text:
    Francis Gellatly, Receiver, &c., Plaintiff and Respondent, v. John Lowery, Defendant and Appellant.
    1. The taking of a note, in New York, from the agent of another for the purpose of carrying it to the principal by whom it had been entrusted to such agent, and carrying it to such principal, in New Jersey, and delivering it to him, is not sufficient to charge the person so carrying the note, in an action for converting the note to his own use, in favor of judgment creditors of a firm by whom the note had been fraudulently assigned to the said principal.
    2. The general partner in a limited partnership had, in fraud of the creditors and of his special partner, transferred certain notes to his father living in New Jersey. The defendant who had advanced to the special partner the capital of the firm, demanded from the father a portion of the amount so transferred, threatening suit, declaring he would have it from the father, but without having any thing with which the fraudulent general partner’s name was connected. Thereupon the father gave the defendant an order on his agent in New York for two of the notes. The defendant went the next day to New York to such agent and delivered the order, and was shown one of the notes. He took it, saw the name of such general partner was on it, (he being payee,) and by the first conveyance thereafter he went to New Jersey, declared he would not take notes with that name upon them, but would have the individual property of the father; delivered the father the note, and received from him his own (the father’s) notes.

      Held, that the defendant is not liable to a receiver for the benefit of the creditors of the limited partnership, as for a conversion to his own use of the note so received from such agent in New York and carried to New Jersey.
    3. A party who has caused a deposition to be taken on his own behalf does not necessarily, by offering and reading parts of it in evidence, bind himself to read it all, nor make the whole of it evidence offered and put in by himself, nor make answers which are irrelevant or incompetent admissible.
    4. In this respect the deposition of a party taken on his own behalf stands on the same footing as any other deposition. If the answers which the party taking the deposition declines to read are relevant and competent, the other party may read them, or cause them to be read, and use them as evidence in his own favor.
    5. In an action to recover the value of a promissory note, alleged to have been converted to the defendant’s use, judgments, against the maker and executions returned unsatisfied having been put in evidence to show that the note was of no value by reason of the insolvency of the maker, it seems to be admissible for the defendant to go further and prove that all equitable remedies are exhausted by proceedings against such maker supplemental to execution, his examination, &c., and that no property could be discovered.
    (Before Hoffman and Woodruff, J. J.)
    Heard, November 16th, 1859;
    decided, January 28th, 1860.
    This is an appeal by the defendant from a judgment for $2,886.49 damages and costs, entered in the plaintiff’s favor, on the decision of John Crosby, Esq., Referee, before whom the action was tried.
    The plaintiff is the Receiver, appointed at the instance of judgment creditors, of a limited copartnership firm carrying on business in New York, under the name of “Ebenezer Cook,” in which Ebenezer Cook was the general partner, and one John A. Lowery, the son of the defendant, was the special partner, and had contributed, as such, $8,000 to the capita] stock. The capital so contributed by John A. Lowery, his father, the present defendant, had advanced to him for that purpose.
    The complaint, in substance, states that the firm became insolvent in February, 1854, and that the property of the firm, then and immediately after, consisted of (among other things) three notes of one McCoy, each for $2,008: that those notes were, without any consideration paid therefor, procured by the defendant from a creditor of the said Ebenezer, to whom the latter had, with intent to give him an illegal preference, transferred them, and were disposed of by the defendant for his own use; and the plaintiff thereupon demands judgment for the value of the notes. The answer sufficiently put the allegations in issue which involved the defendant in any liability, denying that he obtained or disposed of any notes of McCoy, and averring that the only time he ever saw or had either of them in his custody was for the space of one day, when he received it from the possession of one Sherman, who held it subject to the order of one Thomas Cook; that he so received it for the sole purpose of carrying it to the said Thomas Cook, and he did so carry it, and did not, in any manner, dispose of it for his own benefit.
    The Referee found as follows:
    “I find the following facts, as established by the proof:
    “ That, in the year 1853, a limited partnership, under the statute, was formed between Ebenezer Cook, as general partner, and John A. Lowery, the son of the defendant, as special partner ; the special partner contributing to the capital of said partnership the sum of eight thousand dollars; that, in or about February, 1854, the said partnership became embarrassed, and shortly after insolvent; and that, while in a state of embarrassment, and in contemplation of insolvency, the said Ebenezer Cook sold all the effects of said partnership to one Robert McCoy, taking his notes as payment therefor.
    “ That the said Ebenezer Cook paid over to his father, Thomas Cook, on or about the first February, 1854, two of said notes, with other property, in payment of an old indebtedness of his to his said father, with intent to give him a preference over the creditors of the said partnership; that each of said notes was dated 1st February, 1854, one being payable in nine months and the other in fifteen months after date.

      “ That, afterwards, the defendant, knowing of the insolvency of said partnership, and of the circumstances under which said Thomas Cook received the said two notes, received one of them from the said Thomas Cook, being the note payable fifteen months after date, without any consideration being given therefor, which he afterwards exchanged with said Thomas Cook for a note of said Thomas Cook of like amount, and payable ten days after the said McCoy’s note was payable.

      “ I do further find that the plaintiff has been duly appointed the Receiver of all the property and effects, equitable interests and things in action of the said Ebenezer Cook.
    “I do therefore find, as a conclusion of law, that the said defendant is liable to the said plaintiff for the amount of the said note of Thomas Cook, so received by the defendant from Thomas Cook, in exchange for the note of Robert McCoy, held by said defendant, with interest; and I therefore give judgment for the plaintiff against the defendant for the sum of two thousand and eight dollars, with interest from the fourteenth day of May, one thousand eight hundred and fifty-five, amounting in the whole to twenty-five hundred and twenty dollars and twenty-six cents, and the costs of this action.”
    The proofs upon which the Referee found that the defendant received one of the notes made by McCoy,' from Thomas Cook, which he afterwards- exchanged with said Cook, for the note of the latter, and upon which the Referee bases his conclusion that the defendant is liable as for a conversion of: the McCoy note, were:
    That at. the time of the insolvency of the firm, and the sale of the property by Ebenezer Cook, for the notes of McCoy, the special partner, (John A. Lowery,) and his father, the present defendant, were in Europe. On their return they found that Ebenezer Cook had made such sale, and disposed of all the McCoy notes, distributing them to various parties; and" among other dispositions, he gave to his own father, Thomas Cook, who resided at Point Pleasant, Ocean county, in'Hew Jersey, three of such notes, each for $2,008j for a debt which he owed to his father. Thomas’Lowery, on the 24th of October, 1854, went to Hew Jersey to see Thomas Cook, at his house; complained that Cook had thus received, in. payment'of an old debt, notes which were the proceéds of his (Lowery’s) son’s money, and claimed that he was entitled to receive part of the amount, and threatened that unless some arrangement was made he would commence a suit to prevent Thomas Cook’s collecting the McCoy ■ notes. Thomas Cook agreed to let him have $4,000. in McCoy notes, and gave him an order on B. B. Sherman, of Hew York, for two of the notes, they having been left, by Thomas Cook, in Sherman’s hands for collection for his account. ■ The defendant remained over night, and on the 25th came to Hew York, presented the order to Sherman, and Sherman handed him one note, the other being in Bank. Defendant took it, and seeing the name of Ebenezer Cook upon it as indorser, (he being the payee,) and being unwilling to receive any notes having his name upon them, he took the first conveyance, and returned to Thomas Cook, in Hew Jersey, (on the 26th,) told him that he would not have a note with Ebenezer Cook’s name on it, gave him the note, and asked him for his own, Thomas Cook’s, notes, and they were given him, viz., two notes, each for $2,008, indorsed by a son-in-law of Cook, Robert Pharo.
    On the trial the defendant’s counsel produced a deposition made by the defendant, in his own behalf, and read parts thereof, but declined reading a certain answer contained in the deposition made by the witness to questions put by his own counsel. The plaintiff’s counsel insisted and the Referee held that as the answer was a reply in writing, to a question put by his own counsel, the defendant was not at liberty to decline reading it, and he ruled that the answer was therefore in evidence, -and he thereupon permitted the plaintiff to give other testimony which, but for his ruling that such answer was in evidence, as if put in evidence by the defendant might have been irrelevant and inadmissible.
    For the purpose of showing that McCoy’s note, to recover the value of which, this action was brought, was of no value, the maker being insolvent, the defendant put in evidence several judgments, recovered at about the time the said note became payable, (some before and some after, and embracing a period of about one year,) and executions issued thereon returned unsatisfied. He then offered proof that proceedings supplemental to execution had been taken, and to show that they were ineffectual, and no property of McCoy could be discovered. This the Referee excluded.
    The defendant appealed from the judgment entered on the Referee’s decision, to the General Term.

      Albert Cardozo, for the defendant (appellant).
    I. The Referee clearly erred in the decision he made, that an answer which defendant’s counsel declined to read in evidence, was as matter of law in evidence, and was defendant’s evidence.
    No different rule (though the Referee held otherwise) exists where the testimony is taken in writing, prior to the trial, than where the witness is produced in Court.
    1. In either case, before the answer is actually given, the question may be waived and withdrawn.
    2. It was as competent for the defendant to waive the question, as it was for the plaintiff to waive his objection.
    3. The answer in the deposition, was not in evidence—was not given—until actually read to the Referee, anymore than an answer to an oral question would be, before it was uttered.
    It being on the paper was of no importance.
    II. The Referee should have allowed the testimony, as to the proceedings supplemental to execution against McCoy.
    HI. There is no evidence to sustain the Referee’s judgment.
    1. There is no proof that the firm of E. Cook, or Ebenezer Cook individually, was either insolvent, or contemplated insolvency, when the notes of Robert McCoy were paid to Thomas Cook.
    2. The Referee erred in holding that the defendant ever became possessed of the note made by Robert McCoy.

      (a.) The note made by McCoy was held by B. B. Sherman (subject to a lien) for, and as the property of Thomas Cook.
    (5.) When Mr. Lowery carried it from Sherman to Cook, he did no more than carry it from an agent to the principal.
    (c.) What transpired was no more a negotiation by Lowery of the McCoy note, than if Lowery had received the McCoy note directly from Thomas Cook, to inquire, preliminary to accepting it, whether he ought to do so; and had returned it saying “ it is not satisfactory, you must give me something else.”

      (d) It seems monstrous to say, that keeping the note long enough to cany it to Thomas Cook and refuse to accept it, was retaining it for the purpose of obtaining from Thomas Cook other security in place of it.
    3. The defendant certainly sought something different from what the McCoy notes proved to be. Surely, then, he had a right to say that he would not accept them.
    4. Even in the view which the Referee took of the facts, it is a strained conclusion to hold that the delivery of the McCoy note, by Lowery to Thomas Cook, and the delivery to Lowery by Thomas Cook of the latter’s own note, was a negotiation by Lowery of the McCoy note.
    5. It seems but fair that if Mr. Lowery for a moment held one of the McCoy notes, even under an agreement with Thomas Cook, to take it, that there should be a bous pcenitenticz within which he might withdraw from an illegal contract.

      a. In any view, Mr. Lowery had but the most technical sort of possession of the McCoy note. He restored it speedily, to the very person from whom (through an agent) he received it; and that person’s liability (if any existed) for the original taking of it, by him from E. Cook, was unaffected by what occurred between him and Mr. Lowery. Mr. Lowery’s acts have not impaired the estate of Ebenezer Cook, diminished the assets nor damaged the estate in any manner or degree.

      John E. Parsons, for the plaintiff (respondent).
    I. If the McCoy note was transferred to Thomas Cook, by Ebenezer Cook, in contemplation of the insolvency of himself, or of the special partnership, with the intent of giving him a preference over creditors of Ebenezer Cook, or of the partnership, such transfer was absolutely void, as against the plaintiff, representing the rights of creditors. Mo title passed to Thomas Cook. The note remained the note of the partnership. The defendant could obtain no title to it from Thomas Cook, and if he obtained and converted the note, he is responsible to the plaintiff. Especially is this so where the defendant had notice of all the facts, and gave no consideration for the note. (2 R. S., 4th ed., p. 175, §§ 20, 21.)
    3. The defendant did receive the McCoy note payable at fifteen months, and converted it to his own use.
    II. The rulings of the Referee are correct. An answer in a deposition produced by the defendant could not be waived by him—and that answer being in evidence, made the plaintiff’s question admissible.
    HI. The defendant, who effected the partnership arrangement himself, using the name of his son, a boy seventeen years of age, for whose support and maintenance he was chargeable, and himself advanced the special capital, was not a creditor of the partnership.
    Thomas Cook owed him nothing. He ascertains that Thomas Cook has obtained the McCoy notes—visits him for the purpose of compelling him to surrender them to him—procures from Thomas Cook an order for two of them, knowing them to be assets of the partnership, calls on Mr. Sherman and receives one, makes no objection to it—doubtless then, is advised of the danger of the transaction—returns to Thomas Cook, not to surrender the note, but to ask him to take the McCoy notes, and in place of them give his own notes of the same amount. He did not want notes with Ebenezer Cook’s name on, for it would implicate his son, intending to retain all the benefit of the transaction, but to shift the responsibility on Thomas Cook. He holds the note till after he has got Thomas Cook’s notes safely in his hands. He does realize, in fact, $1,000, having no shadow of claim, while creditors receive nothing.

      The questions are all of fact. In such a case the Court will not disturb the conclusions of the Referee.
   By the Court—Woodruff, J.

We think the Referee erred in holding that there is any. foundation whatever for this action. Taking the facts as strongly in the plaintiff’s favor as any evidence in the cause will warrant, Ebenezer Cook the partner of the defendant’s son, had transferred to his father, Thomas Cook, the property of the firm by a conveyance which was fraudulent and void as against the creditors of the firm, and which was also void as against the defendant’s said son (the partner.) The property so transferred consisted of notes of one McCoy. The defendant insisted that by receiving the property so transferred, Thomas Cook had in fact received property belonging to his son and in effect received what the son had contributed as capital, which capital had been advanced to the son by him, the defendant, and making that claim he demanded that compensation should be made to himself and threatened a suit if it was not made.

Under the influence of this demand, Thomas Cook gave him an order on B. B. Sherman for two of the notes made by McCoy.

The evidence to our minds shows, by a decided preponderance, that when the demand was made and the order .was given and received, the defendant had refused to take any part of the property which had belonged to the firm and did not intend to receive any such property, and was not aware when he took the order, that the notes it was proposed be should receive from Sherman were the property of the firm; but the Referee has found otherwise: and let it therefore be assumed that he knew that the McCoy notes were the identical notes which had been fraudulently transferred to Thomas Cook.

It is however plainly shown that he did not know that they bore the indorsement of Ebenezer Cook, the fraudulent partner.

He presented the order. One noté was given to him and on discovering that it bore the indorsement óf Ebenezer Cook, he returned by the first conveyance to Thomas Cook, and demanded other notes instead of those mentioned in the order, and Thomas Cook gave him his own notes.

It is not and cannot be claimed that if on the first interview Thomas Cook had paid him two thousand dollars or any other sum in money, the defendant would have been in any manner liable to the present plaintiff. It would have béen a payment of money which Thomas Cook was not bound to make, but which he would be deemed to have voluntarily made, and in which neither the plaintiff nor any creditor of Ebenezer Cook had any interest. :

So if Thomas Cook had at that first interview delivered to him his own notes indorsed by his son-in-law, the same notes which he did give him at the second interview, it would have been equally clear that the plaintiff had no interest therein, and the creditors whom he represents would have had no concern therewith. -

So if the defendant had found the McCoy notes in the hands of Thomas Cook and had agreed to accept two of them, but on their being produced and handed to him he had examined them, and finding' the name of E.- Cook upon them, refused to accept them in satisfaction of the claim he was urging, and thereupon Thomas Cook’s notes had been given to him, -there would not have been the' slightest ground to claim that he was liable as for disposing of the McCoy notes to his own use, and yet this would have been as literally exchanging the McCoy notes with Thomas Cook as what he did do was.

So if the defendant when the one note, for which he is held liable, was handed to him by Mr. Sherman, had, on seeing the name of E. Cook, handed it back to him, and then gone to Thomas Cook and obtained his notes in lieu thereof, it would be equally clear- that the defendant is not liable.

The supposed ground of liability becomes therefore very narrow. If he had left the note with the agent of Thomas Cook, he would not be liable, but because he carried it to the principal, Thomas Cook himself, he is liable as for a conversion to his own use.

We are not able to perceive that any such liability results from his act. For all the purposes of holding the custody of the note, Sherman and Cook may properly be regarded as' one. Sherman evidently held the note subject to Cook’s order. The defendant, producing such an order, received the note-and carried it to Cook. The distance which at the time separated Cook and Sherman, rendered the interval between the time when the defendant took the note into his hand and the time when he delivered it to Cook, several hours, but that can make no difference, he went by the first conveyance. Suppose that on receiving the order from Cook he had only to' go into the next room, and obtaining the note and perceiving the name of E. Cook upon it, he had returned with it to Cook and refused to accept it, we think it plain it would have involved him in no liability.

It does not appear that there ever was a moment, after he was informed of the true tenor and character of the note, at which he consented to make it his own property; and he certainly did not use it in any proper sense for his own benefit. Instead of converting it to his own use, he returned it to the party who held it and who had the legal title to it as against himself, and as against Ebenezer Cook, the indorser, and Robert McCoy, the maker.

We are not willing to carry the idea of constructive conversion so far as has been done in this case. We think the defendant has been charged with the amount of a note which, according to the only sensible view of the transaction, he never accepted or consented to receive as his own, and in respect to which he did nothing amounting to a conversion.

It is proper to add that the Referee erred in holding that because the testimony of the defendant in answer to the questions put by his own counsel had been reduced to writing, that therefore the defendant’s counsel could not waive the reading of any answer which he did not wish to have read. If the testimony was relevant to any issue in the cause and tended to prove a fact to which the defendant’s statement was competent evidence, the plaintiff was at liberty to read it. (Forrest v. Forrest, 6 Duer, 102.) In this respect the deposition of the plaintiff is to be treated as the deposition of any witness would be when taken on commission or otherwise.

A party who has caused such deposition to be taken does not necessarily, by offering parts of it in evidence, bind himself to read it all, or make answers which are irrelevant or incompetent admissible.

It is not obvious upon what ground the Referee excluded evidence that proceedings supplemental to execution had been taken- against McCoy, and no property was discovered. The action was to recover the value of a promissory note of said McCoy, and it is for that value the Referee gave the plaintiff judgment. Evidence was given of judgments against McCoy, and of the return of executions unsatisfied, some due before and some after the day of the maturity of such note. If this was admissible, in order by proof of the exhaustion of all legal remedies against him to show that he was insolvent, and the note of little or no value, it is not easy to see why evidence that further equitable remedies had been exhausted without discovering any property, was not competent.

The judgment should, we think, be reversed, and a new trial ordered. Costs to abide the event.

Ordered accordingly.


source: Caselaw Access Project

author: Hoffman, J.

license: Public Domain

text:
    Daniel L. Pettee, Assignee, &c., Plaintiff and Appellant, v. John Orser, Sheriff of the city and county of New York, Defendant and Respondent.
    1. Where a copartnership consists of four members, two of whom are absent from the State on business of the firm, the other two partners cannot, without the assent of the others, make a valid assignment of all the copartnership property [in trust,] for the payment of the creditors, giving preference to some over others.
    2. An assignment so executed, and not ratified but dissented from by the absent partners, is void as against the creditors of the firm, and the assigned property may be levied upon and taken by the Sheriff under an execution issued on a judgment against the firm.
    3. The Sheriff, when sued by the assignee, may justify his taking by proof of such judgment and execution, and such an assignment will be held void as to him.
    4. The insolvency of the firm, when the assignment is made, will not authorize two of the parties to make the assignment.
    5. When the assignee, in such case, is one of the preferred creditors, he cannot, for that reason, retain the assigned property or any part of it to apply it to his own debt. He cannot claim, that the assignment is, as to him, an application of the firm’s property to the payment of his particular debt, which any, even one, of the partners might make.
    (Before Bosworth, Ch. J., and Hoffman and Moncrief, J. J.)
    Heard, December 7th, 1859;
    decided, January 28th, 1860.

      This is an appeal-from .a judgment for the, defendant upon a .dismissal of the complaint, and also -from an order denying a motion for .a new trial.
    Thé action was tried before Mr-. Justice-SLOSspur and a jury, on the 12th day of May, 1858. It was brought by the plaintiff, as assignee,- to recover the possession of' fourteen marble mantles, which were, prior to the 31st of January, 1855, the property of William Crumbie, Henry Randall, Alexander Crumbie and James McLean, copartners,, doing business, in the city of New York under the firm name of W. A A. Crumbie & Randall, who, on the day last named, made.an assignment to the plaintiff of all their property in trust for the benefit of. their creditors. The said mantles being thereby assigned, the plaintiff took possession thereof, and afterwards the defendant took the same from the plaintiff’s possession, and refused to return the same, and wrongfully detained and still detains the same, &c.
    The answer, so far as it is material to state it, denied the assignment to the plaintiff; alleged that the instrument under which the plaintiff claims purporting to be an assignment was executed by William Crumbie and Henry Randall only, and without authority from Alexander Crumbie and James McLean, or either of them, and that the same was never assented to, or ratified, by them,, but they expressly dissented, as soon as they.had, notice or knowledge of its existence. -That the trusts..in the said assignment were illegal, fraudulent and void.
    And the defendant therefore justified the taking and detention averring a judgment against the said members of the firm of W. & A. Crumbie & Randall, and an execution théréón addressed to him as Sheriff, by virtue whereof, he levied upon and took the property in question.
    On the trial, the articles of copartnership between the four parties above named were put in evidence. There was nothing therein which was claimed to give any special, peculiar or extraordinary power or authority to either of the partners,
    The plaintiff gave evidence ¡tending to prove, and claimed that he had shown, that on the 31st day of January, 1855, the firm was insolvent. '
    On the day last named, Alexander Crumbie was absent from the State of New York on his way to California-upon business of the firm; and James McLean, the other partner, was also absent from the State of New York, in the Island of Cuba, for and on business of the firm. On that day the two partners who were in New York, William Crumbie and Henry Randall, executed an assignment to the plaintiff in the name of the firm, affixing a seal, and also signing and sealing the same in their individual names. The plaintiff at the same time accepting, signing and sealing the instrument.
    This assignment, after reciting an indebtedness of the firm which they are at present unable to satisfy, purported to assign, transfer and set over to the plaintiff, all the stock in trade, fixtures, tools and property of the firm used in or about the business, and all their choses in action, accounts, claims and demands, and all and singular, every and any other property belonging to the said firm.

      In Trust. First, to sell and collect, &c.

      Second, to pay all reasonable fees, costs and charges which the firm now owe or have been put to for legal advice and services, including the making of the instrument and other papers necessary to carry the object thereof into effect and the costs and expenses allowed by law.

      Third, to pay any costs, charges and expenses to which the plaintiff “may be put or rendered liable in originating, prosecuting and defending the suits, or otherwise in aid and furtherance of the object and execution of the intention of this indenture.”

      Fourth, to pay the several creditors mentioned in schedule A., and annexed thereto, among whom the plaintiff was himself named as a creditor to the amount of $1,291.50.
    And, Fifth, after satisfying the preceding trusts to pay all the rest and remainder of the creditors of the firm, so far as the proceeds of the assigned party should be sufficient and pro rata.

    The said assignment never was executed nor ratified nor assented to by Alexander Crumbie and James McLean, or either of them, but was dissented from by them as soon as they received notice or had any knowledge that it had been made.
    It was proved that the plaintiff took possession under the assignment, among other things, of the mantles in question which had theretofore belonged to the firm, and that the defendant took the mantles from the plaintiff and refused to return them on his demand. And in justification of the taking, the defendant proved the judgment and execution mentioned in his answer, and that his taking was as Sheriff under such execution by levy of the same on the said mantles.
    The plaintiff also showed that the debt mentioned in the assignment as due to him and therein preferred with others named in the schedule annexed, arose for goods sold by him to the firm and used by them in their copartnership business.
    Upon these pleadings and proofs, the defendant moved for a dismissal of the complaint on two grounds:

      First. That the assignment was not the act of the firm, nor signed by Alexander Crumble nor James McLean, but that they expressly dissented therefrom, and therefore the plaintiff had no title.

      Second. That the assignment was fraudulent and void by reason of an illegal and unlimited discretion given to the assignee to originate suits, and use the funds in about the same without limit.
    The motion was granted, and the complaint dismissed.
    Erom a denial of a motion for a new trial, and also from the' judgment when entered, the plaintiff appealed.

      William Curtis Noyes, for the plaintiff (appellant).
    I. The assignment was not invalid or fraudulent by reason of the provision in its third clause; as it only expresses the legal effect of the instrument itself, except as to the expenses of preparing the assignment and the assignor’s liabilities for fees, &c., for legal advice and services.
    1. It was lawful to prefer these fees, &c.
    2. If there is any uncertainty as to the creditor, then the clause in that respect is simply void and does not affect the other parts of the assignment.
    II. The assignment is valid, although not executed by all the members of the firm :
    1. Being joint tenants one or more of the partners, without the assent of all, may lawfully dispose of all the partnership property. (Gow, on P., 51; Collyer, § 395; Smith’s Merc. Law, 79; Fox v. Hanbury, Cowp., 445; Mills v. Barber, 4 Day, 428; 5 Cranch, 289.)

      2. He may mortgage it for an old debt or on a new consideration ; and to secure a particular debt. (Tapley v. Butterfield, 1 Metc., 515.)
    3. He may sell and convey it without the knowledge or consent of the others. (Sale v. Dishman’s Ex’rs, 3 Leigh, 548; Mabbett v. White, 2 Kern., 442.)
    4. He may give a lien upon it, or assign it to pay debts, even when the firm is insolvent, and in so doing in the absence of his partners, so that they cannot act, may give such lawful preferences as all combined could have given. (Pickstock v. Lyster, 3 M. & Sel., 371; Harrison v. Sterry, 5 Cranch, 289; Mills v. Barber, 4 Day, 428; Anderson v. Tompkins, 1 Brock R., 456; Robinson v. Crowder, 4 McCord R., 519; Hodges v. Harris, 6 Pick., 360; Egberts v. Wood, 3 Paige, 517; Havens v. Hussey, 5 id., 30; Deckard v. Case, 5 Watts, 22; Kirby v. Ingersoll, 1 Doug. [Mich.] R., 477; Kemp v. Carnley, 3 Duer, 1; Burrill on Assts. Ch., 4, p. 36, 1st ed.; Robinson v. Gregory, Kelly et al., Supreme Court, General Term, N. Y., MS. Opinion of Roosevelt, J.)
    He can employ an attorney and confess a judgment in a suit at law, which will bind the firm. (McCredie v. Senior, 4 Paige, 378; 9 Wend., 437; 19 J. R., 137; 17 id., 525; 1 Hoff. Ch. R., 534; Collyer on Part., § 439, and note, Perkins’ ed.; id., § 119.)
    5. The cases which seem to establish a different rule are overruled, or are distinguishable from the present. Dickinson v. Legate, (1 Dess., 539,) is overruled in Robinson v. Crowder, (4 McCord, 519,) Harrison v. Jackson, (7 D. & E., 209,) is explained by Chief Justice Marshall in Anderson v. Tompkins, supra; in Deming v. Colt, (3 Sand. S. C. R., 284,) the other partners were present and capable of acting; Kirby v. Ingersoll, (1 Doug. [Mich.] R., 477,) was like Deming v. Colt; Dana v. Lull, (17 Vt., 390,) was decided on the ground of the fraud generally; in Hitchcock v. St. John, (1 Hoff. Ch. R., 511,) the partners resided in different cities and carried on their business, each conducting different branches.
    III. The objection of want of authority to make the assignment in any number of the partners less than the whole cannot be made by creditors or the sheriff, it can only be made, if at all, by the partners themselves. (Robinson v. Gregory & Kelly, MS., supra.)

    The judgment should be reverse'd, and a new trial ordered.

      Aaron I. Vanderpoel, for the defendant (respondent).
    I. The general principle is settled, that the power of part of the copartners to execute a general assignment to a trustee,-for the benefit of creditors, is not conferred by the act or relation of partnership.
    1. In conformity with this principle, it has been adjudged, in a large number of eases, and' cannot be regarded as an open question, that one partner cannot make a general assignment' of the property of the firm, either with or without preferences, where the other copartner is present and capable of acting, but does not consent and concur.
    In the following cases the assignments were without preferences: Hayes v. Heyer, (3 Sandf. S. C. R., 293,) Deming v. Colt, (id., 284,) Fisher v. Murray, (1 E. D. Smith, 341,) Kirby v. Ingersoll, (1 Har. Ch. R., 172,) S. C., (1 Doug. [Mich.] R., 477,) Bull v. Harris, (18 B. Monroe, 198, 199,) Wetter v. Schliepper, (4 E. D. Smith, 707,) Hughes v. Ellison, (5 Mo., 463,) Drake v. Rogers, (6 id., 317,) Kemp v. Carnley, (3 Duer, 1,) Dickinson v. Legare, (1 Dess., 537.)
    With preferences: Havens v. Hussey. (5 Paige, 30.) (See also 1 Abb. Pr. R., 167; 19 Barb., 592; Haggerty v. Granger., 15 How. Pr. R., 243; 3 Kent Com., 49; 19 J. R., 137.)
    2. In all, or nearly all, of the cases above cited, the Court recognized the right of one partner to sell and dispose of all of the property of the firm, directly to a creditor, or to any other person, against the wishes of his copartner. But they declare that there is a very broad distinction between that right and the right to create a trustee of the partnership property with the power to' dispose of it, in the discharge of whose duties and responsibilities the partners have a continuing interest. The one is .the exercise, the other is the delegation of partnership powers,
    3. Under some circumstances the effect, so far as it works a dissolution of the firm, may be the same, whether the assets are disposed of by a sale or by assignment to a trustee; but in the one case the dissolution is the consequence of an act legally within, the partner’s power, and in the other case it results from an act not authorized by the partnership relation. (Mabbett v. White, 2 Kern., 442.)
    4. An assignment to a trustee, ipso facto, works a dissolution, destroys the -business, puts the non-consulted partner but of all his rights. Except by the grace of the assignee, he, one of the chief parties in interest, can neither advise, negotiate, nor aid in settling the partnership affairs. He must bear the burden of all the errors or negligence of the trustee.
    It is a delegation of partnership rights and duties which ought not to be encouraged.
    III. The fact that two of the copartners were absent from the State and from their residence on the business of the firm, did not give the other two copartners a right to execute this assignment. There was no implied power, and no pretense of any express power. Nor did the absent partners ratify the act, but, on the contrary, they expressly dissented from it as soon as they received notice of it. (Hitchcock v. St. John, Hoff. Ch. R., 511; Havens v. Hussey, 5 Paige, 30; Deming v. Colt, 3 Sand. S. C. R,. 284; Dana v. Lull, 17 Vt., 390; Pearpoint v. Graham, 4 Wash. C. C., 234; Wetter v. Schleipper, 4 E. D. Smith, 707; Deckard v. Filbert, 3 Watts & Serg., 454.)
    1. Cases have occasionally arisen, attended with the circumstance that the conduct of the absent partner had been such as to show an abandonment by him of the business, and the investing of the other partner with the entire control and disposition of the property. (Kemp v. Carnley, 3 Duer, 1; Robinson v. Crowder, 4 McCord Law R., 519.)
    2. Two cases have declared that the execution of a general assignment, with preferences, when executed by one partner, in the absence of his copartner, is valid.
    But each contained the feature that the absent partner had invested his copartner with the entire control and management of the business. (Anderson v. Tompkins, 1 Brock., 456; McCullough v. Sommerville, which was based upon Anderson v. Tompkins, 8 Leigh, 436.)
    These cases have not met with the approval or sanction of the courts. The inconsistency of the arguments presented by Chief Justice Marshall, in Anderson v. Tompkins, are apparent. (Fisher
      v. Murray, 1 E. D. Smith, 341, 343; Hayes v. Heyer, 3 Sand. S. C. R., 297; Pearpoint v. Graham, 4 Wash. C. C., 234; Story on Part., 101. As to the case of Harrison v. Sterry, 5 Cranch, 300, see Havens v. Hussey, 5 Paige, 32.)
    3. The assent of, or a subsequent ratification by the absent partner, will not be presumed. It must be affirmatively established by those claiming under the instrument. (Hitchcock v. St. John, Hoff. Ch. R., 511.)
    4. Preferential assignments do not meet with the favor of the courts, and will not be protected or allowed to stand where the courts can redress the wrong. (Nicholson v. Leavitt, 4 Sand., 280; Barney v. Griffin, 2 Comst., 371; Nichols v. McEwen, l7 N. Y. R., 22.)
    IV. The assignment is void by reason of the third trust.
    1. He who accepts under an assignment, ratifies each trust contained in it, and is not at liberty to call in question- the conduct of the assignee so long as he acts within the letter of the instrument. (Olmstead v. Herrick, 1 E. D. Smith, 310; Litchfield v. White, 3 Seld., 443; Edgell v. Hart, 5 id., 213; Dunham v. Waterman, 17 N. Y. R., 9.)
    2. The second clause had provided for all the expenses necessary in the discharge of the trust, including the costs and expenses allowed by law. Whatever was done by the assignee under this second clause, was completely under the control of the Court.
    The third clause was unnecessary, for any proper or legal purpose. It is not subject to any limitation. (McEwen v. Nichols, 17 N. Y. R., 22; S. C., 21 Barb., 65; Mead v. Phillips, 1 Sand. Ch. R., 83.)
    The judgment should be affirmed. ■
   Hoffman, J.

The learned counsel of the plaintiff has adopted for his premises, as an incontestible proposition, that the power of disposition, as well as the power of acquiring and of binding, is fundamentally inherent in each partner, by the very constitution of a partnership. All these attributes of power follow the relation. His argument, on this basis, is forcible and logical. Everything of restriction and modification of this absolute authority must be rigorously established, either from positive convention or express judicial authority precisely to the point. The assumption is of entire authority. The exception must be exactly and strictly limited to what has been expressly declared to be an exception.

But the premises of the learned counsel are far from possessing that entire legal verity which his deduction assumes. Looking only to the ordinary and superficial statement of the relation of partners found in the elementary treatises, his position may appear plausible, if not certain. But, looking to the origin of the law of this relation, and the source from which England, and we after England, have obtained it, its accuracy may be questioned.

The law of England as to partners is derived from the lex mercatoria, and from the civil law. The Abridgments of Brooks and Fitzherbert have no such title. Even in Viner’s Abridgment there are no cases cited prior to the reign of Charles II.

Lord Coke says that the lex mercatoria, or the law merchant is part of the law of England, (Coke Litt., 11 b.;) and Sir William Grant, in Devaynes v. Noble, (1 Mer., 563,) observes, that the common law, although it professes to adopt the lex mercatoria, has not adopted it throughout, in what relates to partnership in trade.

In Molloy’s Treatise Be Jure Maritimo, page 488, (book 3, ch. 7, § 14,) it is stated: “If two joint merchants occupy their stock, goods and merchandise in common, one of them, naming himself a merchant, shall have an account against the other, naming him a merchant, and shall charge him as receptor denariorum ipsius B., ex quacunque causa et contractu ad communem utilitatem ipsorum, A. & B. provenient. .... sicut per legem, mercatoriam rationabiliter monstrare potent.” He cites 10 Henry VII, 16 a.; Fitzherbert Natura Brev., 117 D.

It cannot be questioned that the law of England upon this subject has been drawn primarily from the civil code. As trade and commerce arose, partnerships and societies and corporations grew up; and the resort of the untrained lawyers of the age must have been to those sources which the civil law, in its plenitude of legislation, opened to them. Yet I know of no author, except Mr. Watson, who has noticed this fact. (On Partnership, Introduction, xxv.)

Two questions then occur: First. Does the relation of co-partners imply the existence of a power in each partner, in contemplation of a disposition, to transfer the whole property to the custody and control of a stranger ? Second. Did the civil law, from which England derived the system, recognize such an absolute power of disposition ?

It cannot be said, that there is an inherent necessity for the existence of such a power in order to accomplish the purposes of a partnership. It would be strange to say, that what is done in view of a destruction, or produces a destruction of the relation, springs from such relation, or the powers it logically or reasonably implies. The power is justly implied to do everything which tends to aid, to strengthen, and protect. Many of the leading objects of a partnership—the augmentation of capital —the combination of the varied skill of different persons—the increase of the power of labor, and the expansion of effort and enterprise can be attained, (perhaps less efficiently) without the transmission of the whole authority of the firm to each member, for either the acquisition or disposition of property. In short, whatever tends to preserve, may well be deemed inherent and essential; what presupposes, or produces dissolution, is not merely not inherent, but really repugnant to the abstract idea of a partner’s power. The union of will created the relation: the union of wills seems necessary to destroy it.

And if we find this view sustained by the civil law, we may venture to be assured of its justness, and be emboldened to found our reasoning upon it.

The civil law did not deem such an authority essential to the nature of a partnership. I may go further, and say that the power of absolute disposition of capital stock resided only in the body of the firm, the corpus societatis.

The text of the civil law is as follows: Nemo ex sociis plus parte sua potest alienare, etsi totorum bonorum socii sint, 1. 68, ff. pro. soc., 1. 17, eod. The text of Domat, as translated by Dr. Strahan, is as follows: “Partners, even those who are in partnership of their whole estate and goods, can alienate only their own share of the common stock, and cannot, by their deed, bind the community, except in so far as it has empowered them.”

So Voet (Com., tome I., p. 610, pro socio) says: “Finally, (and to this, the action pro socio is suitable,) that the partner should allow the other partner to use the common property for those purposes, for which it was originally furnished by the will of the partners, and conversely, should abstain from all dealings with the common stock which are new, and repugnant to the primary destination of the partners.”

The President Favre, in his treatise upon the Pandects, (quoted by Troplong, DeSociété, tome 12, p. 83,) says: “Sicenimintellige ut qui societatem etiam universalem et in perpetuam contrahit, rem suam communicet socio et in earn partem dominii transferat, non in perpetuum, sed quamdiu tantum durat societas.”

The learned author, Troplong, whom I have quoted, in his commentary upon the 1860th article of the Code of France, observes: “ It is then the society alone, and not one of its members (without a mandate) which can dispose by sale or pledge, of what belongs to it. Even more, the preservation of the social capital is a point so important that the majority cannot force the minority of the partners to sell the property not vendible, (venales,) which composes it.”

This word venales (which I have translated vendible) means either things held or procured to be sold, or things necessary to be quickly sold, from their perishable character. (Troplong, art. 746, tome 13, p. 229.)

The learned author again says, in commenting upon article 1859, (tome 13, p. 203, n. 714,) this tacit authority (given by each, to each other’s partner) comprehends everything which is common in a procuration general; the power to purchase; to pay; to'receive; to hire or to let; and to sell vendible articles. So in the remarks on article 1860, he quotes a civil law writer as follows: “Ñeque alienare potest nisi fructus, aut alias res quce facile corrumpipossuntf and observes, (N., 474,) “And in this, civil part nerships agree perfectly with the commercial partnerships, en nom collectif in which every partner has the tacit authority to manage. Every day we see one partner selling the merchandise, the traffic of which sustains the business. But in commercial partnerships this power of the right of administration is more apparent and more frequent, because they comprise a far greater number of things vendible, and that the incessant traffic of the merchandise is there a condition of existence. But neither in the partnerships of commerce, en nom collectif, nor in civil partnerships, can one partner dispose of things not vendible.” ’

Once more he observes that the 1860th article extends to a prohibition of a sale by one partner alone of movable as well as immovable, and a violation of it will subject the partners to an action pro socio; but this concerns the partners between themselves. In relation to third persons to whom sales or pledges have been made, the articles 1862, 1863 and 1864 prescribe the rules.

In considering those articles (tome 12, p. 239,) he recognizes the great power of one to bind the whole in general partnerships, and states, “ these principles are affected by modifications. One is, that the act must not plainly transcend the objects of the union. Suppose one associate sells, in the- partnership name, all the immovables without which the firm cannot be carried on is it not clear that the buyer cannot pretend to have the partnership considered the seller, when he has cooperated in an act destructive of the partnership.” (Tome 13, p. 294.)

It may be added, that the law of France has provided in the fullest manner for the method of winding up a dissolved partnership. It is customary to name a liquidator in the articles. If this has been omitted, he can only be appointed by the unanimous choice of the partners; although a custom exists in many places giving a majority this power. (Troplong, tome 13, p. 484.) If an arrangement cannot be made, the Courts are applied to. (Id.)

The-1859th and 1860th articles of the Code Civile of France, are adopted verbatim into the Code of Louisiana. (Art. 2841, Civil Code, Louis., ed. 1825, p. 588.) 1. The partners are supposed to have given reciprocally to each other, the power of administering one for the other. What one does is valid,, even for the share of his partners, without their approbation, saving the right which they or every one of them has to oppose before it be concluded.

2. Every partner may make use of the things belonging to the partnership, provided he employs the same to the uses for which they are intended (d la destination fixíepar l'usage,) and that he does not use them so as to prevent his associates using them according to their rights, nor against the interests of the partnership. 3. Contribution to expenses. 4. One partner can neither dispose of nor make any change in the real property of the partnership, although to its benefit, without the consent of the other partners. 5. In other than commercial partnerships, a partner cannot, as partner only, and if he has not the administration, alienate or engage the things which belong to the partnership.

Article 1860 of the French Codeis: “ The associate who is not the administrator, cannot alien or pledge the things, even movables, (mobiliers,). which belong to the partnership."

The law of Scotland follows in the footsteps of Roman jurisprudence. (Bell’s Com., vol. 2, pp. 615, 616.) That of Holland is equally guided by it.

I am justified, I think, in adopting the language of Troplong. “ The maxims of the Roman lawyers, imitated by Domat, Pothier and others, and expanded by commercial custom, have laid the true foundations of the law of partnership. This was the fruit of long experience, and of the wise observation of important facts.”

It results from this review that in general there was no power as between partners themselves, in one of them to dispose of the common stock absolutely, without the consent of the others; that the unrestricted authority to bind the association was limited to partnership purposes, during the duration of the firm, for the object of carrying it on; that an act exceeding this limited power by one, might give rights to an innocent purchaser; but if he took the whole property, implying that the partner was destroying the means of carrying on the business, he was not innocent; and lastly, that for the purpose of winding up a partnership, the assent of all to a liquidator was necessary, or the tribunals of justice must be resorted to.

In considering the question as affected by the decisions now binding upon this Court, we find some positions, so settled as not' to be open to discussion here.

Deming v. Colt, (3 Sandf. S. C. R., 284,) decided that one partner could not, without the consent of the other, and without consulting him, although present and actively engaged in the business, make a general assignment to a trustee for the benefit of the creditors without preferences. The principle of the court in that case was, that each partner has a. great and powerful interest to see that a proper person is selected to wind up the affairs of the concern ; as the judicious administration of the estate will beneficially affect the extent of the liability of each for the debts remaining undischarged, as well as the prospect of an ultimate surplus.

It was treated as settled law, that an assignment, under such circumstances giving preferences, was void. Havens v. Hussey, (5 Paige, 30,) is referred to, and fully sustains the decision.

In Hayes v. Heyer, (3 Sandf. S. C. R., 293,) heard before the three other Judges of the Court, it was announced that the decision in Deming v. Colt might be considered as expressing the unanimous opinion of all the Justices of this Court, that a partner can in no case make a general assignment to a trustee for the benefit of creditors, against the consent or without the concurrence-of his copartners, the latter being present and capable of acting in the matter.

Fisher v. Murray, (1 E. D. Smith, 341,) in the Court of Common Pleas, is to the same point The learned Judge who delivered the opinion used the words, “ under circumstances rendering it impossible to consult the other partners,” instead of “ the latter being present and capable of acting.”

An assignment under such circumstances, giving preferences, would be even more clearly invalid, and so it was considered in Kemp v. Carnley. (3 Duer, 1.)

Dana v. Lull, (17 Vt., 390,) gives the express sanction to this point of two of the Judges.

In Ormsbee v. Davis, (5 R. I. R., 442, 1859,) a general assignment giving preferences, and mainly to,-the firm of which the assignee was a member, was held void when made by one partner, the other not being shown to have been away or incapable of being consulted, an attaching creditor impeached it..

In Kemp v. Carnly, (3 Duer, 1,) the decision was, that when a partner had absconded, and relinquished all control and management of the concern, an assignment by the other to a trustee, not giving preferences, was valid.

The case of Mabbett v. White, (2 Kern., 442,) involves the point that one partner, when the firm, is insolvent, may make a direct transfer of all the partnership property to a single creditor, to pay a debt, without the knowledge or consent of the other partner, though he was present, or could have been consulted, there being no fraudulent intent to defeat creditors.

The court declared that it was not necessary in the case to decide whether the partner could make an assignment to a trustee for that purpose.

Justices Denio and Johnson dissented, and the former examined the cases with care. I am authorized by one of the learned Judges who concurred in the judgment, (Judge Dean,) to say, that he should have come to a different result had the transfer been to a trustee, giving the creditor a preference.

This decision leaves the question which arises in the present case, open for our determination. It is to be remembered that the absent partners were away upon the business of the firm, and as soon as apprised of the assignment, repudiated it.

Upon the principal question, then, my own conclusion is, that an assignment without the concurrence of acting partners, of all the property of a firm, giving preferences, is void. It is void because the partners have never vested each other, by force of the partnership union, with such a power. It is invalid because it controverts the great object of a partnership, the true theory, and the most sacred bond of the connection, the furtherance of partnership objects, so long as they can be attained, and the equal power of each member to watch over and direct the application of the funds when insolvency overtakes the firm. It is not warranted in the present case by the absence of the other partners. That created no emergency which can justify it. The law will sanction an assignment distributing the property among all the creditors, because the law assumes that all the associates will unite in what equity dictates. The law opens another mode to the partner by throwing the administration of the funds into a court of equity.

It has been suggested, and the argument receives no slight strength from Mabbett v. White, that as the present assignee was a preferred creditor, (to an amount indeed of $1,291.50, out of about $1,620,) the transfer must be as valid as to his demand, as if the property had been directly delivered to him.

It may be answered:

If this may prevail, the rule regarding the concurrence of the partners is effectually defeated. Let all the preferred creditors be named trustees, and the object of the assigning partner will, in the great majority of cases, be attained.

Again, upon a direct transfer in payment of a debt, the partners are discharged, the debt is extinguished. This was the case, in Mabbett v. White, where a note of the purchasers was given for the balance. Here the partners will be left responsible for any deficiency.

Again, here is a trust created to sell the property, to collect the debts, to pay the expenses of the assignment, and yet more, to defray the costs and expenses of prosecuting or defending suits connected with the assignment.

In the case of Ormsbee v. Davis, before cited, a subsequent transfer of part of the partnership property to the creditor, in satisfaction, or even security for the debt, was supported. The line of distinction I have pursued in this argument is strikingly shown in that authority.

I conclude that on no ground can the transfer in question be sustained, and that the judgment appealed from must be affirmed.

Bosworth, Ch. J., and Moncrief, J., concurred in the propositions contained in the head note.

Judgment affirmed, with costs.


author: By the Court—Woodruff, J.

text:
    Patrick Hogarty, Plaintiff and Appellant, v. James Lynch and Leonide S. de Agreda, Defendants and Respondents.
    1. Where a conveyance, absolute in form, was made to one to whom the equitable owner was indebted, without any agreement that the deed should not operate according to its legal import, there is no presumption that the conveyance was taken as security merely, but rather that there was a sale for the consideration expressed in the conveyance.
    2. One who alleges such a conveyance to be a mortgage, has the burden of proof, if the allegation be denied.
    3. Where one, holding a contract of purchase, assigns it to another, whom he owes, by an assignment absolute in form, and permits the assignee to perform the contract, (giving mortgages to the owner,) and take an absolute deed from the owner, if he insists that such -transfers were intended as a security to his debtor and seeks to redeem, must show some agreement or understanding that the premises should be so held. His mere allegation that he made the assignment and permitted the conveyance in confidence that his debtor would so hold, though not denied, will not entitle him to treat the grantee as mortgagee and redeem the premises. Some assent of the grantee, and taking the conveyance with knowledge that it was given in that expectation or upon that confidence, must at least be shown.
    4. In such case, the bona fide grantee of the party receiving such conveyance, having no notice that the conveyance to the latter was not to operate according to its legal import, has a good title which cannot be defeated by any proof of a parol understanding that the conveyance should be held as a mortgage.
    (Before Hoffman and Woodruff, J. J.)
    Submitted, November 7th, 1859;
    decided, January 28th, 1860.
    This action is brought for the redemption of certain two houses and lots from an alleged mortgage. The complaint alleges that the plaintiff held a contract for the purchase of two lots of ground, upon which he was, with the aid of moneys loaned for that purpose by the vendor, erecting two dwelling-houses, upon the completion of which he was to receive a conveyance of the lots and execute a mortgage upon each lot to such vendor to secure the sum of $15,000 each—that being the amount of the purchase-money and the advances so to be made to him.
    That the plaintiff, in the progress of such erection, became unable promptly to meet all his pecuniary obligations, and, in August, 1857, the defendant Lynch became the holder of promissory notes made or indorsed by the plaintiff, amounting in the aggregate to less than $6,000, and was pressing him for payment and threatening to prosecute the parties who had indorsed the notes for the plaintiff’s accommodation.
    That, in order to obtain “ a temporary pacification of the said Lynch,” and to secure the payment of the said demand then due to said Lynch, and with no other intention on his part, he executed to the said Lynch two assignments of the said contract, in each of which the consideration expressed was $27,000—the same being each subject to the deduction of $15,000 which was to be secured to the vendor of the lots by mortgage thereon; but that the plaintiff received no consideration whatever, except forbearance of the said sum of less than $6,000 so due to the said Lynch; and although such, assignments were absolute on their face, they, were executed and delivered on the express under standing by the plaintiff and the promise of the said Lynch that they should opérate ánd be held as security only for the said indebtedness. '
    That the said Lynch still pressing him for payment, the plaintiff was induced, by the confidence he reposed in the said Lynch, to permit the vendor of the said lots to convey the same to the said Lynch, which was done on the 19th of October, 1857 ;■ and the said Lynch executed to such vendor a mortgage for $15,000 on each lot. That such last named deeds were obtained from such vendor by virtue of the said two assignments, and the confidence of the plaintiff that they would be held as security and that the said Lynch would execute an acknowledgment that they were so held, which he promised to' do.
    That the said Lynch has - never executed such acknowledgment, but claims to hold the houses and lots absolutely as his own property as purchaser. .......
    That on the 9th day of April, 1858, the - said defendant, Lynch, conveyed to the other defendant (Agreda,) one of the-said houses, and lots for the consideration of $18,300, subject to the mortgage for $15,000 thereon, which' was deducted from the consideration of $18,300 as a part thereof, and the balance is alleged to have been paid to said Lynch. - .
    That the said Agreda, at. the timé of the conveyance to her, had notice of the plaintiff’s beneficial and actual ownership of the said house, or sufficiént -knowledge to put her upon inquiry.
    The plaintiff thereupon prays that he be declared the-beneficial and equitable owner of the said two houses and lots subject to the said two mortgages of $15,000 each,' and that he be permitted to redeem the same, and that the defendants, respectively convey to him oh the payment to each of - them respectively of such sum as shall in the aggregate amount to the just indebtedness of the plaintiff to the said Lynch, and for such further -or other relief, &c. .
    The defendant, Lynch,- by his answer denies that the contracts were assigned to hind as security or as a means of obtaining “ a temporary pacification,’’ and alleges, unqualifiedly, that the contracts and' all the plaintiff’s rights under the same, and to the said lots of land, were sold and conveyed to him in consideration of debts then due to him from the plaintiff, and money paid to him and money paid for interest to the vendor of the property, such consideration being the full value of the said houses and lots which were not worth more than $18,300, or thereabouts. He denies any promise or understanding that the said assignments were to operate or be held by him as security. He denies that any persuasions were used to induce the execution of the deeds to him by such vendor, or that any agreement or promise, express or implied, was made that such deeds should be held as security or that he would execute an acknowledgment of such fact. He does not deny in any form that the plaintiff had confidence that he would hold the property as security, or that the plaintiff made the assignments and permitted the conveyances to be made to him in confidence in his own (the plaintiff’s) mind, that he would hold the property as securily and permit him to redeem. Other facts are stated in the answer, but they are not material to this appeal.
    The defendant, Agreda, denies every allegation in the complaint, except that she purchased one house and lot for $18,300, which was conveyed to her bona fide for that sum paid, partly in cash, and by assuming the mortgage of $15,000 thereon; and that the conveyance was received and money paid by her without any notice of any claim by the said plaintiff.
    Upon the issues so joined, the case came on for trial before Mr. Justice Hoffmajst, on the 4th of June, 1859. The plaintiff rested his case upon the pleadings, and declined offering any proof in support of the allegations in the complaint; whereupon, on' motion of the defendants, it was ordered that the complaint be dismissed.
    Judgment of dismissal being entered, the plaintiff appealed to the General Term.
    The appeal was submitted without argument upon the points of the plaintiff’s counsel, the counsel for the defendant submitting the matter without points or argument.

      J. W. Blydenburgh, for the plaintiff (appellant).
    I. A creditor in possession, with an assignment of his debtor’s estate, repudiating the price named in his assignment, and affirmatively substituting an indefinite consideration in its place, aoknow¡edging he obtained the assignment on the confidence of the debtor that it would be held as security only for the debt due; is a mortgagee in equity.
    Lynch denies nothing but the value of the property, and any agreement on his part to hold it as security only for the debt then due, all else in the plaint is fully admitted.
    Though he denies any agreement, he does not deny that the plaintiff, by his confidence that Lynch would hold the property as security and permit him to redem it, was led to assign the contracts to him, and permit him to take the title.
    • There never was a sale by the plaintiff to Lynch. No price was ever agreed upon between them. (Milnes v. Gesey, 14 Ves., 408.) If there be a doubt, whether it be a sale or mortgage, it is of necessity a mortgage until the doubt be cleared up; and the burden is on him who alleges a sale. (Story, J., 2 Sumn., 535.) No debt to Lynch was canceled. To make out a sale, the defendant must prove the price paid. (Hugh v. Batte, 10 Yer., 335; Clarke v. White, 12 Pet., 178.)
    Where a mortgage is taken for a preexisting indebtedness, without any intention of discharging the original debtor from personal responsibility upon his former security, his liability upon that security will remain, notwithstanding the debt is further secured by mortgage. (Hone v. Fisher, 2 Barb. Ch. R., 570.)
    II. One who would oppose a legal presumption, has the burden of proof whether that presumption arises from a positive or negative allegation, of the plaintiff’s or defendants’ pleading, or both taken together. (Mills v. Barber, 1 Mees. & Welsb., 427; Ames v. Hughes, 1 Moody & Rob., 461.)
    The presumption; raised by a creditor’s admission that he took an assignment of his debtor’s property for the nominal consideration of $27,000, on the confidence of the debtor that he would hold it as security for a debt of $18,000 or thereabouts, and in violation of that confidence, holding the assignment as a sale against him for an indefinite consideration; requires proof to overthrow, and more than indefinite allegations to neutralize. It is a fraud on its face. And none the less a fraud, than if the creditor had agreed to execute a defeasance, and afterwards refused. To accept a deed under such confidence of the maker, is in fact to agree so to hold it. The law makes the promise, and equity is not precluded by the statutes of fraud, from enforcing it. It is fully saved by the last section of our statute. (2 R. S., 69.)
    III. A trust being fully established by the admitted breach of confidence, the law never presumes an illegality; but requires proof to follow the charge of an unlawful trust. This not being done, the trust was manifestly to take up the fee from Field, and secure the debt of the party taking it up; beyond that, the trust results to Hogarty by operation of law, and is but another name for a mortgage.
    If a transaction resolve itself into a security, whatever may be its form, and whatever name the parties may choose to give it, it is in equity a mortgage. (Flagg v. Mann, 2 Sumn., 535.)
    IV. Mrs. Agreda’s answer denies everything except that she held under Lynch. As such, she can hold no greater right than her grantor, except as an innocent purchaser. She does not venture to say she is. But says her purchase was Iona fide and without notice. But she pins her good faith on the want of notice, and not on the want of knowledge. She had knowledge sufficient to put her on inquiry. This she does not deny.
    The judgment should be reversed, and a new trial ordered.

      John E. Burrill, for the defendants (respondents).
   By the Court—Woodruff, J.

The plaintiff, according to his own allegations, had executed and delivered to the defendant Lynch a transfer absolute in form, conveying all his interest in the premises, and this was followed by the execution and delivery to the said Lynch of an absolute deed for the houses and lots.

Now, the very first point to be established by the plaintiff, (without which there is no foundation whatever for his claim to redeem,) is, that his transfer to Lynch was made and delivered and received as a mortgage; that it was to secure the debt which he owed Lynch.

Without inquiring how far he was concluded by the absolute form of the transfer, or whether he could be permitted, for his own benefit, to show by parol that such a transfer was not to operate according to its terms and legal effect, it must suffice to say, that, in the face of the absolute assignments and conveyance to the defendant Lynch, and in the absence of any agreement that those instruments shall not operate according to their legal import, or even of any understanding to that effect, there is no presumption that they were intended as a mortgage, but rather that they were intended as a sale for the consideration expressed therein.

The plaintiff’s-allegation is expressly and unqualifiedly denied in the answer of the defendant Lynch. The absolute form of the transfer, and the express denial that it was received under any agreement, promise or understanding that he should hold the premises as security merely, are a full protection to the defendant.. They are a full denial of the only ground upon which the plaintiff asks the interposition of the Court. And until some competent proof was given by the plaintiff in support of his allegations, they stand denied and not proved.

The mere statement of the plaintiff that he had in his own mind confidence that Lynch would continue to hold the property as security merely, and that he would permit the plaintiff to redeem, did not require any denial: it is not averred that this expectation or confidence was communicated to Lynch, or that he knew it when he took the assignments and deeds, still less that he consented to take the property upon any such trust.

As to the defendant Agreda, there is not the slightest just pretense of claim to maintain the action against her. She denied generally every allegation in the complaint, except her own purchase. This put the plaintiff to proof of his allegations, and he offered none.

Besides, as to her, the plaintiff could not claim a right to redeem, if he had shown a parol agreement that the deed to Lynch should be held as a mortgage, unless he also proved that she knew it. The bona fide purchaser from one who holds by an absolute deed obtains a good title, although it was intended as a mortgage, if such purchaser have no notice. (Stoddard v. Rotton, 5 Bosw., 378.)

The Court were bound to dismiss the complaint, or order judgment on the merits for the defendants.

The fact that $27,000 was named as the consideration of each of the assignments to the defendant Lynch, however useful it might be if this were an action for unpaid purchase-money, does not sufficiently show that the assignments were intended as mortgages. The judgment should be affirmed.

Judgment affirmed, with costs.


author: By the Court—Hoffman, J.

text:
    Albert Smith, Plaintiff and Respondent, v. Robert Paton, impleaded, &c., Defendant and Appellant.
    1. Where the plaintiff was induced, to purchase a promissory note from the payee by the representations of the latter, that the note was a business note, given by the maker, upon full consideration; and upon suit being brought, the maker, in order to insist that the transfer to the plaintiff was usurious, attempts to prove that the note was made by him without consideration, for the accommodation of the payee, he should be held to clear and distinct proof; and a finding of a Referee, upon that point, for the plaintiff, will not be set aside unless very clearly against evidence.
    (Before Hoffman, Woodruff and Moncrief, J. J.)
    Submitted, January 10th;
    decided, January 28th, 1860
    This action was brought against the defendant, Patón, as maker, and Carpenter & Jaques as indorsers of a promissory note, for $1,000, payable four months after date.
    The maker, Patón, put in an answer alleging that the note was an accommodation note, made by him without consideration, and for the accommodation of Carpenter & Jaques, the payees; and that it was discounted by the plaintiff, for the payees, corruptly and usuriously, the plaintiff reserving a rate of interest greater than seven per cent, to wit, the rate of $24 upon each $100 for one year.
    The action was referred, by consent, to Hamilton W. Robinson, Esq., before whom it was tried, on or about the 7th day of May, 1858. On the trial,* one of the payees and indorsers, Jaques, was examined for the defendant, and on his direct examination he testified that the note was made for the accommodation of his firm of Carpenter & Jaques, and that no consideration was given by his said firm therefor; that he went to the plaintiff, and he cashed it, and added, “I think he gave me $920 for it.” I asked what he would discount it for: after some conversation he said he would give me $920 for it; I then gave him the note and took that amount.
    Upon cross-examination he said that previous to that time the defendant and his firm “ had been in the habit of exchanging notes;” about this time lie gave up my notes that he had; I am not positive I did not give my note for this; we had unsettled accounts; he never rendered me an account; we have had no settlement; I have not the notes he gave up to me; I have destroyed them; he was not indebted to me when he gave this note.
    On his own behalf the plaintiff testified that he was urged by Jaques to buy the note in suit; that Jaques represented expressly that it was a Iona fide business note; that he was at work for Baton more or less all the time, and that this note was given for work; that Baton sometimes owed him $10,000, and he considered him perfectly good for all he agrees—for all his promises; that he fully believed those representations, and that it was a good business note, and relying thereon, he purchased the note; that he did not recollect the sum he paid, but the discount exceeded seven per cent per annum; that after it became due he called on Baton and he promised payment; that whenever he saw Baton he would say “ I have plenty of money coming to me to pay all I owe, and have something besides, and you shall certainly be paid; you need have no anxiety, the note is good and shall be paid.”
    Upon this evidence the Beferee reported as follows: “ That I have been attended by the parties, and having heard their proofs and allegations, do find, as matter of fact:
    “ That the defendant, Bobert Baton, has not proved that the note in the complaint mentioned was made for the accommodation of the defendants, Carpenter & Jaques, or without any consideration therefor, or was not a business note, or that the plaintiff discounted the same usuriously.
    “ And I do find, as matter of law, that the plaintiff is entitled to recover against the defendant the amount of said promissory note, with two hundred and fifty-nine dollars and nineteen cents interest thereon, from maturity to the date of this report; said principal and interest together amounting to one thousand two hundred and fifty-nine dollars and nineteen cents, and that judgment ought to be entered for that sum.”
    “All of which is respectfully submitted.
    “ New York, May 7th, 1858.”
    Erom the judgment entered for the plaintiff in conformity with this report, the defendant appealed.

      George W. Stevens, for the defendant (appellant).
    I. The Referee erred in finding as matter of fact that the defendant had failed to prove that the note was an accommodation note, made without consideration, or was not a business note, or that the plaintiff had discounted the note usuriously.
    II. The note being an accommodation note, and having been usuriously discounted by the plaintiff, never had a valid inception, and is void in the hands of the plaintiff. (Steele v. Whipple, 21 Wend., 103; Rapelye v. Aeby, 1 Hill, 9; Catlin v. Gunter, 1 Kern., 368; Clark v. Loomis, 5 Duer, 468.)
    III. The representation by the payee that a note is business paper, does not estop the maker from pleading usury, if the note be in fact an accommodation note and has been usuriously discounted. (Dowe v. Schutt, 2 Denio, 621; N. Y. Life Ins. Co. v. Beebe, 3 Seld., 364.)

      Beebee, Dean and Donohue, for the plaintiff (respondent).
    I. The finding of the Referee, that defendant had not proved that the note was made for the accommodation of Carpenter & Jaques, or without consideration, or was not a business note, or that the plaintiff discounted the same usuriously, is sustained by the evidence.
    1. It is established by what the defendant did not prove, or offer to prove.
    2. A defense, so penal in its consequences as that of usuryf cannot be made out by presuming facts not proved.
   By the Court—Hoffman, J.

The plaintiff undoubtedly took the note on the representations of Jaques, that it was business paper. This is positively sworn to by the plaintiff, and not contradicted or modified by Jaques.

It is true, that this would not deprive Raton of the defense of usury if the note was an accommodation note, and he had not authorized the representations. (Dowe v. Schutt, 2 Denio, 621.) But it would induce us to scrutinize Jaques’ evidence with strictness, had he sworn that it was an accommodation note.

It is necessary that the evidence to this point should be perfectly clear and decisive. On the face of the paper, consideration is implied, and the defendant Patón is responsible as maker. The note then could be purchased at the discount proven, without the claim upon it being invalidated. If an exchange note had been given, each holder would have been a purchaser for value, and he could sell his property on such terms as he chose (Dowe v. Schutt, ut supra; Cobb v. Titus, 13 Barb., 45; affirmed. April, 1854. Selden’s notes of decisions of Court of Appeals.)

Jaques’ testimony leaves this material point in doubt, which ought to have been made out with certainty and clearness. It may have been an exchange on this evidence.

I think the Eeferee was right, and that the judgment should be affirmed.


author: By the Court—Moncrief, J.

text:
    William Kiernan, Plaintiff, v. Joseph Rocheleau, impleaded, &c., Defendant.
    1. On a sale of chattels with a warranty of soundness or quality, if the warranty be broken, the vendee is entitled, as damages, to the difference between the actual value of the chattels and the sum they would be worth if they were sound, or of the quality warranted.
    2. The purchaser is not entitled to rescind the sale, return the chattels and demand a return of the price paid, unless there was fraud in the sale on the part of the vendor, or there was an express agreement that they might be returned if they were not such as they were warranted to be.
    3. It is not error to refuse to charge the jury as requested by a defendant, if the evidence would not warrant them in finding the facts without which the instruction requested would have no application to the case, even though, as mere propositions of law, the instructions desired are correct.
    (Before Woodruff and Moncrief, J. J.)
    Heard, January 13th;
    decided, February 18th, 1860.
    This case was brought to hearing' upon exceptions taken by the defendant, Joseph Bocheleau, on a trial had before Oakley, Oh. J., on the 24th day of May, 1853, on which trial the plaintiff recovered a verdict for $200, the exceptions having been ordered to be heard in the first instance at the General Term.

      The action was brought against Rochelean as maker, and Louis Demers as indorser, upon a promissory note for $300, payable to the order of the said Louis Demers, and by him indorsed to the plaintiff.
    The defendant Rochelean alone answered the complaint. His defense was, that the note was given to Demers in part payment for a horse purchased from him for the price of $400, whereof $100 was paid in cash: That Demers gave an absolute warranty or guaranty that the horse was free from all unsoundness and was perfect in every respect, and defendant purchased in reliance on such warranty: That the horse was spavined: That Demers knew it, and fraudulently concealed it from the defendant. That on discovering the unsoundness he offered back the horse and demanded the return of the money and note; that in consequence thereof, the consideration of the note has failed and defendant is entitled to rescind the contract; and that the note was transferred to the plaintiff after its maturity and without consideration, the plaintiff having knowledge that there was a defense thereto. The matters set up as a defense were denied by the plaintiff in his reply.
    On the trial the evidence showed that the note in question was given in part payment for a horse, as alleged by the defendant, and that at the time of the sale a small spot or blemish appeared on one of the legs, which was the subject of conversation, and which the said Demers guaranteed was no unsoundness. Whether in fact it had proved to be a spavin, and whether in fact the horse was not perfectly sound, were questions respecting which there was a conflict of testimony. Demers at the time of the sale denied that there was any unsoundness, many of the witnesses fully agreed with him, and there was no testimony that prior to that time there had been anything to indicate that the horse was unsound, except the said small spot or blemish which was the subject of discussion, and in relation to which the witnesses, veterinary surgeons and others differed. There was also conflicting evidence in relation to the difference between the value of the horse if sound and his value with the alleged spavin or unsoundness.
    The evidence showed that the plaintiff received the note after it became due.
    This was the substance of all the proofs given on the trial.

      The defendant’s counsel requested the court to charge the jury as follows:
    I. If Demers fraudulently concealed the existence of the unsoundness, or misrepresented it intentionally, the note cannot be enforced.
    II. If there was a warranty against unsoundness, and the jury believe that at the time of sale there was an existing unsoundness interfering substantially with his (the horse’s) use and value, the warranty is broken and the note cannot be recovered.
    III. If the jury believe that the defendant Rochelean found Demers as soon as he could, and tendered him the horse, he was entitled to rescind the contract of purchase, and is therefore absolved from liability upon the note.
    IV. Under any circumstances the real value of the horse is all that Rocheleau is liable for, and crediting him with $100, as paid, the balance is the only amount collectible upon the note.
    As to the first proposition, the Court remarked that there was nothing in the evidence to show fraud; as to the second and third, that they could have no application to the case under the facts, and refused to charge as requested.
    To the refusal of the Court to charge as requested on each and every one of the said propositions, and every part thereof, the defendant’s counsel then and there duly excepted. The Court charged the fourth proposition as requested.
    The jury rendered a verdict for the plaintiff for two hundred dollars; thus allowing to the defendant one hundred dollars, by way of abatement from the note in suit, for the difference between the value of the horse in the condition in which he was when sold and his value if sound, and thus finding or assuming that Demers warranted the horse to be sound and that he was in fact unsound.

      J. H. Trapp, for the defendant.
    I. The Court erred in refusing to charge the jury that if Demers fraudulently concealed the existence of the unsoundness, or misrepresented it intentionally, the note could not be enforced.
    There was evidence to warrant the submission of this proposition to the jury.

      II. The court erred in refusing to charge the jury that if there was a warranty against unsoundness, and the jury believed that at the time of sale there was an existing unsoundness interfering substantially with the use and value of the horse, the warranty was broken, and the note could not be recovered upon.
    1. There was evidence of a warranty.
    2. There was evidence of an existing unsoundness at the time of warranty, reducing the value of the horse two-thirds.
    III. The Court erred in refusing to charge the jury that if they believed the defendant Rocheleau found Demers as soon as he could, and tendered him the horse, he was entitled to rescind the contract of purchase.
    There was evidence sufficient to go to the jury.
    Demers lived in Canada. Rocheleau called frequently to see Demers, or where he could see him, without seeing him, and did not see him until after the note was due. Demers made no objection about delay. He says nothing, and his subsequent conduct in parting with the note, shows he felt and knew there was a just defense to it.
    The verdict should be set aside and a new trial ordered.

      Thomas B. Barnaby, for the plaintiff.
    I. The refusal of the Judge to charge the first of those propositions, as requested, was correct; for there is nothing in the evidence to show fraud.
    1. There is no proof of any unsoundness existing in the horse previous to the sale.
    2. The sale was open and fair, and above-board. Several witnesses present freely discoursed upon the supposed blemishes and defects upon the horse, and carefully examined the swelling which this defendant now calls a spavin. There was no concealment or misrepresentation.
    II. The refusal to charge the second of those propositions was correct.
    • 1. There was no warranty shown to have been given by Demers on this sale.

      (a.) There was no bill of sale or written guaranty whatever.
    (b.) The conversation about the time of the sale discloses nothing that amounts to a guaranty, any further, certainly, than that the blemish spoken of was not then a permanent and substantial unsoundness, affecting the value of the horse.
    (c.) The purchase, so far as the evidence shows, was fully ended when this conversation took place.
    2. But even if there were a guaranty in any form, or to any extent, it has not been broken.

      (a.) There is no proof that there was any unsoundness at that time, which was not then fully disclosed and embraced in the bargain of sale.
    (b.) The evidence shows, further, that the horse did not depreciate in value at all after the purchase, or certainly no more than would necessarily result from the manner in which he was kept and used by the defendant.
    3. At all events, there is no breach, such as to defeat the recovery, upon the note in question, of the actual value of the horse, less $100, at the time of the sale.
    III. The refusal to charge the third of those propositions was correct.
    1. There is no proof of a proper tender in this case.
    2. No attempt is shown to return the horse within a reasonable time after the sale. Demers was at the place of the sale for six weeks after the horse was sold; and Rocheleau was also frequently there. Yet nothing is said about a return of the horse till late in September.
    3. An offer to return the horse, unless for good cause —for fraud in the sale — would not affect the plaintiff’s rights in any event.
    The plaintiff should have judgment on the verdict.
   By the Court—Moncrief, J.

These exceptions in my opinion might properly and justly be disposed of, by a concurrence in the view expressed at the trial by the learned late Chief Justice; but inasmuch, as it was by his order, that they are heard at the General Term, an examination of the testimony and of the rules of law applicable to the issues in the action has been made.

• As to the first proposition, it will be noticed, that the counsel for the defendant, at the time of making his requests, nor when his attention was directly called to the alleged want of evidence to sustain it, did not specify a portion of the testimony even tending to support it, nor did the counsel, upon the argument, point to any suck evidence. An exception under suck circumstances in fairness or in law will not be upheld. (3 Denio, 598; 3 Kern., 338.)

The proposition assumed some evidence in the case upon which the jury properly might arrive at the conclusion that the seller of the horse, Demers, was guilty of fraud in mating the sale with his guaranty that it was not unsound. There is no such evidence in the case as now presented. Demers positively denied that there was any unsoundness in the horse at the time of sale, and other witnesses agreed with him. The Jury could not be permitted to indulge in speculation and conjecture as to the possibility that Demers knew better or otherwise than as he had testified; there was no evidence to impeach him orto impute other than entire good faith in the transaction.

As to the second and third propositions, it seems to me that the learned counsel, in mating his fourth proposition, conceded the two former to be unsound and untenable.

In Cary v. Gruman, (4 Hill, 625,) it is expressly decided, and I am not aware that the case has been reversed or explained, “ that a warranty on the sale of a chattel is, in legal effect, a promise that the subject of sale corresponds with the warranty in title, soundness or other quality to which it relates; and is always so stated in the declaration when it is technically framed. It naturally follows that if the subject prove defective within the meaning of the warranty, the stipulation can be satisfied in no other way than by making it good. That cannot be done except by paying to the vendee such sum as, together with the cash value of the defective article, shall amount to what it would have been worth if the defect had not existed. There is no right in the vendee to return the article and recover the price paid, unless there be fraud, or an express agreement for a return.” A different rule undoubtedly did prevail at an earlier period, and is commented upon in this case. (Voorhees v. Earl, 2 Hill, 288.)

It was not pretended that there was any agreement for a return of the horse; and there is an entire absence of anything to establish fraud.

Heither of the exceptions being well founded, judgment should be entered for the plaintiff in conformity to the verdict.

Ordered judgment for the plaintiff on the verdict, with his costs.