Talman v. Rochester City Bank

By the Court, Mitchell, P. J. The defendants’ points state that they may concede that if the bond and mortgage mentioned in this case had been assigned in good faith, by Mumford, to the Rochester City Bank, as security for the debt which he owed to the bank, the bank might (with the consent of Mumford) have assigned the bond and mortgage to another and guarantied the payment. But that a distinction is manifest between the right of the bank to guaranty choses in action, belonging to it, and its right to guaranty those belonging to another. The concession is right: and a bank may certainly assign or convey any property held by it, and may enter into the common covenants of guaranty or warranty, on making such assignment or conveyance. This right is a matter of substance and not of form. As a formal contrivance, complying in all outward respects with the requirements of the rule, would be a nullity if it was in fact a mere contrivance, and the substance of the transaction were contrary to the rule, so if the case before the court is in substance within the rule, and only needs a formality to bring it in all respects within it, the omission of the form should be disregarded and the substance alone looked to. For it is not a question whether the bank has used the requisite forms or not, but whether it had any power or capacity to do the thing which [136] it has done, in any possible form ; whether the bank had any power, function or franchise to guaranty, in such a case; not whether it had used all the requisite forms which would clearly show that it had such right. This is not like the case, where that which partakes of the character of form is made necessary by statute. There the seeming form becomes essential, and matter of substance, by the effect of the statute; as when a bank is forbidden to issue circulating notes, unless payable on demand, or at its place of business. If the bank has the power or capacity to give its guaranty, under the circumstances of this case, there is no statute against this form of doing it. The counsel for the plaintiff accordingly insists that the transaction in question was in effect, as well as in form, a guaranty by the bank, of securities in which it had an interest. This requires an examination of the arrangements made between the parties, as shown by the complaint. On the 1st of August, 1838, Mumford was indebted to the bank in a large sum of money, and the bank was desirous of obtaining payment. Mumford, in order to procure the means of payment—and it is to be inferred, in compliance with this desire— assigned to the American Life Insurance and Trust' Company the first six installments (amounting to $14,250) of a bond and mortgage which he held, from one Ingersoll. It was made a condition of the purchase that the bank should guaranty the final collection of these installments and of the interest to become due thereon, and the bank did accordingly execute to the Trust Company its guaranty, which was delivered to the Trust Company at the same time and place that Mumford assigned to the company the bond and mortgage. Mumford received the consideration money for the assignment and guaranty, and applied the proceeds to the payment of his indebtedness to the bank. His negotiation of the note (as is admitted by the pleadings) was with the knowledge and assent of the bank, and for the mutual benefit of himself and of the bank. The guaranty executed by the bank recites that Mumford, being indebted to the bank, had proposed (as is to be inferred, to the bank) to sell the bond and mortgage for the purpose of [137] applying the proceeds of the first six installments upon the indebtedness to the bank, on receiving from the bank their guaranty of the said installments, and interest thereon, to enable him to effect the sale, and that Mumford in pursuance of that agreement had executed an assignment of the bond and mortgage to the Trust Company, with a covenant guarantying the collection of the principal and interest; and then, in consideration of the premises and of one dollar paid by the Trust Company, the bank guaranties to the company the final collection of the said installments, and of the interest thereon; and reserves to itself the right, upon any default in payment of principal or interest, to pay the amount then unpaid to the company, and to have the bond and mortgage assigned to the bank, if the bank shall, so elect. The mortgaged premises were sold, on foreclosure, and on a final sale, on the 24th of November, 1851, only realized $5150, which was their fair value on the last mentioned day. Ingersoll was insolvent and removed from the state, and nothing could be collected from him. The bank is called upon to fulfill its guaranty, and insists that it had no legal capacity to make such a guaranty, and that it is not therefore liable on it. From this statement it is plain that Mumford held the bond and mortgage and arranged with the bank to convert it into money, for the benefit of the hank, and to apply the money to be received to pay his debt to the bank, and that in pursuance of this arrangement, communicated to the Trust Company, he assigned the bond and mortgage to the company, and the bank at the same time guarantied to the company the payment of the bond and mortgage or of the six first installments on it, and that Mumford received the money from the Trust Company and applied the proceeds to the payment of his debt to the bank. If Mumford had asigned the bond and mortgage to the bank and the bank had assigned them to the company, and guarantied the payment as it did, it is conceded that the bank would have been liable. The only difference is that the one transfer from Mumford to the bank, that would have been necessary in that case, was omitted, and Mumford, to simplify the transaction, assigned directly to [138] the company. This was a mere matter of form in conveyancing, and neither the one' form nor the other can be considered as in any degree an attempt to enlarge the franchises of the bank. The measure of a franchise is never determined by immaterial forms. The question always is what power or capacity has been given; not whether the power is exercised in a particularform. In substance the bank had an interest in the bond'and mortgage. The arrangement made between it and Mumford that he should assign that bond and mortgage for their benefit, or assign them and apply the proceeds to his debt to them, gave them such an interest in this bond and mortgage that to some extent the bond and mortgage were the property of the bank. They were agreed to be theirs when it was agreed that the proceeds should be theirs; and when this agreement was carried out, and became an executed contract, it made the bond and mortgage as much to have been theirs during the process of completing the arrangement, as if there had been an express contract, on a sufficient consideration, to assign the bond and mortgage directly to the bank, that the bank might assign to the company. This was the only question much argued in the case: most of the others were waived. It was contended that in some respects the complaint set forth not facts, but the evidence of facts, only. If the facts stated are such that if they were proved as stated, the plaintiff must recover, by operation of law; then the plaintiff has set forth a sufficient cause of action. So when the plaintiff alleges the execution of the guaranty, by the bank, under its seal, and the guaranty recites the consideration on which it was executed, and that is a lawful and sufficient consideration, that is prima facie enough. A statement of certain evidence from which the law draws a conclusion of fact, is in effect a statement of that fact; but a statement of evidence from which the law would not draw a conclusion of fact, but which would be left to a jury to find one way or the other, although it be so clear that a jury ought to find only one way,- may not be sufficient, in pleading. So it might be that it would not in pleading be a sufficient allegation of unseaworthiness of a ship to allege that she set sail, and on the same day,-without encountering any [139] storm or casualty, foundered at sea; although a jury would be bound, on such evidence, to find that she was.unseaworthy. In pleading it might be insufficient, because, by possibility the ship was still seaworthy when she left her port. None of the objections to what is called evidence of facts seem to be as clear as the case supposed. Tet even in such a case, it may be doubtful whether the proper remedy is by demurrer, when the party has a more appropriate remedy by moving to make the pleading more definite and certain. [New-York General Term, June 1, 1854. The judgment appealed from should be affirmed, with costs. Mitchell, Roosevelt and Clerke, Justices.]