author:
Campbell, J.
      Wright, J.

text:
    William Murray, Appellant, v. Michael Walker, Respondent.
    A party making title to premises by the assignment of the legal title as security for a debt, holds the same in the character of mortgagee, and as mortgagee cannot maintain ejectment for the possession of the premises. (2E. S., 312, §51.) A deed of conveyance, absolute upon its face, if intended for the security of a debt, is in equity a mortgage.
    If one, holding as assignee, and for security, a certificate of sale by the State from the surveyor-general, pays up the balance due the State, and takes a patent for the premises, he nevertheless holds as mortgagee in equity, although the legal title, upon the face of the patent, be absolutely in him.
    This is an action of ejectment, brought to recover the possession of certain lands and premises in the city of Auburn. The land in controversy belonged to the State, and was part of the Auburn State prison property, and was sold in 1847 under and by virtue of an act of the legislature passed in that year. One Theron Green became the purchaser, and received on the 17th of September, 1847, a certificate of purchase from the then surveyor-general of the State. This certificate stated that Green had purchased, that he had paid a part of the purchase-money, and that the balance was payable in the manner required by chapter 9, title 5, part 1 of the Revised Statutes of 1829. This certificate was shortly afterwards, and in November, 1847, assigned by Green to one David L. Stanford. On the 5th day of January, 1853, Stanford assigned this certificate to the plaintiff, authorizing and empowering him to take and receive a deed for the premises for his own use and benefit, but adding in the assignment that it was made “ to secure the payment of eight hundred and fifty dollars, with interest, two years from this date.” Stanford went into possession at the time of the assignment to him by Green, and made valuable improvements, erected buildings, and by himself and his tenants remained in possession down to the 14th October, 1857, when the premises were purchased under a foreclosure sale by the lessor of the defendant. The mortgage thus foreclosed was executed by Stanford to Erastus Corning, 10th August, 1855, more than two years after the transfer of the certificate to the plaintiff. The premises were sold under a foreclosure of this mortgage and purchased by Corning on the 14th October, 1857, and defendant, who had been the tenant of Stanford, remained in possession as the tenant of Corning. On the 11th of September, 1857, and while the mortgage of Corning must have been in process of foreclosure, the plaintiff, continuing to hold the assignment of the original certificate of the surveyor-general, obtained a patent of the land from the State, and subsequently brought this action to recover the possession. The justice before whom the cause was tried held and decided that, though the legal title was in the plaintiff, it was so only in form ; that he was, in fact and in equity, only a mortgagee, and had no right to the possession; and granted a nonsuit. The judgment was affirmed at a General Term of the Supreme Court in the seventh district, and plaintiff appealed to this court.

      George Rathbun, for the appellant.

      -Cox, for the respondent.
   Campbell, J.

Since an equitable defense may now be interposed to an action of ejectment, as well as to any other action at law, it would seem, from the conceded facts in this case, that there could hardly be room for doubt as to the correctness of the decision of the Supreme Court. ' What is a mortgage, in its comprehensive sense ? Kent "says (vol. 4, p. 151, of his Commentaries), A mortgage is the conveyance of an estate by way of pledge for the security of debt, and to become void on payment of it. The legal ownership is vested in the creditor, but, in equity, the mortgagor remains the actual owner, until he is debarred by his own default or by judicial decree.” In this case, the plaintiff, by the assignment of the certificate and the patent, became the legal owner. -But, in equity, Stanford remained the actual owner. As such, he made the improvements and mortgaged the premises to Corning, and the latter, by foreclosure of his mortgage and purchase, became the actual owner. He foreclosed and cut off the equity of redemption, as between him and Stanford, and by his purchase became the owner of such equity, and then interposes it as a defense to the plaintiff’s claim, which is that of legal owner. These are simple and elementary principles, and are controlling. The plaintiff never foreclosed the equity of redemption of Stanford—never took any steps, except to perfect the title by the patent. As holder of the certificate, the plaintiff, with the consent of the commissioners of the land office, could have brought an action for injuries done to the land, the same as if a patent had been granted. (1 R. S., 5th ed., p. 541, § 30.) By the express terms of the statute he was entitled to the patent, on payment of the balance due on the certificate. Plaintiff has, at all times since the transfer of the certificate to him, been virtually the legal owner; while Stanford was, at all times, down to the foreclosure sale, the actual owner. This is simply, therefore, an action of ejectment by the mortgagee against the owner of the equity of redemption; in other words, the actual owner in possession. The fact that the conveyance under which the plaintiff claims, namely, the patent, is absolute on its face, makes no difference. The certificate which was the foundation of the patent, and as holder of which the plaintiff’ procured the patent, recited that it was assigned merely as security. As was said by the chancellor, in Clark v. Henry (2 Cow., 327), “ though the conveyance be absolute in terms, yet if the intention appear to make the estate redeemable, it will continue so until foreclosure; for the maxim of equity is, that the estate cannot be a mortgage at one time and an absolute purchase at another.” The obtaining the patent was in no sense a foreclosure, neither in fact nor technically. There was no advertisement and sale constituting a statute foreclosure. There was no action commenced and prosecuted, making the owner of the equity of redemption a party. The plaintiff was clearly not entitled to the possession of the premises, and his complaint was properly dismissed. ,

The judgment should be affirmed.

Wright, J.

The premises, which belonged to the State, and were, by an act of the legislature, ordered to be sold, were on the 17th September, 1847, purchased by one Theron Green, the latter receiving from the surveyor-general a certificate of purchase. Green held the certificate until the 3d November, 1847, when he assigned to David L. Stanford all his right, title and interest in the certificate, and in the land and premises mentioned therein. Stanford went into possession, and erected a building, putting in the defendant as tenant. In August, 1855, Stanford mortgaged the premises to Erastus Corning, óf Albany; which mortgage was foreclosed in October, 1857, and the premises bid in by Corning, under whom the defendant continued to hold as tenant.

On the 5th January, 1853, Stanford assigned his certificate of purchase to the plaintiff, the assignment on its face expressing that it was “ to secure the payment of eight hundred and fifty dollars two years from this date.” On the 11th September, 1857, the plaintiff paid up the balance due on the certificate, and took the title to himself by patent from the State.

Corning having foreclosed, and the defendant being in possession as his tenant, in December, 1857, the plaintiff, brought this action of ejectment. The question is, can it be maintained ?

If the court below were right in the conclusion that the plaintiff’s title was a mere mortgage, although, in form, he held the legal title, ejectment could not be maintained, as the statute declares that “no action of ejectment shall be maintained, by a mortgagee or his assigns or representatives, for the recovery of the possession of the mortgaged premises.” (2 R. S., p. 312, § 57.) This statute forbidding the action, as was held in Stewart v. Hutchins (13 Wend., 486), “embraces in terms every description of mortgage which could previously have been made the foundation of an action of ejectment.” The question then recurs as to the nature of the plaintiff’s title.

I think the Supreme Court decided correctly. The interest which the plaintiff had in the premises, was derived from the assignment of Stanford to him in January, 1853-, This assignment was, on its face, nothing but a mortgage. It is expressed in terms to be made to secure the payment of $850, with interest two years from its date, and a transfer of property as security, is, in equity, but a mortgage. A deed or conveyance, absolute on its face, if really only intended to secure a debt, is deemed, in equity and at law, a mortgage, though the defeasance is by parol. But here the instrument was not an absolute assignment of- Stanford’s whole interest. Being, then, an assignment by way of mortgage, as between the original parties and their representatives, the rule applies “ once a mortgage, always a mortgage.” Clark v. Henry (2 Cowen., 327). The character and quality of a mortgage, and the right of redemption, as an inseparable incident, continued. This right of redemption is favored in equity, and the policy of our system of jurisprudence forbids the barring of it, except by the regular methods prescribed by law. Stanford and his assigns had this right, and could only be divested of it by a foreclosure. The fact that the plaintiff advanced the unpaid purchase-money, and took the title by patent from the State, in virtue of his right as mortgagee of Stanford’s interest, did not alter the relation or rights of the parties. Holding in form the legal title under the patent, placed him in no other or different relation, or in a position more defiant of equities, than in any case where the mortgagor conveys the absolute title in form, but in substance as the mere security for a debt. The equity of redemption of Stanford and his assigns,- stiff clung to the plaintiff’s title. It cannot be doubted, that after the patent had been procured, Stanford, upon tendering to the plaintiff the amount to secure which the contract was assigned, and the amount due on it which the plaintiff paid to the State, with interest on those sums, could have compelled the latter to.convey to him the premises described in the contract or certificate.

But Stanford, who was in possession when he assigned to the plaintiff and at the time of default of payment, instead of redeeming, mortgaged to Corning, as if he held in fee. Corning foreclosed his mortgage, Stanford transferred to him the possession of the premises, and the defendant Walker attorned to him as tenant. This conveyance of the premises to Corning by Stanford (although by way of regular mortgage and foreclosure) transferred with the possession at least all Stanford’s equities of redemption. The right of redeeming from the plaintiff, which was before in Stanford, was then in Corning; and had the plaintiff then filed his bill against the defendant, Corning would have had the right to answer; and either contest the honesty of the loan, or tender the money and redeem. But he was not bound to move until the plaintiff proceeded to foreclose in the regular way; nor could Stanford, after conveying to him all his rights, by any consent or collusion with the plaintiff, effect the ends of foreclosure, in some summary way as against him.

.The case turns wholly upon the construction of the instrument of July, 1853. If that was a mere mortgage of Stanford’s interest, (which I think it was), and not a conditional sale of the certificate, and of his interest in the land therein described, as the plaintiff’s counsel claims it to be, I do not understand it to be seriously contended that it lost (as between the original parties and their representatives) its character as a mortgage by any subsequent action of the mortgagee. Being a mortgage, the plaintiff could not recover in ejectment, for the statute forbade it.

I think the judgment should be affirmed.

All concur except Denio, Ch. J., who dissented.

Judgment affirmed.


source: Caselaw Access Project

author: Davis, J. Wright, J.

license: Public Domain

text:
    Wm. White, Respondent, v. James M. Nellis, Appellant.
    A parent may maintain an action against the defendant for debauching his minor daughter and communicating to her a venereal disease, by which she was made sick and unable to labor.
    This action is not maintainable upon the mere relation of parent and child; but only upon that of master and servant.
    To maintain this action, it is not sufficient to prove the seduction merely; but the plaintiff must show that a direct injury to his rights as master resulted therefrom.
    Wherever the wrongful act, by immediate and direct consequence, deprives the master of the services of his servant, or injuriously affects his legal rights to such service, the law gives the remedy.
    It is not sufficient to defeat the plaintiff’s right of action, to prove that the daughter had had illicit intercourse with two other persons about the same time.
    This was an action in the case for debauching the plaintiff’s minor daughter, and communicating to her a venereal disease, by which she was made sick and unable to labor. It was tried at the Oswego Circuit in December, 1856, and the plaintiff had a verdict for $500.
    The testimony of the daughter tended to show that she was seduced by the defendant while she was living at his house, and had frequent connections with him; that before she left his house she felt symptoms of the disease of which she was subsequently ill; that she left defendant’s on the 21st day of January, 1856, and went to Sangerfield with one Loomis, and remained there several days, and while there had connection with two young men; that she returned to the plaintiff’s house, and was there sick with the gonorrhea for several weeks, and was unable to work, and was attended by a physician.
    The physician testified that he attended the daughter about the first of February, and that she was diseased as above stated. That his bill for medicine and attendance amounted to $30.
    There was evidence tending to show the lewd character of the girl, her sexual Intercourse with others, and to throw discredit upon her testimony.

      The defendant’s counsel asked the court to instruct the jury: 1st. That loss of service from a disorder, contracted by the illicit intercourse, was not sufficient ground to sustain the action. 2d. That in this case there was not sufficient proof that the girl’s disease was taken from the defendant, she having admitted and proved that she, at about the same time, had connection with two other persons.
    The justice refused to charge on these propositions as requested, and defendant’s counsel duly excepted.
    Sedgwick, Andrews & Kennedy, for the appellant.

      C. Whitney, for the respondent.
   Davis, J.

The plaintiff was bound affirmatively to establish that the disease was communicated to his daughter by the defendant. To do this it would not be sufficient merely to show that defendant and two other persons had had sexual intercourse with her at about the same time, and within a , few days prior to the development of the disease.' That, proof would make a case of conjecture only, that ought not to be submitted to a jury for the exercise of their ingenuity in guessing at possibilities. But there was some slight evidence from the girl tending to show that the symptoms of the disease were manifested before she had the connection with the other persons; and though it would not have been unsatisfactory to me if the court had nonsuited the plaintiff on the ground suggested by the request, yet it was not error to decline to instruct the jury as requested by defendant’s counsel. To have adopted the form of his request would not have been a correct presentation of the whole of the girl’s evidence; and that is a sufficient answer to the exception. The court was not asked to interfere with the case, in any other manner upon this ground; and we are not at liberty to disturb the verdict as against evidence, whatever may be our views of its abstract justice.

The only remaining question for consideration is whether proof that a disease was communicated by the act of seduction, by which the daughter was rendered unable to work, is. sufficient to maintain the action. This action is not maintainable upon the relation of parent and child, but solely upon that of master and servant. (Bartley v. Richtmyer, 4 Comst., 38, and cases there cited.) The latter relation existed in this case because the debauched girl was the minor child of the plaintiff, and although living at the time of the seduction with the defendant, the father might have commanded her services at pleasure. (Martin v. Payne, 9 Johns., 387; Clark v. Fitch, 2 Wend., 459; Ingersoll v. Jones, 5 Barb., 661; Honketh v. Barr, 8 Serg. & Rawle, 36; Mulvehall v. Millward, 1 Kern., 343; 4 Comst., 38.)

It is not sufficient to sustain the action to prove the seduction merely. That is the wrongful act from which it must appear that a direct injury to the relative rights of the master has followed. The right of the master, as recognized by the law, is to have the services óf the servant undisturbed by the wrongful act of another. Whenever the wrongful act, by immediate and direct consequence, deprives the master of the service of his servant, or injuriously affects his legal right to such service, the law gives a remedy. In cases of debauchery, the ordinary consequences that affect the master are the pregnancy and lying-in of the servant, during which she is unable to render him service. Hence the precedents of pleadings in this form of action have perhaps invariably alleged a loss of service through those consequences. But it by no means follows that there is no remedy where the loss of service is the direct effect of the wrongful act, although produced by some other consequence. All that the law can require is darnmum et injuria ; for these constitute, when directly connected, the proper and complete elements of an action on the case. (3 Stephens N. P., 2353.) And wherever they combine as an immediate cause and effect, the law cannot deny a remedy without a departure from principle.

It is plain that a seducer who imparts to his victim a vile, contagious disease, does an act as abhorrent to morality, and more so to nature, than one who gets her with child. It is less likely perhaps to bring her to public shame, but only because less likely to be disclosed; and it may be doubted whether the feelings of relatives, rightly appreciative of virtue, would be more lacerated by the one consequence than the other. But these suggestions are aside from the real question, which is, whether the law refuses a remedy to a master who has been deprived of the labor of his servant by a disease communicated by the wrong which consummated her seduction. No case quite like the present has been cited in which the remedy has been denied; and none has been found where the precise question was involved. In Manvell v. Thompson (2 Car. & P., 303), the plaintiff sued for the seduction of a servant, who was his niece. The evidence of loss was that she was in a state of very great agitation and continued so for some time, and that she received medical attendance, and was obliged to be watched lest she should do hers'elf some injury. The plaintiff was allowed to recover. This was a nisi prius case, and its authority is shaken by the criticism of Wright, J., in Knight v. Wilcox (4 Kernan, 413.) But the last named case did not involve the point of this case, nor the question in Marvell v. Thompson, so far as that affects the point now under consideration. The question in Knight v. Wilcox was whether loss of service, produced by illness consequent upon a discovery of the seduction several months after it occurred, was such a direct result of the wrongful act as would sustain the action. This court held that the loss of service in that case did not flow directly from the seduction, but from causes too remote and indirect to be the basis of the action. That principle cannot govern here, for nothing is clearer than that the loss of service in this case was the direct and immediate consequence of the disease imparted by the wrongful act.

In Boyle v. Brandon (13 Mees. & Wels., 138), the action was for seduction where there was no pregnancy. The girl had lived for a considerable period in criminal intimacy with the defendant. He abandoned her, and she fell sick in consequence of his desertion. The court held that the loss of service did not result from the wrong, but from its cessation, and therefore the action would not lie; but it was not intimated that the action could, not he sustained without proof of pregnancy.

In note 30 to 2 Chitty’s Blackstone (p. 115, m. p. 143) it is said, “the action would probably be sustained upon the evidence of a consumption or any other disorder contracted by the daughter in consequence of her seductionbut the remark is sustained by no authority other than the good sense of its author.

But, as already suggested, in the absence of all authority, this action may stand upon sound principle. It is maintainable because a wrongful act has caused a direct injury to a lawful right. In such case, the right of the master to a remedy for an injury to his enjoyment of the services of his servant is equally clear, whether it be produced by beating and wounding the servant, or enticing him from employment, or forcibly abducting him, or wrongfully debauching and impregnating with child, or with disease. Nor, in my judgment, does the remedy depend upon the sex of the servant. The debased woman who lures to her vile embrace an innocent boy, and infects him with loathsome disease, is equally liable to this action if an injury to his master’s right to service follow from her crime. No want of precedent would shield her from the consequences of iniquity when injurious to the rights of parties not participating in her guilt.

The fact that a different rule as to damages prevails in actions for seduction than that applied to other injuries to relative rights which result in loss of service, has, in my opinion, no bearing upon the question. We have now to determine the abstract right to maintain any action at all; and that is something quite independent of the question what damages may be recovered if the action be allowed. If the action can be maintained it is not perceived that any rule governing the question of damages has been violated.

I think the judgment below must be affirmed.

Wright, J.

The evidence justified the jury in finding, and they must have found, that the plaintiff’s minor daughter, whilst temporarily in the service of the defendant, was .debauched by him, and that, from the illicit connection, the daughter contracted a vile disease, on account of which the plaintiff lost her services and incurred medical expenses for her cure. • The only question that such a case can possibly •present is, whether loss of service from a disorder contracted by the illicit intercourse is sufficient ground to sustain the action; or, to state the proposition a little differently, as the loss of service was the direct result of the seduction, whether an action for seduction can be sustained where there is no pregnancy.

I think it is not essential to the maintenance of the action that the illicit intercourse should be followed by pregnancy. The foundation of the action is, the loss of service resulting to the father or master by the seduction of his servant; and when such loss of service has been actually sustained, as the direct effect of the seduction, it is enough. It certainly cannot be important to the right of action whether the father loses the services of his child by illness arising from pregnancy, or from a vile disorder contracted by connection with her seducer.

The judgment should be affirmed.

All the judges concurring,

Judgment affirmed.


author: Davis, J.

text:
    Douglass W. Williams, Respondent, v. Sarah Townsend, Appellant.
    The purchase at a tax sale does not operate to discharge the assessment, or to deprive the owner of his equity of redemption under the statute.
    Where a mortgage provides that the mortgagor shall pay the taxes and assessments upon the mortgaged premises, and, in default of so doing, that the mortgagee may discharge the same, and collect them as a part of the mortgage, the failure of the mortgagor to pay the taxes is not such a breach of the condition of the mortgage as will give the mortgagee the right to foreclose and collect the whole amount secured.
    Where the premises have been sold for non-payment of assessments, and the mortgagee has bid them in, and taken the certificate of sale, he has not thereby paid the taxes on said premises.
    This was an action to enjoin the sale of mortgaged premises under a statutory foreclosure.
    The plaintiff executed to the defendant’s assignor, his bond and a mortgage of premises situated in Buffalo, dated the 8th day of February, 1853, to secure the payment of $2,640, in ten years from the date thereof with annual interest, which mortgage contained a further condition in these words: “ and shall also pay all assessments, taxes and charges on the said premises to be charged on the same, and in case of default in paying the same, the said parties of the second part and their representatives, may discharge such assessments, taxes and charges, and collect the same with interest from the time of such payment under this mortgage, in the manner particularly specified in the condition of a certain bond or obligation bearing even date herewith, &e.” The condition of the bond so far as it relates to the question in this case, was in these words: “ and shall also pay all assessments, taxes and charges on the premises described in the mortgage bearing even date herewith and collateral hereto, and in' case of any default in paying the same, the said” (obligees) “ may discharge said assessments, taxes and charges, and collect the same with interest from the time of payment as part of this bond, and the said mortgage.” The mortgage contained a power of sale, providing that if default should be made in the payment of all or any part of the said principal sum of $2,640, “ or of the assessments, taxes and charges as aforesaid, or of the interest thereof, at the time or times when the same ought to be paid,” then and in such case the mortgagees were empowered to sell the premises at public vendue, &c. “And. out of the moneys arising from such sale or sales, to keep and retain in their hands the said sum of two thousand six hundred and forty dollars, together with such assessments, taxes and charges as shall have been paid by them, together with all costs, charges and expenses, on account of such sale or sales.”
    In 1856 the city of Buffalo assessed upon the said mortgaged premises, taxes amounting to thirty-three dollars and sixty-six cents, for which the premises were sold at auction, by the comptroller of said city, on the 27th day of May, 1857, for taxes, interest and expenses, then amounting to $36.75. The premises were bid off by one M. E. Yiele for the term of five hundred years, and certificates pursuant to the provisions of the charter of said city were issued to him by said comptroller, in his name.
    Yiele was, in fact, the agent of defendant, who was then the assignee of the mortgage, and bid off the said premises for her, taking the certificates in his own name, as he testified, “ for convenience of transfer.”
    On the 1st of August, 1857, the defendant, by her attorneys, commenced a foreclosure under the statute by advertisement in one of the Buffalo papers, which advertisement properly described said mortgage, &c, and claimed to be due thereon “ $2,640 and interest thereon from February 8,1857; and also the sum of $36.75, with interest thereon from March 27, 1857.” There was, in fact, no part of the principal of said mortgage or of interest thereon then due and unpaid. Before the day of sale mentioned in said advertisement, the plaintiff paid to the comptroller of the city of Buffalo the amount legally necessary to redeem the premises from such tax sale; and defendant refusing to discontinue the proceedings of foreclosure, the plaintiff commenced this action to restrain her from selling said premises.
    The court at Special Term held as a question of law “ that the purchase by the defendant at the tax sale, and the taking and holding by her of the tax certificate did not discharge the assessment, taxes or charges for which said premises had been sold at such saleand that “ the defendant was not entitled to enforce the repayment of the amount paid on such purchase as a part of the condition of said mortgage,” and ordered judgment for the plaintiff.
    The judgment was affirmed by the General Term of the 8th district.

      Learned, Wilson & Coch, for the appellant.

      Le Grand Marvin, for the respondent.
   Davis, J.

By the condition of the bond and mortgage the defendant undoubtedly had a right, after failure by the plaintiff to pay the taxes assessed on the mortgage premises, to pay and discharge the same, and thereupon to collect the amount so paid by suit upon the bond or by foreclosure of the mortgage. And the principal question in this case is, whether the purchase of the premises at the tax sales and the taking certificates of such purchase under the provisions of the charter of Buffalo, were a discharge of the assessments and taxes, within the true construction of the bond and mortgage.

By section 20 of title 5 of the charter of the city of Buffalo, as revised by the Laws of 1856, it is provided that the owner of any real estate sold for taxes may at any time before a declaration of sale is granted, as elsewhere provided by the charter, redeem the same by paying to the city treasurer, for the benefit of the holder of such certificate, the amount paid by him with the addition of fifteen per cent per annum on such amount.

The certificates are transferable; and it cannot always be easily ascertained who the holder is. Hence the statute has provided that the redemption may be made by payment to the city treasurer. In all cases of sales for taxes the owner of the land is clothed by law with this right of redemption; and the tax together with the expenses of the sale remain a lien on the premises assessed, with an. addition thereto of fifteen per cent, until the redemption or payment to the treasurer is made. The effect of the sale is therefore merely an assignment of the lien of the tax and the expenses then incurred, enhanced by the additional per centage; and this lien continues till the owner of the land makes the redemption, or the holder of the certificate takes title to the property in the prescribed form. It is therefore clear that the tax or assessment is not discharged by the sale and certificate. In this case the purchase at the tax sale was made by M. E. Yiele, and the certificates of the comptroller were made to him, as he says, for convenience of transfer.” He was in fact the agent of defendant, but there was nothing in the manner of sale or form of the certificate to indicate that fact. The legal rights of the parties are perhaps the same as though the certificate had been made to the defendant; but it would certainly be very embarrassing to titles of real estate if the owner’s right of redemption were dependent upon some undisclosed relation of agency between the apparent purchaser and the incumbrancer of the land. There would be no safety for him if he were not allowed to redeem; because the ostensible purchaser could transfer the certificate to a bona fide holder and subject him to great embarrassment and perhaps to the loss of his land. A mortgagee, who desires to pay off taxes or assessments and charge them on the mortgaged premises, has a very plain course to pursue. At any stage of the proceedings he can step forward in his character of mortgagee and pay the assessment or redeem from a sale before the purchaser’s title has actually ripened by a conveyance finder the law. It is no hardship to require him -to do this in a plain and distinct manner, so as not to embarrass the title of the mortgagor or owner. When, however, he purchases at a tax sale and takes a certificate as purchaser, that is an election on his part to occupy the relation of purchaser, with all the rights and incidents which the law attaches to it. He becomes then the owner of an undischarged lien, which the owner of the land may discharge in the manner provided by law.

But it is insisted that the purchase and taking of the certificate by a mortgagee, who has the right by the terms of his mortgage, or under the general statute, to pay off taxes and add the amount so paid to the lien of his mortgage, is by operation of law, ipso facto, an extinguishment and discharge of the tax. To support this proposition the familiar principle that a person who is placed in a situation of trust or confidence in reference to the subject of the sale, or has a duty to perform which is inconsistent with the character of a purchaser, cannot be a purchaser on his own account. (Torry v. The Bank of Orleans,.7 Paige, 649; Van Epps v. Van Epps, 9 Paige, 257; Burhans v. Van Zandt, 3 Seld., 523.)

But this principle has never been carried so far as to pre ■ vent a junior mortgagee from purchasing the subject matter of the mortgage at a sale under a prior lien; nor has it been held that a title fairly purchased at such sale was held for the benefit of the mortgagor. A mortgage is a mere security for a debt; and there is no such relation of trust or confidence between the maker and holder of a mortgage as prevents the latter from acquiring title to its subject matter, either under his own or any other valid lien. The defendant had no duty to perform to the plaintiff or toward the mortgaged premises that precluded her from buying at the tax sale. She was under no obligation to pay the taxes. The plaintiff had covenanted that she might do so at her option, and thereby acquire certain rights; but she had not undertaken to do it nor subjected herself to any burthen or obligation whatever in respect to the assessments or taxes. She might pay them or not, as she chose, or she might stand upon her general rights and purchase at the tax sale, as others could do, for the purposes of investment or protection. But if this were not so, all that the principle sought to be invoked would require is that as purchaser‘she should take a redeemable interest only which never could ripen as against the mortgagor into a greater one, and not that the lien she purchased should be discharged or extinguished, leaving her to no remedy except the possibly inadequate one under the covenants of the bond and, mortgage. It is my opinion, therefore, that the purchase at the tax sale did not operate to discharge the assessment and deprive the plaintiff of his right of redemption under the statute.

But it is urged that the failure of plaintiff to pay the tax was a breach of the condition of the mortgage, and gave defendant a right to foreclose and collect the whole amount secured. There is no clause of the mortgage mating the whole sum due on failure to pay the interest, or on breach .of any condition. The clause which authorizes the retention by the mortgagee of the whole amount secured after a sale of the premises, does not have the effect claimed for it; nor do I think it would countervail the provision of the statute which requires a sale in parcels, when that is practicable, and prohibits a sale of more than sufficient to pay the amount actually due with the expenses of sale. (3 R. S., 5th ed., p. 860, § 6.) But no right to foreclose would accrue upon a simple failure of the mortgagor to pay the taxes; to give that right it is essential that the holder of the mortgage shall have paid off and discharged the assessment or tax, otherwise no money has become due which the mortgagee is entitled to retain on a sale. The language of the mortgage settles this, for it provides that “ such assessments, taxes and cha/rges as shall home leen paid ly them ” may be retained.

Besides, in my judgment, a mere naked breach of such a covenant in the condition of a mortgage, without the payment of any amount, .would give no right to commence a foreclosure under the statute; but this it is not necessary to determine.

I think the judgment should be affirmed.

Judgment affirmed.


author:
Denio, Ch. J.
      Campbell, J.

text:
    Leonard Kirby et al. v. Patrick Fitzgerald. Delaware and Hudson Canal Company v. The Same.
    Where there are surplus moneys in the hands of the mortgagee arising upon the foreclosure of a mortgage under the statute, and two several actions have been brought by judgment creditors of the mortgagor to obtain such surplus, to be applied on payment of their respective judgments, and a reference has been ordered to determine to whom, as between the plaintiffs, the same shall be delivered, and neither party appeals from such order, or applies for an order for the referee to report the evidence, the proceeding must be treated in all respects like an order made in pursuance of the 16th rule of the Supreme Court, to settle the right to surplus moneys in foreclosure cases.
    By omitting to appeal from such order of reference, both parties consent to that method of determining their respective rights.
    A statement, in effect* that the defendant had purchased of the plaintiff a certain indebtedness (describing it), due to the plaintiff, for which he had given to the plaintiff the promissory notes (describing them), upon which and for the amount of which he confessed the judgment, is a sufficient statement to sustain such judgment.
    In such case, it is not necessary to set forth the consideration of the debt purchased.
    Where a judgment is confessed directly to a third party, who takes the same in good faith and for value, it cannot be impeached for fraud existing between the other parties.
    But if such third party take such judgment as collateral security only after it has been confessed, &e., it would be otherwise.
    This is an appeal by the Delaware and Hudson Canal Company from an order of the Supreme Court, directing the payment to the plaintiff Kirby, and others, of certain surplus moneys arising upon the foreclosure of a mortgage under the statute.
    The mortgage was given by one Patrick McEntee to Fitzgerald, in 1853, upon property owned by McEntee; and, upon a sale of a parcel of the property under the mortgage, the surplus in dispute arose. It was claimed by Kirby & Co and the canal company, who were creditors of McEntee. After the sale, both of these parties claiming the surplus, suits to recover the same were commenced by each against Fitzgerald. After the commencement of these suits, Fitzgerald, upon notice to the plaintiffs in both cases, applied to the court for relief, and on the 31st of August, 1854, an order was made, directing him to bring the .surplus money into court, and it was referred to a referee to ascertain and report which party was entitled to the same.
    The parties appeared before the referee, who reported the facts, and decided, as a matter of law, that the Delaware and Hudson Canal Company were entitled to the surplus^money; and upon this report a motion was made at Special Term for an order directing its payment to them. .This motion was resisted by Kirby and Company, upon the ground that the facts found by the referee entitled them to the money; and it was so decided. An appeal was then taken by the canal company from this order to the General Term, where it was affirmed, and thereupon an appeal is taken to this court.

      R. W. Peckham, Jr., for the appellants.

      John H. Reynolds, for the respondent.
   Denio, Ch. J.

The proceeding in the Supreme Court was anomalous in its form. There were two suits depending against Fitzgerald, who, it is conceded, had in his hands $625, which were surplus moneys arising upon the sale under a statute foreclosure, of certain premises which Patrick McEntee had mortgaged to him. The plaintiffs in these two ■actions claimed to be subsequent judgment creditors having liens upon the equity of redemption. The judgment which the Delaware and Hudson Canal Company held, as assignee, was the earliest in time; but Kirby and others, the plaintiffs in the first above mentioned suit, whose judgment was second in the order of time, claimed that they were entitled to the surplus (which surplus was insufficient to pay the whole of either of the judgments), on the ground that the prior judgment, held by the canal company, was void as against them for reasons which will be presently mentioned. The suits were brought to enforce, against Fitzgerald, the pretensions of the respective plaintiffs to these surplus moneys— the whole amount in the hands of Fitzgerald being claimed in each suit. Fitzgerald applied to the court at Special Term for relief, on notice to the respective plaintiffs, who appeared by their attorneys on the hearing of the motion. The order thereupon made permitted the defendant to pay the money, after deducting his own costs, into a bank, to be held subject to the order of the court, and directed a reference to Mr. P. F. Cooper to ascertain and report which of the plaintiffs were entitled to the moneys; and he was authorized to determine upon the validity of the judgments. He reported a statement of facts, and his opinion that the plaintiffs, the Delaware and Hudson Canal Company, had the prior right to the surplus moneys by virtue of their judgment against McEntee. The Delaware and Hudson Canal Company accordingly applied to the Special Term for an order directing the moneys to be paid to them, and that motion was opposed by the counsel of Kirby and his co-plaintiffs ; but the court, upon the statement of facts reported by the referee, held that the plaintiffs, Kirby and others, were entitled to the said moneys, and directed the same to be paid to them. The order was affirmed at a General Term, and the canal company bring this appeal from that order.

This court has heretofore been moved, on the part of McEntee and others, to dismiss the appeal, which motion was denied; and on that occasion it was held that the referee’s statement of facts was in the nature of a special verdict, and that the order was appealable, and, in substance, that the question must be determined upon the statement of facts. (18 N. Y., 484.) The question on that, motion was simply whether an appeal to this court would lie from the order; that was definitely settled in favor of the right of review. The question as to the conclusiveness of the facts found by the referee was only incidentally before the court, and, perhaps, what was said upon that question was not necessary to the decision. My own judgment as to the nature of the proceeding would be that the order of reference should be treated in all respects like an order made pursuant to the 76th rule of the Supreme Court, to settle the right to surplus moneys in foreclosure cases. It certainly contains the substance of such an order, and although the rule is applicable only to foreclosure suits depending in that court, it was competent for all parties to consent to litigate the right to the surplus moneys in this case in a similar form. By omitting to appeal from the order of reference, I am of opinion that the parties did consent to that method of determining their respective rights. Heither party appealed from the order or applied for an order requiring the referee to report the evidence; but the question was brought before the court upon the statements in the referee’s report. It must, consequently, I think, be reviewed here upon these statements of fact.

Upon the merits, the question is whether the judgment under which the canal company claimed the moneys was void, either absolutely, or as against McEntee and his co-plaintiffs or not. The statement upon which the judgment was confessed was, in my opinion, a sufficient compliance with the statute. It is, in effect, that Thomas McEntee, a son of the defendant Patrick McEntee, was indebted to Colmey, the plaintiff' in the confessed judgment, in an amount exceeding two thousand dollars, and that the defendant had purchased and taken an assignment of a portion of that indebtedness to the amount of two thousand dollars, and had given the plaintiff four promissory notes of five hundred dollars each for the consideration of that purchase, copies of which notes are annexed. The confession is for the same purchase price, being the amount of these notes. A debt incurred in the purchase of property of any kind, whether real estate, chattels, or choses in action, if the purchase is real and not merely colorable, is as obligatory as any other indebtedness; and it is a liability for which a judgment may properly be confessed. It was not necessary to set forth the consideration of the debt purchased, for that was simply matter of description. The fact, out of which the debt for which the judgment was confessed arose, was the purchase by the defendant from the plaintiff of an interest of $2,000 in the debt which Thomas McEntee owed to Colmey. That is stated with sufficient precision.

The more difficult question is, whether, under the statements of the referee, the judgment was impeachable for fraud against creditors. Kirby and his co-plaintiffs were creditors of P. McEntee at the time of the creation of the debt for which the judgment was given, and at the time that judgment was confessed. They are, therefore, proper parties to attack the judgment, if it is impeachable on the ground of fraud.

On the day of the confession of the judgment, the 14th October, 1853, the canal company was the holder of four promissory notes, of $536.50 each, dated on different days in the preceding August, each at four months, and consequently maturing on the same days in the following December. These notes were made by Colmey, and indorsed by Patrick McEntee. Either maker or indorser might lawfully confess judgment in favor of the canal company for the indebtedness for which the notes were given, if it were done in good faith and without fraud. The absence of fraud on the part of that company, in the transaction which followed, is expressly found. What was actually done was this: On this 14th October, a meeting took place between one Haight, the agent of the company, and Colmey and McEntee, the maker and indorser of these notes; and it was agreed between these persons as follows: That Colmey should make a payment on the notes of a sufficient amount to reduce them to $2,000, and give four new notes, of $500 each, bearing the same dates as the old ones, and having the same maker and indorser, but payable at nine months instead of four, so that they would mature in May following, thus extending the credit five months beyond the time of the maturity of the former notes; that the company should have a judgment against McEntee for $2,000, as collateral security for these notes; that such judgment should be confessed in favor of Colmey, and be by him assigned to the company. All this was done on the same day, and in execution of that arrangement. As between Colmey and McEntee, the judgment was to be for the purchase price of the $2,000 of indebtedness existing against T. McEntee in favor of Colmey, which indebtedness was assigned by Colmey to P. McEntee, who gave to Colmey four promissory notes, of $500 each, bearing the same date and having the same time to run as the notes which Colmey had given to the company, and which notes Colmey was also to indorse, and did indorse, to the company. Certain facts are then found, tending to impeach the bona fides of this purchase of the $2,000 of the indebtedness of T. McEntee to Colmey. These are, that the alleged indebtedness was disputed by T. McEntee, who, it is said, claimed that Colmey owed him, instead of his owing Colmey. They had been partners, and there was a controversy respecting their accounts; P. McEntee was then insolvent, and he made the purchase of the interest in the debt which, it was said, his son, T. McEntee, owed Colmey, and gave the notes and confessed the judgment to Colmey, “ instead of confessing the judgment directly to the company, in order to assume that amount of T. McEntee’s alleged debt, and so give to said Colmey an unjust preference to that extent over the creditors of said Patrick, and thus to hinder and delay the creditors of said Patrick in the collection of their debts and defraud them of the same.” It is not stated that the purchase of the debt was merely colorable as between the alleged seller and purchaser. It might be fraudulent if some valuable interest was intended to pass by that purchase; for, if a debtor transfers or creates a lien upon tangible property, for an interest of doubtful validity and an unconvertible character, with the intent and for the purpose of hindering or delaying his creditors, such a transaction, supposing both parties to it to participate in the fraudulent intent, would be plainly void. The position, therefore, of the canal company can only be sustained, if it can be sustained at all, by the consideration that the company was innocent of the fraud, and that, although the judgment was not inform confessed in their favor, it was given under an arrangement between the three parties by which it was to be for the benefit of the company, and to be immediately assigned to them as a part of the transaction. The good faith of the company was, as I have mentioned, found by the referee. We may suppose the case to have been, that the company desired additional security for the debt which they held against Colmey, and for which P. McEntee was contingently liable as indorser, and that they were willing to extend the time of payment five months beyond the existing time of credit, on obtaining such security. McEntee, though insolvent, held an equity of redemption in the premises mortgaged to Fitzgerald, which was of some xalue. He was willing to let Colmey have the benefit of this interest, and for that purpose to create a lien by judgment upon it to aid Colmey in obtaining further credit from the canal company, at the expense of his (McEntee’s) own creditors. The canal company, represented by Haight, expressed its willingness to give the extension, in consideration of having such a judgment confessed and assigned to it. The arrangement thus suggested was executed; and the precise question is, whether the company is in a better position in regard to this question of fi-aud than Colmey would have been if he was asserting the judgment in his own right and for his own benefit, or than an assignee from him would have been who was unconnected with the transaction on which the judgment was given, and had subsequently become the purchaser of that judgment upon an independent consideration. In the latter case, the assignee would be concluded by the rule of law which declares that the assignee of a chose in action, not negotiable, stands in the place of his assignor, and is subject to all the rights of other persons which could have been set up against such assignor.

If the judgment had been confessed directly to the canal company, I am of the opinion that it could not be impeached for the fraud existing between Colmey and P. McEntee. A party having a formal demand against another, but which is invalid for any cause, even usury, may procure the assumed debtor to give his obligation directly to an innocent third person, upon a lawful consideration between the creditor in the usurious security and such third person, and the obligation will not be affected by the usury in the original contract ; though, if the usurious contract itself be transferred upon a perfectly legal consideration, it will -be void in the hands of the party to whom it is thus transferred. I at first thought that the judgment held by the canal company might be sustained upon this distinction, and by considering it to have been confessed to Colmey as a trustee for the company. But, on further reflection, and an examination of the receipt given by the company’s agent to Colmey, I am convinced that the company must be considered as standing in the place of Colmey, and must, equally with him, be subject to the defense of fraud. That receipt of the agent shows that the judgment was collateral to the principal evidence of indebtedness, namely, the notes of Colmey, indorsed by McEntee. Colmey was the principal debtor to the company. He continued to be such, notwithstanding the new arrangement, for the four new notes were made by Colmey and indorsed by McEntee, thus continuing the relation of principal debtor and creditor between Colmey and the company. The receipt acknowledges the delivery of the assignment of the judgment, and of the notes given by McEntee to Colmey on which the judgment had been confessed, as and for a collateral security for the payment of the four notes made by Colmey and indorsed by McEntee. It cannot be said, therefore, that Colmey was a mere trustee in the judgment. It was confessed to him for a debt assumed to be due to him, and the assignment of it to the company merely conferred upon it the rights of an assignee, which rights, as has been mentioned, were subject to all just defenses which could have been set up against it, if it had not been assigned. If Colmey should pay the four notes made by him to the company, he would then be remitted to his ownership of the judgment. He was, therefore, the real judgment creditor, and the company were merely assignees of the judgment, standing precisely in the place of their assignors. If it was confessed to defraud the creditors of McEntee, as the referee has reported, Kirby and his co-plaintiffs can avoid it by alleging the fraud, just as they might have done against Colmey.

It follows, that those parties had the first valid lien as the equity of redemption, and that they are entitled to the surplus moneys. The order must, therefore, be affirmed.

Davies, Porter, Davis, Brown and Potter, JJ., concurred.

Campbell, J.

All the judges, so far as appears, who have expressed opinions in this matter, concur that the statement on which the judgment was confessed was sufficient.

The judgment as between Colmey & McEntee was, I think, valid and good, with a full knowledge of the adverse claims of his son and Colmey. But as far as this fraud is concerned, it seems to me there cannot be doubt. The judgment stood as a lien on the premises sold, and if there had been no transfer, Colmey would clearly, as judgment creditor, have been entitled to collect and receive to his own use the surplus money, at all events as against McEntee, the judgment debtor. The money would have fallen necessarily into Colmey’s hands on the mere proof of the existence of his judgment, unless McEntee could have successfully assailed it. This McEntee could not have done for his own benefit, if he had confessed the judgment for the purpose of defrauding his creditors. The law would have left him where he had placed himself by his own fraudulent act. ' The canal company, holding as assignees of Colmey, and certainly, I think, for a good consideration, having extended the payment of the notes made by Colmey and indorsed by McEntee, acquired all Colmey’s rights. The company took the assignment, as the referee has found, in good faith and without notice of any intent on the part of McEntee to hinder, delay or defraud his creditors. Besides, McEntee was a party to the arrangement by which the judgment was confessed and assigned over to the company, and he would be barred from setting up any equities as against the company if he had any as against Colmey. As was said by Chief Justice Denio, in Bush v. Lathrop (22 N. Y., 548), “ one proposing to purchase the security can easily ascertain whether the person who gave it pretends to any defense. If he disclaims having any, and a purchase is made on the faith of such disclaimer, the assignees will be entirely safe against any which shall be afterwards asserted.” The arrangement between the parties was a virtual disclaimer by McEntee as to any defense to the judgment in the hands of the company. As against McEntee the rights of the company were perfect. The rule that a party taking an assignment, transfer or conveyance of a chose in action, not negotiable, is subject to all the equities between the original parties, has no application or force in this case.

When can the creditors of McEntee successfully attack the judgment in the hands of the company ? The language of the statute is, among other things (3 R. S., p. 224, § 1, 5th ed.),that every “ decree or judgment suffered,” with intent to hinder, delay and defraud creditors, shall be void as against the persons thus hindered, delayed or defrauded. But the ensuing section (§ 355) declares that the provisions of the chapter “ shall not be construed m cmy mcmner to affect or impair the title of a purchaser for a valuable consideration, unless it appears that such purchaser had previous notice of the fraudulent intent of his immediate grantor, or of the fraud rendering void the title of such grantor.” blow, the referee has found that the company had no notice of any fraudulent intent, and I suppose we are to take that finding as entirely conclusive in this case. If there was a valuable consideration on the part of the company, then we are forbidden to construe any of the previous sections, in cmy mcmner, to affect or impair its title to the judgment.

I have already remarked that the extension of the time of payment of the notes on which both Colmey and McEntee were liable, was a valuable consideration. When the transfer is made to a creditor “ there is no doubt (says Mr. Justice Selden in Seymour v. Wilson, 19 N. Y., 421) that the debt paid or sicwedbj the transfer must in such a case be regarded as a valuable consideration within the section, which shows the rights of bona fide purchasers.”

The referee decided correctly; and the order of the Supreme Court should be reversed, and the report of the referee confirmed.

Judgment affirming the order of the Supreme Court.


author: Brown, J. Denio, Ch. J.

text:
    Samuel J. Underhill v. George G. Johnson, and others. Two actions. Samuel J. Underhill v. Richard F. Blydenburgh. Four actions. The six actions are now entitled: George G. Johnson and Amos F. Bingham, Appellants, v. William Judson Blydenburgh, Executor, and others, Respondents.
    Where the vendor of premises already incumbered has taken back mortgages from the vendee upon the several lots conveyed, and, by agreement between the parties, the vendor is not to proceed to foreclose any of said mortgages until the prior incumbrances are 'canceled by means to be furnished by the vendee, or by the sale of such mortgages or either of them; and where the vendor has mortgaged or pledged a portion of said mortgages as security for money loaned, and the pledgee forecloses the mortgages pledged, and has a surplus arising therefrom after satisfying his claims against the pledgor, the vendee, not having paid to the vendor the moneys agreed to be paid to cancel such incumbrances or a part of them, is not entitled to such surplus.
    Where a large number of lots are embraced in the same conveyance 'containing general covenants of warranty, and, by arrangement, separate and distinct mortgages are given for the purchase-money upon separate lots of the land conveyed, the covenants are thereby distributed to the several lots conveyed, and are to be construed as though each parcel had been conveyed for the sum expressed in the mortgage.
   Brown, J.

A portion of the surplus moneys in controversy proceeded from the foreclosure and sale in the two suits first above entitled. The mortgages were a part of a large number referred to hereafter, made by the defendant George G. Johnson to Richard F. Blydenburgh for purchase-money of the lands hereafter also referred to, and by him assigned to the plaintiff Samuel J. Underhill as security for a loan of money. There was a surplus after paying Under-hill, but a large deficiency to pay the sums secured by the mortgages. So that had no other interests intervened, Blydenburgh would have been entitled to the money.

The surplus in the four actions secondly above entitled, were the proceeds of the foreclosure and sale of mortgages made by Richard F. Blydenburgh to Samuel J. TTnderhill, as mortgagee, and were incumbrances upon the lands hereafter mentioned as conveyed by Blydenburgh to George G. Johnson, and upon which the latter executed back to the former mortgages to secure the purchase-money, and which were unpaid, so that Blydenburgh would also have been entitled to this surplus had not other interests intervened. Bingham claimed the surplus, as grantee of Johnson, of the mortgaged lands, and also, as assignee of Johnson, of certain unliquidated damages for a breach of the covenants of warranty in his deed, by which portions of his property had been lost to Johnson, and also for a breach of the agreement hereafter referred to in assigning mortgages given by Johnson on the purchase of the lands. Blydenburgh claimed the surplus, as also did William Peet, as receiver of the property and effects of Blydenburgh, duly appointed upon proceedings in the City Court and County Court of Brooklyn. The referee, to whom the claims of the creditors to the surplus was referred, awarded the moneys to the receiver. Bingham and Johnson appealed to the General Term of the Supreme Court for the second district, which affirmed the report; and thereupon Bingham and Johnson appealed to this court. The appeal is to be determined by the stipulations and agreements of Johnson and Blydenburgh in their contract of purchase and sale of the 15th of March, 1858, and their respective rights, duties and obligations under it. Its provisions are numerous and somewhat complicated, and I shall only refer to such of them as affect the question of the right to the surplus moneys in controversy.

By the contract, which was collateral to the deed, Blydenburgh sold to Johnson 211 lots of land in the city of Brooklyn, portions of which were subject to the payment of mortgages made by Blydenburgh, and to taxes and assessments to more than $80,000. The deed contained the usual covenants; the cash consideration for the lots was $200,000, but the credit price which was inserted in the deed was $266,350, and if the title to any of the lots failed, the grantor was to respond in the first proportion of the $200,000.

No money was paid, but in lieu thereof 211 mortgages. One upon each lot, except five of the lots, which were covered by one mortgage. $80,000 of the mortgages, at the cash estimate, were at interest at seven per cent, payable annually, and the residue, $120,000, at the cash estimate, were at six per cent interest, payable annually, and were all payable five years from the date. Any one or more of the mortgages were to be assigned to any purchaser Johnson might obtain, for a sum equal in cash to the cash value of the premises, or on payment by Johnson of any taxes, assessments or prior mortgage of an equal amount, computing the mortgages at their cash value, and Blydenburgh was to assign the mortgages in any way to facilitate improvement. Blydenburgh was not to enforce payment, or use in any way the seven per cent mortgages so long as the prior mortgages upon the property remained unpaid, except so far as he paid taxes and assessments, or was required to pay and did pay the prior mortgages. And he was not to prevent Johnson, at his own expense, from getting as long credit as he could obtain upon the prior mortgages. Johnson, also, in terms, agreed to pay Blydenburgh $15,000 to enable him to pay off taxes and assessments, viz.: $5,000 on the 15th of May, $5,000 on the 15th of June, and $5,000 on the 15th of July thereafter, and Blydenburgh was to assign to him, or to a person he should name, seven per cent mortgages, at the rate of $6,666.66 for every $5,000 paid, or assign such mortgages as collateral security at double the amount of the money loaned. If Johnson failed to pay any or either of the said sums of $5,000 at the time appointed, then Blydenburgh was at liberty to enforce the payment of all the bonds and mortgages. Upon the payment of the $80,000 with the interest at seven per cent., and the $120,000 with the interest at six per cent, upon the assignment of such bonds and mortgages,without expense, to Blydenburgh, or upon the same being unassigned, the latter was to hold the balance or residue of such bonds and mortgages for the use and account of Johnson. And until the said $200,000, with the interest, should be realized by him over and above all expenses and taxes or accruments by assignment, Blydenburgh should be entitled to enforce and collect all the said bonds and mortgages at their nominal amount. Johnson also agrees to pay everything he realizes from the property to Blydenburgh, or the holder of the mortgages in extinguishment thereof. Johnson never paid any part of the $15,000.

The same identical question presented npon this appeal arose in the case of Braman v. Johnson and others, decided at the General Term of the Supreme Court for the second district, where Mr. Justice Lott, in the opinion, said: “ It is evident from these different provisions, that the mortgages, taxes and assessments upon the property, at the time of the purchase, were to be satisfied with funds to be furnished by Johnson, and that he relied oñ the covenant of Blydenburgh, that the seven per cent bonds and mortgages for $80,000, were not to be used by him until the property was freed from incumbrances. Indeed, the effect of the agreement is to prevent Blydenburgh from paying off the old incumbrances unless with the assent of Johnson, or upon compulsion, or, at least, without being required so to do by the holders thereof. There is therefore no ground for the claim now made by Johnson, that Blydenburgh immediately, on the execution of the deed, became liable to him on his covenants therein, for the amount of the old mortgages, and such taxes and assessments, and that he, Johnson, is therefore entitled to a credit or set-off for the value of the property sold under the foreclosure of such mortgages as have been foreclosed, and for such taxes and assessments against the mortgage in question, which is one of those bearing six per cent, especially as it appears he has not made any payments to Blydenburgh to enable him to pay off such incumbrances. On the contrary, he is precluded from making any such claim by his express agreement, that Blydenburgh should not be sued on his covenants in respect to such incumbrances, unless and until such payments were made. The claim made for a deduction, founded on a want of title at the time of the sale, to some of the lots, is equally untenable. One of the means contemplated and relied upon in the arrangement of the parties for raising the purchase-money, was the sale and transfer of the mortgages given therefor, and the more effectually to facilitate that object, separate mortgages were given upon the separate lots.” This argument, it seems to me, is quite conclusive. The covenants in the deed were qualified by the provisions of the agreement, and the omission to pay off and extinguish the old mortgages, is attributable to Johnson, and not to Blydenburgh. It was not intended the latter should pay them.

In that part of the agreement which provides for the payment of the $15,000 in their several installments, it is declared to be essential for the security of Blydenburgh, and the proper working of the arrangement, that the arrears of taxes and assessments should be promptly paid, and that the $15,000 were necessary for that purpose. It then provides that Johnson should furnish it at the time specified, and declared that if he failed to do so, Blydenburgh might at once demand and enforce payment of any or all the bonds and mortgages. Johnson paid no part of it, indeed he never paid anything upon this large purchase, and now claims that the loss resulting from his omission to pay, shall be borne by Blydenburgh, who is to be made responsible to him. His neglect to pay the $15,000, which was so essential to the due and successful execution of the contract, was, in fact, an ' abandonment of it altogether. He had the nominal title to the premises, but that was all. The real title and right of property, was in Blydenburgh and the holders of the mortgages.

■ I think he has no claim, neither has Bingham, his grantee and assignee, upon the surplus moneys, and that the order of the General Term should be affirmed, with costs.

Denio, Ch. J.

In this controversy, respecting surplus moneys, the respondent, William Beet, as receiver of Blydenburgh, represents his interest, and the appellant, Bingham, equally represents the interest of Johnson, whose equity of redemption he has acquired. The assignment of the mortgage by Blydenburgh to Underhill was by way of mortgage of that instrument, to secure the note which Blydenburgh had given to Underhill. The suit was against Blydenburgh as the mortgagee of the original mortgage, and against Johnson as the mortgagor of the real estate. All the defendants suffered the decree to be taken, as confessed, and the usual order of foreclosure and sale was made. But instead of applying the proceeds of the sale, after payment of the amount due to Underhill and the costs, to the discharge, as far as it would go, of the balance of the mortgage debt, it was directed to be deposited with the county treasurer, subject to the order of the court. As Underhill was only the assignee of Blydenburgh, and had no other or greater rights than he had, I am of opinion that the decree affirming, as it did, the validity of the mortgage, and the equitable right of Blydenburgh and his assignee to enforce it, precludes the appellant from raising the questions principally discussed by his counsel. It establishes that the mortgage was a valid security and incumbrance in the hands of Blydenburgh, and that he had a legal right to assign it by way of mortgage to Underhill. The appellant’s points affirm that the mortgage was not operative, and was incapable of being enforced by the mortgagee or any assignee of his. The only position which I conceive tobe open to Johnson, or his grantee, Bingham, to litigate, is that of payment to Blydenburgh of the mortgage debt, except so much thereof as was required to pay the note held by Underhill, or a set-off of enough to cover the balance of the mortgage debt beyond the debt to Under-hill and interest.

There is no pretense of a payment of these particular mortgages, or of a set-off against the moneys due thereon. The surplus moneys are claimed on the ground that under the terms of the agreement of the 15th March, 1856, and the facts proved in connection with that agreement, Blydenburgh had no right to treat the mortgage as an operative security, or to assign it, and that the assignee was equitably precluded from enforcing it. The contr&ry of that position was held by the Supreme Court in the case of Braman v. Johnson, and that judgment has been affirmed in this court, and, as I have said, the decree in the present case is a further adjudication against that defense.

But if we look again into the agreement the same result will follow. Although all of the large number of lots purchased by Johnson were embraced in a single conveyance, containing a general covenant of warranty, the mortgages were each upon the separate lots, and a provision in the agreement renders the covenant several and distributive, as though a separate deed and covenant had been given in respect to each of the several parcels of land embraced in each of the mortgages. After providing that in any action on the covenants, the consideration of the purchase of all the lots shall be reckoned as $200,000, and it is added that “ if the title of any particular lot or lots shall fail, he (the grantor, Blydenburgh) shall only be held responsible for the first proportional part of such consideration for such lot or lots.” The value of each lot or lots included in each mortgage, as adjusted by the parties, is the money secured by the mortgages respectively, and the covenants are therefore to be construed as though each parcel had been conveyed for the sum expressed in the mortgage, which was given by the purchaser to 'the vendor. It is not contended that Blydenburgh had not a good title to each of the lots embraced in this foreclosure, though he had' no title to some others of them, or that any of the incumbrances which existed upon them has ripened into a title. The sale was subject to the rights of all of the prior incumbrancers, none of whom appear to have been made parties to the foreclosure. The moneys, therefore, which have been paid to Underhill, and the residue of the proceeds of the foreclosure sale, which is the subject of this. controversy, represent the value of the interest acquired by Johnson, under his conveyance from Blydenburgh.

But I am of opinion that Blydenburgh had a right to treat the mortgage in question as a perfect and operative security on account of a default on the part of Johnson to perform the agreement. By a clause in the instrument Johnson was bound to pay $15,000 in three installments, the last one being payable by the 15th of July, four months from the date of the agreement, for the purpose of discharging arrears of taxes and assessments. This stipulation seems to have been a condition precedent to the various stipulations by Blydenburgh for the advantage of Johnson; for it is declared to be essential to the proper working of the general arrangement; and also that in ease of failure on the part qf Johnson in this respect, Blydenburgh might at once enforce payment of all the bonds and mortgages. Blydenburgh was to afford certain accommodations and facilities to enable Johnson to raise the money. These were to consist in Blydenburgh assigning some of the bonds and mortgages to the parties who should advance the money, making such a deduction from the amount as Johnson would be entitled to, upon the payment of the amount himself; or to assign some of the bonds and mortgages as collateral security. But Johnson was to find the lenders, or, as it is expressed, raise the money. This he omitted to do. The main object of the agreement, it is apparent, was to obtain the advantage of Johnson’s address and management in.procuring funds to extricate the estate from its embarrassment, and it was obviously a most important' matter, upon which the whole enterprise hinged. The only pretense of money raised by or through the agency of Johnson, was that spoken of by Bingham; but it was shown that this was obtained by the assignment of mortgages by Blydenburgh to Bingham as late as August and September, 1856, and after the default of Johnson in raising the $15,000. After such default, Blydenburgh, as we have seen, had a perfect right to demand and enforce payment of all the bonds and mortgages, and he could therefore assign them at his pleasure. The defect in the argument of the appellant’s counsel consists in treating the assignments of mortgages made by Blydenburgh after the default of Johnson, as payments made by the latter under the agreement, of so much of the purchase-money. I consider, on the contrary, that in assigning them, after the default, Blydenburgh was. only availing himself of his rights as mortgagee, which had become perfect by the default of Johnson in raising the $15,000,

. The order should be affirmed.


author: Davies, J.

text:
    James B. Dayton, Receiver, &c., v. John B. Borst, Appellant.
    The organization of a banking corporation,'and the subscription of the defendant to the capital stock thereof, creates a legal liability on his part to pay the corporation the amount of his subscription.
    The capital stock of a bank is a trust fund for the security of its creditors; and the legal liability of a subscriber to its capital stock may be enforced to the extent necessary to liquidate its debts, &c.
    This is an action brought by the plaintiff, as receiver of an insolvent bank, organized in the State of New Jersey, to recover of the defendant the amount of his subscription to the capital stock of said bank. The judge, who tried the action without a jury, found, as matter of fact, the organization of the bank pursuant to the laws of the State of New Jersey, and that the defendant, together with six other persons, made, under their hands and seals, on the 24th of November, 1851, a certificate, and duly acknowledged the same, declaring and setting forth,- among other things, that the capital stock of the bank subscribed was $50,000, divided into two thousand shares of $25 each, and that the defendant had subscribed for one thousand nine hundred and ninety shares, amounting to $49,750; that one of the other subscribers to said certificate had subscribed for five shares, amounting to $125, and that each of the other five subscribers had subscribed for one share, amounting each to the sum of $25. .
    That on the 6th day of July, 1853, the plaintiff was duly appointed receiver of said bank, with power to sue for, collect, receive and take into possession all the goods, rights and credits of said bank, and that said plaintiff had duly accepted said appointment.
    That said defendant has never paid said stock subscription so made by him, or any part thereof.
    That there is due from said bank to one Edward J. Tinckham the sum of $5,647.94 with interest at six per cent from November 1, 1853, the whole of which remains impaid. That said bank, on the 6th day of July, 1853, became insolvent; and as a conclusion of law, that the plaintiff was entitled to judgment for the amount of the judgment in favor of Edward J. Tinckham against the bank, and interest from the date of its recovery, and costs of this action.
    Judgment was thereupon rendered against the defendant, and the same was affirmed at the General Term of the Superior Court of Hew York.
   Davies, J.

Upon the facts found by the court, the judgment rendered in this action cannot be disturbed. The fact of the organization of the corporation, and the defendant’s subscription, created a legal liability on his part to pay to the corporation the amount of such subscription. This liability could be enforced, to the extent necessary to discharge and liquidate any debts or liabilities of the bank. The capital stock of the bank was a trust fund for the security of its creditors. (Mann v. Pentz, 3 Comst., 415; Case v. Grant, 15 Mass., 505; Spear v. Grant, 16 id., 92; Wood v. Dummee,. 3 Maine, 308; Nathan v. Whitlock, 9 Paige, 152.) In the latter case, which was an action by a receiver • to collect an unpaid balance upon a subscription to capital stock, the chancellor said, it was a suit to collect a debt which was still due from the defendant to the corporation. The principle decided by these cases is, that when there are debts of a corporation unpaid, the creditors of the corporation might, in proper actions, compel such stockholders to refund sufficient to pay these debts. The fifteenth section of the act of Hew Jersey, under which this bank was organized, declares that any number of persons, not less than seven, might associate to organize a bank, but that the aggregate amount of the capital stock of such association should not be less than $50,000. The sixteenth section of said act declares that the persons so associating shall, under their hands and seals, make a certificate, by the terms of which said association shall be bound, which shall specify the name assumed, and, among other things, the amount of capital stock of such association, and the ■number of shares into which the same shall be divided, the the names and places of residence of the shareholders, and the number of shares held by each of them respectively. In the case of The Rensselaer and Washington Plankroad Company v. Burton (16 N. Y., 457), it was also objected, as in this case, that the defendant had not subscribed to any paper agreeing to take and pay for any designated number of shares, and that, therefore, no liability was created to pay for the same. In that case the action was sought to be maintained on proofs of the defendant’s subscription to the articles of association, similar in all important particulars to those in the present action. In Small v. The Herkimer Manufacturing Company (2 Comst., 330), Judge Gardener said: The subscription must be construed, therefore, as if all the provisions of the statute affecting the liability of the subscriber or his title to the stock purchased by him was incorporated in his agreement.” Judge Buggles, in delivering the opinion of the court in the case against Burton (supra), inquired: Does not the subscription of the defendant to these articles of association, when construed in connection with this provision, distinctly import that the defendant has taken or subscribed for the number of shares set opposite Ms name ?” It admits, he says, of no other interpretation. If this be the true construction of the act of the defendant in subscribing, then it follows, from the principles already established, that he undertook to pay for the shares of the stock thus taken, according to the provisions of the act. The justice of these principles is apparent from the nature of the contract, which is, simply, a sale of so much stock by the company to the subscriber, and, like every other contract of sale, only requires that enough should be said or done to show that one party makes an offer to sell, which the other party, accepts. If there is a sale, then no promise in terms to pay is required, such a promise being inherent in, and inseparable from, the contract of sale.

But it was contended in that case as it is here, that the promise, if any, is implied merely, and that nothing short of an express promise to take and pay for the stock, will subject the party to an action. But such objection is answered by the cases of The Hartford & New Haven Railroad Company v. Kennedy (12 Conn., 500), and The Northern Railroad Company v. Miller (10 Barb., 260), where it was overruled in both cases. In the former case Judge Hunting-ton says: “But if the thirteenth section provides the only remedy to enforce the payment, and therefore excludes an implied promise, it is not readily perceived why it should not cause an express promise to be legally inoperative. There is no other consideration to support the latter than thaj; which sustains the former. It is precisely the same in both. The moral obligation to pay is equally strong in both.” In the latter case, Mr. Justice Willard holds similar language. He says: “ There can no case be found where the courts of this State have made any distinction between an express and an implied promise, with reference to the question we are now considering. They both plainly stand upon the same footing. If an action will lie in one case, it will in the other.” And in the case of The Lake Ontario Railroad Company v. Mason (16 N. Y., 451), the doctrine of these cases received the approval of this court, where it was held that the signature to a paper which states that the subscribers thereby associated themselves, in pursuance and by virtue of the general act for the incorporation of turnpike and plank road companies, which gives the name of the proposed company, the amount of its capital stock and the number of shares, imports a promise upon which an action may be maintained, to take and pay for the number of shares set opposite to the subscriber’s signature.

It is urged that the receiver, appointed under the laws of the State of Hew Jersey, cannot maintain an action against a stockholder of a corporation, to recover any unpaid subscription without showing some statute of that State authorizing ' such proceedings. It is urged that as we have a statute of this State, which confers express power upon a receiver to recover sums which may be due upon shares of stock subscribed in the corporation upon which they are receivers; this action cannot be maintained, unless like authority is shown to have been conferred upon this plaintiff by the • statutes of Hew Jersey. But this ground is untenable. We have seen that it is found as a matter of fact by the court, that the plaintiff has power to sue for, collect, receive and take into possession all the goods, rights and credits of the said bank. How, it has been conclusively shown that the defendant is a debtor to the bank to the amount of his subscription to the capital stock of the bank. Such debt is a credit of the bank, and therefore the receiver has full power and authority to receive and collect it. The defendant cannot object that he claims to recover less, and has judgment for less than the whole amount he is entitled to recover. The court properly limited the recovery to the amount of the debt of the corporation.

It is not an open question in this court, whether the bank was or was not indebted, or what was the amount of its indebtedness. It is found as matter of fact by the court, that on the first of Hovember, 1853, the bank was indebted to one Tinckham in the sum of $5,647.94, and that the whole of said indebtedness remained due and unpaid on the day of the trial of said action. There is no materiality, therefore, in the discussion here, whether the judgment of Tinckham was prima facie or conclusive evidence of such indebtedness. It is only pertinent to the questions presented for adjudication here, .that there was indebtedness on the part of the bank, and if there was, then the defendant was liable to pay, on account of his indebtedness, a sum sufficient to liquidate and discharge such indebtedness. The fact and amount of such indebtedness are conclusively established by the finding of the court which tried the action, and as the defendant has been adjudged to pay only sufficient to discharge such indebtedness, no error prejudicial to him has been committed.

The proceedings for the appointment of the receiver appear to have been in all respects regular, but so far as this court is concerned with that question, it is disposed of by the finding of the court, that he was duly appointed receiver of said bank by the Court of Chancery of the State of Hew Jersey. This court will not examine the evidence to ascertain whether this finding is sustained by it. It must be assumed to be, and, therefore, we regard the plaintiff as duly appointed, with full power to act us such.. Upon these facts, the defendant stands in the position of a debtor to the bank to a large amount. The bank is proved to be insolvent, and indebted to a creditor to a far less amount. The receiver, whose duty it is to collect and receive the credits of the bank, calls upon the defendant to pay, on account of such indebtedness, an amount sufficient to pay off and liquidate such indebtedness of the bank. He has a judgment therefor, and the same must be affirmed with costs.

All the judges concurring,

Judgment affirmed.


author:
Davies, J.
      Campbell, J.

text:
    Milton St. John, Appellant, v. John P. Roberts and Sylvester Lay, Respondents.
    Where a negotiable promissory note has been protested for non-payment, and the liability of the indorsers thereof has been fixed by notice, such indorsers, selling such note without erasing their indorsement, will be held responsible for the payment of the same, though no notice be given to them of its nonpayment by the maker.
    In such case, the defendants are estopped by their acts from controverting their liability upon the note, as the indorsers thereof.
    The facts sufficiently appear in the opinions.

      O. B. Belknap, for the appellant.

      Lapham & Andrews, for the respondent.

      S. Lay, in person.
   Davies, J.

This action is brought against the defendants as indorsers of a promissory note, made by one Waterbury, to the order of the defendant Roberts. There is no dispute about the facts of the case, and they are as follows: Before the note arrived at maturity it was indorsed by the defendants and deposited in bank in Yew York, and, on maturity, payment was demanded of the maker, and being refused the same was protested and the indorsers duly charged. The defendants placed the note, with their indorsements thereon, and the protest thereof annexed, in the hands of an auctioneer for sale, at auction, who sold the same to the plaintiff for the sum of $500; and he paid the auctioneer that sum and received from him the note with the indorsements of the defendants thereon, and the protest of the note attached. Upon the trial, a verdict was taken for the plaintiff for the amount of the note and interest, subject to the opinion of the Superior Court at General Term, which court gave judgment for the defendants, upon the ground that there had been no demand of payment of the note of the maker, and notice thereof to the indorsers, after the transfer and delivery of the note to the plaintiff.

The Superior Court treated the case as if there had been a new contract by the defendants of indorsement, at the time of the transfer and delivery of the note to the plaintiff. It is well settled that when a note, once due, is indorsed and transferred, the indorser cannot be made liable upon his contract of indorsement, unless there has been, subsequent to such indorsement and transfer, a demand of payment of the maker, and notice to the indorser. (Leavitt v. Putnam, 3 Comst., 494.) In this case there was no new contract of indorsement on the transfer and delivery of this note to the present plaintiff. The indorsers themselves put this note upon the market, after they had been legally and duly charged thereon, and made liable as indorsers thereon, with the evidence of such liability atttached. Such act of theirs was a representation of their liability on the note, and they are now estopped, in good faith and sound morals, from denying such liability. The plaintiff purchased the note, as thus presented, and they have received the amount of the purchase-money, and should not be permitted to deny their liability. But we are not without authority, in a case so nearly analogous, that it may be regarded as quite decisive. The rule, thus announced, has been regarded as the law of this State for more than forty years, and upon questions of this character should not be •disturbed, except for grave and controlling considerations.

In Williams v. Mathews (2 Cow., 252), the defendant was sued by the indorsee, as the indorser of a promissory note, made payable to his order and indorsed by him, dated April 9, 1815, payable on the 1st day of Hovember then next. It appeared that a previous suit had been commenced on the note, which was discontinued, and in September, 1817, the note became the property of the plaintiff, who had no interest in it before that time, and that it was then sold to Mm. Ho notice of demand and refusal were given to the indorser, after the transfer and delivery thereof to the plaintiff. The plaintiff was nonsuited, and brought his writ of error, and the prominent point relied on by the defendant was that the note could not be negotiated after the indorser was charged. To this it was replied, that there was no legal objection to it, if it in fact remained unpaid at the time of the transfer. That the only objection to the transfer of a note after it becomes due, is, that it subjects the holder to all the equities in favor of the preceding parties. On the part of the defendant, it was contended that the transfer of dishonored paper creates a new contract, and that the law, in all cases to charge the indorser, required the holder, or his agent, to make a demand after the transfer. That a demand by a previous holder could not inure to the benefit of a subsequent holder, and it was conceded that, in that case, the necessity and the right of a demand by the plaintiff had ceased. Judge Woodworth, in the opinion of the court, says, that after the note became due it came back into the hands of one Williams, which did not imply a payment and taking up of the note, and he afterwards sold it to the plaintiff. That there was no legal objection to the validity of the transfer of a note after due, provided it remain unpaid, by any of the parties, whether the transfer is made by indorsement or mere delivery. The judgment was reversed.

In the present case, the plaintiff dealt with Eieolay, the auctioneer, the presumptive holder of the note, and the plaintiff had no actual notice, or any notice to put him on inquiry as to who was the holder or seller of the note. He had a right to assume that all the parties to the note were bound for its payment, and in this faith he made the purchase of it. I do not see upon what principle the defendants should be absolved from liability, and am, therefore, of opinion that the judgment should be reversed, and that the plaintiff should have judgment upon the verdict.

We place our judgment in this case upon the ground that the defendants are estopped by their acts from controverting their liability upon the note, as indorsers thereof. The other point discussed is not passed upon or disposed of, we regarding the other as controlling and conclusive.

Campbell, J.

A note of one Waterbury for $595.60, payable to the order of defendant Roberts, and by him indorsed, and also indorsed by defendant Lay, was deposited in bank by Lay for collection. Rot being paid at maturity, it was duly protested, and notice of protest given to the. defendants. After protest, Lay, with Roberts’ check, took up the note, and then Lay, by Roberts’ direction, through an auctioneer, sold the note at public auction, at the Merchants’ Exchange, in the city of Rew York, for or on account of whom it might concern. The names of the defendants or indorsers were not erased, nor the indorsement in any way restricted or qualified, and the notarial protest was attached to the note. The plaintiff became" the purchaser, paying therefor the sum of $500, The Superior Court, in the city of Rew York, rendered judgment for the defendants.

When this note was sold at auction by and for the benefit of Roberts, through the agency of Lay, though overdue and disclaimed, it was still negotiable, and its negotiation worked wrong to no parties—not to the maker, who was confessedly bound to pay it—not to the indorsers, for they both took an active part in the sale. (Havens v, Huntington, 1 Cow., 387.) The sale was not adverse and in hostility to the indorsers, but by them. They gave no notice to the plaintiff, who was the purchaser, nor was notice given to any one at the sale that there were any equities in favor of the indorsers. Ror was it state<| for whom the sale was made. For aught that appeared, the seller was the owner and holder of the note, claiming it as well against the ind orsers as the maker. Indeed, it appearing from the notorial papers that the note had been protested, and the names of the indorsers not being erased, such would be the presumption. By the protest and notice, the contract of- the indorsers, which was previously contingent, had become fixed, and upon the paper, as it appeared, were as much liable to pay as the maker. The indorsements were made before the maturity of the note, and no new protest and notice were necessary. The protest already made and notice given at- the time of the maturity of the note, inured to the benefit of the plaintiff as a subsequent holder. (Williams v. Mathews 3 Cow., 252.) It was doubtless an oversight on the part of the defendants that they did not erase their names or restrict their indorsement, so as simply to pass title to the note. But the plaintiff was a pru’chaser for a large consideration, and in good faith, and I think upon the undisputed facts was entitled to recover, if not the full amount of the note, at least his $500 and interest, which he paid for the note.

The judgment should be reversed, and judgment for plaintiff.

All concur in the opinion that the defendants are estopped from denying their liability as indorsers.

Judgment reversed, and judgment ordered for plaintiff upon the verdict.