Hiscock v. Phelps

By the Court Foster, J. I have examined with some' care, the questions arising on the merits on this appeal, and have come to the conclusion, that the report of the referee, and judgment entered thereon were correct. I have no doubt upon the facts proved, that from the 11th day of May, 1866, when the deeds of Cook and of Charles G. Kenyon were executed to the parties composing the firm of Charles G. Kenyon & Co., for the purposes of, and to be used for the copartnership business, and to be paid for out óf the joint fund, which the copartners were to contribute toward its capital, that in equity, the property conveyed became, and should be regarded and treated as copartnership property, and that erections and improvements made upon' the said real estate, thereafter, for the use of the partnership, belonged to the copartners as such. And that all debts-created by them for any of such purposes, would constitute an equitable claim and lien thereon, superior to any legal lien or incumbrance, which either of the copartners could place thereon in his own name, for his own individual debt. The main question is, whether the mortgage of Cook fol the $16,772.30, should have priority over the mortgage of tho defendant, Phelps, executed on the first of the preceding October. — 116 — ■There is no dispute, but that Phelps knew, when he loaned .the first money to Shumway, that the loan was. to him: individually, and to enable him to pay into, the-firm his share of its capital, or that the copartnership was existing, or that the copartnership were, in-.the actual occupation of the -premises as such, and were using it for their copartnership business. Nor is there any doubt that nearly or quite all the amount included in that Cook mortgage 'was. due from the firm to Cook and to the National Bank -before the mortgage to Phelps was executed, and was then entitled to priority upon the whole partnership property as against the loan made by Phelps- to Shumway, and therefore irrespective of the question whether the mortgage to Phelps was so acknowledged as to entitle it to be recorded and to .constitute it notice to all others, I think Cook had. a right,, at the request of the copartners,- to assume and-pay such prior indebtedness. to others, and succeed to all their equitable rights, as against the ■ Phelps’ claim, and that a-mortgage taken by him as security therefor was entitled to priority over .the mortgage of Phelps, even though if had been properly acknowledged and recorded. If I thought the -result of this appeal could be made to " depend upon these questions, I should examine them much more elaborately than I have done, .and should endeavor to • analyze the authorities bearing on the questions; but we are met-with the objection on the part of. the plaintiff that this - appeal is not properly brought • by Phelps; that the. proper and necessary parties for the determination of it have not been served with notice of the-appeal and are not before us, and that we cannot determine the appeal, or at least we cannot reverse the judgment without making Charles G. Kenyon, Peter-Mumford and John S.-Kenyon; parties to it, and the conclusions to which I have-arrived.on this question relieve me from such further examination of the merits of the case. These three defendants appeared by. their: own separate attorney .and put in their separate answer, and alleged the copartnership, the purchase of the real estate in question • as — 117 — partnership property, the payment for it so far as it had been made, and for the improvement of it with copartnership funds; that for such. payments the copartners had made unequal advancements; that C. G. Kenyon had advanced $32,000, John S. Kenyon $4,000, Peter Mumford $4,500, and J óhn P. Shumway $3,800-; that such advancements had been mainly-before, and all of them without any knowledge of the Phelps-mortgage, and made upon the faith and belief that the property was chargeable with the payment of partnership debts ■ and the equalization of advances made by the several' copartners before they could be charged with individual debts-by-mortgage or otherwise; that the mortgage to Phelps was received by him, with full knowledge of the facts, and that they had no knowledge of- Phelps’ mortgage, and they-claimed that the said second mortgage of Cook should have priority over that of Phelps, and also that Phelps’ mortgage should be adjudged only a lien on such - interest, in the land or its proceeds, as Shumway would have after payment of' both of Cook’s mortgages, the mortgage to Charles-G. Ken-, yon, the costs of the foreclosure suit, and the equalizing of-' the said advances. Mow, if the decree in-this case is sustained, it is quite clear, provided' the real estate is worth enough to pay the two-Cook mortgages, and the mortgage to-Charles G. Kenyon, that these three defendants will be absolved from all liability,., on that part of the decree, which holds them liable- on the bond for any deficiency, or they will remain liable only for such deficiency thereon, as may remain after exhausting the whole real estate toward^their discharge;- and, in case there is a surplus after paying the three mortgages to Cook and Kenyon; the question whether their equitable rights, as-, copartners, to an equalization-is, or is not, to be preferred'to the-claim of Phelps under his mortgage, remains open and to-be determined in the ordinary way. On- the contrary, if upon the merits, we should' decide that the Phelps mortgage has priority over the second mortgage -of Cook, and if there should be a deficiency, arising from the — 118 — sale of the premises, in discharging the costs and paying the four mortgages, these defendants would be liable on their bond, under the decree, to a greater amount than they now are, equal to the whole amount found to be due on Phelps’ mortgage; and even if the fund were sufficient to discharge all the mortgages, they would be foreclosed from setting up. their equitable claims as copartners in preference to it. They are, indeed, the only persons who have a real pecuniary interest in sustaining this decree, for they are the only obligors who are responsible, and, being entirely able to pay,, as the findings in the case show, it is not very important to the plaintiff that he succeed in obtaining the preference for his second mortgage; for all deficiency arising from the sale of the real estate, must be made up by these three defendants, provided the question be so determined, as not to discharge their personal liability. ' The Code (section 327) provides that: “An appeal must, he made by the service of a notice in writing on the adverse party, and on the clerk with whom the judgment, or order, appealed from is entered; stating the appeal from the same, or some specified part thereof.” This does not mean that a defendant appealing shall give notice only to the plaintiff or plaintiffs; or that a plaintiff appealing, shall give notice only to the defendant or defendants ; but its intendment and requirement is, that the notice shall be served on all parties whose interests are adverse to the party appealing. The rule of the former Court of Chancery required that. a notice of the appeal should be served on the solicitor of the “ adverse party,” and under this it was held that the notice must be served on the solicitors of the several parties whose interests as to such appeal are adverse to. the appellant. (1 Barbour’s Chancery Practice, 400.) In Potter v. Baker (4 Paige, 290), it was held that, upon an appeal from a vice-chancellor to the chancellor, the appellant must, within the time, for appealing, serve a notice of the. — 119 — appeal upon the solicitors of the several parties whose interests as to such appeal are adverse to that of the appellant. And in Thompson v. Ellsworth (1 Barbour’s Chancery Rep., 624). where the question was as to what parties the appellant was to execute a bond or bonds on his appeal, the chancellor, at page 627, said: “ The adverse party, within the intent and meaning of the eightieth section, and of the (then) 116th rule of this court, means the party whose interest in relation to the subject of the appeal is in conflict with the reversal of the order or decree appealed from, or the modification sought for by the appeal.” He further decided that where two or more of the parties have a common interest in resisting the reversal of the decree, a joint bond as to them was sufficient; but where there arc respondents having distinct and conflicting interests in relation to the object sought for by the appdal, that separate bonds should be given to render the appeal effectual. So, under the Code, in an action brought by executors for the construction of a will of the testator, where several heirs and devisees claiming under the will are made defendants, and a decree or judgment of the court is pronounced, allowing the claims of some of the defendants as against the others, it was held that the latter defendants on bringing an apjreal from the judgment, in order to effect their appeal, must not only serve their notice of appeal and other papers upon the plaintiffs, but also upon the defendants who have established, their claims under the will, as these defendants are the adverse party within the meaning of the Code. (Cotes v, Carrol, 28 Howard’s Pr. Rep., 436.) That case is in precise analogy with the one before us, and, to the extent above stated, the court was unanimous in its decision. A majority of that court held that it was too late to perfect the appeal by serving notice upon the defendants not already made parties to it, and struck the cause from the calendar as to them, and refused to hear the appeal as to any of the matters affecting their interests. The other justice of that court dissented from the latter part — 120 — of the decision, and held the appeal having been brought and'' notice given in good faith that 'the appellants under the second" subdivision of section 327 of the Code ought to be allowed to ■serve' notice of the appeal and copy of the casé and'exc'eptioñá oh those other défendants, &c., and thus perfect tli'eir appeal." . J have said that Charles G. Kenyon, John S. Kenyon and* Peter Mumford aró the persons most interested in upholding" the decree rháde'in this action; but the plaintiff is"more than' nominally interested, because if a new trial should'be granted" and the judgment should be set aside, as against’all the par*, tic's, he" is interested to the whole amount of the mortgage of Phelps, because before the suit should be finally terminated the three defendants might not be able to respond' for any" deficiency ; and he is interested in requiring that a decision" should not be made against him unless" it shall at thé same time be effectual also against him. I have no doubt, therefore, that we cannot decide this' appeal in favor óf the defendant while the three defendants who appeared in the action are not parties to it, and I' have" very little doubt that it is too late now to make them, parties,' and! think the appeal should be dismissed with costs." All concur and jridgment of dismissal ordered;