed by the mortgagor of the mortgagee, the former giving two notes of $6,000 each, at three months, with the privilege of renewal for three months longer. It was found that this mortgage was executed and taken in good faith, and without notice to the mortgagee of any fact which could prejudice him. The money loaned belonged to one Coe, who resided in South America, and for whom Shaw was agent. The notes were once renewed as provided for, but the renewed notes were not paid, and the whole amount of $12,000 and interest was due at the time of the trial. This mortgage was filed in the proper clerk’s office in Ulster county, the 12th July, 1854, and not before, and was never re-filed.
    The sheriff of Ulster county, on the 4th day of Hay, 1854, held several executions issued upon judgments against Elmendorf; and on that day advertised the vessel to be sold thereon, on the 17 th day of July following. On the 26th June, he took a receipt from Elmendorf, P. P. Shaw and one Demeyer, who acknowledged that they had received her from him as sheriff, and agreed to deliver her to him at a place named, on the river, in -Ulster county, on demand, or to pay the amount of the judgments. They did redeliver her on the 8th July prior to the sale, and the sheriff resumed possession of her. In the meantime, Drew had assigned his mortgage to one Dunlap, who had employed one Stewart, a deputy sheriff, to conduct a foreclosure of that mortgage, and he accordingly advertised the vessel to be sold on the mortgage, on the 17th July aforesaid. On said 17th July, the sheriff sold the vessel on the executions, to John Yan Vechten, as the highest bidder, for $19,000. The sale was made, in terms, subject to the Drew mortgage and subject to.all other legal claims. The agent of Dunlap was present, and announced that the vessel would be sold on the Drew mortgage, immediately after the sheriff’s-sale. Shaw was also present, and gave notice of his mortgage and of his claim under it. J. Yan Yechten did not pay any thing on account of his bid, but gave his note, signed also by H. Demeyer, for the whole sum, to Griffith, the sheriff, paya-' ble on demand. Immediately after the sale, and before the parties had left the boat, on the deck of which it was made, J. Yan Yechten paid to Stewart, Dunlap’s agent, the amount due on the Drew mortgage, with costs and expenses, who paid over the same at once to Dunlap, the creditor, who thereupon assigned the same to John Yan Yechten, the latter being advised by counsel, as it is found, that such an assignment would be for his protection and interest. The money so paid was not the money of J. Yan Yechten, but was money furnished to him to make such payment, by Elmendorf. It was found that the purchase of the vessel by John Yan Yechten at the sheriff’s sale, was not made in good faith, but was fraudulent as against the creditors of Elmendorf. He, however, took possession pursuant to his purchase, and commenced to run the vessel between Kingston and Hew York, and continued to do so until the 16th Hovember following. Elmendorf gave J. Yan Yechten a bill of sale of the vessel in February, and the sheriff also executed one to him in March, 1855.
    On the 29th July, 1854, J. Yan Yechten executed and delivered an assignment of the Drew mortgage to Abraham Van Vechten, on a consideration, as expressed, of $5,545. The amount of $1,795, parcel of this sum, had been loaned by Abraham to John the 18th July, and the residue, $8,750 was loaned on the day the assignment was executed. The smaller sum was applied by John to the payment of certain liens on the vessel, and the other was paid by him on account of some of the judgments and executions under which the sale had taken place. It was found that Abraham Van Vechten, in taking the assignment of the mortgage, acted in good faith, and without any notice which would prej udice his title, but that he never took any possession of the vessel; and that the several parties contesting this mortgage had notice of its existence.
    The Westchester County Bank was the holder of certain, promissorjr notes, made by Elmendorf, and indorsed by John Van Vechten and Demeyer, dated June 10, 1854, on which the bank commenced actions, and obtained two judgments for $5,195.20 each against maker and indorsers, the 16th day of March, 1855, and the next day caused executions to be issued to the sheriff of the county of New York, who immediately levied on the vessel in that county. It was claimed by .some of the parties that this levy had become dormant; and the following facts 'bearing upon that point, were found, viz.: the sheriff did not arrest or take actual possession of the vessel, but she. was allowed to make her daily passages between New York and Kingston from the time of the levy until the 15th September following, when she was seized by the United States Marshal, under the process in admiralty. Meantime, on the 15th August, the plaintiff’s attorneys wrote to the sheriff, to the effect that they had given the defendant sufficient lenity, and directed him to apprise them that unless they paid promptly, the vessel would be locked up and sold. The defendant, M. Schoonmaker, became the assignee of the bank, of these two judgments, on the 15th September, 1855; but a considerable amount had been collected thereon, leaving due a balance of only $2,748.77 and interest.
    Schoonmaker wás also a creditor of Elmendorf upon a judgment confessed by the latter, in his favor, on the 30th March, 1855. The confession and statement, which was duly signed and sworn to by Elmendorf, is as follows: “ I, Nicholas Elmendorf, the defendant, hereby confess myself indebted to Marius Schoonmaker, plaintiff, in the sum of seventeen thousand nine hundred and thirty-one dollars, and hereby authorize the said plaintiff and his executors, administrators, attorneys, or assigns, to" enter a judgment against me for that amount. The above indebtedness arose on the sale and conveyance by the plaintiff to. the defendant, of his right and interest in the boats, property and effects of William Masten & Co., in January, 1854; and I hereby state that the sum above, by me confessed, is justly due to the said Marius Schoonmaker, plaintiff, without any fraud whatever. Dated the 30th day of March, 1855.” It appeared that there was indorsed upon an instrument, of January 9, 1854, by which Elmendorf undertook to repay Schoonmaker the amount of his advances for the firm and towards the purchase of its property, a statement signed by Schoonmaker and Elmendorf to the effect that these advances, over the receipts, amounted to $16,488.59; but this indorsement was without date, and it was not proved when it was executed. Execution was issued on this judgment April 12, 1855, to the sheriff of the county of New York, he having then in his hands the execution on the above mentioned judgments of the Westchester County Bank. The sheriff declined to sell the vessel without an indemnity, and none was furnished. The sheriff advertised her for sale, but she continued her trips until seized by the Marshal.
    The claim of the defendant, James H. Elmore, arose as follows : He loaned John Van Vechten $1,000, on his note, on the 19th January, 1855, under an understanding with the master of the Alida that he should be paid out of her first earnings; but, payment not being made, Van Vechten, on the 15th September thereafter, executed to him a mortgage on the vessel, then under levy and advertised to be sold by the sheriff of New York, conditioned for the payment of the amount on demand with interest. When Elmore took this mortgage, which was filed in the proper office on the same day, he had notice of the plaintiff’s mortgage.
    The plaintiff proved his mortgage, which was of the date and in the terms above mentioned, but it was not filed in any clerk’s office. It was found to have been executed as a cover for an usurious transaction.
    The note for $19,000, which John Van Vechten and ¡N". Dé'meyer had given to Griffith, sheriff of Ulster county, upon the sheriff’s sale of the vessel, was, prior to ¡November 15, 1854, reduced by payments to $4,565.41, and on that day Griffith recovered judgment against the maker for that sum, and afterwards caused an execution to be issued to the coroner of Ulster county, who levied upon the vessel, but, subsequently and before the commencement of the action, aban- ' doned the same. - Griffith did not appeal here.
    In the course of the trial the counsel for Elmore and Schoonmaker offered to prove that the mortgage of Shaw was given upon an usurious consideration. The evidence was excluded . on objection by the counsel for Shaw, and the parties offering it excepted. The pleadings did not set up usury in this security.
    The conclusions of the judge, in matter of law, were, first, that the mortgage to Drew was extinguished by having been paid off with the moneys' of Elmendorf, one of the mortgagors ; secondly, that the purchase of the vessel by John Van Vechten, at the sheriff’s sale, was void as between him and the creditors and mortgagees of Elmendorf; but that the title which" he acquired was good as against Elmendorf and that it accrued to the benefit of any Iona fide purchaser under him; thirdly, that M. Schoonmaker was entitled to be first paid the amount due on the judgment assigned to him by the Westchester County Bank out of the funds in the hands of the receiver; but," fourthly, that he was not entitled to be paid; the amount of the judgment assigned to him on account of the insufficiency of the statement upon which it was entered; and, lastly, that the defendant, Sháw, was entitled to be next paid the amount of his mortgage out of the said funds, and that, as such, payment would exhaust such funds, he was entitled .to the whole amount thereof. Judgment accordingly.
    The defendants severally excepted to the report, but it was affirmed at a general term. The plaintiffs, and the defendants, A. Van Vechten, Shaw, Elmore and Schoonmaker, severally appealed from the parts of the judgment adverse to them respectively.

      E. Moore, for Van Vechten and Elmore.

      John E. Burrill, for Shaw.

      M. Schoonmaker, in person.
   Denio, Ch. J.

It will be convenient to consider in the first place the claim of the defendant, Abraham Van Vechten, as the assignee of the mortgage executed by Hasten, Elmendorf and Schoonmaker to Drew. That mortgage was the earliest incumbrance on the vessel, and the claimant shows a formal title to it by mesne assignments under the mortgagee. The answer relied upon is, that the debt which it has given to secure was paid off by Elmendorf, the debtor, before the assignment to the claimant. It was so paid in fact, and the question is, whether the payment was, under the circumstances, an extinguishment of the lien. The immediate assignor of the claimant was John Van Vechten. His assignee having taken the assignment in good faith, has the same right which he had, or, if he acted as the agent of Elmendorf, which Elmendorf had, and he can claim no other or better title. (Bush v. Lathrop, 22 N. Y., 535.) Immediately preceding the payment J. Van Vechten had purchased the vessel at a sheriff’s sale on executions against Elmendorf, the mortgagee and owner of it; and the payment of the mortgage was actually made by the hand of J. Van Vechten to Dunlop, the creditor; and at the time of paying the money he took an assignment to himself of the mortgage, evincing, by that act, an intention to preserve the lien of the mortgage, and not to extinguish it. But this is not the whole case. The purchase at the sheriff’s sale was not bona fide, but was made with a view to defraud the creditors of Elmendorf, and the money which was paid to Dunlop was not that of J. Yan Yechten, but was money which Elmendorf' the debtor, had furnished him to make the payment. The case is the same as though Elmendorf had paid the money himself and had procurred an assignment to be made to J. Van Vechten. The purchase at the sheriff’s sale was in terms subject to the Drew mortgage, the amount due on which was, in effect, a part of the sum bid as the purchase of the vessel. Hence, Elmendorf was under no obligation to pay off the mortgage for J. Van Vechten’s benefit.

Again, the greater part of the money obtained by John from Abraham Van Vechten, on which the latter took the assignment of the mortgage, was applied towards the payment of the residue of the judgments under which the sheriff had sold the vessel. J. Van Vechten was in no manner liable for the balance of those judgments, and the money was, therefore, expended for the benefit of Elmendorf, and the smaller amount which was first borrowed of Abraham was applied to the payment of liens upon the vessel; but John’s purchase was made subject to all legal incumbrances, and if his purchase was fictitious, the amount paid to extinguish these liens was paid for the benefit of Elmendorf. These circumstances show, beyond any reasonable doubt, that the transaction by which J. Van Vechten became invested with a formal title to the vessel, and became, at the same time, the formal assignee of the Drew mortgage, was merely colorable. Elmendorf was the real party to that transaction, and J. Van Vechten was his instrument, and the object was to cover up the property of the former and protect it from the pursuit of his creditors. It is a feature of the case that when the Drew mortgage was paid, Dunlop, the holder, was about to enforce it by a sale of the vessel. My opinion is that the transaction is to be considered precisely as though Elmendorf, continuing to be the owner of the vessel, had himself paid off a debt owing by him, for which he had pledged it, by way of mortgage, and had procured the creditor’s security to be formally assigned to a third person named by him. The title thus attempted to be preserved is now set up by Abraham Van Vechten against Shaw, a mortgagee, whose title existed at the time of the payment, but which title was subsequent in date to the Drew mortgage, and against Sehoonmaker, whose title arises upon a levy on execution subsequent to the alleged extinguishment I am of the opinion that the Drew mortgage was paid and extinguished. Elmendorf, it should be remembered, had, as between himself and the other makers of the notes, which the mortgage was given to secure, become the sole debtor. The - debt was the principal subject, and the mortgage was but an incident, deriving its whole legal effect from the existence of the debt. The debt is paid, not by a party having only an interest to redeem the pledge, but by the debtor himself. Assuming, as I have done, that J. Van Vechten’s purchase was fictitious, there was no person in existence who had an equitable interest in keeping the Drew mortgage on foot, after the mortgage debt had been paid; while Shaw had the strongest interest in insisting that the payment should have its natural' effect of extinguishing the security. It is the bald case of a debtor whose property is subject to two successive liens, paying, out of his own means, the debt for which the earliest lien was created, and attempting to keep the security outstanding in the name of a third person, in order to resume it at his pleasure or convenience, upon a new transaction. But if we consider the purchase, af sheriff’s sale, therefore, fraudulent, as not merely colorable, the difficulty of preserving the lien of the Drew mortgage will be equally great. The sale upon that supposition vested a title in J. Van Vechten, as against Elmendorf; but he had no legal or equitable right to require the latter to pay off the prior lien for his benefit, and to be subrogated to the holder of such elder lien, in order to protect him against those which were junior. His purchase was, in terms and effect, subject to the Drew mortgage and to all prior liens, and he had actual notice of Shaw’s mortgage as well as that of Drew. If he had paid off the latter with his own money, it would be difficult to maintain that he could hold it against Shaw. But when it was paid with the money of Elmendorf, it was ipso facto extinguished, notwithstanding the assignment, which was executed to make it appear that it was still on foot. The effect of the payment of a debt by the ■party indebted, is to extinguish the contract and release the collateral securities. Cases may exist in which another party may be entitled, upon the same doctrine of equitable subrogation, to hold the securities for himself, but I think there is not any feature in this case, calling for the application of these doctrines. . The conclusion to which I have come does not depend upon any principle of merger. The mortgage of Drew was extinguished, not by merger, but by payment. There was no union, in one person, of the property in the vessel and the charge upon it, because the charge was extinguished by payment before it was, in form, assigned to the purchaser of the vessel.

■ The principle is well settled in the English courts of equity that if there be successive mortgages upon property, real or personal, and the debtor, or any person standing in his place, with notice of the second incumbrance, pay off the earlier one, it is extinguished as against the second -incumbrance, and as against any person subsequently deriving title under the owner of the equity of redemption. Otter v. Lord Vaux (39 Eng. Law & Eq., 611), was the case of successive mortgages of real estate, the second one being, in terms, expressly subject' to the first. The first mortgagee sold the premises under a power of sale contained in his mortgage, and the mortgagor became, in effect, the purchaser, and took, a conveyance to himself, and subsequently executed another mortgage of the property. It was held that the effect of the transaction was the payment of the first mortgage, and that the second thereupon became the primary lien upon the estate. Lord Chancellor Ceanworth said the case was that of a mortgagee liable to pay a sum of money to his first incumbrancer, paying it and getting a transfer; “ but that transfer," he said, “ is something which, upon general principles, he cannot set up against those who claim as his "creditors, by a title subsequent to that which he has so paid off. He pays it off for the benefit of the inheritance, and all persons who are entitled to any portion of the inheritance under him. claiming, after that which he has paid off, are entitled to the benefit of his having, to that extent, liquidated the prior demand.” The cases cited by the counsel for the plaintiff in that case, one of which related to personal property, are' further examples of the principle.

Abraham Van Vechten cannot claim any advantage on account of the negotiable character of the securities given to Drew on the mortgage debt. These were three promissory notes, two of which had been paid off, sometime before the sale of the vessel. The remaining one was past due when A. Van Vechten acquired his interest, which made it subject in his hands to the defence of payment. Besides, the evidence does not show that it was ever transferred to him.

The counsel for A. Van Vechten relies upon the case of Millspaugh v. McBride (7 Paige, 509), and other cases to the same effect. There were in that case two successive mortgages, and two of the defendants were the purchasers of the equity of redemption, and they purchased in and took an assignment of the first mortgage to protect their title; and it was held, on a bill to foreclose the second mortgage, that the older one was not extinguished by merger, but was to be first paid out of the proceeds of the sale on the foreclosure. This is quite consistent with my conclusion in the present case; and the distinction is, that here the first incumbrance was paid by the actual debtor, whose duty it was to pay all his debts to the creditor who was entitled to receive it. In such a case no assignment of the paid security can prevent its extinguishment. That part of the judgment of the Superior Court which pronounced against the claim of Abraham Van Vechten must, therefore, be affirmed.

The next lien in the order of time is the mortgage of. $12,000, executed by Elmendorf to Prosper P. Shaw, February 25th, 1854. There is no question as to the bona fides of this security, and the mortgagee is entitled to be first paid, unless he has lost his advantage by an omission to comply with the provisions of the act of 1833¿ requiring chattel mortgages to be filed. (Ch. 279.) It was not filed in the proper office until July 12, 1854, and was not afterwards refiled.

The first question upon this branch of the case is, whether John Van Vechten can successfully contest this lien. He made a formal purchase of the vessel at the sheriff’s sale, under execution, against Elmendorf, on the 17th July in that year. That purchase, even if it were bona fide, would be subject to Shaw’s mortgage, unless its lien were impaired by an omission to file the 'mortgage. A bona fide purchaser at sheriff’s sale has, undoubtedly the same rights under that statute which the creditors whose judgments were being enforced by execution had. • It is not stated when these judgments were recovered, nor when the debts were contracted upon which they were recovered. The executions were levied on the 4th May, 1854, and the sheriff took actual possession and put the vessel in the hands of receiptors on the 26th June thereafter. Down to that time Shaw’s mortgage had not been filed. The creditors had, therefore, a superior right to show, and a bona fide purchaser would have obtained, a title not subject to the mortgage. But J. Van Vechten’s purchase is found to have been fraudulent against the creditors of Elmendorf. It is not expressly found to have been made for the use and benefit of Elmendorf, or to have been merely fictitious or in trust for him, as seems to have been the case on the former trial (6 Bos., 398), but other facts are found, which, as I have already said, show it to have been so. J. Van Vechten cannot, therefore, avail himself of the advantages which the judgment creditors had acquired. Being a trustee for Elmendorf, he stands precisely in his place, so far as this question is concerned, a'nd the mortgage was perfectly valid against him, without filing.

It is next to be determined whether Elmore is entitled to a priority over Shaw. He loaned $1,000 to John Van Vechten, the 19th July, 1855, without any agreement at the time that he was to have a mortgage, but on the 15th September following, Van Vechten executed a mortgage bn the vessel to him. It was then under a levy by the sheriff of Hew York, but was being navigated between Kingston and Hew York, under the direction of J. Van Vechten. The act of Elmore was bona fide, so far as it could be, under these circumstances. But his mortgagor, J. Van Vechten, was not a bona fide, purchaser under Elmendorf. He cannot, therefore, claim under his title, unless he was himself a bona fide mortgagee. But he took his mortgage for an antecedent debt, and did not part with any valuable thing as a consideration for it; and it has been settled that the term bona fide- in the act of 1833, is to receive the same interpretation as when used .in the act respecting the recording of conveyances of real estate (Van Heusen v. Radcliff, 17 N. Y., 580.) Shaw’s mortgage is, therefore, a superior lien to that of Elmore, although there was a default, as to filing it, when that of Elmore was, executed.

The claim of Schoonmaker, as the assignee of the judgment of the Westchester County Bank, against Elmendorf, is to be next considered. The debt upon which these judgments were recovered, was contracted on the 10th day of June, 1854, when Elmendorf became the maker of several notes, iifdorsed by Deraeyer and Van Vechten, of which the bank became the holder,, and on which it recovered judgments on the 16th March of the next year (1855); and it caused a levy to be made on the vessel the next day, by virtue of executions on those judgments; and the vessel remained subject to that levy until the following September, when the marshal’s sale was made. When the debt was contracted, Shaw’s mortgage was in existence, having been executed the preceding February, but it was not filed until more than a month afterwards. Furthermore, Shaw was in default for not refiling his mortgage from the 7th July, 1855, inclusive, down to the time of the marshal’s sale. I am of opinion that each of those omissions have operated to give the executions the preference over the mortgage. The statute of 1833 declares that a mortgage not filed (where there is no delivery of possession) shall be absolutely void as against the creditors of the obligor. (Ch. 279, § 1.) It is argued that this embraces only creditors who have obtained judgments and executions during the time when the omission to file existed. If this were so, the act would not, in many cases, accomplish any beneficial purpose. One proposing to part with money or property to another, under a contract to be repaid at a future time, could obtain no information for his guidance by a search at the proper office. But it was the apparent, and I think, the real object of the act, to prevent the setting up of secret mortgages against persons who might deal with the mortgagor, on the faith that his property was not thus incumbered. It is true, the mortgage cannot be legally questioned until the creditor clothes himself with a judgment and execution, or with some legal process against his property; for creditors cannot interfere with the property of their debtor without process. But when they present themselves with their process, they may, I think, go back to the origin of their debt, and show, if they can, that when it was contracted, the incumbrance with which they are now confronted existed and was kept secret, by being withheld from the proper office. I observe, that it is insisted that the bank or its assignee cannot object to the default in filing the mortgage before the debt was contracted, because it is not shown that the notes were negotiated to them during that time. But I think the right to a preference over the unfiled mortgage attaches to the debt, and accompanies it when transferred to another in the course of the negotiation of commercial paper.

The statute also declares that every mortgage filed pursuant to its provisions, shall cease to be valid against the creditors of the mortgagor, or against subsequent purchasers and mortgagees, after one year from such filing, unless within thirty days preceding the expiration of the year, it shall be again filed, with a statement of the interest of the mortgagee. (§ 3.) The question is, whether a creditor must, in order to avail himself of this provision, have become such during the default in refiling. We have given a construction of this provision in its bearing upon purchasers and mortgagees, in Meech v. Patchen (14 N. Y., 71), and we held that a mortgagee could. not take advantage of an omission to refilé unless he became such mortgagee during the existence of the default. This was based very much upon the word subsequent, which is used to . qualify the term purchasers and mortgagees, and means, as we ¡thought, subsequent to the omission to refile. But this expres- | sion is not employed as regards creditors. Beading the statute ! literally, the creditors who may take advantage of the default in refiling, embrace all the creditors of the mortgagor, without regard to the time when the debts were contracted. It may be said, that if the creditor, having the statutory notice that the goods of the party with whom he is about to deal are mortgaged, trusts him notwithstanding,^ he is not likely to be greatly prejudiced by the want of record information that the lien is still existing after the expiration of the year; and this is true. He certainly has not the same need of this information which he had of the existence of the mortgage when he first dealt with the mortgagor. Still, he may give further, time of payment or omit to enforce his demand, if he finds that the lien of the mortgage is not kept up, when he would, have acted differently upon learning that it was continued. The language of the statute being direct and positive, embracing all creditors, I do not think we oqght to hold that the lien continued as against these executions, after the default in refiling the mortgage.

The judgment confessed by Elmendorf, in favor of Sehoonmaker, was for a debt existing anterior to the execution of the mortgage to Shaw. At the time of confessing the judgment and issuing the execution, the mortgage was in existence, and had been filed, and the time had not arrived for refiling it; but while the boat was under the levy on this execution, the default in refiling occurred. If I am right in the last view taken of the judgments of the Westchester County Bank, the-confessed judgment, if otherwise valid, would have a preference over the mortgage of' Shaw, and would be entitled to come in next after the judgment of the bank. But I am of the opinion that it is void for the want of a sufficient statement. The statement is, that the “ indebtedness arose on the sale and conveyance, by the plaintiff to the defendant, of his right, title and interest in the boats, property and effects of William Mastin & Co., in January, 1854.” The case which comes the nearest to sustaining this statement is Neusbaum v. Keim (24 N. Y., 325). But in that case the fact of a sale and delivery of property by the defendant was positively stated, and that the sum for which the judgment was confessed was “abalance due upon such sale. We thought that was an affirmation, to a common intent, of a dealing in meat, and that the amount was the balance of the price of the several parcels sold by the plaintiff to the defendant. The dealing was of a character which usually forms the subject of an account. It is quite different in the case before us. It is not stated in what manner the plaintiff was connected with the firm mentioned, or what interest, if any, he had in it, and it is not stated, by inference or otherwise, that the sum confessed was the price or equivalent, or any part of the price or equivalent, of the right, title and interest sold. It is said, indeed, that the indebtedness arose on the sale, but how it was connected with the sale, or in what manner it arose, on or out of it, is not mentioned. If it should be said to be inferable that Mr. Schoonmaker was a partner and sold to Elmendorf his interest as such partner, such an interest would be only the residue remaining after the debts were paid and the partnership accounts were adjusted; and a sale without such an adjustment would naturally be the subject of a special contract, upon which an indebtedness in a great variety of forms might arise. It might, indeed, be sold in .gross, without a settlement, for a definite sum, subject to all contingencies, and then the price, if credit was given for it, would be a debt for which a judgment might be confessed. But this statement does not convey, even to a common intent, the idea of such a transaction. It may be added, that the evidence does not disclose such a case, but shows that the transaction was special, as such a bargain would be expected to be. By the agreement that is set forth in the evidence and referred to -in the findings, the consideration for the transfer of the interest was, first, an agreement of Elmendorf to repay Schoonmaker’s advances, over and above his receipts; that is, his accounts with the firm were to be settled, and the balance be paid him ; then he was to be indemnified against all the debts of the firm, and against debts incurred by him in purchasing property for the firm, and finally against his costs and expenses which he might incur in relation to the premises. There was no definite price agreed upon for the interest parted with. It is true, there was an indorsement required by the parties liquidating theamount.of the advances over the results, which is dated the day before the date ’of the instrument, but it was not shown to have been executed at its date, and it is not referred to in the confession of judgment. This detail shows that an indebtedness may well arise on the sale of such an interest and not be the price of the subject sold. I am, therefore, inclined to the opinion that this paper does not state the facts out of which the alleged indebtedness arose, or show that the sum confessed was justly due, in the sense of the Code. There is, no doubt, considerable resemblance between it and the one in Neusbaum v. Keim, but when closely examined there appears to be a substantial and clear distinction.

The plaintiff’s mortgage, being founded on an usurious consideration, was utterly void against all the other parties having liens on the property. (Schroepple v. Corning, 5 Denio, 236.) The defendant Griffith had judgment against him' in the Supreme Court, and does not appeal.

On consultation, however, it appears that all the other judges have come to the conclusion that the confession of judgment in favor of Schoonmaker was valid, the statement being, it is conceived, sufficient within the cases which have been adjudged in this ¿ourt. It is thought to affirm with reasonable certainty, that the amount for which the judgment was confessed, was the agreed price to be paid by the defendant for the interest of the plaintiff in the property of William Masten & Co., upon the purchase by the defendant of that interest.

The result, therefore is, that the judgment of the Superior Court must be affirmed, so far as it is appealed from by Abraham Van Vechten, John Van Yechten, Elmore and the plaintiff; and that, as to the appeal of Sohoonmaker, it must be reversed and modified so as to allow said Sohoonmaker to take the whole proceeds of the sale, the two judgments held find owned by him exceeding the amount of these moneys. Neither of the parties are to recover costs of these appeals against any of the others.

Judgment accordingly.