Marks v. Reynolds

12 Abb. Pr. 403

Opinion

By the Court.

*—Davis, J.

—The judgment sought to be set aside was confessed to Marks, the plaintiff, to secure him against a contingent liability as'indorser .for the defendant, amounting to $4,450; and also to secure him as trustee for John Yan Horn and George R. Keep, for contingent liabilities arising upon their indorsements for said Reynolds, to the amount of $3,335; and as trustee for Augustus Keep and George R. Keep to secure them for contingent liabilities as such indorsers to the amount of $560.

The points made by the appellants counsel are, first, that the statement of the. nature and character of the liability is insufficient ; and second, that a judgment cannot be confessed to one party as trustee for another to secure the latter against contingent liabilities, or for any indebtedness.

The special term, in my opinion, came to a correct conclusion as to the sufficiency of the statement. The contingent .liabilities are described as arising upon certain specified notes made by Reynolds, and indorsed by plaintiff and by the other persons named. These notes are described by dates, amounts, when and where payable, and by whom made and indorsed. The liability upon them intended to be secured is a contingent one, as accommodation indorser; and of course if the particular notes have had no inception, or are not ^outstanding, or the in.dorser shall never be charged upon them, there is nothing secured by the judgment. It was not necessary, in my opinion, to state the consideration of the notes, nor the fact that they had been discounted.; although the latter fact is fairly inferable from what is stated. The creditors of Reynolds are fully informed of the nature and extent of the contingent liability. The facts stated put them upon inquiry, which, if followed, enables them definitely to ascertain the exact amount of the contingent liability that may at any time ripen into an actual one; and in my opinion are a sufficient compliance with the requirements of the Code.

The confession and judgment, so far as the plaintiff’s own liability is secured, may be sustained even if the court shall conclude that they are void as to the other amounts. (McKee a. Tyson, 10 Abbott' Pr., 392; Hoppock a. Donaldson, 12 ho

The question remaining to be determined is, whether a judgment may be confessed, under the Code, to one person in trust for another, the trustee and the trust being created and declared by the defendant in the written statement. This question is simply one of power under the provisions of the Code. I have studied those provisions in the light of the learned judge at. special term, and am not able to concur in his conclusion.

The Code provides that “a judgment by confession may be entered without action either for money due or to become due, or to secure a/rvy person against contingent liability on behalf of the defendant, or both, in the manner prescribed by this chapter.” (§ 382.)

“ A statement in writing must be made, signed by the defendant, and verified by his oath to the following effect.....

“ 3d. If it be for the purpose of securing the plaintiff against a contingent liability, it must state concisely the facts constituting the liability, and must show that the sum confessed therefor does not exceed the same.” (§ 383.)

In my judgment, “ the person” who may be secured against a contingent liability must be “ the plamtiff,” in whose favor the judgment is confessed. These terms, as used in the two sections, qre convertible and synonymous. The intention was to give power to the defendant by a confession to the party who had incurred such contingent liability on his behalf, to secure him to the amount of such liability; and not to authorize the creation of trusts through which, by the intervention of a trustee as plaintiff, all the contingent liabilities of a debtor might be aggregated and secured. Our system does not favor the creation of trusts except for certain specified and limited purposes, among which I do not think the trust in question is to be found. Besides, the establishment of such trusts seems to be obnoxious to serious objections. It of course includes the right of the debtor to select his own trustee; and if he may confess such a judgment for his indebtedness or contingent liabilities, he may, of course, choose a trustee most favorable to himself, without consulting, or perhaps in defiance of, the wishes of his creditor, and thus gain all the lenity which a friendly trustee would have it in his power to show him. If the judgment be valid eo instanti upon its confession and entry, it of course merges the existing indebtedness; and probably anticipates and prevents any future judgment upon the same contingent liability. So that a pressing creditor may suddenly find the note of his debtor on which he is seeking payment, or which he desires to turn out in payment of his own debts, or to hypothecate for his own liabilities, merged in a judgment confessed to his trustee whom he has not chosen, and for whose kindly offices he has no desire. This must be the effect of the existence of such a power in the debtor, unless it be also held that the validity of such a confession and judgment depends upon the assent of the creditor or his subsequent ratification. But there is no way provided in which this assent is to appear; and hence such judgments would be left open to controversy, whether such assent was given, or such ratification made,—subjects upon which contending creditors might litigate interminably upon questions of fact dehors the record, and resting in parol and loose acts and declarations. Besides, these judgments, if thus themselves contingent, would encumber the records and dockets of the court with invalid judgments not assented to nor ratified, to the serious prejudice of the business community. If such a judgment, to which there has been no concurrent or subsequent assent of the beneficiary, is to be valid till repudiated, at what time will it cease to be a lien ? or when must the repudiation or ratification be announced ? When ratified,'will the lien relate to the time of docketing, or of .the ratification? And what effect shall be given to such a judgment as against others recovered while it is thus inchoate? The difficulties that surround the right to confess judgments to trustees seem to me embarrassing and insuperable. I have no doubt the judgment in this case is just and .equitable, and was confessed in good faith, and ought to be sustained, if the power to confess such a judgment exists;.but to establish such power seems to me to open a door to mischiefs prejudicial to the best interests of community and liable to great abuse; and I do not think the Legislature have done or intended to do it. In my opinion, the order appealed from should be reversed, and the judgment in question should be declared valid only as to the contingent liability of Marks; and the residue invalid as to Mrs. Wright’s judgment, and postponed thereto.

Grover, J., concurred. Marvin, P. J., dissented.

Present, Marvin, P. J., and Davis and Grover, JJ.