author: Talcott, P. J.:

text:
    JAMES D. FERGUSON, Respondent, v. THE MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Appellant.

      Former judgment — when it does not bar a second action — How far the receipt of premiums, with knowledge of certain facts, estops the company from setting up such facts as a defense.

    January 28, 1870, tlie defendant issued to the plaintiff a policy insuring the life of plaintiff’s brother, in the sum of $5,000. In 1871, the company commenced an action to have the said policy canceled and declared void, on the ground that it was procured by false and fraudulent statements made by the present plaintiff in his application therefor. The complaint therein did not question the plaintiff’s insurable interest in the life of his brother, ■ and no issue in regard thereto was made in the action, but the answer and the judgment, subsequently entered therein in favor of the then defendant, the present plaintiff, recited, that he was interested in his brother’s life by reason of a debt owing from the latter to him. In tliis action, brought by the plaintiff, upon the policy, after his brother’s death, the defendant alleged in its answer that his brother was not indebted to the plaintiff at the time of the issuing of the policy or 'at any time thereafter, and that the plaintiff had no insurable interest in his brother’s life, and also set up several false and fraudulent representations contained in the application for the policy and certain breaches of warranty, as defenses to the action.

      Meld, (hat the judgment rendered against it in the former action, did not prevent the defendant from proving tbe defenses of a went of insurable interest and of breaches of warranty set up in its answer to this action.

      Qumre, as to whether the fact that the defendant had received premiums upon the policy, with knowledge of the facts which it now' sought to set up as. defenses to the action, would prevent it from so doing.
    Appeal from a judgment in favor of the plaintiff, entered upon .a verdict directed by the court, and from an order denying a motion for a new trial, made upon the minutes of the judge before whom the action was tried.

      Spiggs & Mathews, for the appellant.

      William Kerna/n, for the respondent.
   Talcott, P. J.:

This is an action on a policy of life insurance, issued by the defendant, through its general agent, at Utica, on January 38, 1870.’ The defendant in its aoswer sets up several false and fraudulent representations, made to the defendant in obtaining the policy, ■and also ■ separately sets up certain breaches of warranty as a defense to the action.

The policy of insurance was upon the life of Amos S. Ferguson, -the brother of the plaintiff, and was obtained upon the declaration of the plaintiff, that he had an interest in the life of the said Amos S. Ferguson to the full amount of the policy, to wit, the ■sum of $5,000.

The complaint averred that at the time the policy was made and delivered, the said .Amos was indebted to the plaintiff in the sum •of $5,000, and upward, and that he was so indebted at tbe time of his death.

The defendant in its answer averred tbat Amos was not at the time of issuing, or at any time thereafter, indebted to the plaintiff in any amount whatever, and that the plaintiff had no insurable interest in the life of said Amos which fact was well known to the plaintiff and was fraudulently concealed from the defendant; and the defendant insists that by reason of such .fact the said' declaration and the policy were untrue and fraudulent as against the defendant, and were and are wholly inoperative and void as-against it.

The plaintiff specially replied to the answer, amongst other things, that in the year 1871 the company commenced an action against him, the plaintiff, in the Supreme Court, Oneida county, to have declared void, delivered up and canceled the said policy of insurance, “ upon the grounds and for the reasons substantially set up in the defendant’s answer in this action, that the said policy was and is void.” That an issue was joined in said action and was duly tried on the merits at a Special Term, in January, 1873, and the same was subsequently decided by the 00111!:, and the decision in writing duly filed on June 21, 1873, “ wherein and whereby it was adjudged and declared that the said policy of insurance was not void for the reasons alleged in the complaint in said action, or for any reason, and that the same was valid, and the said complaint in said action was dismissed with costs, and the said judgment has since stood and does now stand in full force and virtue.”

After the plaintiff had rested on the trial without having given any evidence tending to show that the plaintiff had any insurable interest in the life of the said Amos, at the time of the issuing of the policy or at any time afterwards, the defendant’s counsel moved for a nonsuit, on the ground that the plaintiff had proved no cause of action, and that he had not proved any insurable interest in the life of Amos S. Ferguson, which motion was denied, and the defendant excepted to the ruling.

But at the close of the opening for the defense, the counsel for the plaintiff offered in evidence the judgment roll in the former action, which was, objected to by the defendant, but admitted. From the judgment roll it appeared that the company in that suit alleged that the now plaintiff, intending to cheat and defraud the now defendant of the moneys therein specified, made an application to the now defendant to insure the life of one Amos Ferguson for $5,000, and for the sole benefit and advantage of the now plaintiff, and that, to induce the now defendant to accept such risk and to issue such policy, the said James D. Ferguson presented to the company a declaration or statement subscribed by him in relation to the .health, habits and occupation of , the said Amos S., falsely stating and representing among other things that the said Amos was then in good health, and usually enjoyed good health, and that the said Amos never had disease of the heart or other disease to injure his health ; and also .presented a physician’s certificate to the same effect, but that the said representations were false and fraudulent, &c.; and that the company, misled by such misrepresentations, issued the policy; _ and that by reason of the premises the policy was and is fraudulent and void, and ought to be surrendered up to the plaintiff and canceled ; and demanded relief, and a judgment that the said policy of insurance was obtained by fraud and misrepresentations, and was and is fraudulent and void; and that the now plaintiff be adjudged and directed to deliver up the same to be canceled, and for such other’ relief as may be just.

There was not a word in the complaint in the former action, drawing in question the insurable interest of the plaintiff in this suit. But in the answer in that suit the now plaintiff states by way of -recital, that “ Amos S. Ferguson, mentioned in the said complaint being indebted to this defendant, and thereby this defendant being interested in his -life, this defendant made application to the said plaintiff . . . for an insurance on the life of the said Amos S. Ferguson, to the amount of $5,000, for the benefit of the said defendant as a creditor of the said Amos S. Ferguson,” &c. And the trial judge in his findings, finds among his conclusions of facts, by way of recital also, “That on or about the 21st day of January, A. D., 1870, the defendant then being á creditor of one Amos S. Ferguson, to the amount of over $5,000, applied,” &e. But' there was ho issue whatever in that suit upon the question of Amos S. Ferguson’s indebtedness to the now plaintiff, or upon the insurable interest of the now plaintiff in the life of the said Amos S.

The evidence given in the former action does not appear: The replication of the plaintiff to the answer of the defendant in this suit avers, that it was adjudged ’ and decreed in the former suit, “that the said policy of insurance was not void for the reason alleged in the complaint in said action, or" for-any-reason, and that the same was valid.” .....’’j" ‘

■ 'This' is a misapprehension of the form of "the former judgment which, following in the language of the conclusion of law of the court before which that cause was tried, simply adjudged that the policy of insurance was “not void for the reason alleged in the complaint.”

After the record of the former judgment was received in evidence, the court excluded all evidence offered to sustain the defense of the defendant or any part of it, on the ground that the defendant was estopped by the record of the former judgment from setting up any such defense. • The defendant’s counsel offered to prove that at the time tbe application was made, and at the time the policy was issued, the plaintiff did not have an insurable interest to the amount of $5,000, or to any amount, in the life of Amos S. Ferguson. The court said, in respect to this offer, “ There is an ex • press finding in the decision in the former action, to the effect that he did have an insurable interest, and that, together with the proof now before the court, is conclusive upon the defendant,” and excluded the evidence ; to which ruling the defendant excepted.

The court,-it will be observed, did not seem to have noticed that the finding referred to was not within any issue in the former suit, and was only stated incidentally and by way of recital. No evidence was given, save by the production of the judgment record in the former suit, tending to show that the plaintiff had, at the time of issuing the policy, or at any other time, any interest in the life of Amos S. Ferguson.

The Revised Statutes declare on the subject (1 R. S., 662, § 8) as follows: “ All wagers, bets or stakes made to depend upon any . : . . unknown or contingent event whatever, shall be unlawful ; ” all contracts for or on account of any money or property, or thing in action so wagered or staked, shall *be void; and in section 10, “ The two last sections shall not be extended so as to prohibit or in any way affect any insurance made in good faith for the security or indemnity of the party insured, aud which are not otherwise prohibited by law

The 'defense of a want of an insurable interest was, as we have -noticed, specially set up in the answer in this case and was in issue. The modern American authorities hold that unless the assured has some interest in the life of the party whose life is insured, the policy of insurance is void as a wager policy, and was void at the common law, and is especially so since the statute above referred to, which is merely declaratory; and that interest in the subject matter is- essential to recovery on a life policy, as well as in all other policies of insurance. (Ruse v. Mutual Benefit Life Ins. Co., 23 N. Y., 516; S. C., on a motion for reargument, 24 N. Y., 653.) And it was then held, contrary to the doctrine of certain English cases, that the simple declaration of interest on the part of the assured was not sufficient, but that the interest must be proved when put in issue. Tbe interest must exist when the policy is issued (Howard v. Albany Ins. Co., 3 Denio, 301, and Ruse v. Mutual Benefit Co., supra), and must exist when the loss occurs. (Shotwell v. Jefferson Ins. Co., 5 Bosw., 247; Murdock v. Chenango Ins. Co., 2 N. Y., 210; Fowler v. New York Indemnity Ins. Co., 26 Id., 422; Freeman v. Fulton Fire Ins. Co., 14 Abb. Pr., 398; Mutual Life Ins. Co. v. Wager, 27 Barb., 359; Bliss on Life Ins., 18, 19, notes; May on Ins., 115.)

The defendant sets up in its answer, as a third and separate answer, that the application and statement therein contained and the answers to the questions thereto annexed, became the basis and formed a part of the policy, and it was thereby expressly agreed that if the same were not in all respects truly and correctly stated, the policy should be void, and specifies certain alleged breaches of warranties contained in the said policy. A breach of a warranty contained in- a policy of insurance constitutes a defense, independent of the question whether the policy was obtained by any fraudulent representation. (Foot v. Ætna Life Ins. Co., 61 N. Y., 571; Barteau v. Phenix Life Ins. Co., 67 Id., 595; Cushman v. United States Life Ins. Co., 63 Id., 404.)

The trial court in this case, being about to direct a verdict for the plaintiff, said, For the purpose of the ruling my impression is, that the facts contained in the respective offers are unavailing to the defendant, for the reason that the effect of the judgment record and the effect of the subsequent payments [of premium], with the knowledge on the part of the defendant which is now shown by the evidence, would estop this defendant; and that, therefore, it would not be a useful expenditure of time to go through the evidence in detail, and then reach these rulings in the end.

“ The ruling is made with the same force and effect as if the evidence was here. To that ruling the defendant has an exception.” The court thereupon directed a verdict in favor of the plaintiff for the amount of the policy, less the amount of the set-offs allowed. The jury returned such verdict. The defendant then moved for a new trial on the minutes.

We are of the opinion that the court erred in holding the defendant estopped by the judgment in. the former action, not only as to the insurable interest of the plaintiff in the life of Amos S. Ferguson, but also as to so much of the defendant’s defense as was founded on an alleged breach of the warranties of the policy. The plaintiff did not and could not have recovered in the former action on the ground of a breach of warranty.

The rule is explicit and absolute that a party must recover, if at all, in equity, according to the case made by his bill; and no relief can be granted for matters not charged in the bill, though they may be apparent from other parts of the pleadings and from the evidence. The judgment must be seov/ndmn allegaba as well as probata. (Bailey v. Ryder, 10 N. Y., 363; Peck v. Mallams, Id., 548; Ferguson v. Ferguson, 2 Id., 361; Frost v. Koon, 30 Id., 446.)

The adjudication in the former action was only upon the issue litigated, and which, as we have seen, was the only one which was determined in that case. (Campbell v. Consalus, 25 N. Y., 613; People v. Johnson, 38 Id., 63; Sweet v. Tuttle, 14 Id., 465; Stowell v. Chamberlain, 60 Id., 212.)

In Campbell v. Consalus (supra), it was held that the amount due by the bond should have been put in issue, though there was an agreement that matters foreign to the pleadings might be given in evidence and decided by the verdict, but it was held that such agreement did not operate to enlarge the operation of the judgment rendered on such verdict.

In Stowell v. Chamberlain (supra), where it was claimed that a former judgment between the same parties was an estoppel, it was held, that in order “ to bar the second action, the circumstances must be such that the plaintiff might have recovered in the first, ■for the same cause as is alleged in tbe second.” "We think the verdict was erroneously directed, for the reason that the judgment in the former action was received as an absolute bar and estoppel •against the defendant’s defense, not only of a want of interest in tbe plaintiff in tbe life insured by tbe policy, but also as a bar to tbe defense of a breach of warranty.

But in so bolding, we do not mean to be understood as deciding, but wbat tbe subsequent payment and receipt of tbe premiums, with notice to the company of tbe facts which are sot up as breaches of the warranties, may have estopped it from setting up those defenses, hut .only that the verdict was directed on erroneous grounds, and because there may be questions of fact as well as law to be disposed of on another trial.

Tbe order denying a new trial and judgment reversed, and a new trial ordered, costs to abide tlie event.

Present — Talcott, P. J., and Smith, J.; Hardin, J., not sitting.

Judgment and order reversed and new tidal ordered, costs to •abide event.


source: Caselaw Access Project

author: Barrett, J.:

license: Public Domain

text:
    ELIZABETH H. EASTMAN, Appellant, v. DANIEL E. STARR, Respondent, Impleaded, &c.

      Stay of proceedings, after entry of judgment — when it cannot be granted without security being given — Code of .Civil'Procedure, §§ 613, 618 — a stay will not be granted because the defendant'is applying, in another court, for a discharge under the Two- Third Act. ■

    During, the pendency of this action and prior to the recovery of a judgment herein, the defendant' procured from the ’ Court of Common Pleas of the , City of New York an order directing him to make an assignment of all his property, and discharging him from his debts, under the “ Two-Third Act.” Thereafter,this order was, upon the plaintiff’s application, vacated dud the discharge canceled on the ground that it was fraudulently and irregularly procured. Prom this last order the defendant appealed to the General Term of. the Common Pleas, and procured a stay of all proceedings in the Court of Common Pleas during the pendency of such appeal.
    Thereafter the plaintiff having recovered a judgment in this action and instituted proceedings to procure the appointment of a receiver, the defendant obtained an order staying all proceedings in this action pending the stay granted by the Common Pleas.
    Upon an appeal from that order, Held, that the stay of proeedings was in effect an injunction staying proceedings upon a judgment for a sum of money, within sections 613 and 618 of the Code of Civil Procedure, and could only be granted upon the payment of the amount thereof into court, or upon security therefor being given as therein provided.

      That in the absence of any averment of fraud or error, it would be subversive of right and contrary to precedent to stay the enforcement of a valid and regular judgment, without statutory authority, merely because another court might hereafter decide that the defendant was entitled to be discharged from his debts.
    That the order should be reversed.
    Appeal from an order made at a Special Term, staying all proceedings on a judgment recovered by the plaintiff, pending a stay granted by tbe General Term of tbe Common Pleas, in a certain proceeding instituted in that court by the defendant to obtain bis-discharge as an insolvent debtor under tbe Two-Third Act.
    This action was commenced in January, 1879, to recover the. sum of $15,000, due upon a bond executed by tbe defendant Starr and one Biker. • In August, 1879, the defendant Starr applied to* tbe Court of Common Pleas of the City of New York to be discharged from bis debts, and thereafter, and in October, 1879, procured an order directing him to make an assignment of all his property, and discharging him from bis debts. Tbe plaintiff thereafter procured an order vacating the orders obtained by tbe defendant,, and canceling and setting aside tbe discharges, on the ground that they bad been fraudulently and irregularly procured. Prom this order tbe defendant appealed to tbe General Term of tbe Common Pleas, and procured an order staying all proceedings in that court during tbe pendency thereof.
    The plaintiff having recovered a judgment herein in March, 1880,, upon which an execution bad been returned unsatisfied, moved for tbe appointment of a receiver, with a view of reaching certain property owned by;,the- defendant. Thereupon the defendant moved for and obtained an order staying all proceedings herein, on thes part of tbe plaintiff, pending tbe stay granted by tbe Court of Common Pleas.

      George S.'Hastings, for tbe appellant,

      Orlando L. Stewa/rt, for tbe respondent.
   Barrett, J.:

We think the stay should not have been granted, Tbe plaintiff lias a perfectly valid judgment against the defendant which be seeks to enforce. That is a right expressly guaranteed to him by law. The Code of Civil Procedure (§§ 613, 618), following the Revised Statutes, forbids an injunction staying proceedings upon a judgment for a sum of money unless the amount of the judgment be paid into court or security therefor be given. The present order staying proceedings was the equivalent of such an injunction. The form was of no consequence. Further, upon the facts presen, ed there was no basis for the stay. The defendant had no defense to the action which resulted in the judgment, none to the judgment itself. All that he claims is a hope that his proceedings, under the Two-Thirds Act, in the Court of Common Pleas may ultimately result in an effective discharge. The fact that that court, pending the hearing therein, has granted a stay of the creditor’s proceeding m that matter, cannot avail the defendant here. There is no intei’dependence as to the proceedings before the officer in the Court of Common Pleas and upon the judgment of this court. There being no averment of fraud or error it would be subversive of right and contrary to precedent to stay the enforcement of a regular and valid judgment, without statutory authority, merely be-' cause another court may hereafter decide that the defendant is en-' titled to a discharge.

The order appealed from should be reversed, with $10 costs, and disbursements, and the stay vacated.

Present — Davis, P. J., Brady and Barrett, JJ.

Order reversed, with $10 costs, and disbursements.


author: Davis, P., J.

text:
    In the Matter of the Application of JANE KNAPP, &c.
   Order reversed, with $10 costs, and disbursements; order entered as directed in opinion.

Opinion by

Davis, P., J.


author: per Curiam.

text:
    ARCHIBALD M. ALLERTON and another, Appellant, v. SARAH L. VANDEWATER, Respondent, Impleaded, &c. SAME v. SAME.
   Order reversed, with $10 costs, and disbursements.

Opinion

per Curiam.


text:
    ZACHARIAH E. SIMMONS, Appellant, v. CORNELIUS J. VANDERBILT, Respondent.
   Order affirmed, with $10 costs, and disbursements.

Opinion

per Curiam.


text:
    JAMES J. HIGGINSON, Appellant, v. THE FARMERS' LOAN AND TRUST COMPANY, Respondent, Impleaded with others.
   Order affirmed, with $10 costs, and disbursements.

Opinion

per Curiam.


text:
    WILLIAM D. WINSOR, as Receiver, &c., Respondent, v. JOSHUA BAKER and others, Appellants.
   Order modified as directed in opinion, and affirmed as modified, without costs.

Opinion

per Curiam.


author: Ingalls, J.:

text:
    THE NAUGATUCK CUTLERY COMPANY, Respondent, v. SUMNER BABCOCK and WILLIAM W. POST, Appellants.

      Action to rescind a sale for fraud — the judgment creditor of a fraudulent vendeeacquires by a levy no better title than such vendee had — Similar fraudulent acts a/re admissible to establish fraudulent intent — Effect of making false statement to a mercantile agency — who may rely thereon— When the failure of a pan'ty to produce a letter will authorize the admission of parol evidence of its contents — When it is sufficient to offer upon the Piñal to retw'n notes received upon a sale attacked for fraud — Secondary evidence.

    A judgment creditor, by levying upon goods in the possession of the debtor, acquires no better or greater title thereto than the debtor has, and if the latter’s title thereto is defective because procured by false a.nd fraudulent representations, his vendor has the same right to rescind the sale and. retake the goods, as against such creditor, as ho liad as against the vendee.
    For the purpose of establishing a fraudulent intent on the part of a vendee in purchasing goods, it is competent to show similar transactions between him and other parties, occurring at or about the time of the purchase in question.
    In an action to rescind a sale of goods, on the ground that it was procured by false and fraudulent representations made by the vendee, the plaintiff was allowed, against the defendants’ objection and exception, to prove that in December, 1875, a member of the defendants’ firm, for the purpose of influencing the conduct of those to whom they were to apply for credit, made a statement to the reporter of a mercantile agency, who came to-inquire as to the standing of the firm, as to its assets, and as to the property owned by one of its members, which statement was, to the knowledge of the firm, utterly false; that in March following, the plaintiff wrote from Connecticut t.o a person in New York, inquiring as to the defendants’ responsibility, and received a letter in reply thereto from him, in which he stated, among other things, that he liad made inquiry at a mercantile agency, who reported them well. He had seen the statement made to the-reporter of the agency, though it was not shown that he was a subscriber thereto.

      Held, that the evidence was properly received.
    The plaintiff notified the defendants to produce a letter written to them. Upon the trial the defendants offered to prove that they had delivered it to their assignee in bankruptcy, but did not show who he was, or where he resided, nor that they had made any effort to produce it, or even that they had notified the plaintiff that they had parted with it.

      Held, that it was proper to allow the plaintiff to give parol evidence of the contents of the letter.
    In an action to rescind a sale on the ground of fraud, it is sufficient to produce upon the trial and offer to surrender the notes given for the goods purchased; no tender of them need be made before the commencement of the action.
    The ruling of a judge on the trial admitting secondary evidence will not be reversed on appeal, unless it very clearly appears that an error has been committed which has prejudiced the party complaining thereof.
    Appeal from a judgment in favor of the plaintiff, entered upon the verdict of a jury, and from an order denying a motion for a new trial, made upon the minutes of the justice before whom the action was tried.
    The action was brought on October 13,1876, to replevy certain cutlery sold to the defendants by the plaintiff, on the ground that the sale was procured by fraud. Before the commencement of the action, the goods had been levied upon by the sheriff, under executions issued on judgments recovered against the firm, on September 29,1876. Goods had been sold by the plaintiff to the defendants, composing the firm of Rowe, Babcock & Post, a.t various times between December 16, 1875, and September 19,1876. All of the goods sold before May 31, 1876, had been paid for, and notes had been given for the residue, which had not matured when this action was brought. The firm went into voluntary bankruptcy on October 6, 1876. Upon the trial it appeared that on December-31,1875, the reporter of Bradstreet’s Commercial Agency for the cutlery trade, having inquired as to the standing of the firm for his agency, was given, by the defendant Post on behalf of the firm, a written statement, stated to have been signed by Rowe, stating that he owned western bonds and mortgages to the value of §37,000 to §40,000 ; real estate, unincumbered, valued at §40,000; bonds, house mortgages, railroad bonds (good), §30,000; independent of §80,000 stock and bonds of doubtful value, and his interest in firm ; Post telling him that this statement had been left to show to mercantile agencies and persons calling to know its standing. Post stated in addition that the firm had §40,000 over liabilities ; §40,000 in stock; §20,000 to §30,000 assets, and the same amount of liabilities. This statement, which proved to be false, was written out by the reporter in lithographic ink, and copies printed from' it, which were handed to merchants inquiring for reports. In March, 1876, the plaintiff wrote William Brown to inquire as to defendant’s standing. He inquired at Bradsti-eet’s Commercial Agency, received one of these lithographic reports, and wrote plaintiff that they were reported well at mercantile agency.

      Ohm. H. Winfield, for the appellants.

      George W. Wingate, for the respondent.
   Ingalls, J.:

This action was instituted by the plaintiff to recover the possession of certain merchandise which was' purchased by the defendants of the plaintiff, upon the ground that in making such purchase the defendants perpetrated a fraud upon the plaintiff which rendered the contract void, and prevented the vesting of title to the property thus obtained, in the defendants. We have examined the evidence with care, and are satisfied that upon the merits the jury reached a correct conclusion. The defendants produced no evidence to explain the transaction, and the result seems in accordance with the equity of the case. The property, which was replevied, was 'identified, upon the trial, as a portion of the cutlery sold by the plaintiff to the defendants. It appears by the evidence that such of the goods as were delivered, previous to May 31,1876, had been paid for by the defendants. It was insisted at the trial that the plaintiff must show affirmatively that the particular goods which had been seized by the plaintiff were actually sold to the defendants subsequent to that date. The court submitted to the jury, as a question of fact,, for them to find whether or not the goods in question had been paid for by the defendants; and they must necessarily have determined that such payment had not been made, and we thinlc the evidence is in harmony with such conclusion. The evidence is to the effect that the defendants replenished their stock of cutlery from time to time as it became reduced or exhausted, and we deem the inference reasonable and justifiable that the portion of the cutlery which remained unsold in the defendants’ store, and which was replevied by the plaintiff, had been sold by the company to the defendants subsequent to May 31,1876, and therefore not paid for. The case discloses that the defendants repeatedly urged the plaintiff to send forward the cutlery, to enable them to fill orders for goods, which were delayed by them, because their stock had become so reduced that they were unable to supply such demand. If the goods which the plaintiff seized had been paid for, the defendants could have shown it, and, having omitted to do so, should not complain of the inference which the jury has drawn from the facts and circumstances submitted to them upon the trial, bearing upon that question. If the defendants commingled the cutlery as it was delivered from time to time by the plaintiff, so that it was rendered impossible or impracticable for the latter to identify with certainty the particular articles which were furnished to the defendants subsequent to May 31, .1876, the plaintiff should not be required to furnish positive evidence of such identity. If doubt existed as to whether the goods replevied were a portion of the cutlery sold to the defendants by the plaintiff, a very different question would be presented; but starting with that fact, established in favor of plaintiff, we deem the evidence sufficient to sustain the conclusion of the jury that the goods in question had not been paid for. When inferences are to be drawn by a jury from facts and circumstances submitted for their consideration, the appellate tribunal reluctantly interferes with their determination. (Rounds v. Delaware, Lackawanna & Western R. R. Co., 64 N. Y., 138; Cothran v. Collins, 29 How. Pr., 155-170; Morss v. Sherrill, 63 Barb., 21.) In Bernhardt v. Rensselaer & Saratoga R. R. Co. (1 Abb. Ct. App. Dec., 134), Judge Selden remarks : “ If there are inferences to be drawn from the proof, which are not certain and incontrovertible, they are for the jury.”

Assuming that the sale was void on account of' the fraud of the defendants, Howe, Babcock & Post, and therefore that they acquired no valid title as against the plaintiff, the levy by virtue of an execution in favor of a creditor of such firm, could not have the legal effect to divest the title of the plaintiff and defeat the remedy resorted to for the recovery of the property, as such creditor cannot be regarded as a bona fide purchaser, and therefore could only acquire the title which Rowe, Babcock & Post possessed at the time of such levy. The fraud perpetrated by the defendants above-named prevented their acquiring title to the goods in question as against the plaintiff, and is also fatal to the claim of the execution creditor. (Cary v. Hotailing, 1 Hill, 311; Hersey v. Benedict, 15 Hun, 285; Lacker v. Rhoades, 45 Barb., 500; Root v. French, 13 Wend., 570; Mowrey v. Walsh, 8 Cow., 238; Van Cleef v. Fleet, 15 Johns., 147; Van Kleek v. Leroy, 4 Abb. Pr., N. S., 431; Hall v. Erwin, 60 Barb., 350.)

For the purpose of establishing the fraudulent, intent with which the cutlery was purchased by the defendants of the plaintiff, it was competent for the latter to prove similar transactions of Rowe, Babcock & Post with other parties, which occurred at or about the time the goods in question were purchased of the plaintiff. (Miller v. Barber, 66 N. Y., 568; King v. Fitch, 1 Keyes, 432; Hersey v. Benedict, 15 Hun, 283; Cary v. Hotailing, 1 Hill, 311; Hall v. Erwin, 60 Barb., 350; Amsden v. Manchester, 40 Id., 158.) The admission as evidence, of the statement made by Rowe, Babcock & Post to the commercial agency, does not furnish ground, we think, for reversing the judgment. ’ Sufficient was shown to justify the jury in an inference that such statement was communicated to and acted upon by the plaintiff. The defendants deliberately made the statement, obviously for the purpose of influencing the conduct of those to whom they intended to apply for credit, and they must have known that the effect thereof would be to mislead and injure those with whom they should have dealings involving credit. The party who makes such a statement should beheld strictly responsible for its truthfulness. The plaintiff, for the purpose of showing that the company had been informed of and had acted upon such statement, with other circumstances, put in evidence the following letter:

“ 95 John St., March 17, 1876.
“ Naugatuck Cutlery Co. :
“ Gentlemen: In reply to your inquiry as to the standing of the house you name, we have heard no rumors prejudicial to them; we were speaking with a peison last week who was doing business with them, and spoke highly of their position, and since receiving your letter we have made inquiry from mercantile agency, who' report them well. I shall be in your neighborhood probably next week, and will talk with'you further.
“Yours truly,
“ WILLIAM BROWN.”

The statement made to the mercantile agency was calculated to inspire confidence in the financial soundness of the defendants, yet it proved to be utterly false, to the knowledge of such defendants, and to the prejudice of the plaintiff. (Cazeaux v. Mali, 25 Barb., 585; Morse v. Swits, 19 How. Pr., 276.) The evidence does not establish a ratification by the plaintiff of the contract of sale, after the company became aware of the fraud. The claim interposed by the plaintiff in the bankruptcy-proceeding, on its face negatives any such intention, as the fraud of the defendants in procuring the cutlery is expressly asserted as the ground of the plaintiff’s claim. It was not shown upon the trial that the plaintiff accepted the notes of Rowe, Babcock & Post, after the plaintiff had acquired a knowledge of the fraud which they had perpetrated upon the company, and consequently such acceptance did not amount to a ratification of the sale of the goods. We do not think a fatal error was committed by admitting parol evidence of the contents of the letter ■which was addressed to the defendants, in answer to their letter of December 3, 1875. Due notice had been given by the plaintiff to the defendants, requiring the latter to produce such letter upon the •trial. And without making any effort to procure the same, or even notifying the plaintiff that they had parted with it, and where it could be found, the defendants contented themselves with an offer upon the trial to show that they had delivered it to the assignee in 'bankruptcy, but who he was, or where he resided, the offer did not «disclose. (Jackson v. Shearman, 6 Johns., 19.) Giving due weight do all the facts and circumstances, we are convinced that the defendants failed to show, or even to offer to show, a state of facts from which the court was bound to conclude that such letter was beyond the control of the defendants, so that they could not produce it upon the trial. It is so much matter of discretion with the judge at the trial, in determining whether a case' is made for the introduction of secondary evidence, that his ruling should not be reversed unless it appears very clearly that error has been committed which has prejudiced the case of the' party who complains. The verdict of the jury was substantially correct, and if any error was •committed in the form of - entering the judgment, the remedy to •correct the same should be by motion rather than an appeal from the judgment.

The offer to surrender the notes upon the trial was all that the law required. No tender of them was necessary before the action was commenced. (Nichols v. Michael, 23 N. Y., 264; Bradford v. Fox, 38 N. Y., 292; King v. Fitch, 1 Keyes, 450.) An examination of the case has convinced us that substantial justice has been attained; and that no error has been established which calls for a reversal of the judgment, which therefore should be ■affirmed, with costs.

Davis, P. J., concurred.

Present — Davis, P. J., and Ingalls, J.

Judgment affirmed, with costs.


author: Per Curiam.

text:
    EDWARD KEMP and others, Plaintiffs and Respondents, v. WELLS S. DICKINSON, Appellant, and MARIA DE CARMO, GOMES DE MAGELHAES and others, Defendants and Respondents.

      .Action of interpleader — when a commission to talce testimony ma/y issue therein— when the order should, not direct that the testimony ma/y he used on the tidal of all issues that may arise.

    Appeal from an .order made at Special Term, directing a commission to issue herein to take testimony.
    The action was brought to compel an interpleader respecting a fund held by the plaintiffs between the defendant Dickinson and the other defendants. Dickinson denied the right of the plaintiffs to compel him to interplead. The other defendants admitted it, and set up in their, answers the various facts which they relied upon to establish their rights in the fund. Upon the motion of •one of the defendants, the order in question was made. It contained, among others, the following provisions:
    “That the plaintiffs and the defendant Dickinson be at liberty'to join in said commission, and that the trial of this action be stayed until the return thereof. ■
    “ And it is further ordered, that the testimony to be taken under the commission hereinbefore mentioned, may be. used on the trial of the issues in this action, and also upon the trial of any issues which this court may hereafter direct to be tried as 'between the défendants in this action, or any of them, as to the right of any of said defendants to the fund, or any part thereof, now in the hands of the plaintiffs, and mentioned in the complaint herein.”
    The court, at General Term, said : “ This is an action of inter-pleader. The right of the interpleader is denied by one of the defendants. This defendant sets up in his answer facts and circumstances which, he contends, are inconsistent with and bar the right of the plaintiffs to judgment of interpleader. The issues thus-raised must first be tried before the rights of the respective defendants, as between themselves, can be litigated in this action. If the defendant, who contests the plaintiffs’ right to an interpleader, be successful, the complaint will be dismissed, and the parties remitted to their ordinary actions.
    “ It is not apparent from the papers, that there are, as yet, any issues as between the co-defendants. But if such be the case, these issues are conditional upon the plaintiffs’ success in establishing their right to the interpleader. This being, so, the court below should not, by a special provision in its order, have extended the use to be made of the testimony (when procured under the commission), to subsidiary issues, dependent, for their existence as subjects of litigation herein, upon the result of the primary and direct issue between the plaintiffs and the defendant Dickinson. In legal contemplation, such subsidiary issues are to be joined, after the court has decreed the interpleader. It is the issues to be thus formed to which reference is made in the Code. (§ 888, subd. 5.)
    “ The order should be modified by limiting the use of the testimony, to be taken under the commission, to the trial of the issues in this action, as between the plaintiffs and the defendants, without costs of this appeal.
    “ The precise form of our order is stated in the list of decisions handed down.”

      Joseph B. Flounders, for the appellant.

      Edward Patterson, for the respondents.
   Opinion

Per Curiam.

Present — Davis, P. J., Brady and Barrett, JJ.

Order modified by striking out 'the'following words: “ And also upon the trial of any issues which the court may hereafter direct to be tried, as between the defendants in this action, or any of them, as to the right of any of said defendants to the fund or any part thereof, now in the hands of the plaintiffs and mentioned in the complaint herein,” and affirmed as modified, without costs.


author: Westbrook, J.: Learned, P. J.,

text:
    ORANGE R. YOUNG, Respondent and Appellant, v. THOMAS J. GUY, Appellant and Respondent, Impleaded, &c.

      Bights of one talcing a mortgage {given, to secure an existing indebtedness.) from one who has theretofore contracted to sell the land — how far the vendee will be protected, in payments made to his vendor without notice of the mortgage — as to payments, after notice of the prior mortgage, to am, assignee of a mortgage given by the vendee.

    This action was brought to foreclose a mortgage given to the plaintiff by one Scribner, on February 2, 1875, to secure a pre-existing indebtedness, and which liad been recorded on the next day after its date. Upon the trial, it appeared that Scribner had, on October 24,1874, agreed to sell the premises covered by the mortgage, to the defendant Guy, who then paid to him $2,200, and thereafter, and on May 1, 1875, accepted an ordinary warranty deed of the premises, and paid to him the further sum of $1,006.91, and gave back a purchase-money mortgage for $1,800, which was thereafter assigned by Scribner to one Flack.
    The plaintiff had no knowledge of Guy’s contract, when he took the mortgage, nor had Guy then entered into possession of the permises, nor did Guy know of the existence of the plaintiff’s mortgage when he took the deed and gave back the $1,800 mortgage. After the commencement of this action to foreclose plaintiff’s mortgage, the defendant Guy, having thus, notice of the plaintiff’s rights, paid’ to Flack the amount of his mortgage.

      Held, that as the plaintiff took the mortgage to secure a pre-existing debt, lie was not a purchaser for a valuable consideration, and that lie only acquired thereby a lien upon the property to the extent of the interest of Scribner in the unpaid purchase-money due upon the contract.
    That as between the plaintiff and Scribner, the former was entitled to the $1,300 secured by the purchase-money mortgage, and that, as Flack acquired no greater title than his assignor had, the plaintiff had the same right to the money secured by the mortgage as against Flack.
    That the defendant, having paid the money to Flack after notice of the plaintiff’s rights,, was not protected thereby, and should be compelled to repay the same to the plaintiff. (Learned, P. J., dissented.)
    That the payment made by Guy to Scribner on his execution of the contract for purchase, and also that made on the delivery of his deed was valid as against the plaintiff’s mortgage.
    Cross-appeals from a judgment entered upon tlie report of a referee. The defendant Guy appealed from the whole of the judgment; the plaintiff Young from so much of said judgment as decides that the plaintiff’s mortgage is a lien only to the extent of .$1,300 and interest from May 1^ 1875.

      JS. A. Parmenter, for Guy.

      Eselc Gowm, for Young.
   Westbrook, J.:

This action was brought to foreclose a mortgage for $7,000, given by one Scribner to the plaintiff on February 2, 1875, to secure an indebtedness upon two promissory notes of over $6,000, which mortgage was duly recorded on the day immediately succeeding that of its date.

The mortgage covered two pieces of land in the city of Troy, one known as No. 3 St. Paul’s place, and the other as No. 5 St. Paul’s place. The latter lot had been sold under a prior mortgage, such sale producing no greater sum than the amount due thereon, with the costs of foreclosure.

At the time Scribner executed the mortgage to thé plaintiff, he bad, by contract dated October 24, 1874, agreed to sell and convey to the defendant, Thomas J. Guy, No. 3 St. Paul’s place, that .being one of the lots mortgaged to the plaintiff, the conveyance ¡to be made and possession delivered on May 1, 1875, and had on the day of the execution of the contract received, from Guy a payment of $2,200 thereon. When the plaintiff, however, took his mortgage from Scribner, he had no knowledge of the existence of the contract with Guy, nor had Guy taken any possession of the property.

On May 1, 1875, Guy, without any knowledge of the existence of the plaintiff’s mortgage, completed his purchase of Scribner, taking a deed of the property, paying on that day to Scribner in cash $1,006.91, and giving his bond, with a mortgage on the premises, as security for its payment, conditioned to pay to Scribner $1,300, as in the bond is expressed. The bond of $1,300, given by Guy to Scribner upon the completion of the purchase, and the mortgage securing the same, were assigned to the Messrs. Flack.

After the plaintiff had commenced this action to foreclose his mortgage, and after service upon Guy of process- and papers therein, which gave to him full notice of the plaintiff’s mortgage, the defendant Guy paid to the said Messrs. Flack the amount oi their mortgage.

The trial of this action was before a referee, upon whose report a decree of foreclosure has been made in favor of the plaintiff, to the extent of the $1,300 mortgage, and interest thereon, given by Guy to Scribner, and assigned and paid to the Messrs. Flack. From this paid of the decree the defendant Guy has appealed.

The plaintiff, while conceding that he can have no claim upon tbe property to the extent of the $2,200 paid by Guy ujion the execution of his contract ■ of purchase, nor upon $1,888.29 of the purchase-money paid by Guy as a part of his purchase, in the discharge of liens older than the mortgage sought to be foreclosed, nevertheless insisted, before the referee, that in addition to the amount allowed by the referee he should have a decree for the sum of $1,006.91, and interest thereon, which sum Guy paid to Scribner on the day he took the deed, which day was subsequent to the execution of the mortgage to the plaintiff. The claim made to this $1,006.91 the referee disallowed, and from his report in that particular the plaintiff appeals.

In the foregoing statement of facts many findings of the referee have been eliminated, for in regard to them there is no disputé, and they throw no light upon the points in controversy.

The first question is, was the plaintiff entitled to a decree awarding to him the amount due upon the mortgage paid to the Messrs.' Flack % And the second is, was Ire entitled to the $1,006.91, paid to Scribner h ,

The first interrogatory has already been decided by this.court in this identical cause, upon a previous appeal (12 ITun, 325). It .was then held that the plaintiff took, by his mortgage, a valid lion upon the premises to tho extent of the purchase-money unpaid by Guy oh his agreement, and that as the mortgage which Guy executed for $1,300, the balance of the purchase-money, was no payment thereof, his subsequent payment to the Messrs. Flack, with knowledge of plaintiff’s rights, was not good as against the plaintiff. The reason given by tire court for that conclusion was, that if Scribner had retained tho ownership of the bond and mortgage, .Ire could not have compelled payment to himself for his own benefit; and as his assignees (the Messrs. Flack), took it subject to all equities which existed against it in the hands of Scribner, they were equally powerless to enforce it. As, however, the soundness of the conclusion reached by a majority of the General Term, that Scribner would have been unable to compel the payment of the Guy mortgage to himself, has been questioned, it may be proper to examine it anew.

" As the deed from Scribner to Guy was in consummation of an agreement to sell and convey, which was prior in time to the execution, delivery and recording of the mortgage from Scribner to Young; as such deed was taken by Guy without knowledge of the Young mortgage, • and as the Young mortgage was not given to secure an indebtedness or liability incurred on the faith thereof, but represented only a pre-existing debt, the conveyance from Scribner to Guy (as will hereinafter be shown) woiild have given to the latter a good title to the j>roperty as against the Young mortgage, if the whole purchase price had then been paid. The exact form of the deed to Guy is not given in the ease. In tho evidence it is simply stated to be a warranty deed,” and the date and record ate given. The referee finds it to be “ an ordinary warranty deed.” This is -but a very imperfect description. Was it one containing covenants of warranty and of quiet enjoyment only % If so, there must be an actual eviction to warrant an action for breach of covenant. ' (Greenvault v. Davis, 4 Hill, 643; Fowler v. Poling, 6 Barb., 165.) Did it contain a covenant of seizin % If so, it was broken, provided the grantor (Scribner) did not then have title. (McCarty v. Leggett, 3 Hill, 134.) Did it covenant against incumbrances ? If it did, and there were valid liens upon the property at" the time of its execution, an immediate right of action accrued to the grantee. (Hall v. Dean, 13 Johns., 105.) Or did the deed <bf conveyance contain all these covenants ? Quite possibly it did, for one of that character, in common parlance, passes as frequently by the name of “ an ordinary warranty deed,” as one which contains simply covenants of warranty and of quiet enjoyment. It is useless, however, to pursue a discussion based upon the form of the deed, for of its' exact character the case does not inform us, and its Covenants are immaterial to the point we are considering. Any forifi of deed from Scribner to Guy, which conveyed the premises, and which the latter accepted in good faith, and for which he 'actually paid the consideration-money, without knowledge of the 'young mortgage, would have given a good title. The defense of Guy tó.'thé payment of the mortgage given by him to Scribnei;, •does hot rest upon the failure of his title, but upon the fact that when Giiy had notice of the mortgage given by Scribner to Young he was not justifiable in paying the balance of the unpaid purchase .price of the property, which the mortgage he gave to Scribner represented,, to Scribner. When the present action was commenced, and summons and complaint were served upon Guy, though Guy ' had a good title to the property as against Young to the full extent ‘ of bis’ payments actually made (as we shall have occasion to show hereafter), lie’ had not yet paid the entire purchase-money. There was still $1,300, and interest from the time of the delivery of the .deed to him, due on the sale to him, and the question he was to ask was not, Is my title good \ but it was, To whom shall I pay the money which I still owe ? It is too clear for argument that with Scribner and Young both before the court (as they actually were, or might have been .brought upon Guy’s application), if Scribner had. still retained the Guy mortgage, that the payment would have been directed to be made to Young and not to Scribner. However good a payment by Guy to Scribner would have been, if made by Guy without knowledge of the Young mortgage, as protecting Guy, yet if such payment had not in fact been made, and all the parties were before a court of equity, as between Young, who held Scribner’s mortgage, given to secure an honest debt, and Scribner, who was endeavoring to obtain what his own mortgage gave to Young, there could be no doubt as to the result. And what is trae as between Young, Scribner and Guy, is .also true ás between Young, the Messrs. Flack and Guy. The Messrs. Flack were but Scribner’s assignees, as against whom all the equities in favor of Young as against Scribner equally attached. For these reasons it', is clear that the conclusion of the General Term that neither Scribner nor the Messrs. Flack could have compelled Guy, after he was notified of the existence of the Young mortgage, executed and recorded intermediate the making of the agreement of purchase and sale between Scribner and Guy, and its consummation by the delivery of the deed of conveyance, to pay to either the balance of the unpaid purchase-money, was sound, both in equity and in law. Scribner had parted with his right to such unpaid purchase-money to Young by the execution of the mortgage to the latter, and he had nothing whatever owing to him thereon when he undertook to - give the Messrs. Flack title thereto.

For these reasons, I fully concur with the majority of the General Term, and although the presiding judge differed from his -associates, it was upon the assumption, which the findings of the trial court then required, that the plaintiff knew of Guy’s agreement when he took the mortgage sought to be foreclosed. This fact is now expressly found to be otherwise, and by such.new finding, it seems to me, all cause for difference is removed. It cannot now be said, as was then plausibly urged, that Young was guilty of laches in permitting Guy-to give his bond and mortgage without any notice of the former’s rights accruing from his mortgage, thus not only allowing Guy in ignorance to assume an obligation he would not then have incurred, but also by want of such notice. enabling Scribner to obtain securities which he subsequently transferred to tlie Messrs. Flaclc. The plaintiff undoubtedly took a valid lien by his mortgage upon the property, to the extent of the purchase-money unpaid by Guy, good as against Scribner or his assignees, and good as against Guy after actual notice thereof, and-no act of his, nor want of an act, which perhaps he ought to have taken, if he had been informed of Guy’s agreement of purchase with Scribner, which he was not, has misled any of the parties, or given either an equity as against him on that ground. The fact, that his mortgage was given to secure a precedent debt, makes no difference. 'The owner of the fee, Scribner, like every other owner of property, before ho actually conveyed away his interest, could give a mortgage on the property to secure an honest debt, which would bo valid as against him to the extent of his ownership, and any purchaser of the property from Scribner was bound, after notice, to pay the balance of the purchase price to the holder of the incumbrance and not to Scribner.

The referee is mistaken in the view taken in his opinion, as to the effect of the mortgage given to the plaintiff. It became a lien on the land to the extent of the mortgagor’s interest; the amount due him on the agreement to sell and convey to Guy being the limit thereof (see opinion of Allen, J., in Moyer v. Hinman, 17 Barb., 140, and cases there cited); and even though the referee was right in his supposition that the mortgage was a lien upon the unpaid purchase-money only, and'hot upon the land, his conclusion, that this suit, brought to foreclose the mortgage, upon the assumption that it bound the realty, was no notice to Guy of the lien upon the unpaid purchase-money, is equally erroneous. The mortgage to Young, being alien upon the land itself to the extent of the money owing to Guy on his purchase, his action, treating it as a valid incumbrance upon the property, was properly brought, and the efficacy of the notice to Guy, given by such suit, depended upon a correct statement to him of the facts; and a mistake by the holder of the mortgage as to the effect of such facts upon his remedy — that he could enforce the whole amount duo upon the mortgage against the property — could not impair the validity of -the notice. As, however, the referee, while he differs in opinion from this court as to the rights of the parties, in his conclusion follows the decision made at General Ter/n, a further discussion of the merits of this point is unnecessary. It is, in fact, res aclgucbicata by virtue of the decision heretofore made in this court.

As to the second question (Was the plaintiff entitled to a decree for the $1,000.91, paid by Guy ?), it may also be said, that this was, incidentally, at least, decided when the cause was before us on the previous occasion. Judge Bocees, in his prevailing opinion (12 Hun, 325, see page 327) says : “ He was, therefore, protected in his payments made prior to, and at the time he received his deed from Scribner pursuant to the contract of purchase, May 1, 1875, including the liens on the lot then assumed by him, for he was then without notice of the plaintiff’s mortgage.” As, however, the learned counsel of the plaintiff claims that the opinion was erroneous in this particular, the court having, as he claims, overlooked the fact that Guy was not in possession of the property, whilst in the cases relied upon in the opinion (Moyer v. Hinman, 13 N. Y., 180; Trustees of Union College v. Wheeler, 61 Id., 88) the purt chasers by contract were, it may be well for a moment to consider that question again.

■ It is' true that in the cases just referred to the parties holding contracts of purchase were in possession of the land, which fact was notice sufficient to put all persons dealing with the vendor • upon inquiry (see also 5 Abb. N. Y. Dig., 370, paragraphs 134, 135, 130, and cases there cited) but does the want of possession by the purchaser in this case change the result as to the payment made by him on May 1, 1875, which payment was after execution, delivery, and recording of the plaintiff’s mortgage ?

By the recording act (2 R. S., 6 ed., p. 1138, § 1), and a mortgage is included in its language (Id., p. 1151, § 72), it is provided : “ Every conveyance of real estate within this State hereafter made shall be recorded in the office of the clerk of the county where such real estate shall be situated; and every such conveyance not so recorded shall be void as against any subsequent purchaser in good faith and for a valuable consideration of the same ' real estate, or any portico thereof, whose conveyance shall be first duly recorded.”

If Guy liad, previous to the execution of the plaintiff’s mortgage, taken an actual conveyance in fee from Scribner, instead of a mere agreement .for one to be given at a future day, and had neither recorded Ms deed nor gone into actual possession of the premises, such deed would have been.invalid as against the plaintiff’s mortgage, provided such mortgage had been first recorded, and the plaintiff had taken the same, to use the language of the statute, “ in good faith, and for a valuable consideration.” If the plaintiff’s mortgage had been received in tbis manner, it seems clear that tbe defendant Guy’s agreement for a conveyance could not place , him in a better position than be would have been bad be received an actual transfer of tbe title, and bad failed to record tbe instrument making sucb transfer. 'Why then does not tbe plaintiff’s mortgage give to him a lien upon tbe land, in preference even to the cash payment, by Guy at the time of tbe making of tbe contract of purchase? Tbe answer is manifest. Tbe plaintiff’s mortgage having been given to secure an old debt was not for a valuable consideration,” as required by tbe recording act to give it a prior equity. (Dickerson v. Tillinghast, 4 Paige, 215 ; Pickett v. Barron, 29 Barb., 505.) It was, however, entirely valid as against the owner of tbe property to the extent of bis interest, for sucb owner could give, as before stated, a valid mortgage on bis own . property or interest, to secure an honest debt, and it was also perfectly valid as to Guy for bis remaining indebtedness upon bis purchase, when be received actual notice thereof. But until actual knowledge of tbe mortgage was brought homo to Guy, ■be was protected pot only in payments made prior to tbe execution of tbe mortgage, but in all subsequent ones made to bis vendor in conformity with bis contract of purchase. Tbis follows from tbe fact, that tbe recording act only protects tbe bolder of a subsequent mortgage, when it is given for actual value, parted with on the faitb of its execution; but tbe mortgage of tbe plaintiff, as it was not so taken, only operated as an assignment to him of Scribner’s interest in tbe property as security for tbe debt, and be was therefore bound, like any other assignee, to give the debtor notice of tbe assignment, if be wished to be protected against a payment to tbe assignor. Tbe payment, therefor, of $1,000.91, made by Guy, on May 1, 1875, to his vendor, without actual knowledge of the mortgage of the plaintiff, was good, and for the amount thereof no remedy can be given to the plaintiff; but the payment to the Messrs. Flack, as they had. no greater rights than Scribner, having been made after notice of the plaintiff’s rights, can, as has been previously stated, be no more held to be valid as against the plaintiff -than if made to Scribner after the same notice had been given.

This conclusion does ample justice to both parties. It is just to Young, because the record of his mortgage, which was given to secure an old debt, was no notice to Guy of its existence, and to prevent payments by Guy to his covenantee or his assignee, he was bound to give actual notice thereof. It is just to Guy, because, when the commencement of the action, by the service of process on him, informed .him of Young’s claim, he could Jiave brought the money due on his mortgage into court, and compelled Young and the Messrs. Flack to litigate their rights, at their own expense, or at the expense of the fund, as the court might ultimately determine. He was not compelled to side with either claimant, but having elected to side with the Messrs. Flack he assumed the risk of their right to demand the money still duo upon his jmrehase, which his mortgage represented, and the • legality of its voluntary payment by him to them. It follows that the judgment entered upon the report of the referee should be affirmed, but as neither party has succeeded upon his appeal, neither should recover costs thereon as against the other. »

Bockes, J., concurred.

Learned, P. J.,

dissenting :

"When this case "was here before (12 Hun, 325), the jury had found that the plaintiff had notice of the contract with Guy at the time when he took his mortgage. The majority of the court held, however, that notwithstanding such notice, the mortgage was valid against Guy, to the extent of the payments made by him, after actual-notice of the existence of the plaintiff’s, mortgage. On the last trial the referee found that the plaintiff had no. notice .of the contract with Guy, when he took his mortgage.

If we assume, however, that, although the plaintiff had no notice of Guy’s contract, yet that, as his mortgage was taken to secure a precedent debt, he gained no rights against the money paid by Guy, the further question arises: could Guy have successfully defended against the bond and mortgage held by the Flacks ? If not, then ho should be protected in respect‘to the money paid on the mortgage, as well as in respect to the money paid at the time when he received his deed. The referee has found that Guy had no defense to that bond and mortgage.

Scribner executed to Guy “ an ordinary warranty deed ” of the premises. Guy gave back this $1,300 bond and mortgage for a part of the purchase-money, and went into possession of the premises and so remains. If sued upon this bond and mortgage, his defense would be that, at the time when he received his warranty deed, the premises were incumbered by the mortgage to the plaintiff. I think that the decisions hold that this is not a good defense as long as Guy is not evicted. (Parkinson v. Sherman, 74 N. Y., 88 ; Sandford v. Travers, 40 Id., 140; Curtiss v. Bush, 39 Barb., 661; Edwards v. Bodine, 26 Wend., 109; Leggett v. McCarty, 3 Edw. Ch., 124; Abbott v. Allen, 2 Johns. Ch., 519 ; Bumpus v. Platner, 1 Id., 213.)

This appears more strongly when we consider that, from the time of the contract, Guy -was the equitable owner of the land; and that, as above stated, the plaintiff parted- with nothing for his mortgage, and therefore acquired no rights as against the dealings and contracts of Guy, made in good faith.

It may be said that the mortgage to the plaintiff operated ,as an assignment of Scribner’s rights in the land and in the contract, so that the plaintiff was entitled to have whatever Scribner should receive from Guy. That may be so. The plaintiff may have been equitably entitled to compel Scribner to assign to him the $1,300 mortgage given by Guy on the purchase. But that is not a claim that the mortgage is not binding on Guy; on the contrary, it is a claim that, being binding on Guy, it should have been transferred by Scribner to plaintiff. Tn fact, the plaintiff has never insisted that this $1,300 mortgage rightfully belonged to him; but has, insisted that his own mortgage was valid, and that this was subject thereto. And when Guy was threatened with foreclosure by thu Flacks, I do not see that ho could have interpleaded them §.nd the plaintiff. For the plaintiff never claimed any interest, legal or equitable, in the $1,300 mortgage. ' ■ ■ ■ ■

To illustrate : Suppose that Scribner, after executing the plaintiff’s mortgage for a precedent debt, had assigned to a third party for a valuable and present consideration all the moneys to be received from Guy on the contract. It does not seem to me that Guy could have resisted the claim of such third party to the moneys.

. Judgment affirmed, without costs to either party.


author: Westbrook, J.:

text:
    EDWARD J. CHAPIN, Appellant, v. JOSEPH THOMPSON, Respondent, Impleaded, &c

      'Motion for anew trial, after the trial' ofspecific issues hy a jury — when ii'must he made— Usury^-when the mortgagor is npt estopped from setting up the defense • °ft ty reason of Ms having recognized the mortgage as valid in a general -assignment.

    W.here, in an action brought to, foreclose a mortgage, issues of fact aré framed 'and, in pursuance of an order to that effect, tried by a jury, a motion for a new trial on a case and exceptions, founded upon irregularities committed on the trial by'the jury, must be made before the entry of judgment in the action, otherwise the findings of the jury will be deemed to have been acquiesced in, and questions of fact involved therein cannot be reviewed on an appeal from the judgment.
    Whore, after giving a mortgage to secure a usurious loan, the mortgagor sub- . sequently executes to the mortgagee, who still holds the mortgage, a general assignment of all his property in trust to pay his debts, aud in an inventory of his property and debts, subsequently made thereunder, recognizes the mortgage as a valid lien, and the debt it was given to secure as a valid debt, he is not thereby estopped from setting up the defense of usury in an action brought to foreclose the mortgage, by the mortgagee or his assignee, where there is no proof that the latter took the assignment on the faith of such recognition.

      Appeal from a judgment in favor of the defendant, entered upon the trial of this action at Special Term.

      Magone & HoTbrooh, for the appellant.

      Edward G. Janies, for the respondent.
   Westbrook, J.:

This action was brought to foreclose a mortgage for the sum of $6,000, executed' September 12, 1816, by the defendant, Thompson, to one Abiel E. Ilelmer, and assigned by Ilelmer on April 5, 1818, to the plaintiff.'

Thompson defended the action upon the ground of usury,, claiming that Helmer had demanded, as a condition of making the loan which the mortgage was given to secure, the sum of $600' in addition to the legal interest, which sum Thompson had paid.

In July, 1818, by order of the Special Term, it was directed that the questions of fact arising upon the answer should be tried by a jury, and interrogatories were framed for that purpose.

The issues were tried in October, 1818, at the St. Lawrence Circuit, before Mr. Justice Tappen, and the jury found that the loan .secured by. the mortgage was made upon an understanding and agreement that the borrower should pay to the lender, and did pay to him, the sum of. $600, in addition to the legal and lawful interest, as the consideration for the loan.

. In November, 1818, the case was heard at Special Term by Mr. Justice Tappen. No motion was made for a new trial of the issues, but the plaintiff, the court having “ approved and adopted said verdict, . . . applied upon the pleadings, proofs and verdict herein for judgment of foreclosure and sale, without a judgment for the deficiency, and the defendant, Joseph Thompson, . . . applied thereon for a judgment, declaring said bond and mortgage void, and enjoining any prosecution thereon, and ordering the same" to be surrendered and canceled.” Upon such hearing the court found the execution of the bond and mortgage as charged in the complaint, and that they were given to secure a loan made upon the usurious agreement alleged in the answer. The court further found that on October 22, 1811, • the defendant, Thompson, made a general assignment of all liis property, real and personal, to Abiel E. Helmer, the mortgagee, and then the holder of said mortgage, in trust for the payment of his debts; and “ in the schedule of Thompson’s creditors, contained in his inventory, made pursuant to chapter 466 of the Laws of 1877, was inserted the name of the said Helmer, as his creditor for $6,000, {for money loaned secured by mortgage,’ and among said Thompson’s assets, and as a part thereof in said inventory, were described the lands so mortgaged to said Helmer, and at the end of each parcel so described was inserted the statement, mortgaged to Abiel E. Helmer to secure the payment of $6,000, dated September 12, 1876, interest due on said mortgage from March 12, 1877,’ and the estimated value of the land so mortgaged was added at the end of such statement.”

The court also found that Helmer accepted the trust, but that he “ has made no account of his proceedings as such trustee,” and that “ on the 5th day of April, 1878, said Helmer, by an instrument under his hand and seal, duly assigned and transferred the said bond and mortgage, for a valuable consideration, to the plaintiff, Edward J. Chapín, and about ten days afterwards, this action was commenced; there-was not any agreement or understanding between said Helmer and Chapin, upon which said bond and mortgage were transferred by Helmer to Chapin, in addition to what is expressed in the written assignment thereof.”

As conclusions of law the court held: “ 1st. That said bond and mortgage are usurious and void. 2d. That the plaintiff is not entitled to any relief thereon as against the defendant, Joseph Thompson, or his property in the hands of said assignee. 3d. That the defendant, Joseph Thompson, is not estopped or precluded from availing himself of the defense of usury against said bond and mortgage. 4th. That judgment should bo entered herein, declaring said bond and mortgage usurious and void, and enjoining any prosecution thereon, and that the said bond and mortgage be surrendered and canceled as provided by statute.” Costs were also awarded to the defendant, Thompson, as against the plaintiff, but no costs are allowed to or .against any other parties.” Judgment having been perfected upon the decision, the plaintiff appeals to this court, and seeks to reverse the judgment' upon alleged errors committed upon the trial by the jury, and also because, as he insists, the decision in favor of the defendant was erroneous in law upon the facts found.

Before proceeding to the discussion of the questions which have been presented upon this appeal, it should be stated that no motion for a new trial of the issues found by the jury was made before judgment, as required by section 1003 of the Code of Civil Procedure, and that the Court of Appeals have held in this very action that a motion for a new trial upon a case with exceptions could not be entertained by the Special Term after judgment. Prom that decision it must follow that the alleged errors committed upon the trial before the jury cannot now be considered on this appeal. If a motion for a new trial had been made before judgment, as required by section 1003, no separate appeal could have been maintained from the order (Code of Civ. Pro., § 1347, subd. 2), but the defendant, in his notice of appeal from the final judgment, would have specified the intermediate order he wished to review. (Code of Civ. Pro., §§ 1301, 1316, 1317.) Unless, however, a motion for a new trial has been made at Special Term, the findings of the jury will be deemed to have been “ acquiesced in, and the questions of fact involved therein cannot be reviewed on appeal.” (Ward v. Warren, 15 Hun, 600.) And as the Court of Appeals have held, as already stated, in this very case, that such motion must be before judgment, it follows that the plaintiff is without remedy to review the alleged errors upon the jury trial.

This leaves but a single question for our consideration, and that is, was the defendant, Thompson, by reason of his assignment of all his property to Palmer in trust to pay debts, and the statement in his schedules of this mortgage as a valid debt and an existing lien, estopped from interposing and setting up the defense of usury ?

In the discussion of this question it should be observed that there has been no finding by the court to the effect that the present plaintiff took the assignment of the bond aad mortgage upon the faith that Thompson had in and by the assignment recognized them as valid obligations; nor have there been any requests to find any facts upon that subject, as required by section 1023 of the Codo, so that this court can, for itself, consider the evidence, and from it, if such a conclusion was thereby justifiable, find an estoppel, based upon the consideration that the defendant, Thompson, has misled the plaintiff to his injury. The case presents only this bald question. If the mortgagor, in addition to the execution of a mortgage to secure a loan tainted with usury, subsequently executes to the same mortgagee, who still holds the void mortgage, a general assignment of all his property in trust to pay debts, and in an inventory of his property and debts, subsequently made thereunder, recognizes such mortgage as a valid lien, and the consideration thereof as a valid debt, is he thereby estopped from setting up the defense of usury to an action brought to foreclose the mortgage ?

It matters not whether the action is brought by the mortgagee or his assignee, for, unless new or different equities exist in favor of the latter, by reason of the fact that the mortgagor induced the assignment, and none are found in this case, the law is well settled, that the assignee of a mortgage takes it subject to any defense which existed against it in the hands of the mortgagee.

A reference to the statutes of our State (2 B. S., 6 ed., pp. 1164, 1165, 1166), in regard to the rate “ of the interest of money,” will show how sweeping they are in declaring void “ all bonds, bills, notes, assurances, corvoey anees, all other contracts or securities whatsoever (except bottomry and respondentia bonds and contracts), and all deposits of goods or other things whatsoever,” given to secure the payment of a usurious loan. What is an assignment of the borrower’s property to the lender to pay debts, including as a valid debt the usurious loan, but a conveyance or .a security to secure the payment of a claim which the law makes unlawful ? It may, of course, be plausibly argued, that the debtor can treat as valid a loan tainted with usury, and that he does so treat it, when he makes an assignment of his property for the purpose of paying it together with other debts. But precisely that argument can also bo made upon the mortgage, for that is a conveyance or pledging of property for the specific purpose of paying the loan, as if it was a valid claim, and if it could prevail in the one instance it would also prevail in the other. The statute makes no distinction between the first, and any subsequent security taken by the usurious lender, for by its express terms “ all conveyances” and “ all other contracts or securities ”. thus infected are void. The second or the third, and as many as the lender sees fit to exact, and the borrower is weak. or foolish enough to give, are just as void as the one which was. cotemporaneous with the loan. The usurer presents no claim to the tender mercies of the court, and has no standing to demand any protection, and the purchaser of the tainted instrument is in no better position. (See Gray v. Green, 77 N. Y., 615, and especially page 619, an action which was tried and decided at Special Term by the writer of this opinion.)

The case of Hartley v. Harrison (24 N. Y., 170) presents no such .question as is now before us. There the mortgagor had actually convoyed the land, retaining no interest therein, and had charged the property in the*hands of the buyer with the payment of the mortgage. It was precisely as if he had put so much money in the hands of the purchaser wherewith to pay the mortgage, which, being dedicated and pledged for, that purpose, thereby. created a new agreement between the mortgagee and the buyer. In this case, the original mortgagor has but placed additional property, in the hands of the original mortgagee as security for the payment of the usurious loan. The mortgagee still held the mortgage, and the assignment to him conveyed no property to a third person for his benefit, thereby creating an obligation on the part of the person receiving the transfer to pay to the mortgagee, according to his agreement with the mortgagor, of which the conveyance accepted by him is the evidence. Ilelmer was the holder of the mortgage, and assignee under the trust deed for the. benefit of creditors, for six months prior to the assignment of the mortgage to the present plaintiff. There was at no time any dis-, position or sale of the property by the mortgagor, Thompson, which gave to- a then holder of the mortgage any remedy depending xxpon the principle on which Hartley v. Harrison was decided. The present plaintiff is precisely in the position of Helmer, for the trust deed was held by the latter, when the former purchased the mortgage.

The question involved in this case was, however, expressly decided in Strong v. Strickland (32 Barb., 281). In that action, though, by the general assignment of the mortgagor of all his •property to pay debts, “ the mortgage debt being placed among the preferred debts provided for and directed to be paid,” it was held, that this did “ not estop the mortgagor from bringing an action to cancel and set aside the mortgage on the ground of usury,” and in the course of his opinion in that case, Allen,' X, (p. 289) says: “A direction to Adams and Strickland to appropriate certain property to the payment of the mortgage debt, with other debts, does not estop the mortgagor from alleging usury, when the bond is sought to be enforced against him personally, or the mortgage against the property.” It is true, because the judgment declared “ the mortgage void as a lien and charge upon the premises, to a/ooid all question for the futwref the learned judge said, the judgment may be modified, by providing in terms - that the judgment shall not affect the claims of the mortgagee or assignee of the mortgagee under the assignment,” but it is manifest, from the seope of the whole opinion, what the decision must have been, had the general assignees been parties to the action, and if there had been no finding, as there was (as shown by the original .case, produced upon the present argument), that the assignee of .the mortgage purchased it upon the faith of the clause in the assignment for the benefit of creditors, providing for its payment as.:a preferred debt. - '

In the ease before us, as has already been said, there, has been no special pledge of property to pay this particular debt. The assignment was a general one to pay all debts, and in it this mortgage debt was not mentioned. In the inventory required by law to be filed, however,, the debt is recognized as existing, and as a lien upon the property embraced in the mortgage. If, when a general assignment for the benefit of creditors expressly provides for the payment of a usurious mortgage as a preferred debt, and an assignment is taken thereof on the faith of such a provision, the mortgagor could maintain an affirmative action to have the bond and mortgage annulled, it would seem to be clear that, under circumstances such as this case discloses, there could bo no valid objection .urged to a defense of usury by the mortgagor, when he is made a party defendant to a foreclosure action, and when he has a clear interest in having the bond and mortgage declared void.

A further discussion of this question is unnecessary. The statute, if the light of an adjudged case did not guide us, is clear. The mortgage being void for usury, the attempt, by the mortgagee, to take to himself new and additional security by a general assignment, did not aid him. Both were absolutely void by the provisions of the Revised Statutes, and, being void, it would be remarkable if either could operate as an estoppel in favor of any party to the transaction, or in favor of one who occupies the precise position of one of the contractors, and who has not a single equity beyond that of the individual from whom he derived title.

The judgment appealed from should be affirmed, with costs.

Learned, B. J., and Bockes, J., concurred.

Judgment and order affirmed, with costs.