Mann v. Eckford's Executors

15 Wend. 502

• Court: New York Supreme Court
• Decided: July 15, 1836
• Status: Published

Opinion

By the Court,

Bronson, J.

One of the grounds on which the defendants moved for a nonsuit was, that the plaintiff was bound to prove a demand upon Gibb'ons for the payment of the money secured by the bond and mortgage, and that notice of the non-payment had been given to Eckford, or his executors.. In actions upon the contract of guaranty it is sometimes necessary to aver and prove a demand of payment from the principal debtor, and notice of the non-payment tó the guarantor. Mechanic Ins. Co. v. Ogden, 1 Wendell, 137. Douglass v. Reynolds, 7 Peters, 126. 3 Wheaton, 154, note. But I think no demand was necessary in this case. The bond and mortgage of Gibbons were dated on the 2d of December, 1825, and the money was payable on the 2d of December, 1826. On the previous 17th of July, Eckford’s bond was executed, and was conditioned that Gibbons should punctually satisfy and pay themoney. The undertaking was absolute th&tGibbdns should pay at the specified time; and there was nothing either in the terms of the contract or the nature of the transaction which impose^ on the .creditor the duty of seeking the principal debtor. Allen v. Rightmere, 20 Johns. R. 365. Although a surety is in some things favorably regarded in the law, his contract, like that of every other person, must be interpreted . according to its natural and most obvious import. If he make an unconditional engagement for the act of a third person, the contract will be broken if that person fails to do the act. A qualification of the agreement, though not expressed in terms? may sometimes be inferred from the special circumstances of the case; but here there is no ground for such an inference?, The obligor agreed that his bond should be forfeited if Gibbons did not pay at the day. He might have limited his undertaking in such a manner that he would only be answerable for any deficiency after a foreclosure of the mortgage, and a resort to Gibbons on his personal obligation; but he has. made a different contract, and must abide the legal consequences. It was his duty to pay the debt immediately on the default of the mortgagor; and then he wduld have been substituted in the place of the creditor, with the right to resort to Gibbons on the bond and mortgage for his indemnity. Classon v. Morris, 10 Johns. R. 539. Hayes v. Ward, 4 id. 129.

But if a demand of Gibbons and notice toEckford, were neeessary to the plaintiff’s right of action, proof of those facts could not have been required on the trial. No demand or notice is averred in the declaration, and, as a general rule, the party is only bound to make out his Case as he has alleged it in pleading. It is true that, on a motion in arrest of judgment, after verdict for the plaintiff, the court will presume that some" things, not directly alleged in the declaration, were proved on the trial; and in the cases to which this presumption extend, the judge at the circuit ought to require the evidence to be given. But the presumption does not extend to a case where an averment like the one under consideration has been wholly omitted. Where a good title is defectively set forth, and where the facts omitted may be fairly implied from those alleged, or are so connected with them that the facts alleged could not be próved without proving those omitted, there it will be presumed, after verdict, that the defect in pleading, was supplied by proof on the trial. Addington v. Allen, 11 Wend. 374. Rushton v. Aspinall, Doug. 679. Tidd’s Prac. 950. The case in Douglas goes directly to the point under consideration. It was an action against the endorser of the bill of exchange, and the declaration did not allege a demand of payment from the acceptor, nor notice of non-payment to the defendant. This was adjudged a fatal defect after verdict, and the judgment, which had been rendered for the plaintiff, was reversed for that cause.

There is still another answer to the objection that no demand upon Gibbons was proved. If a demand had been averred in the declaration, the plaintiff would not have been bound to prove it. The plea of non estfactum puts in issue nothing but the execution of the deed on which the action is brought; and, as a general rule, neither party can be either required or permitted to go beyond the issue joined. 10 Johns. R. 47. 12 id. 337. 14 id. 89. 9 Cow. 307. 10 Wendell 202.

The next ground for asking a nonsuit was, that the plaintiff had not produced the bond and mortgage of Gibbons, nor accounted for their non-production. I can perceive no foundation for this objection. The plaintiff had not counted upon those securities, and they did not constitute any part of the evidence which- he was bound to give for the purpose of maintaining the issue. He had nothing to prove but the ex-ecut*on ^ie bond. Cases were cited to show that where a suit is brought upon the original consideration for which a promissory note has been given, the plaintiff cannot recover without producing and cancelling the note on the trial. But they have little to do with the present enquiry. It was suggested, as the principal reason for requiring the production of the bond and mortgage, that it might have appeared that the money had been paid ; and that the defendants have the right to be substituted in the place of the plaintiff in relation to those securities. It is a sufficient answer to the suggestion of payment, that no such defence was set up by the defendants, either in their plea or notice of special matter ; and had such an issue been made, it may be doubted whether the plaintiff would be bound to furnish the defendants with evidence to maintain it. If payment by Gibbons had been pleaded, the burden of proving it would have rested on the defendants. On a proper application, they might have had a discovery from the plaintiff in relation to their defence; but they could have no right to call on the plaintiff, upon the trial, to admit any fact or to furnish them with the means of establishing it. In relation to the other branch of the suggestion, there can be no doubt that a surety who pays the debt of his principal, has the right to be substituted in the place of the creditor. But the right of substitution only arises on payment of the debt—not while the surety is resisting tjie payment. When the defendants have discharged their obligation, they may call on the plaintiff to put them in possession of the bond and mortgage of Gibbons, but not before. If the creditor has put it out of his power to make the substitution, that will in some cases discharge the surety ; but no such defence was set up on this occasion.

The only remaining ground on which the motion for a non-suit was made is, that the plaintiff had not shewn any title in the- Western Insurance Company to the bond and mortgage of Gibbons. What was meant by this general objection, when it was taken on the trial, or how the circuit judge understood it, I am unable to say; but the questions which the counsel raised on the argument could not be very likely to occur to the mind of any one without a specification. Indeed, one of the questions discussed under this head could not have been considered on the motion for a nonsuit, for the fact on which1 the question is based had not at that time been proved. The most obvious meaning of the objection, as it was taken on the trial, was, that no assignment or transfer of the bond and mortgage to the company had been proved, That ground is now abandoned, and in its place we have two others: first, that the company had no power to take the bond and mortgage; and second, that the transaction .was illegal and void, because the business was done at an office kept by the company in the city of New-York. The party is not at liberty to make general objections at the circuit, and then seek to overturn the decision of the judge upon grounds which were not distinctly presented to his mind. A case or bill of exceptions need not contain the arguments in support of any position taken on the trial; but it should show that the particular question which the party intends to discuss was made and decided at the circuit. This course is due alike to the judge who tries the cause, the party whose interest may be effected, and the court which may be required to review the proceedings.

Although the question growing out of the place where the business was transacted had not arisen at the time of the motion for a nonsuit, evidence on that subject was given near the close of the trial, and the judge may have intended to decide it in his charge to the jury that the plaintiff was entitled to a verdict. It may therefore be proper to examine it; and although the right of the defendants to raise the other question discussed on the argument may be doubted, I will consider that also. Had the Western Insurance Company power to take the bond and mortgage ? The company was incorporated in 1817. 4 Laws of N. Y. 192, (b). The capital was not to exceed $400,000. The corporation was made “ capable of purchasing, holding and conveying any estate, real or personal, for the use of the said corporation, subject to the restrictions herein after mentioned.” §1. The restrictions were that the corporation should not deal in goods, stocks, &c., nor engage in banking, nor make contracts for the payment of money, unless under seal. .<§>11. And further, “ the lands, tenements and hereditaments which it shall be lawful for the said corporation to hold, shall be only such as shall be required for its immediate accommodation in relation to the convenient transaction of its business, or such as shall have been or may be bona fide mortgaged to the said company by way of security, or which may be conveyed to it in satisfaction of debts previously contracted in the course of its dealings,” &c. All lands not held for the immediate accommodation of the company or by way of mortgage, were to be sold and disposed of within five years after the corporation acquired a title to the same. <§> 10. The president and directors were authorized to make by-laws “ touching the management and disposition of the stock, property, estate and effects of the corporation.” <§> 7. There was no special provision in relation to the mode of investing the capital; but the 11th section, in imposing restrictions on the power of the company, contained an implication in favor of buying stock, by way of securing the capital, or some part of it, and of selling the stock to pay debts. It also contained an implication in favor of taking the pledge of stock, by way of security for debts. I can perceive no reason to doubt the power of the company to invest the whole or any part of its capital, by way of loans on bond and mortgage, or to reinvest any portion of it in the same way, whenever it should become necessary or convenient to do so. The corporation has power to purchase, hold, and convey real estate, but cannot hold for an indefinite period, save such lands as may be necessary for its immediate accommodation, or such as shall be mortgaged by way of security. The charter was granted in 1817, but no time was fixed for the organization of the company. Comstock, the president, testified that the organization took place in 1825, and these securities were taken in July, 1826, when the company probably had capital to be invested. Whether the corporation could make loans for any other purpose it cannot be necessary to inquire; for it will not be presumed, in the absence of all proof of the fact, that this was an illegal transaction. The strict rule which \ prevails in relation to the powers of corporate bodies is salutary in its influence, and ought not to be relaxed ; but there is no principle upon which an act, apparently within the legitimate authority of a corporation, should be presumed to have been done for an illegal purpose. This corporation had power to lend its capital on bond and mortgage, and to take mortgages by way of security for debts ; and if these securities were taken for some other purpose, it was incumbent on the defendants to prove the fact. If the company had power to take the bond and mortgage directly from Gibbons, it was not suggested that they could not take those securities by way of assignment,

Did the fact that these securities were taken at an office kept by the company, in New-York render the transaction illegal ? This is not like the case of The People v. Geneva College, 5 Wendell, 211. The college was founded for the education of youth in the village of Geneva, and they claimed as a franchise the right to establish a medical faculty in the city of New-York. The court held that they had no such right. In the case under consideration the name of the corporation is, “-The Western Insurance Company of the Village of Buffalo; subscriptions to the capital stock were to be opened in that place; notice of the first election was to be given, and the elections for directors were to be held in that village. Beyond this there was nothing to fix the location of the corporation. Whatever limitation in relation to other matters may be implied, I think the company might loan its capital on bond and mortgage in any part of the state; and the fact that the business was transacted at an office kept by the company in Neio-York, will not invalidate the securities. It does not appear that the office in New-York was established for the purpose of banking, or doing any other act beyond the powers of the corporation ; and should it be granted that the'company had no right to keep an office in New-York for any purpose, still, if the act of taking the bond and. mortgage at that place was in itself legal, I doubt whether it could be avoided merely because the business was transacted in an unauthorized office. The defendants should, at the least, have proved that some business was done at the New- York office, which the company had no authority to transact in that city.

Another question was mentioned on the argument, to wit, that the company had no power to take from Mr. Eckford this collateral undertaking for more effectually-/ securing the payment of the money mentioned in the bond and mortgage. But as this point does not appear to have been made or even hinted ai on the trial, I do not think it should be considered in this place. There can never be an end of legal controversies, if the parties are permitted to discuss questions in a court of review, which they omitted to make at the proper time.

The decision of the judge in relation to the amount of damages to be assessed was correct. As the condition of the bond was not simply for the payment of money by the obligor, it was necessary to assign a breach. It was a collateral undertaking for the act of a third person. 2 R. S. 378, § 5. The act to be performed by Gibbons was the payment of a specified sum of money at a particular time. The declaration alleged that he had not paid it. The defendants did not plead to or in any way deny the allegation ; and, according to well established principles in relation to pleadings, the fact of non-payment was admitted. There could be no question about the extent of the plaintiff’s damages. He was entitled to the specified sum, and would have recovered that amount, if he had not laid his damages at a smaller sum in his declaration, and if he had not voluntarily consented on the trial to limit still further the extent of his recovery. This bond was not like one conditioned to build a house, or do any act other than the payment of money. In cases of that description, the jury cannot see from the condition itself, nor ascertain by mere computation what damages the plaintiff has sustained ; and evidence on that subject must therefore be given, if the party wishes for any thing more than nominal damages. The cases already referred to sufficiently prove that the plea of non est factum, standing alone, admits every material allegation in the declaration, except the execution of the deed on which the action is founded. If the debt of Gibbons had been paid either in whole or in part, the defendants should have pleaded or given notice of that fact; and even then the burden of proof would have rested on them ; and if they gave no evidence, the damages must have been assessed as they were on the present occasion. The only alteration made by the revised statutes from the former rule in relation to bonds of this description, is that which requires the breaches to be assigned in the declaration. Formerly they might in some cases be assigned in the replication, or they might be suggested on the record where the plaintiff had judgment on demurrer, or by confession or nil dicit. 1 R. L. 518, § 7. When a breach is assigned in the declaration, that like any other material averment which the defendant does not controvert, is admitted. It is said, however, that the breach assigned in this case does not allege that the money has never been paid, but only that it was not punctually paid. It must be admitted that the pleader has followed very closely the language of the condition;'but I think the breach, though somewhat informally drawn, is sufficient in point of substance. It alleges that Gibbons did not punctually pay, nor hath he yet paid the amount mentioned in the condition of his bond, with interest as the same fell due, according to the tenor thereof. The pleader evidently intended to allege that the money had never been paid, neither on the day nor at any other time ; and if the concluding words, “ according to the tenor thereof,” are necessarily repugnant to the previous allegation, they may be rejected. 1 Chitty’s Pl. 253.

The decision that the defendants could not inquire into the original consideration of the bond and mortgage of Gibbons, or prove them usurious, was clearly right. The plaintiff is not seeking to enforce those securities, but the contract of Mr. Eckford, by which he engaged that the money mentioned in the bond and mortgage should be paid. If the bond and mortgage were void for usury, Mr. Eckford, who was the president of The Life and Fire Company, may probably have known it; but there is no evidence that The Western Insurance Company knew it. That company took a contract which covered all contingencies by which they might fail of receiving the money from Gibbons. Such a contract the testator made; and he might as well set up the defence that the mortgage estate was inadequate to pay, or Gibbons insolvent, as to allege that the securities were invalid. As the counsel. who closed the argument on the part of the defendants was understood to give up this point, I will not examine it any more at large.

The judge decided that evidence'was inadmissible to show that the transfer of the bond and mortgage of Gibbons by The Life and Fire Company' was made in contémplation of insolvency. The act to prevent fraudulent bankruptcies by incorporated companies, Laws of 1825, p. 448, declares void all transfers and assignments of the property of, a corporation made in contemplation of insolvency. § 6. But the act was made for the protection of the creditors of the corporation. It avoids all preferences, and secures an equal distribution of the property among the creditors, in case of insolvency. § 17. The - act contains some few provisions for the safeguard of stockholders against the unwarrantable acts of the officers of a corporation ; but the leading object was the protection of credi-' tors. Upon what principle, then, can the defendants set up this objection ? Eckford was not a creditor; he was one of the actors in making this transfer. The transfer, if void, is void as against the creditors of The Life and Fire Company; but they do not complain. The defendants do not'represent them, and cannot, I think, be allowed to stand on this defence. It is not unlike the case of a deed made to defeat creditors, which is good as against the grantor and all others who are not creditors. If the assignment was made in contemplation of insolvency, there was no offer to prove that the- officers of The Western Insurance Company knew that fact; and I remark once more, that they took a contract which covered all the contingencies by which they- might fail to receive the money from Gibbons. It may be proper here to notice that the defendants, notwithstanding the decision of the judge, afterwards gave evidence on this question; but it was evidence directly contradicting the pretence that this assignment was made in contemplation of insolvency. They read the answer of The Western Insurance Company, which stated that the transfer was made before The Life and Fire Company stopped payment, “ and while the said company, its officers and agents, contemplated, and intended to continue its pay-merits, and as a means of assisting or enabling it to do so.” This leads to another remark. It does hot appear upon what particular offer of evidence the judge decided the points .of law on which the defendants now principally rely. The case . , , , . . f 1 ,J . states that they opened their defence to the jury, and were proceeding to call witnesses to controvert the plaintiff’s claim, when the plaintiff objected that the defendants, under the pleadings, could not go into the proof offered ; whereupon the j'udge laid down some five or six legal propositions. One of them was, that the defendants could not give evidence to show that the transfer of the bond and mortgage was made in contemplation of insolvency; and yet, when evidence on that question was afterwards offered, it was admitted. The fact may be otherwise, but it looks very much as though the judge was asked to decide a number of abstract questions of law, and not to determine whether some particular evidence which the party proposed to give was or was not admissible. What was intended by the decision of the judge that the validity of the assignment upon any other grounds could not be inquired into, I am unable to say. He had just decided, that evidence was inadmissible to prove that the assignment was made in contemplation of insolvency ; and when he added the remark under consideration, he probably meant that the transfer could not be impeached on any other grounds of a similar character. If more than this was intended, and the party had in truth offered any evidence of a different character, I think he should have specified what that evidence was in particular. It will not do to make a general remark, which is well founded in one point of view, the basis of a particular objection of another kind, which may not have been presented to the mind of the judge on the trial. Proving that the assignment was made in- contemplation of the insolvency of The Life and Fire Company would not affect the plaintiff’s claim, for the reasons which have already been given ; and there possibly may have been “ other grounds” on which the transfer would be illegal and void on the part of The Life and Fire Company, without prejudicing the plaintiff’s right to recover in this action.

The next general remark of the judge on the defendants’ opening was, that the question whether any consideration passed from The Western to The Life and Fire Co. for the bond and mortgage, or whether the same was transferred to pay an antecedent debt, and also any inquiry into the state oi the accounts between the two companies, could not be gone into. The judge evidently did not intend to be understood as saying that no question could be made whether any consideration had at any time passed between the two companies for the bond and mortgage, but only that it was immaterial whether the consideration passed at the time of the assignment, or whether the transfer was made to pay an antecedent debt. He decided immediately afterwards that the defendants might show a total failure of the consideration of the bond of the testator ; and the defendants subsequently read the answer of The Western Company, which showed that most, if not all, of the consideration for the assignment of the bond and mortgage had been paid before the transfer was made. After reading the answer of The Western Company, which showed that the sums paid by them to The Life Sy Fire Company greatly exceeded the amount of the bond and mortgage of Gibbons, the defendants offered to prove that the amount actually paid by The Western Company was less than the bond and mortgage, and only amounted to $13,500; that this money was paid to The Life Sf Fire Company, and that no other consideration passed between Eckford and The Western Company. The judge overruled this evidence, and held that the amount of the recovery did not depend on the amount paid by The Western Company for the bond and mortgage ; and that the right of the plaintiff could only be defeated by showing an entire failure of the consideration. Before the revision of the laws in 1830, it is entirely clear that the defendants could not have enquired into the consideration of the testator’s bond, except for the purpose of showing that it was illegal. The mere want or failure of consideration would have constituted no answer to the action. 20 Johns. R. 134. 9 Cow. 307. It is now provided, that in every action upon a sealed instrument, the seal thereof shall only be presumptive evidence of a sufficient consideration, which may be rebutted in the same manner and to the same extent as if such instrument were not sealed. There must, however, be a plea or notice with the general issue, or the defence will not be admitted. 2 R. S. 406, § 77, 78. This new rule of law has been applied to sealed contracts made before the statute was passed. In Case v. Boughton, 11 Wend. 106, the defendant pleaded the failure of the consideration on which a sealed note was given inl829, and the plea was held good. In McCurtie v. Stevens, 13 Wend. 527, it was remarked by Mr. Justice Nelson, that the statute only altered a rule of evidence, and did not impair the contract. It gave to the defendant a new defence in law, the benefit of which was before available only by means of a cross action, or in another forum. The question in this case also arose on the alleged failure of the consideration. So far as this statutes goes only to the remedy of the contracting parties, there can be no very great evil in applying it to sealed obligations executed prior to the revision. But in making the application, care must be taken that we do not go beyond .the form of the remedy, and interfere with the obligation of the contract. It is a familiar principle in jurisprudence, that a statute shall not have a retrospective effect so as to destroy a vested right; and this principle of natural justice, so far as it relates to “ the obligation of contracts,” is recognized and enforced by the constitution of the United States. This statute must, I think, receive a more restricted construction when applied to antecedent agreements under seal, than it will require in relation to contracts entered into since the act was passed. Should it be construed to reach every possible question of consideration on sealed instruments, made before the year 1830, it will, in some cases, be brought into conflict with a principle which it cannot withstand. In Case v. Boughton, the statute only went to the remedy. The action was on a sealed note, given on the sale of a horse. The defence was, failure of the consideration. The plaintiff had made a false warranty and fraudulent representations concerning the soundness of the horse. Before the statute, the plaintift would have recovered upon his sealed obligation; and the defendant might have sued and recovered damages on account of the warranty and fraud. The only effect of applying the statute to that case was, to adjust the whole controversy in one 'O V action, instead of having cross suits. It may also be proper t° construe the statute so as to give a defence where the party had before no remedy at law, but only in a court of equity, But of this I think there may be some doubt. It will be time enough to decide the question when it shall arise. The defence set up in this case was not the failure, but an original want of consideration. If the defendants, under the decision of the judge, had succeeded in making out that there was a total want of any such consideration as would be necessary to support a simple contract of the same character, this sealed instrument, independent of the statute, would, nevertheless, have been valid at law, and the defendants must have answered for the default of Gibbons, according to the contract of their testator. Livingston v. Tremper, 4 Johns. R. 416, The agreement was not only valid at law, but the obligor could not have been discharged from it by a court of equity. The total absence, or the inadequacy of consideration, may be important circumstances in ascertaining whether there was fraud in obtaining the contract; and courts of equity have sometimes refused to lend their aid and decree the specific performance of an agreement which was not founded upon a sufficient consideration. But in the absence of all fraud, and where there is nothing in the relationship between the parties from which an undue influence may be inferred, a court of equity will not interfere and set aside a contract, ntir control the parties in attempting to enforce it at law.

The mere want of such a consideration for a deed as would be necessary to support a simple contract is not a sufficient ground for setting aside the obligation in a court of equity. Indeed, voluntary contracts have been enforced by decrees for specific performace. Villers v. Beaumont, 1 Vern. 100. Beard v. Nuthall, id. 427. Bunn v. Winthrop, 1 Johns. Ch. 329. Osgood v. Franklin, 2 id. 23. Where an executory, contract is entered into for the sale of property, it is evident that the parties contemplated a consideration—a. quid pro quo; and the inadequacy of price may be so gross that it will amount to evidence of fraudbut if a man make a voluntary conveyance of his property without any circumstance of fraud or undue influence beyond the mere fact of its being voluntary, it will bind him, though it may be void as against creditors and subsequent bona fide purchasers. The promise of a gift is void, but a gift executed cannot be recalled. The promise of a gift is void, because the law will not uphold a simple contract without a sufficient consideration ; but if one covenant that he will give another a sum of money, I know of no principle upon which he can be discharged from the obligation. Fallowes v. Taylor, 7 T. R. 471. 3 Burr. 1639. Com. Dig. Fait. B. 4, b. note c. The bond of Mr. Fckford, although it may have been given without consideration, was a valid obligation at the time it was executed ; and the subsequent statute must not be so construed as to annul the contract, either in whole or in part. There is nothing in the statute calling for such a construction. If a retrospective effect was at all contemplated by the legislature, they certainly did not intend that this statute should be applied in such a manner as to impair the force of pre-existing agreements. In this case the judge decided that the defendants might show the want or total failure of consideration. In that I think he erred; but it is an error of which the plaintiff only can complain. Although what the defendants wished to prove was called indifferently the want and the failure of consideration, it was in truth the mere want of consideration. They did not propose to show that something was either given or promised to Mr. Eckford asan inducement for making the bond, which afterwards proved to be valueless; nor that any supposed consideration passing between the two companies had ultimately proved worthless ; but the defendants wished to make out that there was in truth no pretence of consideration for the undertaking of Mr. Eel ford. What would have been the consequence of admitting such evidence? If allowed to have the same influence that it would upon an instrument without seal, the effect would be to annul the contract. It would not only affect the remedy, but it would reach and overturn the right itself. If the defendants were not at liberty to set up the total absence of consideration for the purpose of defeating the action entirely, they clearly could no.t show a partial want of consideration for the purpose of reduc- • . c J '■ mg the amount ot damages.

I ami strongly inclined to the opinion that the obligor was estopped by his deed from setting up the defence of a partial want of consideration. The evidence offered was to show that only 13,500 was paid by The Western Company to The Life and Fire, for the bond and mortgage of Gibbons. The bond of Edf odd recites that The Western Company ha.d paid the money for the bond and mortgage of Gibbons, Piad mentions the amount secured, viz. $s25,00Q'; and then the condition is, that Gibbons shall satisfy the amount paid by the Western Company, being the amount mentioned in the bond of Gibbons. Here was the admission under seal of a particular fact by the party, and I doubt whether he was afterwards at liberty to controvert it. Wittes, 9. 'But it is unnecessary to decide that point in this case.

-1 think there is no sufficient ground for disturbing the verdict.

New trial denied.