author: BRADLEY, J. : BARKER, J.

text:
    AUGUSTA A. WILSON, Appellant, v. S. GREGOR DORAN and EGBERT R. THOMPSON, Respondents.

      Tender and payment of money into court — effect thereof, as an admission of the title of the plaintiff to the cause of action.

    This action was brought by the plaintiff, as the assignee of Davis & Co., to whom one Wilson had assigned a claim against the defendants. The answer contained a general denial; a statement that Wilson had assigned the cause of action to a general assignee, before assigning it to Davis & Co.; that a tender had been made before the action was brought, which the defendant was ready to pay into court; it also set up a counter-claim for a part of the amount. At the time of the service of the answer the defendant paid the amount of his tender into court, but gave no notice to the plaintiff that he had done so. Upon the trial the court nonsuited the plaintiff on the ground that she had failed to establish her title to the cause of action owing to Wilson’s having made a prior assignment thereof, and refused to submit to the jury the question as to whether or not the tender had been made, or as to the amount of damages.

      Held, that the payment into court was an admission of liability upon the cause of actionjalleged, only to the extent of the amount so paid in; that it did not relieve the plaintiff from establishing his cause of action upon which to base a claim for any further or greater sum, nor make the question, as to the recovery of any further sum one simply as to the amount of damages to be recovered.
    That the money so paid into court became the money of the plaintiff, and that the defendant could not thereafter, in any event of the action, take it out.
    That after the payment into court the only question to be decided was whether the plaintiff had established a cause of action entitling him to more than the amount so paid.
    That if the plaintiff failed to establish a cause of action entitling him to more than the amount so paid inio court, the defendant was entitled to a nonsuit or verdict. (Barker, J., dissenting.)

      That the decision of the issue as to whether or not a tender was made could not have benefited the plaintiff as she had not established any right of action against the defendants, the only right she had having arisen from (he payment of the money into court by the defendants.
    The proper practice to adopt in case of the payment of money into court considered.
    Appeal from a judgment in tbe defendants’ favor for costs, entered upon a verdict rendered in the Monroe County Court, and from an order denying the plaintiff’s motion for a new trial founded upon the minutes.
    The defendants were copartners and brokers, and as such had a transaction with George W. Wilson, upon whiclÜ the defendants became indebted to him in the sum of $600. The plaintiff in her complaint set out her title to the cause of action, derived as follows : An assignment by Wilson to Davis & Co., and from them to herself. The answer contained a general denial, and also averred that Wilson had transferred the cause of action to Hiram Davis, as assignee, for the benefit of his creditors, prior to the execution of either of the assignments under which the plaintiff claims title. The answer also set up as a partial defense that before the assignment was made by Wilson, under which the plaintiff claims title, that Wfison became indebted to the defendants in the sum of $410.08, by reason of an over-payment made by them to him, and claimed the same as an offset against the plaintiff’s cause of action, and that on settlement with Wilson the balance found due in his favor was the sum of $189.32 and no more. The defendants, also, in bar of a recovery, averred that prior to the commencement of the suit, they tendered to the plaintiff, the said sum of $189.32, and that they have ever since remained and still are ready and willing to pay to the said Wilson or to Davis & Co. or to the plaintiff or to to any person entitled to the same, the said sum of $189.32, but that the plaintiff and the other persons named have refused to receive the same, and that defendant bring the same into court ready to be paid to the plaintiff if she will accept the same. On the day the answer was served, the defendants paid into court the said sum, which was left in the hands of the clerk.
    On the trial, evidence was given as to which assignment was first made. On the question as to how much remained unpaid on the original cause of action, and as to whether there was a tender made of the said sum of $189.32, in due form and to the proper person the evidence was conflicting. After the evidence was all in, at the defendants’ request, the court directed a nonsuit, upon the ground that the general assignment preceded the one under which the plaintiff claims title and for that reason the plaintiff had failed to make out a cause of action. To this the plaintiff excepted and asked to go to the jury upon the question of damages, which was refused and the plaintiff again excepted. The costs as taxed and inserted in the judgment were sixty eight dollars and fifty cents.

      J. S. Garlock, f&r the appellant.

      John N. Beckley, for the respondents..
   BRADLEY, J. :

I cannot assent to the reasons given by the opinion of brother BarKer for the conclusion by him reached. The answer puts in issue for the purposes of the trial the matters alleged in the complaint in respect to the plaintiff’s title to the claim in suit, and if the evidence required the conclusion that the plaintiff had no title the verdict was properly directed for the defendants. The defendants allege a tender before the action was commenced of $189.32. If that was made and the money brought into court the plaintiff was entitled to it notwithstanding the verdict. But that fact would not entitle the plaintiff to a verdict for the amount of it.

At common law, payment of money may when tender has been made before suit, and when no tender has been made, be paid into court. And when so paid into court the money becomes that of the plaintiff, and the defendants cannot, in any event of the action, take it out. (Murray v. Bethune, 1 Wend., 191; Malcolm v. Fullurton, 2 Durn. & E., 645, 648.) The payment into court during pendency of an action without tender required a rule to that effect, which was, as matter of course, entered before plea, and after that special leave by order was required. (Griffiths v. Williams, 1 Durn. & E., 710; Dunlap v. Com. Ins. Co., 1 Johns., 149; Baker v. Hunt, 1 Wend., 103.) And if the plaintiff accepted and took the money he was entitled to costs up to the time of payment into court. But if he proceeded to trial and was finally entitled to no more than the amount so paid in, he was allowed no costs but was required to pay the defendant’s costs subsequent to the payment into court. (Stevenson v. Yorke, 4 Durn. & E, 10; Kabell v. Hudson, Id., 11; Burstall v. Horner, 7 id., 368; Aikins v. Colton, 3 Wend., 326.)

The payment into court is an admission of liability upon the cause of action alleged to the extent of the amount so paid in. And it is not important for that purpose whether it follows, and is pursuant to a tender before suit or paid in during its pendency ■without previous tender. Beyond that his liability to pay may be contested. (Cox v. Parry, 1 Durn. & E., 464; Long v. Greville, 4 Dowl. & Ry. [K. B.], 632; Reid v. Stenton, 5 Barn. & Adol., 499; Meager v. Smith, 4 id., 673; Spalding v. Vandercook, 2 Wend., 431; Berdan v. Greenwood, 3 Exch. Div., 251; Hawkesley v. Bradshaw, 5 Q. B. Div., 302) And in either case (whether paid into court pursuant to such tender or after the commencement of the action by virtue of what was known as a common rule entered for the purpose), if the plaintiff fail to establish a right to recover a greater sum than that paid in, the defendant was entitled to nonsuit or verdict. (Stevenson v. Yorke, 4 Durn. & E., 10; Burstall v. Horner, 7 id., 368; Archer v. English, 1 Mann. & Gran., 873; Aikins v. Colton, 3 Wend., 326; Murray v. Bethune, 1 id., 191; Dakin v. Dunning, 7 Hill, 30; Becker v. Boon, 61 N. Y., 317, 322; Platner v. Lehman, 26 Hun, 374.)

This proposition is founded upon the reason that the payment into court is payment pro tanto of the claim alleged, and so much of it is in practical effect stricken out of the complaint. (Bank of Columbia v. Southerland, 3 Cow., 336, 338.) In Kelly v. West (4 J. & S., 304), cited in support of the contention that the plaintiff is entitled to judgment by reason of the tender, the money was not paid into court. And in Caldwell v. Cassidy (8 Cow., 271) the demurrer to the plea was sustained because it failed to allege sufficient to constitute an effectual tender. Those cases do not aid the plaintiff here. The proposition that a tender does not discharge the debt, cannot be questioned, nor is it a bar to a recovery. The bar depends upon the payment into court and is produced by it. When that is properly done the plaintiff must establish a right to more than was tendered and paid into court, or judgment will go against him. And the money in court is treated as a payment to him, and is his from the time it is so paid in. It is said that the payment into court is an admission of the cause of action alleged. (Johnston v. Columbia Ins. Co., 7 Johns., 315.) But that rule has its qualifications.

It is an admission only as to the amount paid in, except that when the action is upon a special contract it also admits the contract and breach alleged, and the question becomes one of damages only. (Perren v. Monmouthshire Ry. Co., 11 C. B., 855; Kingham v. Robins, 5 Mees. & W., 94; Yate v. Willan, 2 East, 134; limited by Clarke v. Gray, 6 East, 564, 571; and see Huntington v. Am. Bank, 6 Pick., 340.)

Payment into court upon a general count of indebitatus assumsit, admits nothing more than liability for the amount so paid in. (Perren v. M. Ry. Co., 11 C. B., 855.) The cause of action alleged in the complaint in this action is, in its nature, upon a special contract, pursuant to which stock was purchased and sold by the defendants as brokers, and a' sum in excess of that which they were entitled to retain for commissions, etc., produced by the transaction. While the contract, sale and liability may be deemed admitted, the amount for which the defendants were chargeable to the plaintiff upon such liability is not admitted beyond that paid into court. (Cooper v. Blick, 2 Adol. & E. [new Rep.], 915; Spalding v. Vandercook, 2 Wend., 431.) The question arises whether the title in the plaintiff to the cause of action beyond that amount, is admitted.

The contract and the breach of it constitute the cause of action in behalf of the party entitled to the proceeds. The plaintiff is not the party to the contract, and her right to recover depends upon a transfer by which title to it was vested in her. The question of her title is distinct from the canse of action, and relates to the plaintiff’s right to damages. The effect of the payment into court is an admission that she is entitled to the amount paid in, but nothing more in that respect. Her right to the damages beyond that sum is a question open to contest in the action. And it is not important whether that right is defeated by want of title or for any other cause bearing upon that subject. By the payment into court the defendants admit that a cause of action exists, that the plaintiff is entitled to so much only. And when it appears that she has no title to the cause of action her right to any amount beyond that sum is defeated. It did appear that the plaintiff had no right to the damages, because the cause of action did not pass to her by the transfer under which she claims, and without the aid of the payment into court, having no right to recover any damages for want of title to the cause of action, the plaintiff cannot by means of that fact support a right against the defendants to a greater sum than that so paid into court.

In Cox v. Parry (1 Durn. & E., 464) the action was on a policy of insurance made in the name of one Simons, upon which the plaintiff had no right of action, but the defendant having paid a sum into court it was insisted that ho thereby had admitted the cause of action in the plaintiff.

The court held otherwise, except as to the sum so paid into court and there said that the defendant “ has thereby admitted that the plaintiffs are entitled to maintain their action on the policy to the.amount of that sum. B ut he has admitted nothing more. He does not by paying money into court vary the construction and import of the policy so as to entitle the plaintiffs, to recover beyond that extent.” So in the case at bar there is no admission that the plaintiff had any right of action upon the contract to which she was not a party except as to the amount paid in and to that extent only. This question of title was tried, and the court below held the plaintiff had none to the cause of action alleged, because Wilson, the party to the contract, had by his general assignment for the benefit of creditors disposed of it before his transfer to Davis & Co., from whom the plaintiff claimed to- have derived her title.

What has been said is applicable only to tender and payment into court at common law. The statute has extended the right to make a tender during the pendency of an action, and has regulated the proceedings in such cases. (2 R. S., 553, 554, §§ 20, 23.) And the provisions have been carried into the Code Civil Procedure (§§ 731, 734). The effect of such a tender is that the plaintiff recovers in any event, but if he accept the tender, and the recovery be greater than the amount tendered, the latter sum must be deducted from the recovery, and judgment rendered for the residue only, and the question of costs is governed by the amount of such residue. And, in any event, if the recovery does not exceed the sum tendered, the defendant takes costs. (Slack v. Brown, 13 Wend., 390, 394.)

Tbe Code has added a provision requiring the payment into court of the money tendered to render it effectual (see. 732), which will require the practice of deducting the amount so paid in from the judgment recovered, as the jfiaintiff only, can take it out of court. But my attention is called to no statute which seems to have the effect to abrogate the right and practice at common law of paying into court, pursuant to a rule or order, during the pendency of the action, and without any tender having been made. The reviser’s note on the subject does not indicate such purpose. (3 R. S. [2d ed.], 779.) And the court has treated the common-law rule in that respect as remaining, by the application of it since the statute. (Dakin v. Dunning, 7 Hill, 30.)

In the case at bar the money was paid into court. And it was done to effectuate an alleged tender made before suit. The defendants in their answer allege a tender to the plaintiff’s assignors before the assignment of the claim to her, and that they have ever since remained and still are ready and willing to pay,” etc. And “ that the defendants now bring the sum of $189.32 into this court ready to be paid to the plaintiff if she will accept the same.”

Issue is deemed taken upon this plea of tender. And a question of fact was presented by the evidence, whether the tender was actually made to the plaintiff’s assignors.

In the view taken by me of the case, the only right the plaintiff had against the defendants, as appears by the evidence, was that derived from the fact and plea of tender, because it quite clearly appeared upon the trial that before the transfer was made by George W. Wilson to the plaintiff’s assignors of the claim in question, he had made his general assignment for the benefit of creditors. And the court below was justified in so holding upon the evidence as matter of law.

The admission furnished by the tender, answer and payment into coui’t gave the plaintiff the right to that amount. And being entitled to recover no more than that it is not clear that the plaintiff can take or derive any benefit from contesting the fact of tender and the proper payment of the amount of it into court. It may be assumed in her behalf upon the answer and payment into court, that the money was tendered and is in court subject to her order. And in view of any right which the plaintiff has, she is not entitled to costs as against tbe defendants. The only advantage that a plaintiff can derive from contesting the fact of tender is not to have it in the way of the recovery of costs, but then his right to recover must be supported by evidence other than the admission furnished by the alleged tender. The fact of the tender or payment into court constitutes the admission which entitles the plaintiff to the amount. The plaintiff is therefore in no situation to insist that a new trial should be had upon the question of tender. It certainly would be no advantage to her to succeed upon that issue, because in that event the plaintiff would be entitled to nothing unless she could stand upon the fact of payment into court as pursuant to a rule, although no rule was entered, but in that case, as has been suggested, she could take no recovery or costs. The contention of the. plaintiff’s counsel that because notice was not given that the money was paid into court, she is entitled to interest on the amount tendered and costs, is net supported. The money was paid into court at the time the answer was made. The right to it arises out of that fact, but no concession results which entitles the plaintiff to any increase of the amount by accumulation of interest. The answer makes jprofert in curia of the money tendered. And the want of a notice that it had been actually paid in was mere matter of practice and of irregularity only, which might be waived, and is waived by receiving the answer without objection in that respect. (Sheriden v. Smith, 2 Hill, 538; Platner v. Lehman, 26 Hun, 374.) The payment of the money into court, although not an issuable fact, is necessary to render the tender effectual, and important because otherwise the money is not necessarily within the control of the plaintiff who is entitled to it. (Eddy v. O'Hara, 14 Wend., 221; Brown v. Ferguson, 2 Denio, 196; Wilder v. Seelye, 8 Barb., 408; Becker v. Boon, 61 N. Y., 317.) But the fact of notice, other than the allegation to the effect that the defendant brings the money into court, is not a substantial requirement of practice, although the plaintiff may treat the omission as irregularity and refuse to accept the answer, and if it contain other matters of defense, notify the defendant that the portion of the answer alleging the tender is not accepted, because of want of such notice.

The better practice in all cases on payment of money into court is to enter a rule to that effect, which may be done as matter of course, except in the single instance of paying in without tender during the pendency of the action-after plea pleaded where the order of a judge is required. By the entry of a rule the authoi-ity appears upon the records of the court, and the purpose of the money there also appears.

The conclusion is that the issue of tender has in it no advantage to the plaintiff, and she was in no manner prejudiced by the omission to submit that question to the jury, and that the judgment and order should be affirmed.

Smith, P. J., and Haight, J., concurred.

BARKER, J.

(dissenting):

It may be conceded, in disposing of the plaintiff’s motion for a new trial, that from all the evidence it was established as an undisputed fact that the general assignment made by Wilson for the benefit of his creditors preceded in point of time the assignment under which the plaintiff claims title. The plaintiff insists, however, that the cause of action set out in the complaint and her title thereto were not in issue on the trial, and that both those questions of fact were conceded by the defendant by the payment of the money into court, as damages; that by offering proof on her part as to the source of her title, and when the assignments were made, she did not deprive herself of the benefits of the defendants’ admissions.

The defendants, by their plea of tender and payment of the sum so alleged to have been tendered into court, impliedly acknowledge the cause of action as described in the complaint, and that the plaintiff is entitled to recover thereon in her own right, and the only question remaining to be determined on the trial was the amount of damages to which the plaintiff was entitled. This rule of practice prevails although the answer contains a general denial of the plaintiff’s complaint. The plaintiff was not put to proof for the purpose of establishing a cause of action in her favor, of the nature and character of the one set forth in her pleadings. The act of the defendant in paying the money into court is to be treated as an admission by the defendant that they owe that sum to the plaintiff upon the cause of action as alleged in the complaint.

The defendants contend that by .paying the money into court they simply admitted tliat there was so much due the plaintiff, and its sole effect was to strike so much out of the complaint, and if the plaintiff claims a greater sum in damages she must prove everything to entitle her thereto, precisely in the same manner as if no money had been paid in ; that the payment of the money into court was not an admission of the original cause of action as set up in the complaint and that the plaintiff was entitled to recover thereon. This view was taken by the court below, and for that reason the nonsuit was granted.

In Johnston v. Columbian Insurance Company (7 Johns., 315) the action was on a marine policy as for a total loss. The defendant pleaded the general issue and paid into court a sum of money, under the common rule, upon the whole declaration. It was held that the payment of money into court was an admission of the cause of action as alleged in the declaration.

In Yate v. Willan (2 East, 128) the action was also founded on a marine policy, and it was there held that the payment of money into court, upon a count stating a special contract, is an admission of such contract and narrows the inquiry on the trial to the quantum of damages sustained by the breach thereof.

In numerous other eases the rule is stated to the same effect, thus, if money be paid into court in an action on a bill of exchange there is no necessity of proving the defendant’s handwriting (Gutteridge v. Smith, 2 H. Black, 374), if, in an action of covenant, the execution of the deed is admitted. (Randall v. Lynch, 2 Camp., 357.)

It is also conclusive as an admission of the plaintiff’s right to sue (Shippey v. Denison, 5 Esp., 191), and of his right to the character in which he sues (Lipscombe v. Holmes, 2 Camp., 441; Randall v. Lynch, Id., 357), and precludes the objection that another should have been joined as plaintiff (Walker v. Rawson, 1 Moody & Rob., 250; Burrill’s Pr. [vol. 1], 407, 408, and cases there cited; Graham’s Pr. [2d ed.], pages 537, 538).

The reason assigned for this rule of practice is, that as the defendant only disputes the amount of damages to which the plaintiff is entitled, the plaintiff only comes prepared to prove that his damages are greater than the sum paid into court.

If these views are adopted by my brethern as sound, it is unnecessary to consider the form in wbicb the verdict should be rendered, if the plaintiff should fail to establish that her damages were greater than the sum tendered.

As the evidence was conflicting upon the question as to the amount unpaid by the defendants upon their contract with Wilson, the plaintiff’s assignor, and whether there was a tender made before suit brought, these questions should have been submitted to the jury for their consideration.

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

Judgment and order affirmed.


source: Caselaw Access Project

author:
Bradley, J.:
      Haight, J.

license: Public Domain

text:
    JOHN T. WILLIAMS and BERNARD S. CLARK, Appellants, v. GEORGE M. WHEDON, as Survivor, etc., of GEORGE M. WHEDON & CO., and J. JUDSON CROSS, Respondents.

      ¡Partnership — right of a surviving partner to make a general assignment containing preferences.

    A sole surviving partner may make a general assignment containing preferences, of all the firm property for the benefit of the firm creditors, which will be (valid as against the latter, although liable to be set aside upon the application of the representatives of the deceased partner. (Haiuht, J., dissenting.)
    Appeal by the plaintiffs from a judgment, entered on the decision •of the Ontario Special Term dismissing the complaint on the merits.
    'The action was brought to set aside, as fraudulent against creditors, ■an assignment made by the defendant Whedon as survivor of the 'late firm of George M. Whedon & Co., composed of him and .James Benwick. The latter died and afterward, in January, 1884, the defendant as such survivor made a general assignment of the property of the firm to the defendant Cross, for the benefit of its creditors, giving preferences. The defendant Whedon as such survivor was insolvent. The debts amounted to upwards of $5,000 and the nominal value of the assets was a little more than $2,000. 'The plaintiffs were creditors of the firm and recovered judgment against the survivor, and execution having been returned unsatisfied they bring this action.

      A. F. Baldwin & S. Baldwin for the appellants.

      Wynkoojp <& Bice, for respondent Cross.

      Jas. A. Hobson, for respondent Whedon.
   Bradley, J.:

The trial court found that the assignment was in fact made in good faith and without any intent to defraud the creditors of the firm of George M. Whedon & Co. The only question here is whether the assignment was.invalid and fraudulent against such creditors by reason of want of power to make it. Our attention is called to no case heretofore determined in this State, distinctly pre-; senting and deciding that proposition.

In Nelson v. Tenney (36 Hun, 327) it was held that as against the personal representatives of a deceased partner, the survivor-could not, as such, without their consent, make an assignment of the partnership property in trust for the benefit of' its creditors.

And this was put upon the ground that as between the survivor and such representatives, a trust existed which in -equity imposed upon him the duties of that relation in respect to the disposition of the assets, and the»closing up the partnership affairs which he was not, as against them, permitted to delegate to or devolve upon another. This has the support of the reason applicable to a trust relation in all cases which involve -the exercise of personal care, judgment and discretion of the trustee in the performance of the duties and obligations created by it. By the death of his partner the defendant, as survivor for the purposes of the liquidation of the partnership, business, took the place and assumed the responsibilities of the firm, but he was so far subject to the supervision of the representatives of the decedent, that interposition in equity might be had in their behalf to prevent or defeat abuse by him of the trust, with a, view to the protection of the liability of the estate they represented by having a faithful application of the firm assets in payment of its debts, and for the preservation of the rights which might ultimately arise upon an accounting with him. They may, however, by their assent to the assignment by the survivor make it effectual as to them. (Hutchinson v. Smith, 7 Paige, 26.) And the personal representatives of the deceased partner may not desire or care to object to an assignment made without first having their consent. It cannot be assumed that they object to it until some action is taken by them for relief against it.

The question arises here whether the relation of the creditors is such as to enable them to raise the objection to the execution of the trust by the assignee. And this depends upon the question of power of the survivor. Tire primary liability for the payment of the partnership debts is his, and he is chargeable as effectually as if they were his individual debts, and for the purposes of the remedy at law of the creditors not distinguishable from them. (Nehrboss v. Bliss, 88 N. Y., 600; Shale v. Schantz, 35 Hun, 622.) And he has all the power which had been possessed by the firm to sell the property and pay the liabilities, and may pay some to the exclusion of others if it is not sufficient to discharge all, and in that manner accomplish such preferences as he may desire, leaving for others his liability only. The firm assets are not by reason of the death of a partner in any sense deemed the estate of a deceased person so as to permit the application of the statute prohibiting in such case preferences in distribution. And the suggestion of the chancellor to that effect in Hutchinson v. Smith (7 Paige, 35), is not supported. (Loeschigk v. Hatfield, 5 Robt., 26; S. C., sub nom. Loeschigk v. Addison, 4 Abb. [N. S.], 210; affirmed, 51 N. Y., 660.)

This power to dispose of property and give preferences in payment of partnership debts is also possessed by the respective partners during the continuance of the firm. (Mabbett v. White, 12 N. Y., 442; Graser v. Stellwagen, 25 id., 315; Van Brunt v. Applegate, 44 id., 544.) But one or more partners, without the consent of all the members of the firm, cannot make an effectual assignment of the partnership property in trust for the benefit of its creditors. And this inability rests upon the want of power. The relation of each member to the firm, for the purposes of its legitimate business, is that of agency. And the introduction of a trustee into the place cf the firm to take charge of the disposition of its property, and the payment of its debts is subversive of the business purposes of the partnership, and is not within the power ■ of any partner or number of partners less than the whole to aecomjplish. (Havens v. Hussey, 5 Paige, 30; Deming v. Colt, 3 Sandf., 284; Coope v. Bowles, 42 Barb., 87; Welles v. March, 30 N. Y., 344.) But as this is wholly a question of authority, it is held that there may be circumstances under which the requisite consent may be implied in support of the assignment. (Sheldon v. Smith, 28 Barb., 593; Palmer v. Myers, 43 id., 509; Lowenstein v. Flauraud, 11 Hun, 399; Welles v. March, supra.) The fact of authority depends upon evidence, and will not be presumed as against a judgment creditor who may bring an action to set it aside as an unlawful disposition of the property having the effect to hinder and delay creditors, and therefore as against them fraudulent. (Hitchcock v. St. John, 1 Hoff. Chy. R., 511 ; Pettee v. Orser, 18 How., 442 ; S. C., 6 Bosw., 123; affirmed, sub nomine Potter v. Orser, 28 How., 581; Welles v. March, 30 N. Y., 344, 349.)

This remedy is not founded in any relation of trust or confidence as between the firm and its creditors, but wholly in the want of power of a partner to thus dispose of the firm property. And as between the survivor and the creditors of the firm there is no defined relation of trust. And when it is said that he holds the partnership property in trust for that class of creditors, it is understood that they have in equity a preference over his individual creditors in respect to it, and that he is not at liberty to withdraw it from application in behalf of such creditors, and the same rule applies to the property of any individual debtor in so far that it is his duty to appropriate it or its proceeds to the payment of his debts, and he is not permitted to place his property beyond their reach, but they have the right to insist that it shall be immediately and unconditionally devoted to the payment of his debts, and it is only on those terms that he is permitted to withdraw it from the ordinary process of the law. And to that extent and for such purpose his duty has the nature of a trust. This does not qualify his right to exhaust his property by preferential payment, and he may for that purpose create a trust and thus direct its execution. But the trust relation in fact which imposes the duty of payment of the partnership debts is between the survivor and the representatives of the deceased partner, and that is the trust referred to in the cases cited by the plaintiff’s counsel. (Case v. Abeel, 1 Paige, 393 ; Egberts v. Wood, 3 id., 517; Skidmore v. Collier, 8 Hun, 50; Hooley v. Gieve, 7 Abb. N. C., 271.) The case of Mills v. Argall (6 Paige, 577) has no application. It had relation to a limited partnership which in the respect in question was governed by the statute. (1 P. S., 767, § 21.) The relation of the partnership creditors to the partnership property or their right in respect to it, has been in no manner improved or changed by the death of the partner, and their relation to the survivor is not, nor is his to them, any different from that which existed before the death, between them and the firm in any important respect. The debts then became those of the survivor as they had before been the debts of the firm, with the ultimate right of the creditors on failure to collect of him to seek the estate of the decedent. The power to sell the property and right to make preferential payment of debts are complete in the survivor, and there is no relation between him and the creditors in the way of the right to devolve the power of disposition of the property and payment of the debts of the firm upon a trustee as effectually as the firm may have done it. He owes them no duty which requires his personal supervision and care in the business in their behalf and which he cannot delegate for execution to another. There seems no reason which permits the creditors to assert in their behalf the rights of the personal representatives of the deceased partner. The rights of the latter depend alone upon their wishes and action and are personal to them. It may be as necessary for a survivor, as a firm, to protect by assignment in trust the property from undesirable appropriation and sacrifice by litigation and legal process, and for the purpose of distribution amongst creditors. It is no less liable to such consequences in the hands of the survivor than if held by the firm. And no reason appeal’s to us why this power as against the creditors may not be effectually exercised by the survivor. It is not a question of power, strictly as such, which enables the representatives to defeat the operation of an assignment in trust of the survivor, but is rather a violation of duty which he owes to them by reason of his trust relation and has the nature of disability which they alone may assert.

The matter of preference has no importance as bearing upon their right. The personal representatives have no legal interest in that question. Their right rests wholly upon the personal duty of the survivor, and that he is disabled from voluntarily delegating it to a trustee; and there is no principle to support the objection of the creditors to preferential payments. If the plaintiffs can in this action succeed in setting aside the assignment they will be entitled to a judgment that their debt be first paid out of the property, and properly so, but this is not consistent with a trust in behalf of the creditors of the firm, which, if it existed, would require a pro rata distribution of the assets. There is no rule requiring this as before mentioned. We think there was not a want of power in the survivor to make the assignment.

In White v. Union Insurance Company (1 Nolt & McCord, 556; S. C., 9 Am. Dec., 726), the plaintiff, as assignee of the surviving partner of a firm, sought to recover of the defendant dividends due the firm, and the question was whether, first, the assignment was valid, and, second, the defendant could set off a note held by it against the assignor. The court held with the plaintiff on both questions and he recovered. That case only went to the question of power to make the assignment. Neither the rights of creditors or personal representatives were involved.

In Egberts v. Wood (3 Paige, 517), the question here was not necessarily considered; and later a non-committal expression of the ' chancellor in that case in respect to the right of one partner to assign the firm property in trust for creditors was converted into a contrary conclusion. (Havens v. Hussey, 5 Paige, 31.)

In Haynes v. Brooks (8 N. Y. Civ. Pro. R., 106) it was held that the plaintiffs could not raise the question because they were not partnership creditors. In Bancroft v. Snodgrass (1 Coldwell [Tenn.], 431) it was held that, as against a creditor of the firm, the assignment of a survivor in trust for creditors was fraudulent and void; and one of the reasons given was to the effect that he had no power to make it. The reasoning of the court there goes in support of the right of the representatives of the deceased partner to assert the want of such power. Beyond that we see no occasion to adopt its application.

These views lead to the conclusion that the assignment was valid. None of the exceptions are well taken.

The judgment should be affirmed.

Smith, P. J., and BaiíKeií, J., concurred.

Haight, J.

(dissenting):

In April, 187-7, George M. Whedon and James Ren wick entered into an agreement by which they became copartners, and as such carried on a business in coal, lumber and produce, at Stanley, N. Y., until the fall of 1883, when the copartnership was terminated by the death of Ren wick. On the 14th day of January, 1884, Whedon, as the surviving member of the firm, made a general assignment for the benefit of creditors of all the copartnership property and assets, with preferences, to the defendant Cross. Subsequently, the plaintiffs, as judgment creditors of Whedon as surviving partner, brought this action to set aside the assignment as fraudulent and void.

The only question presented is whether a surviving partner can make a general assignment, giving preferences, of the copartnership property to a. trustee for the payment of the debts of the copartnership. The question thus presented is not free from difficulty. It has often received the attention of the courts and has been the subject of considerable discussion, resulting in a conflict in the authorities in our own and several of the other States. In the case of Egberts v. Wood (3 Paige, 517), Chancellor Walworth appears to have reached the conclusion that one partner could, during the lifetime of the copartnership, make a general assignment for the benefit of creditors, and that in case of the death of one of the partners, the survivor could make the assignment; and this case seems to have .been followed in the case of Hutchinson v. Smith (7 Paige, 26) and in Palmer v. Myers (43 Barb., 509). In these latter cases, however, the precise question does not appear to have been involved, and consequently they cannot be considered as controlling upon the question. In the case of Havens v. Hussey (5 Paige, 30), the chancellor takes occasion to review his decision in the case of Egberts v. Wood, and upon a more deliberate examination of the question reached the conclusion that his opinion-in that case should be modified, and that it should be held that the implied authority, arising from the ordinary contract of copartnership, does not authorize one of the partners, without the assent of his copartners, to make a general assignment of the copartnership effects to a trustee for the benefit of creditors, giving preference to one class of creditors. This latter question appears to be now well settled in this State, the courts uniformly holding that one member of the firm has not the power to make a general assignment for the benefit of creditors without the consent of the other members. ( Welles v. March, 30 N. Y., 344, 350 ; Fisher v. Murray, 1 E. D. Smith, 341; Deming v. Colt, 3 Sanford’s R., 284, 291; Haggerty v. Granger, 15 How., 243 ; Pettee v. Orser, 18 id., 442; Kelly v. Baker, 2 Hilton, 531.)

The question received elaborate discussion by Vice-Chancellor Hoffman in the case of Hitchcock v. St. John (1 Hoffman, 511-518); he reviewed the case of Egberts v. Wood and numerous other cases, and reached the conclusion that an assignment by one member of the firm is not authorized, because of the want of power in any one partner to make it; that there is no such power during the existence or after the dissolution of the copartnership. In the case of Deckert v. Filbert (3 Watts & Serg. [Pa.] R., 454), it was held that after a dissolution of a partnership one of the firm has not power to make a voluntary assignment of the effects of the partnership for the benefit of creditors against the express consent of his copartner. In the case of Bancroft v. Snodgrass (1 Coldwell, 430, 441), it was held that after the dissolution of a partnership by the death of one member, the surviving members had no authority to make an assignment of the partnership effects to a trustee with preferences.

In the case of Nelson, as Executor, etc., v. Tenney (36 Hun, 327), the General Term of the First Department recently held that a surviving partner has no power, without the consent and concurrence of the representatives of the deceased partner, to make an assignment to a trustee for the benefit of creditors of the firm, and to create preferences among the creditors by such an assignment, and that a court of equity will take possession of the estate by a receiver at the suit of the personal representatives, if such an attempt has been made.

It will be observed from an examination of the authorities to which I have referred, that the question is one of power. One member of a copartnership cannot make a general assignment of the copartnership effects without the consent of the other members, for the reason that he has not the power; that the act is not within the scope and object of the partnership. If the individual partner has not the power during the existence of the copartnership, can he have it after the partnership has been term-mated by the death of one of the members? The survivor takes title to the copartnership effects it is true; but the survivor takes title for the purpose of closing up the copartnership business and distributing the surplus after paying the debts. The title of the survivor is not absolute but is in the nature of a trust. He is. given no other or greater powers than he had during the existence of the copartnership. It may' be argued that he has the power, as survivor, to sell the copartnership property ; that he may pay such creditors as he chooses in whole or in part. True, but he had this power during the existence of the copartnership. Each partner possessed an equal general power and authority in behalf of the ^ firm to dispose of the partnership property and effects for any and all purposes within the scope of the partnership, and in the course of its trade and business. As agent of the firm, one partner could sell, mortgage, pledge or otherwise dispose of the firm effects for partnership purposes; and yet, notwithstanding this power, he could not make a general assignment for the benefit of creditors, with preferences. And why? In entering into the contract of partnership the parties confide in the skill, capacity and integrity of each other. Each is entitled to the experience, management, judgment and discretion of the other. It was not the skill, capacity, integrity, experience, management or judgment of a third person that was contracted for, but it was of the individual members composing the firm, and neither member has the right, without the concurrence of the other members, to do any act which would defeat the object or purpose of the copartnership. Consequently the authority of each of the partners, as agent of the firm, is necessarily limited to transactions within the scope of the partnership, and a general assignment to a trustee of all the funds and effects of the partnership for the benefit of creditors is the exercise of a power without the scope of the partnership enterprise, and amounts of itself to a suspension or dissolution of the partnership. It would be the transfer to another person of the power to manage and control the copartnership property. It would deprive the other members of the firm of the skill, experience, judgment and integrity in the management of the property of the firm, of their copartner, and commit the same to a stranger in whose selection they had had no choice. In entering into the copartnership it must be assumed that the parties contemplated the possible contingency of the death of one, and the title of the effects vesting in the survivor, who is then permitted to act without the judgment and advice or the watchful eye of the former partner. If the survivor could not, during the existence of the copartnership, by assignment transfer to another his skill, integrity, experience, management, judgment and discretion, it does not appear to me that he has power to do it after the death of his copartner. If he cannot delegate before the death of his copartner, he ought not to be permitted to after. If his living partner had the right to have the personal exercise of these powers the representatives of the deceased have the same rights, and that he should personally administer the trust which the law has placed in his hands.

Again, if an action can be maintained by the personal representatives of the deceased partner to set aside an assignment, as was held in the case of Nelson v. Tenney, 1 see no reason why the action may not also be maintained by the judgment creditors of the firm. The creditors are interested before the personal representatives. Whilst the survivor may not hold the property of the firm as trustee for the creditors, I see no reason why they may not be permitted to protect themselves from any illegal act of the survivor that would result in injury to them. To hold that the assignment would be valid as to the creditors, and void as to the personal representatives, would present an anomaly not contemplated by any rule of law with which I am familiar. The creditors would then be bound by the assignment, and would have to await the action of the assignee in converting the property into money to pay their debts. After waiting years without redress the personal representatives may see fit to restrain the assignee from further acting in the premises, and thus the rights of the creditors may be postponed and indefinitely delayed. It does not appear to me that such can be the law.

The judgment should be reversed and a new trial ordered.

Judgment affirmed, with 'costs.


author: Bradley, J.: Barker, J.

text:
    MARY MURRAY, as Administratrix, Etc., of HUGH MURRAY, Deceased, Appellant, v. ARTHUR G. FOX, THE BUFFALO GRAPE SUGAR COMPANY and Others, Respondents.

      Release of a surviving partner — when it releases the estate of a deceased partner — release, of liability on covenants in adeed — when it does not release the grantor froma prior liability to pay a mortgage — evidence— when a witness is not interested within the meaning of section 839 of the Code of Civil Procedure.

    This action was brought to foreclose a mortgage given by Arthur W. Fox and one Williams, as collateral to a bond made in the name of Arthur W. Fox, under which name the said Fox and Williams were engaged in carrying on business as partners. The bond and mortgage were given to secure firm debts. After the death of Fox, the plaintiff compromised with Williams and gave to him a sealed instrument, releasing and discharging him from all several liability on account of the bond and mortgage, and all other dealings whatsoever, and from all joint liability on account thereof, and of notes and other dealings in connection with. said firm or for any cause whatsoever jointly with Arthur W. Fox or otherwise ‘‘ but not intending hereby to affect or discharge the liability of said Arthur W. Fox or his estate therefrom, or to affect or discharge any other security for any of said demands other than the personal liability of said Horace Williams.”

      Reld, that as it was to be assumed, in the absence of evidence to the contrary, that Williams was at the time of Fox’s death and has since remained solvent and possessed of partnership property, he was the principal debtor, and that the plaintiffs, by releasing him, against whom as the survivor the plaintiff was bound to first exhaust his remedy, lost all right to proceed against the representatives of Fox upon the bond.
    That the Fox heirs were entitled to make this defense as they took by descent lands which were subject to the mortgage, but that it did not protect them in this case for the reason that the release did not discharge the mortgage debt, but was in legal effect a covenant not to sue Williams, which did not defeat the action to foreclose the mortgage.
    After the execution of the bond and mortgage the defendant corporation purchased a portion of the premises covered thereby, receiving a full covenant warranty deed expressing a consideration of $130,000. Thereafter it released Williams and the personal representatives, heirs and next of kin of Fox from liability, past and future, on the covenants in the deed.

      Reid, that the release from liability, on the covenants contained in the deed, did not release the grantors from their liability to pay the mortgage, nor prevent the company from recovering from them any amount which it might be compelled to pay to relieve the land from the lien thereof. (Barker, J., dissenting.)
    Upon the trial of this action a stockholder of the defendant corporation was called as a witness, by tbe heirs of Fox, and allowed to testify as to personal transactions had with the plaintiff’s intestate, which tended to show that the bond had been paid.

      Held, that, as the company had a right to reimbursement from "Williams and the estate of Fox for any money it might be obliged to pay to discharge the land from the lien of the mortgage, it, in a legal sense, derived no benefit from the establishment of the fact of the payment of the bond, and the fact that the witness was a stockholder thereof did not, therefore, render his testimony inadmissible in favor of the heirs of Fox as against the plaintiff. (Barker, J., dissenting.)
    Appeal by the plaintiff from a judgment, entered in Erie county on the 16th day of November, 1883, in favor of the defendants, upon the decision of Hon. Albert Haight, Justice, before whom the action was tried at Special Term.
    This action was commenced in this court on the 12th day of December, 1881, to foreclose a mortgage executed on the 14th day of December, 1867, by Arthur W. Fox (since deceased), Horace Williams and wife, to Hugh Murray, the plaintiff’s intestate, upon certain real estate situate in the city of Buffalo, a portion of which was conveyed to the defendant, The Buffalo Grape Sugar Company, by the said Arthur W. Fox and Horace Williams, by a full covenant deed (including a covenant against incumbrances), bearing date January, 10, 1874.
    The said mortgage was given to secure the payment of the bond of Arthur W. Fox, for $5,600, besides interest, on or before July 1,1868. The defendants answering were the defendant, The Buffalo Grape Sugar Company, and the heirs of Arthur W. Fox, deceased.

      George O. Greene, for the appellant.

      Adelbert Moot, for Fox heirs, respondents.

      Franklin D. Locke, for Grape Sugar Company, respondent.
   Bradley, J.:

The bond in this case made by Arthur W. Fox was secured by mortgage made by him and Horace Williams. The trial court found that this bond and mortgage were made to secure the indebtedness of the partnership composed of Arthur W. Fox and Horace Williams, then doing business in the firm name of Arthur W. Fox. And this is supported by the evidence. After the death of Arthur W. Fox, the plaintiff compromised with Williams and made to him a release duly executed under seal, which by its terms discharges and releases him from all several liability on account of such bond and mortgages, notes, and all other dealings whatsoever, and from all joint liability on account thereof, notes and other dealings in connection with said firm for any cause whatsoever jointly with Arthur W. Fox, or otherwise, “but not intending hereby to affect or discharge the liability of said Arthur W. Fox or his estate therefrom or to affect or discharge any other security for any of said demands other thari the personal liability of said Horace Williams.” If the liability of the representatives of the deceased partner Fox, and that of Williams upon the bond given to secure the payment of the partnership debts were several and concurrent at the time the release was made in such sense that an action might then have been brought against them together or severally, the release of the personal liability of Williams in view of the reservation clause would not have operated to the discharge of the Fox representatives from liability. The rule in England is that on the death of a member of a partnership there is in equity a several liability of the survivor and the representatives of the deceased partner, so that the latter may in the first instance be sued although the survivor is solvent (Wilkinson v. Henderson, 1 Myl. & K., 582), and the proposition is so stated by Judge Story in his Equity Jurisprudence (§ 676). But in this State the law is otherwise. On the death of a partner, the survivor, for all practical purposes, takes the legal title to the partnership property and the place of the firm in respect to its assets and liabilities, and is vested with the possession and management of the property for the purposes of closing up its affairs. (Egberts v. Wood, 3 Paige, 517; Nehrboss v. Bliss, 88 N. Y., 600; Holbrook v. Lackey, 13 Met., 132, 134; Adams v. Hackett, 27 N. H., 289; 29 Am. Dec., 376; Kinsler v. McCanty, 4 Rich. L. R., 46; S. C., 53 Am. Dec., 711; Andrews v. Brown, 21 Ala., 437 ; 56 Am. Dec., 252.) And the primary liability to pay the firm debts is that of the survivor. The remedy of a creditor at large of the partnership is against him alone unless he is insolvent. (Lawrence v. Trustees, etc., 2 Denio, 577, affirming, Trustees, etc., v. Lawrence, 11 Paige, 80; Slatter v. Carroll, 2 Sandf. Chy., 573 ; Voorhis v. Baxter, 18 Barb., 592 ; Voorhis v Child’s Executors, 17 N. Y., 354; Pope v. Cole, 55 id., 124.) And in that event, or when the legal remedy has been unsuccessfully exhausted against the survivor, the creditors may proceed in equity against the representatives of the deceased member of the firm and his estate. (Haines v. Hollister, 64 N. Y., 1, and cases before cited.) The burden is upon the creditor to establish the facts which afford the right to so proceed. It is assumed that the survivor Williams was solvent at the time of Fox’s death and has remained so, and that as survivor he had the partnership property and effects. His primary liability to pay the debts of the firm would seem to give to the representatives of the deceased partner the quasi relation of sureties in respect to remedy against them. And when the plaintiff’s right to proceed against Williams, who alone was so primarily liable, was voluntarily surrendered by her, and such surrender consummated by compromise with and release of him in respect to such liability, the right of the Fox representatives to have those debts collected of Williams was violated and cut off, and it would seem they cannot be subjected to liability for such debts. (Fogarty v. Cullen, 17 J. & S., 397, 398 ; Millerd v. Thorn, 56 N. Y., 402; Colgrove v. Tallman, 67 id., 95; Dodd v. Dreyfus, 17 Hun, 600.)

It is contended that the terms of reservation in the release of remedy against all parties other than Williams, enables the plaintiff to obtain relief as against the Fox representatives, although their relation is that of sureties. There may be no difficulty in cases where the liability of a surety is concurrent and several with that of the principal debtor to suspend or release the remedy of the creditor against him, when the legal rights of the surety are not prejudiced, but saved by proper words of reservation. In such case the release may be treated as a covenant not to sue the principal. (Price v. Barker, 4 Ell. & Black, 760 ; Couch v. Mills, 21 Wend., 424; Matthews v. Chicopee M. Co., 3 Robt., 711; Bateson v. Gosling, L. R., 7 C. P., 9.) And the remedy of the surety over against his principal by way of subrogation or otherwise being preserved, no legally recognized prejudice results to him. (Morgan v. Smith, 70 N. Y., 537, 545 ; Calvo v. Davies, 73 id., 211, 217; Hubbell v. Carpenter, 5 id., 171; Boaler v. Mayor, 19 C. B. [N. S.], 76; Green v. Wynn, L. R., 7 Eq., 28; affirmed, L. R., 4 Chy., 204.) But here there was a primary liability of the survivor. And the failure of a completely successful remedy against him, is a condition precedent to the liability of the representatives of the deceased partner for the partnership debts, which distinguishes this case from those cited. (Miller v. Fenton, 11 Paige, 18, 20.) This proposition depends upon the fact that the liability of the partners was joint only, which may not be entirely free from doubt here. The name of the firm when the bond was made was-Arthur W. Fox, and in that name it was executed. The instrument does not, in terms, describe the name as that of the firm as distinguished from the name of the individual. The debts and liabilities intended to be and in fact secured by it were those of the firm, and it referred to the understanding that the mortgage as collateral was to be executed by both Fox and Williams, which was d-one. No reason is apparent other than that the name of the firm was Arthur W. Fox, for the execution of the bond in that name for its benefit. And it will be observed that the liabilities secured by the bond were for loans before then made and thereafter to be made and for such paper as Murray should thereafter sign, accept or indorse of and for Arthur W. Fox. The trial court in its decision did not express the finding that the bond was executed by the firm, but in support of the conclusion of the trial court it may be implied as found by the expression of the fact that such was the name of the firm and that the bond was made for its benefit.

There is no presumption that the partnei’ship property in the hands of the survivor is insufficient to pay the debts of the firm or that his responsibility is inadequate. The personal liability was that of Williams only. By releasing him the plaintiff has defeated her right to do in the first instance that which is requisite to charge the Fox representatives personally. On the assumption that the bond was only the joint obligation of the firm it follows, if these views are correct, that the Fox representatives were by the release to Williams relieved from personal liability on it.

The Fox heirs have an interest in making the defense as they took by descent land of their ancestor, and if the mortgage continues an existing incumbrance they will have to pay it to protect their title. (1 R. S., 749, § 4.) And they rest such defense on the charge that the plaintiff has voluntarily defeated their right to have the fund primarily chargeable in the hands of Williams, as survivor of the firm, applied in satisfaction of the mortgage debt for which purpose the latter would otherwise be personally liable. (Robinson v. Robinson, 1 Lansing, 117.) There may be cases of release of personal liability to pay a debt secured by mortgage without impairing the latter as a lien. That is so where the premises are conveyed by the obligor and mortgagor subject to the mortgage and he is released from personal liability. The mortgaged premises are then the primary fund to pay the debt and the mortgage remains effectual for that purpose. (Tripp v. Vincent, 3 Barb. Chy., 613; Bentley v. Vanderheyden, 35 N. Y., 677.) And without such release the grantor, if required to and he does pay the debt, has the right of subrogation as against his grantee and those holding under him (Johnson v. Zink, 51 N. Y., 333), although there is no personal liability of the grantee to pay it. (Dey Ermand v. Chamberlin, 88 N. Y., 658.)

But here no relation has been assumed to the premises which separates the mortgage from the debt secured by it, and the Fox representatives and heirs have not in any manner consented to such severance and continued lien of the mortgage. The right to enforce the security is dependent upon the preservation of the debt secured by it. The mortgage is collateral to and the mere incident of the debt, and depends upon the subsisting vitality of it. (Merritt v. Bartholick, 36 N. Y., 44.) The difficulty in the defense founded upon the release to Williams is that it did not discharge the mortgage debt but was, in legal effect, a covenant not to sue him, and therefore is not available to defeat the action to foreclose the mortgage. (Price v. Barker, 4 E. & B., 760; Couch v. Mills, 21 Wend., 424.)

The other ground of defense was that of payment, and the trial court found that the bond and mortgage were in fact paid. The objections and exceptions taken to the admission of evidence hereafter referred to on that question, require the consideration of the relation of the Fox representatives and heirs, arid the Buffalo Grape Sugar Company, in respect to the mortgage debt. The latter defendant purchased of Fox and Williams a portion of the mortgaged premises subsequent to the mortgage and took from them a full covenant warranty deed, and afterwards released Williams and the personal representatives, heirs and next of kin of Fox, from liability, past ' and future, on the covenants in the deed. The contention on the part of the plaintiff is that this release from the covenants operated. ..to make the deed a conveyance of the equity of redemption only, and changed the relation of the company as that of surety, in respect <to the mortgage debt and lien, to that in the nature of principal of ■its grantors.

A conveyance made without covenant on the part of the grantor is not as between the parties necessarily taken subject to an existing mortgage on the premises, in such sense as to make the land conveyed the.primary fund for its payment. In such case the question ás one of intent and understanding of the parties to the deed. The (payment of the estimated value of the premises conveyed, without -deduction of the amount of the incumbrance, is a fact which renders .a covenant unnecessary to show that the purchase was not of the equity of redemption only. The consideration expressed in the •deed to the company was $120,000, which may, if necessary, ibe presumed to have been the consideration, paid. ( Wood v. McClughan, 4 T. & C., 420 ; Peck v. Mallams, 10 N. Y., 528.) The covenants in the deed in that respect are only evidence of intent. (Cooper v. Bigly, 13 Mich., 474, 475.) When made, the deed contained a covenant against incumbrances, which is very satisfactory ■evidence that the consideration paid was treated as the full value of (the property, and that the duty was that of the grantors to discharge the land from the mortgage lien. ( Wadsworth v. Lyon, 93 N. Y., 201.) There is nothing in the release of the personal .liability of the grantors from the covenant tending to reduce the •quantum conveyed, or intended to be conveyed, by the deed, or to show that the purpose was to make the conveyance subject to the mortgage or to change the relation of the parties in respect to it. The release left all remedies except that which the covenants gave.

' It is, therefore, fair to assume that as between those parties the mortgage debt still remained that of the grantors, and the primary •duty to relieve the premises of the lien continued with them-. And that the right and remedy of the sugar company in the event it should be required to and did pay it, were that of subrogation and indemnity. (Cole v. Malcolm, 60 N. Y., 363.)

It is otherwise when a conveyance is subject to a mortgage. 'Then the equity is with the grantor to have it paid from the land, and although his relation is not strictly that of surety where the grantee has not assumed its payment, yet he has the equitable right of subrogation for his protection. (Murray v. Marshall, 94 N. Y., 611.) If the view taken is correct, the mortgage debt is that of the grantors, and the grantee has for protection and reimbursement a complete remedy over against the former if required to pay the mortgage debt.

The fact of payment, as found, rested somewhat upon the evidence of Cicero J. Hamlin, who was the owner of stock of the Buffalo Grape Sugar Company. His evidence in this respect had relation to communications and transactions of the witness with the plaintiff’s intestate, and was incompetent in behalf of the company defendant, by reason of his interest in the event as to that defendant. (Code Civil Pro., § 829; Stall v. Catskill Bank, 18 Wend., 466, 473.) This evidence was received in behalf of the Fox parties.

And the question arises whether it was admissible as to them. If the defense of the Fox heirs prevails on the ground of payment of the mortgage debt, the adjudication will inure to the benefit of the Buffalo Grape Sugar Company, so far as to be effectual, to remove an apparent incumbrance, prior to the conveyance to it, and thus relieve the title of the company from it. In that view the adjudication in favor of the Fox heirs will go directly to its benefit. And unless there is some countervailing interest or right in support of his competency, it would seem that the interest of the witness was such as to render his evidence referred to inadmissible for the purpose for which it was received. (1 Greenl. Ev., § 390; Doe v. Tyler, 6 Bing., 390; Church v. Howard, 79 N. Y., 415, 420; Hill v. Hotchkin, 23 Hun, 414; Hadsall v. Scott, 26 id., 617; Barton v. Scramling, 31 id., 467.)

But the right of the Buffalo Grape Sugar Company to seek reimbursement from Williams and the estate of Fox, for any amount it might be required to pay to discharge the lien of the mortgage in question upon the land conveyed by Fox and Williams to it, would seem, in the legal sense, to render the company and the witness, as its stockholder, indifferent as to the result of the action, and therefore give competency to his evidence as to the Fox heirs within the rule declared in Benedict v. Hecox (18 Wend., 490, 503). So far as appears Williams and the estate of Fox are solvent.

The motion to strike out evidence of the witness Damon was founded on tbe fact that on his cross-examination it was made to appear that his evidence in chief was of facts not within his personal knowledge and therefore incompetent. The motion to strike it out called upon the discretion of the trial court, and the denial of it was not error. (Gawtry v. Doane, 51 N. Y., 84; Stokes v. Johnson, 57 id., 673; Marks v. King, 64 id., 628; Platner v. Platner, 78 id., 90; Miller v. Montgomery, Id., 282.)

It will not be presumed that the evidence was considered, and the contrary appears by the opinion of the trial court.

And although the opinion is no part of the record, it may be referred to for some purposes. (Snyder v. Snyder, 96 N. Y., 88; Allen v. Allen, 18 Week. Dig., 184.)

The judgment should be affirmed.

Smith, P. J.,' concurred; Haight, J., not sitting.

Barker, J.

(dissenting):

I am of the opinion that the judgment dismissing the complaint should be reversed. If any part of the bond remained unpaid, then the mortgage continues to be a lien on the premises, and the plaintiff was entitled to the usual decree of foreclosure. It is wholly unnecessary in this connection to consider the question whether the personal representatives of Pox would be liable for any deficiency which might exist after the sale of the premises. The release of Williams from all personal liability on the bond did not pay the debt nor impair the securities held by the plaintiff, and she could enforce them for the purpose of securing the payment of her unsatisfied debt. The general rule is that when a debt is secured by a lien on property, either real or personal, and the debtor is released from his personal liability and the debt secured remains unpaid, the lien may be continued and enforced if such was the intention of the parties to the agreement. In this case the intention of the plaintiff not to release the mortgage was plainly expressed on the face of the instrument itself. The words of limitation used to qualify the general language of the instrument are as follows: “ But not intending hereby to effect or discharge the liability of said Arthur G-. Pox orhis estate therefrom, or to affect or discharge any other security for any of said demands other than the personal liability of the said Horace Williams.”

The release of Williams, therefore, did not discharge the mortgage lien as to so much of the debt as may have remained unpaid at that time. (Tripp v. Vincent, 3 Barb. Ch., 613; Goodrich v. Goodrich, decided in this Dept., April, 1885, not reported.) Among merchants it is customary to discharge their debtors from all personal liability on their debts and demands, stipulating at the same time not to surrender up such securities' as they may hold, but reserving the right to enforce their payment. These provisions are in no wise inconsistent with each other when inserted in an instrument of this character. When taken together they are construed as a.covenant on the part of the creditors not to pursue the debtor on his personal promise. In legal effect it is the same as when the mortgagor is discharged from his personal liability under bankrupt laws. (Newton v. Scott, 9 Mees. & Wels., 431.) Alien on property, as security for the payment of a debt, may exist where no person is liable to pay the debt. In such cases the lien may be enforced by proceedings in rem, and such was the nature of this action.

It is wholly unnecessary to determine now whether the release of Williams, the surviving partner of Fox, had the effect to discharge the personal representatives and heirs-at-law of the deceased partner from all liability on the bond. If such was the legal operation of the discharge, the debt still remained unpaid and the plaintiff could enforce all pledges and collaterals held as securities. If these views are correct then it follows that the legal conclusion of the learned trial court that the release of Williams operated to discharge the mortgage as a lien on the lands therein described was erroneous. The referee held as a conclusion of fact that the bond had been fully paid. If this finding is based upon competent evidence, then the complaint was properly dismissed upon the merits. I think, however, that Hamlin was not a competent witness for the personal representatives of Fox, and was disqualified by reason of the provisions of section 829 of the Code of Civil Procedure. The complaint was dismissed generally and upon the merits, and if payment of the bond was established the premises were discharged from the lien of the mortgage. Hamlin, as a stockholder in the Grape Sugar Company* was directly and immediately interested in the issue of fact arising onthe plea of payment. The judgment if permitted to stand will be competent and conclusive evidence as between the parties that the mortgage lien has been discharged by payment of the debt which it was given to secure. The Grape Sugar Company as well as the personal representatives of Fox and his heirs-at-law, all of whom were made parties defendant, can use this record as evidence in their favor in any other action against them or either of them founded on the bond and mortgage, whatever may be the nature or character of the same.

The degree of interest which will disqualify a witness under section 829, is the same as the one which prevails at common law. That rule, as stated by Mr. Greenleaf, is as follows: “ The true test of the interest of a witness is, that he will either gain or lose by the direct legal operation and effect of the judgment, or that the record will be legal evidence for or against him in some other action. It must be a present, certain, and vested interest, and not an interest uncertain, remote or contingent.” (Sec. 390; Hobart v. Hobart, 62 N. Y., 83; Miller v. Montgomery, 78 id., 283; Steele v. Ward, 30 Hun, 555.) As Hamlin had a direct pecuniary interest in the event of the action, he should not have been permitted to .give the personal conversations he had with the deceased mortgagee, relative to the payments which had been made upon the bond and mortgage. Without placing full and implicit reliance on the evi dence of this witness it is difficult to see how the issue on the ques tion of payment could have been found in favor of the defendants, who rely on that particular defense.

If I correctly understand the position of my brethren, with whom I am unable to agree in affirming the judgment, they concede that Hamlin was directly interested in the result of the action, but hold that he was a competent witness for the representatives of Fox and his heirs because his interest- on the question of payment was balanced. The position that the witness was indifferent as to the result of the issue of payment is founded on the contention of the respondents, that if it had been determined that the mortgage was a valid lien on the premises and a decree of foreclosure and sale awarded, then the Grape Sugar Company could have paid the decree and been subrogated to the position of the plaintiff and enforced a payment of the bond out of the Fox estate.

If it should be conceded that the Grape Sugar Company, on paying off the mortgage for the purpose of protecting its interest in the pi’emises, could have recourse to the Fox estate for indemnity, then I do not concur in the argument that Hamlin’s interest on the-question' of interest were balanced. (1 Greenl. Ev., §§ 399, 120; Benedict v. Hecox, 18 Wend., 490; Collins v. Ellis, 21 id., 397; Wilmot v. Richardson, 6 Duer, 336.) But I do not deem it necessary to consider this question further, as I place my objection to the competency of the witness, on the ground that the Grape Sugar Company would not have had any remedy over against the Fox estate if it had been compelled to pay the bond and mortgage to protect its rights and interests. The release executed by that company, discharging both. Williams and Fox from all liability on their covenants contained in. their deed conveying the premises to it, had the legal effect to make, the deed a mere conveyance of their equity of redemption in the premises, and the rights of the parties should be now determined, the same as if such had been the character of the deed at the time of its delivery. The release in effect struck out every covenant in-the deed and discharges the grantors from every right of action which the grantee had against them on account of such covenants,, and the comprehensive language used is as follows: “ The Buffalo' Grape Sugar Company has released and discharged, and by these-presents does release and forever discharge the said Horace Williams- and the personal representatives, lieirs-at-law and next of kin of said Eox, from all liability for any cause on account of any covenants contained in the deed, from the said parties to the Buffalo Grape Sugar Company, or on account of any breach in such covenants, past or future.”

Treating the conveyance as a quit-claim, the legal presumption is that the grantee paid the grantors, as- a- consideration for their conveyance, the value of the premises at the time of the conveyance; less the amount of the mortgage lien.. The genei’al rule on that, subject is when the grantor conveys by a quit-claim deed, absolute!}!silent, as to the outstanding, incumbrances of which the grantee has. notice, he takes the premises-subject to the incumbrances, unless it is made to appear that, he paid the full value therefor. (3 Pomeroy’s Eq., § 1205; 3 Wash. on Real Prop., 380; Shuler v. Hardin, 25 Ind., 386.)

If, however, the grantee- pays the full value of the premises to-the grantor as the-consideration for the deed, and there-is an existing personal liability on the part of. the. grantor to pay the debt: secured by tbe lien, then such liability continues and the debt cannot be shifted on to the lands as the primary fund out of which payment is to be made. In snch a case if the grantee pays the lien to save his lands, he may be subrogated to the rights of the creditor and enforce the personal liability of the grantor. (Wadsworth v. Lyons, 93 N. Y., 201.) But if the amount of the lien be deducted from the purchase-price, then the lands are the primary fund out of which the debt is to be paid as between the parties to the conveyance. Where there are no covenants in the deed, and no reference is made to the incumbrance thereon, the presumption exists that the amount of the lien was deducted from the consideration money.

In Wadsworth v. Lyon (supra) the fact appeared that the grantee paid full value for the lands, and no reference whatever was made on the face of the deed to the incumbrance and it was held that the primary liability of the obligors to pay the bond could not be shifted on to the land, but it is distinctly stated in the opinion of the court that the rule would be otherwise if the incumbrance was deducted from the consideration of the conveyance, or by some agreement between the grantor and grantee charging the primary liability upon the grantee, leaving as between them the grantors to stand as mere sureties for the bonded debt.

In the case at bar there is no finding that the grantee paid full value for the premises, nor any evidence produced from which the fact could be found. It is disclosed by the evidence, and the question is left in no doubt whatever, that the officers of the Grape Sugar Company knew, when they executed the release, of the existence of this bond and mortgage, and that it was not paid up nor discharged. The legal presumption should prevail, as no evidence was produced meeting the presumption that the price paid for the premises was their value, less the incumbrance. The deed contained a covenant against incumbrances, and therefore as soon as the deed was delivered, as well as at the time the release was executed, the grantee had a right of action against the grantors which was satisfied by the discharge. It is impossible to conceive of any purpose on the part of Williams and Fox in procuring a discharge from their covenant, unless it was to be relieved from all liability, present, prospective or contingent, arising from the existence of the mortgage lien at the time of their conveyance. The release may be construed as a covenant on the part of the grantee not to sue Williams and Fox in any form of action for indemnity in case any portion of the mortgage lien was enforced against the premises, or as an agreement between the grantor and grantee charging the lands, as between those parties, with the primary liability to pay the debt.

For these reasons I think the judgment should be reversed and a new trial granted.

Judgment affirmed, with costs.