text:
    Claflin et al. v. The Farmers' and Citizens' Bank of Long Island.
    A general authority to the president of a bank to certify cheeks drawn upon it, does not extend to checks drawn by himself.
    The face of the check showing the president’s attempt to use his official character for his private benefit, every one to whom it comes is put upon inquiry; and when the certificate is false, no one can recover against the bank as a bona fide holder.
    Independent of the objection arising upon the face of the paper, the holding of a certified check for a long period, as a security, of itself implies a holding in bad faith, and requires explanation.
    Appeal from the Supreme Court. Action to recover upon three checks drawn upon the bank and certified as good by its president. Two of the checks, one for $5,500, dated February 4, 1854, and one for $10,000, dated February 25, 1854, were drawn by the President, ,G. W. Houghton, to the order of C. A. Cleveland; and the other for $5,000, dated December 81, 1858, was drawn by Thomas Green, payable to the order of said Cleveland. The trial was before a referee, who found these facts: The checks were drawn and certified at their dates; the president had authority to certify checks upon the defendant’s bank; said checks were certified at his' business office in New York, but such fact was not known to the plaintiff when he received the checks; the checks at their date were delivered to the payee thereof at the same time, and he paid the drawers the full amount thereof; the payee of such checks indorsed and transferred them on the day of the dates to the plaintiff, who, upon receiving them respectively, paid to the payee thereof the full amount expressed on the face of each check, “ and that the plaintiffs so received the said checks in good faith,” and have ever since held the same. Evidence was given of a by-law of the defendant, that “no officer or clerk, except the president or cashier and first teller, shall be permitted to certify checks, and it shall be their duty to enter them immediately to the debit of their respective accounts whenever they are so certified.”
    In the course of the trial a motion for nonsuit was made and denied, under exception by the defendant. The referee ordered judgment for the plaintiffs for $26,224, which ^having been affirmed at general term in the first district, the defendant appealed to this court. The cause was argued at March term.

      William C. Noyes, for the appellant.

      John E. Burrill, for the respondents.
   While the cause was under advisement at June term, the then Chief Judge, Samuel L. Selden, delivered the following opinion:

The only question in this case, which seems to me to require serious consideration, is, whether Mr. Houghton could bind the bank by accepting checks or drafts drawn by himself. It is a well settled rule of the law of agency, to which I apprehend ■ there is no exception, that no person can act as the agent of both parties to a contract, although he himself may have no interest on either side; nor can he act as agent in regard to a contract in which he has any interest, or to which he is a party on the side opposite to his principal. In the present case, Mr. Houghton, as the drawer of the checks, was the party with whom the contract of acceptance was primarily made, and stood, therefore, precisely in those opposite relations which the rule referred to forbids. It is not necessary for the principal in such cases to show that the agent has acted unfairly or that he himself has sustained any injury. The act of the agent is deemed to be unauthorized, and the contract is void.

It is conceded, -in the opinion of the Supreme Court in this case, that, as between the bank and Mr. Houghtpn, the certificate of acceptance of the latter would not be obligatory. But. that court supposed that a subsequent bona fide holder could, nevertheless, avail himself of such certificate. The difficulty in the way of this conclusion, however, is, that the want of authority in Mr. Houghton to bind the bank appeared upon the face of the check. There could be no bona fide holder of such an instrument. An indorsee of commercial paper may, it is true, very frequently acquire rights superior to those of the original party; but never, so far as I am aware, when he has notice of the defect. If he knows the facts which would render the paper void in the hands of the party from whom he derives title, he cahnot recover.

The Supreme Court seems to have supposed that, to prevent the plaintiffs from being considered as bona fide holders, they must have known that the drawer had no funds in the bank to meet the check. This was clearly an error. The acceptance was void in the hands of the drawer, irrespective of the question whether he had or had not such funds. The double relation in which Mr. Houghton stood alone rendered it Void, and of this the plaintiffs were apprised by the check. It could not be necessary that they should have had notice of any other fact, in order to defeat their recovery; as the same facts which render commercial paper void in the hands of the original party, will equally avoid it in the hands of any subsequent holder having notice of such facts.

It is of no importance that the referee has found, as a fact, that the plaintiffs were Iona fide holders. This finding is opposed to the plain law of the case, and is therefore nugatory. This reasoning applies to two only of the checks upon which the action is brought. I see no obstacle to a recovery upon the check drawn by Green. The judgment of the Supreme Court should be reversed, and there should be a new trial.

Smith, J.

The objection that the cause was improperly referred on the ex parte application of the plaintiffs’ counsel at the circuit, cannot now be raised. If there was error in such reference, the defendant should have applied to the circuit judge, or at the special term, to vacate the order. After going before the referee and trying the cause upon the merits without objection, it is too late to raise the question in the court of review that the action was improperly referred.

The motion for a nonsuit was properly denied. When it was made the plaintiff had proved the making of these checks, and their acceptance by the indorsement thereon, by the defendant’s president, of the word “ goodand also a by-law of the defendant’s which impliedly authorized the president to certify checks, and also the due presentment of the checks thereafter and the refusal of the defendants to pay the same. This proof clearly, at least, entitles the plaintiffs to recover upon the $5,000 check made by Thomas Green.

The remaining questions relate to the two checks of Houghton, the defendant’s president, of $5,500 and $10,000, made and accepted by him. The power given him by the by-law to certify checks, clearly did not authorize him to certify his own checks. It is a necessary and universal implication in all cases of agency, that the power conferred upon the agent is to be exercised for the exclusive benefit of the principal. It is repugnant to the very nature and essence of such power to hold that it may be used for .the benefit of the agent in hostility to the interests of the principal. That a trustee or agent shall not act for his own benefit in any matter relating to his agency or trust, is an old and familiar doctrine of the court of equity, frequently asserted in the courts of this country and in England.

The rule is applicable to all persons standing. in a trust relation.' The principal is entitled to the exercise in his behalf of, all the skill, industry and ability of his agent, and to his intensest fidelity to his trusts. This rule is well stated and discussed in the opinion of Judge Demo in the case of The New York Central Insurance Company v. National Protection Insurance Company (14 N. Y.; 20 Barb., 471).

But it is claimed that these rules do not apply in their strictures to negotiable paper; that, when there is an apparent authority to execute such paper, a Iona fide holder is to be protected as in the case with partnership paper in the hands of an innocent holder.

These checks were negotiable, and the certificate thereon, indorsed by the defendant’s president, was equivalent in legal effect, if a valid act, to the acceptance of a bill of exchange to the same amount. Judge Selden, in the case of the Farmers' and Mechanics' Bank v. Butchers' and Drovers' Bank (16 N. Y., 128), says of such checks: “ Each check, if duly certified, imposes upon the bank an obligation to retain the amount for which the check is drawn, and the obligation assumed is substantially the same as that assumed by the acceptor of an ordinary bill of exchange.” Judge Demo uses very nearly the same language in the same case (14 N. Y., 625).

These checks, after their acceptance in the manner above stated, were transferred to the plaintiffs for their full face, as the referee finds, and he also finds that he received the same in good faith. This consideration presents all the difficulty there is in the case. A bona fide holder of negotiable commercial paper is a favorite of the law, and his rights are always guarded by the courts with great care and liberality, from respect to the great interests of trade and commerce. But I do not think this consideration can be permitted to prevail to sustain the plaintiffs’ right of recovery in this case upon these two checks. Clearly, upon well settled principles, Houghton had no power to accept his own drafts or checks in behalf of the bank. The act was a palpable excess of authority, and any person taking the paper was bound to inquire as to the power of the agent so to contract.’

This rule was asserted in the case of Gould v. The Town of Sterling, and Starin v. The Town of Genoa (23 N. Y., 452, 464). In these cases the plaintiffs, as bona fide holders of the bonds in suit, had paid the full valúe for theta, but this court held that they were bound to inquire as to the facts upon which the authority of the agents -depended to issue the bonds. Judge Selden says (p. 464): “ One who takes a negotiable note or bill of exchange, purporting to be made by an agent, is bound to inquire as to the power of the agent.”

Within this rule the plaintiffs were bound to inquire whether Houghton had authority to accept his own checks in behalf of the bank,' so as to bind the bank as acceptor But I do not think the plaintiffs can properly be called bona fide holders of these checks.. The referee finds that he is a holder for value, and that he paid the full amount of the face of the checks in good faith. This is all the referee finds on the facts. In finding as a conclusion of law that the defendants are liable on such checks, he may, perhaps, be deemed to find that they are bona fide holders thereof within the legal sense of such phrase.

But I think the. conclusion of law erroneous: the plaintiffs cannot be truly considered, in a commercial or legal sense, bona fide holders of these checks. A bona fide holder of commercial paper must receive the same in the usual course of business, for value, and without any notice of facts tending to impeach the character or validity of the paper as between the original parties. The plaintiffs cannot claim the protection of this rule. They had distinct notice, by the face of the certificate and the signature thereto, that the acceptance was improper and irregularly made. It was patent on the face of the paper, that the acceptance was a fraud; that the president of the defendant’s bank, in accepting such checks, was violating his duty, and using his official character for his personal benefit, and thereby perpetrating an act of dishonesty, in palpable violation of his trust. '''No business man of common intelligence could take these checks in good faith, and without suspicion or notice of this fraud. Upon this distinct fact, I would hold that the plaintiffs are not bona fide holders of these checks, and are not entitled to recover the same of the defendants. And the fact, also, that these three checks for $20,500 were taken and held for the period of nearly a year after their receipt by the plaintiffs^ without presentation to the bank for payment, and that this large amount of money was thus left in the bank, to the credit of the drawer of the checks, without interest or any arrangement about it, unexplained, is quite conclusive evidence, to my mind, that the checks were not taken in the usual course of business. But evidence, may be given, on another trial, explanatory of this delay in presenting the checks for payment, which may be quite satisfactory. Evidence on this point was offered, which, I think, was erroneously excluded by the referee.

That this defence, though in its origin and nature of an equitable kind, is now available in an action at law, upon the instrument improperly executed by the agent or trustee, is fully asserted and distinctly held in the opinion of Judge Dentó, in the case of The New York Central Insurance Company v. The National Protection Insurance Company (supra), and is, of course, res judicata in this court.

I think the judgment of the court below should be reversed and a new trial granted, with costs to abide the event.

Gould, J. It is no doubt truly settled by this.court, that a. check upon a bank, certified as good by a proper officer of the bank, is, in some respects, like a bill of exchange, accepted. Precisely in what respects, however, is not accurately ascertained ; as the decisions were limited to the points then before the court.

Strictly speaking, the certificate, “ good,” is an admission by the drawee of a sight bill that he is in funds to pay; and the law imposes the obligation to pay, from that fact, and without any express promise by him; and, in favor of the holder of the check, that liability is fixed; and no subsequent disposition of the funds to other purposes can release the obligation.

Yet, upon a sight bill, there is strictly nó such thing as an acceptance. It is to be paid on presentation. And the whole custom, of certifying bank checks has arisen to meet the convenience of merchants and banks, by putting mere checks in a condition to be passed from hand to hand, and deposited in other banks than those on which they are drawn, as cash, to save the trouble of counting over bank notes or coin, and to avoid the danger of mistakes in such countings; and also to answer the purpose of bank drafts, in remittances.

All these purposes, however, are substitutes for, and intended to be equivalent to, present payment. And the bank officer, who does his duty, notes the fact that he has certified such a person’s check for such amount, and virtually deducts from that person’s credit balance on deposit the amount of the check; thus saving the. amount, in the hands of the bank, to pay the check as soon as it comes -in for payment (either from another bank, in exchanges, or from any holder), such return of the check being usually and regularly either the next day, or within a short period. Such a check has no time to run ; credit, in the light of time given, is no element of it. It represents cash, and is no more to be pledged as security, than the same amount of coin would be. Using it as collateral security is a misuser; and such a use would .call for clear proof of very peculiar circumstances, to warrant the holding that the taker of the check took it bona fide.

In the case before us, the claim is that these plaintiffs paid the full face of these checks to the drawers, at the date of the checks, the checks being then certified. That they held them as security for the money so paid, for nearly a year, and then demanded payment, not of the drawer from whom the security was taken, but from the bank. That is to say, for about a year the bank had held, tied up, to answer to the demand on these checks, $20,000 of the drawer’s money, on which such drawer was losing interest; and the holder of the security, having paid his $20,000 at the date of the checks, was, at the end of the year, entitled to draw his $20,000, without interest; so that he too had lost a year’s interest on $20,000.

On the face of it, that claim is not true. No number of witnesses could prove it. It is utterly incredible. Such a holding, barely that, is not a bona fide transaction, and cannot be made to appear so. Where the fraud upon the bank was perpetrated, is sufficiently apparent. But, in the absence of any explanations of this protracted holding of these checks, it is not apparent what knowledge the plaintiffs had of’ the fraud, or when they acquired their knowledge. That this delay was not opened for explanation, is the fault of the defendant, the objection to inquiring into it, coming first from that side. Still, the nature of the checks is such, that the holding, which the plaintiffs claim, cannot be bona fide, and the referee’s finding, to the effect that it is so, is not supported by the evidence.

There should be a new trial, to find out whether there can be any possible explanation of the facts, consistent with good faith in 'the plaintiffs. And this is needed, irrespective of any of the facts as-to the authority of the president to certify checks, or the knowledge of the directors that he did so. He and they may have so conducted as to bind the bank in some cases, but there are no acts of the directors before us which do "away with the difficulties on the part of the plaintiffs themselves.

Davies and Sutherland, Js., dissented.

Judgment reversed, and new trial ordered.


source: Caselaw Access Project

author: Denio, Ch. J.

license: Public Domain

text:
    The People, ex rel. Knapp et al., v. Reeder, Sheriff, et al.

    A sheriff levied on goods; left them with a receiptor, who claimed to be, and was, the owner, and not delivering them, the sheriff recovered judgment for their value. In an action by the plaintiff in the execution, the sheriff is estopped from showing that the goods did not belong to the judgment debtor.
    The fact offered in evidence does-not exonerate the sheriff, because he had the benefit of an estoppel against the receiptor, on the question of title, which enures to the plaintiff in the execution, and his failure to collect it resulted, not from the fact that the title to the goods was not in the judgment debtor, but from the insolvency of the receiptor.
    Appeal from the Supreme Court. Action against the late sheriff of Chemung and his sureties, on his official bond, the condition of which was that he should well and faithfully perform and execute the duties of the office of sheriff. The relators had recovered a judgment for $897.18 against Benjamin C. West and others, and the execution had been delivered to the sheriff to execute. He levied upon certain horses of greater value than the amount of the judgment, in the possession of one Anson West, and left them with him upon his executing a receipt therefor. This paper recited the judgment and execution, and thg,t the sheriff had levied “upon the following goods arid chattels, the property of Benjamin G. West, one of the above named defendants, to wit,” &c., describing the horses; and he (A. West)'thereby acknowledged that he had received the said horses of the sheriff; and he promised to deliver them to him on demand, at his (West’s) dwelling house,’ or,, in default thereof, that he would pay the sheriff the amount of the judgment with interest; together with his fees. The sheriff afterwards demanded the horses of A. West, but he did not deliver them; and he then brought a suit against him in the Supreme Court, aid recovered judgment for the amount of the relators’ judgment, by default, but was unable to collect anything on the execution. The sheriff returned the execution of the relators, stating the above facts in the return, and also, that the defendants in that execution had no goods or chattels, lands or ‘tenements, &c.
    On the trial of the present action, the defendants offered to prove by B. 0. West, and also by by A. West, that the horses belonged to the latter, and not to either of the defendants in the relators’ execution; and that both of them so informed the sheriff at the time of the levy, and also that at the time of executing the receipt, Anson West protested that the horses were his property; but the judge rejected the evidence on the plaintiffs’ objection. The judge also directed a verdict for the plaintiffs, for the amount of the relators’ judgment and interest, which was accordingly given. The defendants’ counsel excepted to the several rulings of the judge. On appeal, the judgment on the verdict was reversed at a general term, and a new trial was ordered. The plaintiffs appealed here, with the usual stipulation.

      John K. Porter, for the appellants.

      Alexander S. Johnson, for the respondents.
   Denio, Ch. J.

I am of opinion that the Supreme Court fell into an error in reversing the judgment entered on the verdict. ISTo point is "better settled than that a party giving a receipt for property seized by an officer, upon an execution or an attachment, is estopped from setting up against the officer that the property is his own. That precise question arose in Dezell v. Odell (3 Hill, 215), and was determined against the receiptor. The estoppel would be perfect in the present case, even upon the dissenting opinion of Judge Bbobtsoet in that case. The receipt there did not contain the admission, inserted in the one now before us, that the property belonged to the defendant in the execution, and this led the dissenting judge to remark, that it was not shown that the receiptor had ever said that the property belonged to the defendants in the execution, or that he ever stood silently by and saw the goods taken as their property, without asserting his claim. If the receipt had recited, as this one does, that the property for which it was given was that of the judgment debtor, all the judges would have concurred in the position that the defendant could not set up title in himself against the admission-in his receipt, upon which the defendant had acted.

But we need not rely upon the receipt as concluding the receiptor; for there is an estoppel of a more solemn kind in this case, namely, the judgment which the sheriff recovered against him for the property levied on and contained in the receipt. This would prevent him and every person standing in privity with him from ever denying that, as between him and the officer, the latter had the title to the horses.

We are of opinion, moreover, that this estoppel enured fully to the benefit of the plaintiffs in the execution. In point of form it was the sheriff in whose favor it attached, but he had no individual title or interest whatever, except such as he acquired as the representative of the judgment creditor,

. by being charged with the execution of their process against the property of their debtor. This right is set forth in the receipt, and it was the title which Anson West acknowledged when he agreed to deliver the horses to the sheriff as the property of B. 0. West, which had been levied upon by virtue of the relators’ execution, and it was that title only which he was estopped to dispute. Suppose the judgment which the sheriff recovered against A." West had been collected, could he have put the money in his own pocket and have defended, himself against the relators’ action by proving that the title to the horses was actually in West, and not in the judgment debtors ? This would be preposterous, and yet I do not see. but that he could do this, unless these creditors were entitled to the benefit of the estoppel.

But it may be said that if the creditors take the benefit of the estoppel, they must recognize the sheriff’s act in entrusting the property to the receiptor as their own act; and therefore his insolvency, by which the property has been lost to them, must be accounted their misfortune and not that of the sheriff. This is plausible, but I do not think it a sound position. Upon seizing property upon an execution, the sheriff may take it into his own possession, or he may entrust it to another, and rccéive an undertaking 'for its redelivery with or without surety as he may think discreet and safe. He must judge at his own peril, as to the responsibility of the parties to whom he may deliver it. If they prove insolvent, by which the property fails to be applied to the creditors’ debt, it is the misfortune of the sheriff who consented to trust them, instead of keeping the goods in his own hands, or requiring better security. It is one.of the hazards incident to his office, for which he is recompensed by the other advantages which it secures to him. Any other rule would leave the creditors at the mercy of the executive officer of the court, who would have no motive of interest to see that the property levied on was kept in safe hands.

These propositions are, therefore, established, which together make out the case of the relators; namely, that Anson West, the only person who has ever claimed this property against the execution creditors, is proved by his own acts and concessions, which are absolutely conclusive against him, and also by the judgment which he suffered to be recovered against him, to have no title to it; and that the sheriff, notwithstanding, entrusted it to him, upon his own agreement to deliver it up when called for, which agreement he has neglected to perform, and thereby the creditors have been deprived of having its value applied to the satisfaction of their debt. It follows, as it seems to me, inevitably, that the sheriff thereby became liable for the debt.

In a case very similar to the present, decided by the Supreme Judicial Court of the State of Maine (Penobscot Boom Co. v. Wilkins, 27 Maine, 345), it was decided that the officer could not set up, as a defence to the action of the creditor, that the property did not belong to the judgment debtor. A receipt had been taken, as in the present case, which contained expressions, admitting, in effect, that the property belonged to the judgment debtor. The officer had voluntarily given up the receipt to the receiptor. But it was conceded by the court that the officer could have defended, himself, by any evidence which would have exonerated the'receiptor if he had brought an action against him. I consider the principle decided to be identical with the one which we apply in this case.

There is no weight in the suggestion that the relators have assumed the action against the receiptor as their own, and have thus waived their remedy against the sheriff. The evidence is only that one of them told the sheriff that it was best for him to demand the property of Anson West, and sue him if he did not deliver it. This had no tendency to show that they took the result of that action upon themselves.

The judgment ought to be reversed, and judgment final rendered on the verdict, with the costs of the appeal.

All the judges concurring,

Ordered accordingly.


author: Selden, J.

text:
    Gillespie et al. v. Torrance.
    The accommodation indorser of a note given for chattels sold cannot, at law, avail himself of a breach of warranty as to the quality of such chattels, by way of defence, recoupment or counter-claim.
    Such a defence does not rest upon a failure of the consideration of the contract on which the action is founded, but is the setting off of one distinct claim against another.
    In such case, it is the right of-the principal to set up a counter-claim, if sued, or bring his separate action, and the surety cannot make the election for the principal, or do anything to impair his right of recovery in a separate action.
    It seems that the surety would be relieved in equity, in case of the insolvency of the principal: Per Selden, J.
    Appeal from the Superior Court of the city of New York. Action upon a promissory note against the indorser only. Defence, that the indorsement was for the accommodation of the maker; that the note was one of several given for oak timber sold to the maker by the plaintiffs; that the timber was a raft in the Hudson river, opposite the city of New York, and that, on making the sale, the plaintiffs produced certificates of inspection showing that there were 29,441 feet of first quality oak, for which Yan Pelt, the maker of the notes, agreed to pay 27-£ cents per foot, and 5,523 feet of second quality or refuse oak, for which Yan Pelt agreed to pay 13f cents per foot; that, by the usage of the timber trade in New York, the seller is deemed to warrant that the timber sold corresponds in quantity and quality with the description in such inspection certificates; that Yan Pelt gave his notes, indorsed by the defendant, for various sums, amounting in the aggregate to $9,000, the price of the timber as computed from the inspection certificates, and all of which notes hád been paid except the one in suit; that after the delivery of the timber it was discovered that the inspection certificates- were erroneous in this, that of the timber of first quality there was 15,000 feet less than the certificates stated, and an equal excess in the refuse timber; that if the prices Had been correctly computed according to the fact, instead of being computed according to the certificate, it would have amounted to less than $5,000'; that the plaintiffs had, therefore, been overpaid, and there.was no consideration for the note in suit. On the trial, the judge, under exception by the defendant, excluded evidence as to the quantity of the timber of the different qualities; declined to permit an amendment of the answer alleging an express warranty; and excluded evidence of the usage set up in the answer, making a sale by certificate equivalent to a warranty.
    • The other facts stated in the answer were substantially proved or admitted. • The plaintiffs had a verdict and j udgment, which having been affirmed at general term, the defendant appealed to this court.

      Charles A. Rapallo, for the appellant.

      William Stanley, for the respondents.
   Selden, J.

The defence in this case is not founded on a failure of the consideration of the note, otherwise than by a defect in the quality of the timber for which it was given. That being so, if there was neither warranty nor fraud in the sale of the timber, the defect in quality constitutes no defence. (Seixas v. Woods, 2 Caines, 48; Sweet v. Colgate, 20 John., 196; Welsh v. Carter, 1 Wend., 185; Johnson v. Titus, 2 Hill, 606.) The answer does not allege fraud in the transaction, and unless it shows a warranty of the quality of the timber, it presents no defence to the note, either partial or total. • The argument of the appellant’s counsel, to maintain the position that the defence rested upon a failure of consideration, and not upon a claim for damages on a breach of warranty, is very ingenious; but the answer and the proof show that all the timber contracted to be delivered to Van Pelt, and for which the notes were given, was in fact delivered, and the real ground of complaint is, that a much larger proportion of it than was shown by the inspector’s certificates, upon the faith of which the purchase was made, proved to be of inferior quality. The law being well established that such defect of quality, in the absence of fraud or warranty, constitutes no defence to the note,' or to any part of it, and there being no pretence of fraud, it follows that the defence, if there is any, rests upon, a breach of warranty.

The question then arises, whether the plaintiff, an accommodation indorser upon a note given by Van Pelt to the plaintiffs for the timber, can’ avail himself of a breach of the contract of warranty in regard to the quality of the timber, made by the plaintiffs to Van Pelt, on the sale to him. To decide this question, it is necessary to ascertain the ground upon which such defences, by way of recoupment, as they were denominated prior to the adoption of the Code, now, partially, if not wholly, merged in the much broader term, counter-claim, were admitted. If we regard such defences as resting upon a failure of the.consideration of the contract on which the plaintiff’s action is founded, then unquestionably the defendant could avail himself of the breach of warranty in this case, because an indorser or surety may always, where the contract has not been assigned, show a failure, partial or total, of consideration of his principal’s contract which he is called upon to perform. But if such defences are regarded as the setting off of distinct causes of action, one against the other, then it is clear, as will be' shown hereafter, that this defendant could not avail himself of such defence.

The subject of the precise ground on which a defendant is allowed to reduce a recovery against him, in an action upon a contract, by alleging and proving fraud or breach of warranty— whether the contract, where there is fraud, is regarded as destroyed, and the recovery had on a quantum meruit, or whether the reduction of the plaintiffs’ claim rests upon a partial failure of consideration, or upon the setting off of distinct claims against each other—has often been discussed, but without any general concurrence of opinion on the question. (Reab v. McAllister, 4 Wend., 90, et seq.; S. C. in error, 8 id., 109; Batterman v. Pierce, 3 Hill, 171, 177; Ives v. Van Epps, 22 Wend., 155; Nichols v. Dusenbury, 2 Comst., 286; Van Epps v. Harrison, 5 Hill, 66; Barber v. Rose, id., 78; Baston v. Butler, 7 East., 479; Withers v. Greene, 9 How. U. S., 213.)

A careful examination of the subject, I think, must lead to the conclusion, that wherever recoupment, strictly such, is allowed, distinct causes of action are set off against each other. This would seem to follow from the right of election, which all the cases admit the defendant hás, to set up his claim for damages by way of defence, or to resort to a cross-action to recover them. (Ives v. Van Epps, 22 Wend., 157; Batterman v. Pierce, 3 Hill, 171; Britton v. Turner, 6 N. H., 481; Halsey v. Carter, 1 Duer, 667; Barber v. Rose, 5 Hill, 81; Stever v. Lamoure, Lalor’s Supp., 352, note a.)

In many cases the defendant’s damages would exceed the amount of the plaintiff’s claim, which shows conclusively that such damages do not rest upon a mere failure of consideration. Where there is fraud, the party deceived, on discovering the fraud, may rescind the contract; but if he does not do that, the contract on his part remains entire, not broken and not modified, and he is bound to perform it fully according to its terms: he has, however, arising from the fraud, a distinct cause of action, the amount of which he may set off against any liability on his part growing out of the transaction in which the' fraud was perpetrated. As was said by BeobsoB", J"., in Van Epps v. Harrison: “ When sued for the price, the vendee may in general recoup damages; but while he retains the property he cannot treat the contract as wholly void, and refuse to pay anything. By retaining the property he affirms the validity of the contract, and can be entitled to nothing more than the damages which he has sustained by reason of the fraud.” The same principle is applicable to cases of warranty, •except that the breach of warranty gives no right to rescind, unless there is an express contract to that effect. (Street v. Blay, 2 Barn. & Ad., 456; Voorhees v. Earl, 2 Hill, 288; Cary v. Gruman, 4 id., 625; Muller v. Eno, 14 N. Y., 597; Thornton v. Winn, 12 Wheat., 183; Lattin v. Davis, Lalor’s Supp., 16:) In ordinary cases of breach of warranty, therefore, both contracts remain binding to their full extent, and where recoupment is allowed, damages for a breach on one side are set off against like damages on the other side. The “ cross-claims arising out of the same transaction compensate one another, and the balance only is recovered.” (8 Wend., 115; 22 id., 156; 3 Hill, 174; 2 Comst., 286.)

It has always been optional, as is suggested above, since the doctrine of recoupment has gained a foothold in the courts, with a party who has sustained damages by fraud or breach of warranty in the purchase of goods, when sued for their price, to set off or recoup such damages in that action, or to reserve his claim for a cross-action; and when he elected to recoup he could not, under the Revised Statutes, have a balance certified in his favor, nor could he maintain a subsequent action for such balance. (Sickles v. Pattison, 14 Wend., 257; Batterman v. Pierce, 3 Hill, 171; Wilder v. Case, 16 Wend., 583; Stever v. Lamoure, Lalor’s Supp., 352, note, a; Britton v. Turner, 6 N. H., 481.)

Under.the Code of Procedure, doubtless a balance might be recovered (Code, §§ 150-274; Ogden v. Coddington, 2 E. D. Smith, 317); but the right of election to set up a counterclaim -in defence, or to bring a cross-action for it, still exists. (Halsey v. Carter, 6 Duer, 667; Welch v. Hazleton, 14 How. Pr., 97.) How it is not easy to reconcile with these established principles, the right of the defendant in.this suit to avail himself of the claim which Van Pelt may have against the plaintiffs on a breach of warranty. 1. Such damages constitute a counter-claim, and not a mere failure of consideration, and not being due to the defendant, cannot be claimed by him. (Code, § 150; Lemon v. Trull, 13 How. Pr., 248; 16 id., 576, note.) 2. Van Pelt has a right of election whether the damages shall be claimed by way of recoupment in the suit on the note, or reserved for a cross-action. The defendant cannot make this election for him. 3. If the defendant has a right to set up the counter-claim, and have it allowed, in this action, it must bar any future action by Yan Pelt for the breach of warranty ; and as no balance could be found in defendant’s favor, he might thus bar a large claim in canceling a small one. If the right exists in this case, it would equally exist if the note was but $100 instead of $1,800. 4. Supposing the other notes given for the timber to have been indorsed by different persons, for the accommodation of Van Pelt, and all tó remain unpaid, each of the indorsers would have the same rights as the defendant. If they were to set up the same défence, how would the conflicting claims be reconciled ? '

In the case which was shown on the trial, there would seem to be a strong equity in favor of the defendant to have the note canceled or reduced, by applying towards its satisfaction the damages which appear to be due to Van Pelt for the breach of warranty. It is, however, an equity, in which Van Pelt is interested to as great, and possibly to a greater, extent than the defendant, and cannot be disposed of without having him before the court, so that his rights, as well as those of the defendant, may be protected. That remedy may be open to the defendant still, notwithstanding the judgment; especially if the insolvency of the parties renders that course necessary for his protection. (14 Johns., 63, 17; id., 389; 2 Cow., 261; 2 Paige, 581; 6 Dana, 32; 8 id., 164; 2 Story’s Eq. Jur., §§ 1446, a, 1437.) My conclusion is, that the court below was right in holding that the defendant could not set up the breach of warranty in defence, partial or total, to the suit on the note; and as the warranty presented the only ground on which there could be a claim of defence under the answer, there is no necessity for considering the other questions presented in the casé.

The judgment should be affirmed.

All the judges concurring,

Judgment affirmed.


text:
    The Susquehanna Bank v. The Board of Supervisors of Broome County et al.

    An action will not lie to restrain the collection of a tax, on the bare ground that the assessment was illegal. There must be, in addition, facts bringing the case under some acknowledged head of equity jurisdiction.
    Appeal from the Supreme Court. The action was brought against the board of supervisors and the collector, to enjoin the collection of a tax of $490, assessed against the plaintiff, for personal property, by the board of supervisors of the county of Broome, at their annual session in November, 1855. It appeared that the plaintiff was an association under the general banking law, that its articles were signed in January, 1855, and that it received its circulating notes from the Superintendent in April, May and June following. On the assembling of the board of supervisors in November, the bank presented an affidavit, sworn to by its president, stating' the foregoing facts, and that the bank had no real estate, and had not, at the time of making the affidavit, earned or been in the receipt of net profits or clear income in amount to exceed the sum of two thousand dollars, and that at the time the assessment was made for that year, in the town of Chenango, in which the bank was situated, the said bank had not paid its expenses, and that it had not made any dividend. The bank, therefore, claimed a right to commute for its taxes, under the act concerning the assessment of taxes on incorporated companies, and the commutation and collection thereof, passed in 1853. (Ch. 654, § 9.) The board decided against the right of the bank to commute, for the reason that it had not been in existence a full year; and proceeded to impose a tax upon the amount of the capital paid in, which the assessors had inserted • in the assessment roll. The warrant had been delivered to the collector. They subsequently passed a resolution to the effect that they did not question the truth of the affidavit, but, in rejecting the claim to commute, they proceeded upon the ground above mentioned.
    Mr. Justice Gray, before whom the case was tried, decided that the claim to commute was well founded, and gave judgment for the plaintiff, making a preliminary injunction which had' been issued perpetual, on condition, however, - that the plaintiff should, within four days, pay to the county treasurer five per cent upon $2,000, the profits admitted to have been realized, with costs against the board of supervisors, but not against the defendant Abbot, the collector. The judgment was affirmed at a general term, whereupon the defendants appealed here.

      Daniel S. Dickinson (Attorney-General), for the appellant.

      Giles F. Hotchkiss, for the respondent.
   Denio, Ch. J.

The question whether a corporation was entitled to commute for its taxes, under the act of 1853, when that act was in force, where the corporation had not been in existence for one whole year when the tax was imposed, came before this court in the case of Howes, President of the Park Bank, v. Wood, Mayor of New York (24 N. Y., 93), at the October term last year; and we held, after full consideration, that the section allowing a commutation had no application to such a case. The Park Bank had been in existence about ten months, and .had earned a considerably greater amount of profits in proportion to its capital than the Susquehanna Bank had earned when the claim to commute was made, though less than five per cent on the capital. But these circumstances do not distinguish the cases, so far as the right to commute is concerned. The question depends wholly upon the construction of the statute, and our conclusion was, that an experiment of one whole year was required to be made before it could be said that the corporation had not been in receipt of five per cent net profits during the preceding year. Where the right to commute does not attach, the corporation is taxable under the general law regulating the taxation of corporations. That decision, of course, determines this appeal.

But if we should stop here, it might possibly be inferred that we supposed a suit like the present one, in the nature of a bill in equity for an injunction, would lie, in such a case, if the board of supervisors had fallen into an error in refusing to allow the plaintiffs to commute, and taxing them on their capital. On the contrary, we consider it entirely settled that they would not be entitled to such a remedy. The question has often been before the courts, and there has been a steady course of adjudication to the effect that a bill to restrain the collection of a tax would not lie, unless the case were brought within some acknowledged head of equity jurisprudence. Where the tax is upon land, and the law allows it to be sold to collect the tax, and the conveyance to be executed by the proper officer would be conclusive evidence of title, and the tax was not void on its face, a suit in the nature of a bill guia timet will lie; and so where there might otherwise be a multiplicity of suits, and the right had been once settled at law. But independently of such cases, there is no more reason for entertaining a suit of this character than there would be, where, in an action for the recovery of money, a party had a judgment against him upon an erroneous ruling of the law. The following are some of the principal cases upon the point: Moores v. Smedley (6 Johns. Ch., 28); Wiggin v. The Mayor, &c., of N. Y. (9 Paige, 16); Van Dorn v. The Same (id., 388); The Mayor of Brooklyn v. Messerole (26 Wend., 132); The N. Y. Life Insurance Co. v. The Supervisors of the City of N. Y. (4 Duer, 192); Heywood v. The City of Buffalo (4 Kern., 534). It is not necessary that we should show that the party complaining in this class of cases could have his grievance examined in some other form; but we suppose that a certiorari might, at the discretion of the Supreme Court, be awarded, to determine the validity of a tax. It would not, however, be granted as a matter of course, but only on showing satisfactory grounds for relief, and making it appear that no considerable public inconvenience could arise from the delay. (The People v. The Supervisors of Allegany, 15 Wend., 198.)

We considered the point of jurisdiction so well settled, that when the appeal in Wilson v. The Mayor, &c., of New York, which presented a similar question, was brought on at the June term last year, we gave judgment against the plaintiff on the argument, reversing the judgment of the Court of Common Pleas of the city and county of New York. In that case, the plaintiff had been taxed in the city of New York, for personal property, while he was a resident of the State of Connecticut, and he commenced the action to restrain the collection of the amount. The question was the same in principle, upon the point of jurisdiction, as the one now before us.

The judgment of the Supreme Court must be reversed, and the complaint be dismissed, with costs.

All the judges concurring,

Ordered accordingly.


author: Selden, J. Sutherland, J., (dissenting.)

text:
    Graser v. Stellwagen.
    In the absence of fraud, one member of a firm may, notwithstanding the protest of his partner, transfer all the property of the partnership, in consideration of the promise of the purchaser to pay its debts, though not yet due.
    The question of fraud .cannot be raised by one claiming adversely to the •sale who does not, by the pleadings, show himself to be a creditor or purchaser, and who upon the trial appears to be only a creditor at large.

      In order to found an exception upon the omission of the' judge to submit the question of fraud to the jury, the party must, it seems, ask to have it so submitted as well where the case is within the statute of fraudulent conveyances (2 B. S., p. 137, § 4), as in other cases.
    Appeal from the Supreme Court. Eeplevin for a quantity of merchandise. The answer was a general denial merely. On the.trial, the plaintiff made title to the goods under a bill of-sale, executed in the name of the mercantile firm of Wagner & Graser by Valentine Graser, one of the members, August 25, 1858, of all the personal property of the firm. The bill of sale was executed by Graser without the knowledge of his partner, Wagner, and without consulting him, though he was at the time in their store, where the paper was drawn, engaged in the business of the firm. On being informed thereof, on the same day, Wagner repudiated the transaction, and refused to deliver the goods. Graser thereupon, by the direction of the plaintiff (his father), locked the store and delivered the key to a person named by the plaintiff. The consideration of this bill of sale was the agreement of the plaintiff to pay for the goods, he being bound for such payment to the defendant, of whom the goods had been purchased in May preceding, as joint surety with one Hartman Wagner, the father of the other partner.
    The defendant offered to prove these facts: a chattel mortgage, executed September 4, 1858, by William Wagner, in the name of his firm, Wagner & Graser. This mortgage was to secure the payment to the defendant of the purchase-money due him for the goods. It had been proved that the goods were immediately delivered to and removed by the defendant from the store in which they had remained; and the offer was also to show that such delivery was under the mortgage. The evidence was excluded, and the defendant took an exception. The defendant moved for a nonsuit, which was refused, and he took an exception. The court directed a verdict for the plaintiff, and judgment thereon was rendered at general term in the eighth district, where the exceptions were heard in the first instance. The defendant appealed to this court.

      John L. Talcott, for the appellant, contended that, as the plaintiff did not take actual possession of the goods, his title was presumptively fraudulent, and the question should have been submitted to the jury, under our statute (2 R. S., p. 137, 14). There being some evidence to sustain the validity of the sale, the judge had no authority to decide it as matter of law, whether requested to leave it to the jury or not.

      L. B. Porter, for the respondent.
   Selden, J.

It having been settled in the case of Mabbet v. White (2 Kern., 442), that a single partner has power, in the absence of fraud, notwithstanding the dissent of his co-partner, to transfer all the property of the copartnership in payment of one or more debts of such copartnership, I see no ground upon which the defence in this case can be sustained. The question of fraud, either against the copartner, or against creditors, was not available to the defendant under his answer. He merely denied the plaintiff’s title to the goods, and his own taking and conversion, or detention of them, without claiming any rights himself either as purchaser or creditor. As a stranger, he could not question the validity of a transaction between other parties on the ground of fraud. That objection is available only to parties and privies. (Jackson v. Eaton, 20 John., 478.) The defendant does not, by his pleading, show himself to be either creditor or purchaser, and for that reason the evidence which he offered, of a title derived from Wagner and Graser, was properly rejected. (14 Barb., 541; 20 id., 473; 3 Comst., 510; 5 Duer, 392.)

The delivery of the goods by William Wagner to the defendant was proved without objection, and if that evidence is available, notwithstanding the defect in the pleadings, to show such a privity between the defendant and the copartnership as to entitle him to insist that the sale to the plaintiff was fraudulent, which is at least doubtful (24 Wend., 291; 2 Comst., 361, 506), it will not aid the defendant here, for the reason that he did not ask to have the question of fraud submitted to

the jury. (Plumb v. Cattaraugus County Ins. Co., 18 N. Y., 392; Winchell v. Hicks, id., 558.) no such distinction in this respect, as that contended for by the defendant’s counsel, between questions of fraud in general and those in regard to fraudulent conveyances, which are made by statute questions of fact for the jury in all cases,” has ever been made, and I should not think it wise to adopt it, if the case required a decision upon that point. That question, however, is not presented, as the defendant has not in his answer claimed any interest in the goods as creditor; and the plaintiff’s proof, if that were available to him without pleading, only shows him to be a creditor at large, and as such he could not dispute the validity of the transfer to the plaintiff oh the ground that it was designed to defraud creditors. (Andrews v. Durant, 18 N. Y., 496.)

The case of Mabbett v. White (supra), shows that the sale made by Graser to the plaintiff, its good faith not being denied, was valid. In that casé, the sale was made to a creditor of the copartnership, but he was' not a creditor to the full value of his purchase. For upwards of $1,700 he gave his note, which was turned out by the partner making the sale to another creditor. • The engagement of the'plaintiff in this case to pay the debt of the firm to Stellwagen, was equivalent to giving his note for that purpose, and I see no material distinction, therefore, between this and the former case. The principle having been settled that one partner may transfer the entire assets of a copartnership in payment of a part of its debts, or to provide means for their payment, without the consent and in face of the protest of -his copartner, it would be unwise and lead to great confusion if nice distinctions should be introduced in regard to the particular manner in which it should be done, where no question of good or bad faith is involved.

The judgment should be affirmed.

Denio, Ch. J., Davies, Wright and Gould, Js., concurred.

Sutherland, J., (dissenting.)

In my opinion, the transaction by which Edward Graser undertook to transfer to the plaintiffs’ intestate, Valentine Graser, the entire stock in trade of his firm, without the knowledge or consent of his partner, cannot be upheld, and ought not to be sanctioned by this court.

On the 8th of May, 1858, the partnership was formed, to continue three years: on the 12th of May, the greater portion of the goods in question were bought by the firm for partnership purposes of the defendant, the firm giving therefor to the defendant their two promissory notes, one dated May 12th, 1858, for $467.79, payable three months after date, and the other dated May 10th, 1858, for $1,618.59, payable two years after date, and at the same time Valentine Graser and Hartman Wagner executed their joint bond to the defendant to secure the payment of these notes. Now, on the 25th of August, 1858, Edward Graser, without the knowledge or consent of his partner, William Wagner, and without consulting him, although he was at the place of business of the firm, undertook to sell and transfer to Valentine Graser, for the purpose of indemnifying him for his liability on the bond, and in consideration of his agreeing to pay the defendant for the goods so bought of him, the goods for the possession of which "this action is brought, the greater portion of them being the' goods so bought of the defendant and being the entire stock in trade of the firm, and thus to break up and end the business of the partnership within about three months after it was formed, without any alleged change of circumstances to justify. it, and without even the excuse of insolvency.

In my opinion, Edward Graser had not the power to make the sale and transfer to Valentine Graser, without the knowledge or consent of his partner, which he undertook to make.

Mabbitt v. White (2 Kern., 442), does not show that he had the power to make the sale, for the sale was not .made to pay or to secure the payment of a partnership debt owing to Valentine Graser. The firm was not indebted to Valentine Graser at the time of the sale. It does not appear that, either before or after the sale, Valentine Graser had paid anything on the notes of the firm given to the defendant for the goods. The large note was not due, but had more than eighteen months to run. The small note had been mostly paid, it is to be presumed, by the firm.

Edward Graser had no express power to make the sale. On the contrary, he took care to make it without the knowledge of his partner. If he had power to make it, the power must be implied from the partnership relation. But ought such power to be implied from that relation, to enable him thus to destroy, not only the partnership agreement but the partnership business, not only without any excuse, but with the most apparent bad faith towards his partner? I think not.

In my opinion, the judgment of the Supreme Court should be reversed, with costs.

Allen and Smith, Js., also dissented.

Judgment affirmed.


author: Sutherland, J.

text:
    Robinson v. Ryan et al.

    The purchaser at a mortgage sale under an attempted statutory foreclosure, void as against the mortgagor for want of notice, stands as an assignee of the mortgage.

      It seems that this is sufficient evidence of his title, in a foreclosure suit by such assignee to which the mortgagee is not a party, as against a grantee of the land, subject to the mortgage.
    The land was subject to re-entry for non-payment of rent due on a lease in fee. The mortgagee had covenanted with the mortgagor to pay such rent to the landlord; but the mortgagor, by a subsequent agreement with the mortgagee, assumed the payment of such rent: Held, that, as against a grantee with notice of the agreement, the assignee of the mortgage was entitled to pay the rent to protect his interest; to taclc the amount, to his mortgage, and to foreclose as for a sum immediately payable, though no part of the principal was due on the mortgage.
    Appeal from the Supreme Court. Action to foreclose a mortgage upon a farm in Berne, Albany county, made by Catharine D. Ryan and Peter D. Ryan to Horace Wyman and John D. Livingston, November 27, 1852, for $1,850, payable in five years, with interest annually, part of the purchase money of the mortgaged premises conveyed the same day by the mortgagees to Catharine D. Ryan, who was the wife of Peter D. Ryan.
    The complaint alleges an assignment of the mortgage by the mortgagees to one Hornblower, and - an assignment by Hornblower to the plaintiffs; that $94.50 for interest due 27th ¡November, 1853, was unpaid, and further alleges that the premises were conveyed to Catherine D. Ryan, subject to the rents, covenants and conditions of a lease in fee of the same from Stephen Van Rensselaer to John Oliver, Jr., the annual rent reserved in which lease was twenty-two and a half bushels wheat, four fowls and one day’s riding; that the lease contained a clause or condition giving- a right of re-entry for non payment of the rent; that on the 1st day of January, 1853, there was due to the successor of the lessor, for rents up to that day, and interest thereon, $359.49, which the plaintiff, for his own security, was compelled to pay, and did pay; which sum, in addition to the amount due on the mortgage, the plaintiff claimed should be paid out of the moneys arising from the sale of the mortgaged premises asked for.
    The joint and several answer of the defendants, by a general denial, first puts in issue the fact of the assignment of the mortgage to the plaintiff by Hornblower, and subsequently admits that there was due on the mortgage, when the action was commenced, $94.50, for interest, and avérs a tender of that amount to the plaintiff on the 6th ¡November, 1854, and an offer to pay the costs of the action up to that time. The answer also alleges that Wyman and Livingston expressly covenanted with Catharine D. Ryan to pay all rents due under the lease, and denies the right of the plaintiff to tack the rents alleged to have been paid by him upon “his aforesaid mortgage, and have a decree of foreclosure for the amount thereof.” The answer also alleges that the defendant ¡Nichols is the owner . of the premises in fee, and became the purchaser thereof on the 27th day of October, 1854, subject only to the mortgage mentioned in the complaint. The defendant Lawson disclaims any-interest in the premises, as subsequent incumbrancer or otherwise, and says he conveyed all his interest therein to the defendant Nichols, on the 2'7th day of October, 1854.
    At the trial, at the Albany Circuit, in March, 1856, before Mr. Justice Harris, the plaintiff produced the mortgage and proved its execution, and an assignment thereof by the mortgagees to Hornblower, dated December 14, 1853. The plaintiff proved no assignment, in writing, from Hornblower to hipa; but he proved certain proceedings by Hornblower, as assignee, to foreclose the mortgage by advertisement under the statute, regular in all respects, except that it appeared that the copy of the published notice of such foreclosure was served upon the mortgagor, Catharine D. Rjmn, by mail, directed to her at Berne, Albany county, when, at the time of such service, she resided in the city of New York, and that, under these proceedings, the premises were sold on the 15th day of March, 1854, and that the plaintiff became the purchaser. It was also shown that the amount due Van Rensselaer for back rents, January 1, 1853, was $359.49, and that this amount was paid by the plaintiff, May 10, 1854, and the original lease from Van Rensselaer was introduced in evidence, by which it appeared that it contained the usual clause or condition giving a right of re-entry for non-payment of the rent. It also appeared that the deed from Livingston and Wyman to Mrs. Ryan was recorded December 1,1852, and contained a covenant on the part of the grantors to pay all rents due to Van Rensselaer up to the 1st day of January, 1853. John D. Livingston testified that previous to the delivery of the papers the agreement was, that the grantors should pay the rent due on the farm, and- that they were drawn with that understanding, but that, when they were delivered, a different arrangement was made; Mrs. Ryan stipulating in writing to pay $260 of the rent, in consideration of the grantor’s assuming to pay the same amount in discharge of a mortgage upon certain city property which she was bound to pay; that he afterwards paid that mortgage; and that the defendant Nichols was present when, the papers were delivered, and this arrangement was made, acting as the attorney of Mrs. Ryan in the transaction of the business. It further appeared that on the 27th day of October, 1854, Mrs. Ryan conveyed the premises to the defendants, Nichols and Lawson, and' that subsequently, and on the same day, Lawson conveyed all his interest in the premises to Nichols. The defendants proved the tender averred in the answer. It was also shown on the part of the plaintiff that, after the sale of the premises to the plaintiff, he was called upon by the agent of Van Rensselaer for the rent paid by the plaintiff, and that, probably, a fifteen days’ notice of re-entry was issued.
    Upon the close of the evidence, the defendants moved that the complaint be dismissed, and judgment rendered for the defendants, upon the grounds,
    1. That the court had no jurisdiction of the case, as it appeared that the amount due on the mortgage was less than $100.
    2. It did not appear that the plaintiff had any right or title to the mortgage.
    3. That the plaintiff was not entitled to have the amount paid by him for rent tacked to the mortgage, and made a lien upon the premises.
    4. That if the rent or any part of it could be tacked to the mortgage, it could only be tacked to the principal, and no foreclosure for that amount could be had, until some part of the principal became due.
    5. That the plaintiff stood in no better position than Wyman and Livingston, who, by their covenant in the deed to Mrs. Ryan, are estopped from having the rent they agreed to pay tacked on the mortgage, or made a lien on the lands in their “favor as against the mortgagor or a subsequent grantee.
    6. That the payment of the rent by the plaintiff was voluntary, and there was nothing to show that the plaintiff was compelled to pay it to preserve the estate or save the lien of the mortgage.
    7. That by reason of the covenant of Wyman and Livingston, no assignee of theirs could, under any circumstances, pay the rent which they, by that covenant, were required to discharge, and tack it upon the mortgage, and enforce it as a ten upon the land.
    8. That the tender of the amount due with costs to that time, extinguished all right to proceed with the foreclosure of the mortgage.
    9. That the plaintiff was not entitled to any order or decree of foreclosure in the premises.
    The court refused to decide as requested by the defendants, upon any or either of the foregoing propositions, and the defendants excepted-. Judgment of foreclosure was rendered for the amount due on the mortgage, and for $260 of the amount paid by the plaintiff for rent. This judgment was affirmed a,t the general term, and the appeal to this Court was from this judgment of affirmance.

      M. C. G. Nichols, for the appellants.

      Lyman Tremain, for the respondents.
   Sutherland, J.

There is no doubt that, as to the mortgagors and their grantees, or the grantees of Mrs. Ryan, the statutory foreclosure was utterly void, and did not and could not affect their title or estate, or operate so as to convey a legal title to the premises to the plaintiff. (Bloom v. Burdick, 1 Hill, 130; Van Slyke v. Shelden, 9 Barb., 278.)

The act of 1844, amending the provisions of the Revised Statutes as to foreclosing mortgages by advertisement, requires a copy of the published notice of foreclosure to be served on the mortgagor, either personally or by leaving the same at the dwelling house of the mortgagor, or by mail directed to the place of residence of the mortgagor. Mrs. Ryan, the mortgagor, was not served with notice in either manner. The notice was attempted to be served by mail, but it was directed to her at Berne, Albany county, when, at the time, she resided in the city of New York.

The plaintiff, by bringing this action to foreclose the mortgage, concedes that the attempted foreclosure by Hornblower was void as to the mortgagors and their grantees, and that he did not get an absolute title to the premises by his purchase under the same, but he insists that those proceedings, and his purchase under the same, operated as an assignment of the mortgage to him by Hornblower, and that he thereby got all the rights and interest of Hornblower as assignee of the mortgage.

In Jackson v. Bowen (7 Cow., 13), it was held that a conveyance by a mortgagee as upon a statute foreclosure, if the proceedings to foreclose were irregular, operated as a good assignment of the mortgage, and the purchaser might claim as assignee of the mortgage. This case would appear to be controlling on this question. Besides, the mortgage has been delivered by Hornblower to the plaintiff. The plaintiff produced it on the trial.

Hornblower is not a party to this action, but it is presumed that he could not set up the irregularity of his own statutory foreclosure proceeding as against the plaintiff; and if so, why should not Nichols, the present owner of the premises, pay the mortgage to the plaintiff as assignee ? It would have been safe for him to have done so:

I think, then, assuming that the answer puts in issue the plaintiff’s right and title to the mortgage as assignee of Hornblower, that the foreclosure proceeding, and the plaintiff’s purchase under it, could and did operate as an assignment of the mortgage to the plaintiff.

But, upon the whole answer, it is difficult to say that the defendants intended to put in issue the plaintiff’s right or title to the mortgage. They first, by a general denial, deny every allegation in the complaint, “ except as hereinafter admitted by the said defendants.” They afterwards aver the tender to the plaintiff, and deny hi§ right to. “ tack the rents alleged to have been paid by him, upon his aforesaid mortgage.”

The next question is, whether the plaintiff, as assignee of the mortgage, could or did enlarge his mortgage to the amount of $260, by paying the rent to Van Bensselaer; whether he could tack $260 of the amount paid Van Bensselaer on or to Ms mortgage.

Most clearly he could not, as against a bona fide grantee of Mrs. Ryan, without notice of her agreement or stipulation to pay $260 of the rent due Van Rensselaer. As against such a grantee, Livingston and Wyman, the mortgagees, would not only have been estopped from thus enlarging the mortgage, by their covenant in the deed to Mrs. Ryan—for it would be presumed that such grantee bought with notice of,such covenant, even independent of the registry acts and of the fact that the deed was recorded—'but such an enlargement by them as against a subsequent bona fide grantee without notice would have been against the policy of the registry acts, and would not have been permitted without reference to the covenant in their deed. (St. Andrew's Church v. Tompkins, 7 John. Ch., 13; Frost v. Beekman, 1 John. Ch., 288.) It is very clear, then, that the plaintiff could not tack to his mortgage the $260, as against Nichols, the present owner of the premises, if Nichols were a bona fide grantee without notice of Mrs. Ryan’s agreement or stipulation to pay $260 of the rent; for the plaintiff can have no better or other right to do so than the mortgagees would have had, had they paid the rent as mortgagees.

But Nichols is not a bona fide grantee without notice. Livingston testified that he was present when the deed was delivered, and Mrs. Ryan agreed to pay $260 of the rent; that he was acting as the attorney of Mrs. Ryan in the transaction of the business. He then took his conveyance with full knowledge of Mrs. Ryan’s agreement to pay $260 of the rent; and if so, the mortgagees could have enlarged the mortgage by paying the $260 as against him, if they could have done so against Mrs. Ryan or the mortgagors; and it is very clear that the plaintiff, as assignee of the mortgage, could enlarge the mortgage as against Nichols, if the mortgagees could have done so.

The question then is, whether the mortgagees could have enlarged the mortgage, as against Mrs. Ryan or the mortgagors, by paying the rent to Van Rensselaer. Mrs. Ryan’s stipulation was, that she would pay $260 of the rent to Van Rensselaer. Her agreement was not to pay the $260 to the mortgagees. This is the fair inference from Livingston’s testimony. • If the agreement had been to pay the $260 to the mortgagees, I should much doubt whether they could have enlarged the mortgage even as against Mrs. Ryan, by paying the rent to Van Rensselaer, because, under all the circumstances, perhaps, the inference would have been that "the parties intended that the mortgagees should rely upon her.personal security or undertaking for the payment of the money, and, if the parties so intended, to have permitted the mortgagees thus to enlarge their mortgage, would have been doing violence to the understanding or agreement between the parties. But as the agreement of Mrs. Ryan was to pay $260 of the rent to Van Rensselaer,- and as the rent, considering the reentry clause in the lease, must be deemed to have been a prior lien or incumbrance on the farm, I do not see why the .mortgagees could not have enlarged their mortgage by paying the rent to Van Rensselaer.

I think the principle upon which they would have had this right is illustrated and has been enforced in the cases cited by the plaintiff’s counsel, holding that taxes, &c., necessarily paid by the mortgagee to preserve his security, may be added to his mortgage. (Silver Lake Bank v. North, 4 John. Ch., 370; Faure v. Winans, 1 Hopk. Ch., 283; Burr v. Veeder, 3 Wend., 412; Rapelye v. Prince, 4 Hill, 119.)

If the mortgagees had paid the rent to "Van Rensselaer, it' would have been considered, I think, as having been necessarily paid, because it would appear from the reentry clause in the lease, that "Van Rensselaer could at any time have reentered for the non-payment of the rent, and thus have destroyed their mortgage security. The mortgage in the plaintiff’s hands as assignee was subject to the same peril: the rent was demanded of him, and probably notice of reentry served upon him. If the plaintiff could add $260 of the amount of rent paid by him to his mortgage, it must be deemed to have been added to the principal, and to have been forthwith, due and payable.

If the foregoing views are correct, it is not necessary to examine the question of jurisdiction, or as to the effect of the tender, or any other question attempted to be raised' by the appellants. Indeed, if the foregoing views are correct, there is no question of jurisdiction, or as to the force and effect of the tender.

I think the judgment of the Supreme Court should be affirmed, with costs.

All the judges concurring,

Judgment affirmed.


author: Denio, J.

text:
    _White v. Wageb.
    The disability of a husband to take land by conveyance from his wife, is n0j¡ removed by the statute (ch. 375 of 1849) enabling her to devise and convey as if she were unmarried.

      Held, accordingly, that a deed executed by a wife, in contemplation of death, to her husband, in good faith and voluntarily, was wholly ineffectual.
    This case came before the Supreme Court upon the submission of a controversy, pursuant to § 372 of the Code of Procedure.
    The plaintiff claimed to recover $2,600, and interest, being the consideration of a conveyance, executed by the defendant to him the 19th February, 1855, of fifty-two acres of land. The conveyance was by deed, containing a covenant of seisin and of warranty. The case states that the defendant'derived title to the land as follows: “On the 15th day of August-1849, and before that time, Calista Wager, then being the wife of the said defendant, was seised in fee of the said fifty-two acres of land, inheriting a part from her mother, who died May 28th, 1848, and the balance from her father, who died several years previously; and, on the said 15th day of August, 1849, the said Calista Wager,— not being indebted to any person, without being influenced by the said defendant, but in good faith and without fraud, freely and voluntarily, as her own act. and deed, with intent to and for the purpose of giving the said land to the defendant, and of vesting the title to the same in him, in view and in the prospect of immediate death, to her known, and being of sound mind and understanding,— did sign, seal, acknowledge, execute and deliver, in due form of law, to the defendant, her husband, a quit-claim deed, conveying to the defendant, in his actual possession then being, the said land; the said deed expressing a consideration of one dollar; and, on the next day thereafter, departed this life, leaving the said deed in full force and effect, and also leaving her surviving two infant children,” &c. The deed was duly recorded.
    The sole question was, whether the title to the land passed to the defendant, by this deed. The Supreme Court held that it did not,- and gave judgment in favor of the plaintiff.
    The defendant appealed, and the case was submitted on printed points.

      Samuel Love, for the appellant.

      Marcus Lyon, for the respondent.
   Denio, J.

It is an established doctrine of the common law, that, in consequence of the unity of person between husband and wife, neither the husband nor the wife can grant, the one to the other, an estate in possession, reversion or remainder, to take effect" in possession during the life time of the grantor. (Littleton, § 168; Co. Litt., 3, a, 112, a; Hargrave’s Note, 12, and cases referred to; Bell on Property of Husband and Wife, 470; Firebrass v. Pennant, 2 Wils., 254; Shepard v. Shepard, 7 John. Ch., 57; Voorhees v. The Presbyterian Church of Amsterdam, 17 Barb., 103, and cases cited by Hand, J.; Simmons v. McElwain, 26 Barb., 419; Dempsey v. Tylee, 3 Duer, 73.) There are some exceptions to the rule, not necessary to be adverted to here, but which will be found sufficiently stated in the treatise of Mr. Bell, at the place cited. The rule itself is one of those stubborn mandates of the common law which requires absolute obedience from the courts, whatever they may think of the justice or equity of its application in a par* ticular case. In the case referred to, from Wilson’s Reports, where a provision by a husband for his wife was in question, the judges said they would be glad, if possible, to get over that maxim of law,* that “a husband and wife are one person,” and, therefore, cannot grant lands to one another. “But,” they said, “we are dealing with a fundamental maxim of the common law, and might as well repeal the first section of Littleton, as to determine this grant from the husband immediately to the wife to be good, and where there-is not so much as the shadow of a person intervening.” The reporter adds, that the postea was ordered to be delivered to the defendant, “ reluctante tota curia.” But it is, nevertheless, a very technical principle; and where the design is for a husband to convey to the wife, it may be evaded, in various ways, as by a feoffment to a third person to the use of the wife, or a covenant with a third party to stand seised to the use of the wife (Bell, ut sup.); or, where the wife desires to convey to her husband, the two may join in a conveyance to any one whom they can trust to convey immediately to the husband; and thus the title will be vested in him. (Merriam v. Harsen, 2 Barb. Ch., 232.)

Thus far, there is no serious controversy between the counsel for the respective parties; but the defendant’s counsel insists that, if it be assumed that this conveyance of Mrs.' Wager to her husband would be void at common law, the recent statutes respecting married women have changed the rule, and that now a wife may execute a valid conveyance to her husband, notwithstanding their coverture. In examining these statutes, it is necessary to bear in mind that the wife was formerly subject to other disabilities except the want of power to make a conveyance to her husband. At common law, she could not convey to any one' except by the expensive and dilatory process of fine and recovery; but afterwards, by statute, she was enabled to execute a valid deed of her lands by joining with her husband, and submitting to an examination to show that she acted without coercion; but she could not devise her lands. As to her capacity to accmire the title to property to her own use, the rule was, that all the personal estate which she possessed at her marriage, and all which came to her by any title during coverture, even when received as a compensation for her personal services, vested immediately in her husband, unless it was protected by a settlement to her sole and separate use. If she was the owner of land at the time of •her marriage, or acquired title to it during coverture, the husband immediately became entitled to the rents and profits of it, and was at once seised of a freehold estate in it. Hone of these disabilities attached to the condition of a married man, who was as free to receive the title to property, and to dispose of it, after marriage as before, with the single exception that he could not be the grantee of a deed executed by his wife, or make a grant directly to her. As to the world in general, the estate of marriage did not affect his ability to acquire title to, or to dispose of his property just as he might have done if he had not been married. ' I except, of course, from this remark, the subject of dower, the inchoate right to which the husband could not dispose of. But it was never supposed that the husband’s rights and powers as to property, as affected by the marriage relation, ought to be, or were, susceptible of being increased. The marriage imposed no disability on his part which any one considered a social grievance. On the contrary, the complaint was that his rights were too great, and ought to be diminished. But as to the wife, there came to be a pretty strong sentiment that she was the victim of an oppressive legal system, from which she ought to be relieved. This was a prominent subject of debate in the Constitutional Convention which sat in 1846; and the substance of the subsequent act of 1848 was at one time incorporated into the project of the new Constitution, but it was finally rejected by a close vote. (Debates, by Croswell and Sutton, pp. 55,116, 794, 795, 811-813.) The advocates for a reform as to the legal condition of married women then addressed themselves to the legislature, and the result, in the first instance, was the act of 1848 (ch. 200). It constituted the wife the sole proprietor of all the property of both kinds which she should own when she came to be married, and of all which shotdd devolve upon her by any title daring the coverture. It attempted to divest rights already vested in her husband under the antecedent law, but as to that it was ineffectual. (Westervelt v. Greig, 2 Kern., 202.) But it did not confer upon her the capacity to convey or devise real estate. (Wadhams v. The American Home Missionary Society, 2 Kern., 415.) This was done by the act of 1849 (ch. 375), which authorized a married woman to convey and devise real and personal property, and any interest or estate therein, and the rents, issues and profits thereof, in the same manner and .with the like effect as if she were unmarried. The first mentioned act is entitled, an act for the more effectual protection of the property of married women; and the other is an act to amend the one first mentioned. But independently of this explicit statement of the object of the legislature, it would be quite apparent from the provisions of the acts that the design was, not to confer any additional advantages upon married men, but that it was intended solely for the benefit of the other party to the marriage relation: what is now claimed for the act of 1849 is, that it enables a husband to take a title to realty directly from his wife, contrary to the rule of the common law which has been referred to. We would not expect to find in a law, passed professedly to shield the property of married women from the control of their husbands, a provision making it more easy for the latter to acquire such control. Beyond all doubt the greatest peril to which the separate estate of the wife is exposed, is her disposition to acquiesce in placing the title to it in the hands of her husband. This the common law prevented to a certain extent by rendering her direct conveyance to him void. I am quite confident that the legislature which passed the acts of 1848 and 1849, would not knowingly have repealed that prohibition in the interest of the husband. If it had been intended to interfere with the doctrine at all, it would have been in the interest of the wife. Kow, we know that the common law rule was in the contemplation of the legislature when these statutes were under consideration, for in both of them the power of a feme covert to take property by gift, grant, &c., is limited by the qualifying words, “from any person other than her husband.” Thus it will be perceived that they refused to abrogate the rule where the question was respecting conveyances from the husband to the wife, though the disability of the latter to take property to her own use was the evil which it was intended to remedy. The ability of the husband to take property conveyed to him was not at all under consideration, and he was left to such rights in that respect as the antecedent law gave him.

But it is argued that the power in terms given to a married . woman, by the act of 1849, “ to convey and devise real and personal property,” “ as if she were unmarried,” embraces all manner of conveyances, and necessarily includes any which she might make to her husband. No doubt there was an intention to confer upon the wife the legal capacity of a feme sole, in respect to conveyances of her property, but this does not prove that she can convey to her husband, for no such question could possibly arise in respect to a feme sole, there being no person to whom, in respect to conveyances as made by her, the rule of the common law could apply. By assimilating the case of a wife to that of an unmarried woman, the legislature merely meant to say that she should have the same power as though she were not under the disability of coverture. Taking away that disability, she would have power to make all such conveyances as were not forbidden by special provisions of law; but such general statutes are never understood to overreach particular prohibitions, founded on special reasons of policy or convenience. Corporations cannot, in general, take title to lands by will. The removing of the disabilities of femes covert would not allow them to make a devise to a corporation not authorized to take. It is not the disability of the wife alone which would, by the common law, render void her conveyance to her husband. The husband is as much disabled to take under such a conveyance as she was to convey. Therefore, to render the conveyance valid, the husband’s disability, as well as that of the wife, must be removed; but, as has been remarked, there is no language in these acts, and nothing in their apparent intention, which looks to the removal of any disabilities under which he labored.

Upon the whole, I am of opinion that the acts of 1848 and 1849 have no influence upon the case, and that the principle which renders direct conveyances between husband and wife void, applies to her deed under which the defendant claimed title to the premises in question.

I agree, also, with the Supreme Court, that the defective conveyance cannot be aided by the application of equitable principles. It was wholly without consideration, and in such cases equity does not interfere. (See the cases cited in Shepard v. Shepard, 7 Johns. Ch., 57.)

The judgment of the Supreme Court must be affirmed.

Wright and Smith, Js., dissented.

Judgment affirmed.