Commercial Bank v. Cunningham

Wilde J. afterward drew up the opinion of the Court. The demandants’ title is derived from Joseph Edgarton and Joseph B. Edgarton, the former owners of the demanded premises, under a mortgage deed from them, made and executed January 31st, 1833, to secure the payment of large debts due to the demandants, and also to secure any future demands they might have against the Edgartons, so long as [274] they should be under any liabilities of any sort to the demandants. It is objected on the ¡Dart of the tenant, that this mortgage deed was fraudulent against subsequent purchasers ; or if not as to existing debts at the time the mortgage was made, yet that it was not a valid security for any demand which accrued to the demandants after that time. Neither of these objections, as it seems to us, can be supported. It is admitted, that the demands intended to be secured were bond fide demands. It does not appear, nor indeed is it alleged, that there was any secret trust between the parties; but on the contrary it clearly appears from the facts agreed, that there was a good and adequate consideration for the conveyance, and that it was made for the purposes appearing on the face of the conveyance, and of the agreement of the demand-ants accompanying it, which fully explains the understanding and the intention of the parties. It is no proof of fraud or con cealment, that the latter was omitted to be recorded, for it was not necessary that it should be ; and there is no reason for supposing, that it was omitted for the purpose of concealing any part of the transaction. There being, therefore, no proof nor indication of any fraudulent concealment as to the extent of the mortgage, the agreement that the mortgaged property should stand bound for future discounts and advances, is valid and unexceptionable. A greater part of the newly contracted debts were but renewals, or substitutes, for the old, and did not increase the amount due on the mortgage, which is less now than it would have been if only the old notes had now remained unsatisfied. But without relying on this circumstance, we think it clear, that a mortgage made bond fide for the purpose of securing future debts, expected to be contracted, in the course of dealings between the parties, is a good and valid security. And so are the authorities. United States v. Hooe, 3 Cranch, 73 ; Skirras v. Caig, 7 Cranch, 34 ; James v. Morey, 2 Cowen, 292 ; Brinkerhoff v. Lansing, 4 Johns. Ch R. 73. Considering then the demandants’ title valid, several questions remain as to the amount now due on the mortgage. The demandants claim, that, the drafts and notes made or indorsed [275] by Edgarton, Priest & Co., are covered and secured by the mortgage ; and we think this claim is well founded. The two Edgartons are parties to these notes and drafts ; and it is no objection, that Priest also is a joint debtor with them. It appears, however, that the most of these were indorsed by William Parker & Co. ; and a few were made by them, and indorsed by Edgarton, Priest & Co. The defendant contends, that the latter were discharged from their liability by the plaintiffs’ release to Parker & Co., which was given on their assigning their property for the payment of their debts. This claim is undoubtedly well founded as to all those notes and drafts which were signed by said Parker & Co., as makers, or principal promisors ; for the release to the principal promisor is equivalent to payment of the debt, and consequently discharges the indorser. But it is very clear, that the receiving part payment from the indorser and releasing him, cannot operate as a discharge of the principal debtor from the balance due. It is however agreed, that some of the notes indorsed by W. Parker & Co., were made for their accommodation, and the proceeds thereof went to their use. But the demandants deny, that they had at the time of the discount of such notes, or when the release was made, any notice of this fact. It has been argued, that as to these notes Parker & Co. are to be considered as the principal debtors, and that a discharge to them must operate as a discharge of the other parties to the notes. In support of this argument the counsel for the tenant rely on the case of Saxton v. Peat, 2 Campb. 185, and on Collott v. Haigh, 3 Campb. 281. These cases were decided by Lord Ellenborough at nisi prius; but the correctness of the decisions has been very much doubted ; and they were overruled in the case of Fentum v. Pococke, 5 Taunt. 192. In Kerrison v. Cooke, 3 Campb. 362, Gibbs C. J. says ; “lam sorry the term, accommodation bill, ever found its way into the law, or that parties were allowed to get rid of the obligations they profess to contract by putting their names to negotiated paper.” In Price v. Edmunds, 10 Barn. & Cressw. 582, Bayley J. suggests, though he does not decide the point, that a party .by signing a note as joint maker, renders himself subject to all the liabilities of a joint maker. And [276] Park J. says, that the decision in Fentum v. Pococke, where ii was held, that the acceptor of an accommodation bill was not discharged by giving time to the drawer, was good sense and good law. From these cases it appears, that the weight of authority is against the decisions in Saxton v. Peat, and Collott v. Haigh. But it is not incumbent on us to decide between these conflicting authorities in the present case. For we think there is no proof that the plaintiffs had notice, that these notes were accommodation notes. The knowledge of Parker, although he was one of the directors of the Commercial bank, is no proof of notice to that corporation, especially as he was a party to all these contracts, whose interest might be opposed to that of the corporation. . To admit the stockholders or directors of a bank to subject it to liability, or to affect its interests, unless they have authority so to do expressly by its charter, would be attended with the most dangerous consequences, and is certainly not sanctioned by any authority. Hallowell and Augusta Bank v. Hamlin, 14 Mass. R. 180. The plaintiffs, therefore, are entitled to recover the balances due on the notes in question against the Edgartons and Priest, and by the terms of the mortgage they are entitled to a conditional judgment therefor, together with their other claims. To ascertain these balances, the amount paid out of the goods and effects of Parker & Co. must be applied distributively and proportionally to all the demands proved by the plaintiffs, or admitted under the assignment. Their claim to apply these payments to other claims they had against Parker & Co. to the exclusion of the claims secured by the mortgage, is altogether unfounded and inadmissible. This is not a case in which the debtor or creditor has the right to make the application of any payment, for the application is made by law according to the circumstances and justice of the case. Judgment for the plaintiffs, nisi.