Beers v. Waterbury

1. Under the provision of the Laws of 1833, ch. 279, (2 Rev. Stat., 3d ed., 196,) which requires chattel mortgages to be refiled annually, “ together with a statement exhibiting the interest of the mortgagee in the property thereby claimed by him by virtue thereof,” a statement is sufficient which annexes and refers to another document filed with it, if the two papers( read together in connection with the original mortgage, disclose the interest of the mortgagee intelligibly. 2. On refiling a chattel mortgage, which, by its terms, was given to secure the payment of notes, and also to secure the mortgagee against outstanding liabilities, the statement annexed was that the amount of the unpaid notes constituted the amount of the mortgagee's interest, and made no reference to any claim that the mortgage was held as a security against the outstanding liabilities. Such outstanding liabilities then, in fact, existed, and a copy of an agreement between the parties, which was annexed and filed with the statement, and referred to in it, stated that the mortgage was given to secure such outstanding liabilities. But this agreement was made some months before the making and filing of the statement; Held, that as against subsequent purchasers, the renewal of the mortgage was good as to the amount claimed as due upon the notes; but it was not good as to any of such outstanding liabilities. 3. An understatement of the amount due does not affect the validity of the mortgage as to the amount which is stated; but the mortgagee cannot, as against the parties designed to be protected by the statute, afterwards claim that any greater sum is secured by the mortgage than is mentioned, in terms or by intelligible reference, in his statement. 4. Notice of the facts, to render such a defective statement sufficient as against subsequent purchasers, must be actual notice, not merely of the mortgage, but of the actual amount for which the mortgage was held as security when they purchased. 5. A chattel mortgage was given to secure, among other things, liabilities of the mortgagor assumed by the mortgagee, and the schedule annexed specified money paid for taxes to the amount of $300, and the complaint in an action to foreclose the mortgage claimed only the payment so specified; but on the trial proof was received, without objection, of the payment of another tax, and its recovery was allowed; Held, that this was error, for as against subsequent purchasers not having any notice of the mistake by which this other tax was omitted, only the amount specified in the schedule could be recovered. 6. An exception to the decision of a Judge, before whom a cause is tried without a Jury, fails, if the conclusions of law stated and the judgment settled upon the decision do not pursue the decision in respect to the point excepted to, but are in conformity with the exceptant’s view. 7. The purchasers of personal property upon which there is a valid chattel mortgage, who consume or sell a part of the property, so that what remains does not produce sufficient to satisfy the mortgage debt, may be held personally liable for the deficiency. 8. This is so even though they took the property in hostility to the mortgage, and denying that it was an existing lien. 9. A stockholder of a corporation holding a claim against it for which the stockholders are individually liable, cannot recover upon it in an action against one of the stockholders individually. He can only set up the claim in a proper action against the stockholders generally for a contribution. 10. A demand not set up as a counter-claim in the answer, cannot be recovered as such. 11. In an action by a mortgagee of chattels to foreclose the mortgage and to obtain a personal .judgment for the debt, subsequent purchasers of the mortgaged property cannot avail themselves of a demand in favor of the mortgagor, against the mortgagee, as a counterclaim.

Appeal from a judgment entered upon the decision of Mr. Justice Hoffman at Special Term. This action was brought to foreclose a chattel mortgage, joining as defendants, subsequent purchasers of the mortgaged property, and seeking to charge some of them with any deficiency that might arise by reason of their having consumed a part thereof. The defendants were Bobert J. Jimmerson, James T. Husted, Charles G. Waterbury, David L. Youngs, and the Dry Dock, Grand Street, Bowery and South Ferry Stage Company. The chattel mortgage was given February 1st, 1854, by the defendants, Jimmerson and Husted, to the plaintiff, upon certain horses, stages, &c. The plaintiff, Beers, and defendant, Jimmerson, had been partners in a stage establishment in the City of Hew York. Beers sold out his interest to Husted, one of the defendants, who gave in payment 28 promissory notes for an aggregate amount of $18,064.29; and Husted and Jimmerson, forming a new copartnership, secured Beers for those notes, and also against his liability for debts of the old firm, by this mortgage upon the entire property. Sometime in the spring of 1854, Jimmerson and Husted became insolvent, and assigned their property, and subsequently the assignee, with the concurrence of Jimmerson and Husted, sold the stage establishment, embracing the property covered by the mortgage to Beers, to the defendants, The Stage Company, a Corporation formed under the General Act of April .4, 1854, and as one of the conditions of the- transfer, that Company assumed the payment of all the debts and obligations secured by the plaintiff’s mortgage. On July 26th, 1854, The Stage Company made a written contract with Beers, by which, in consideration of Beers’ forbearance to enforce immediate payment of the mortgage, which had before this time become wholly due by default, the Company agreed to pay the notes at certain shortened dates, and agreed to issue forthwith to Beers, its stock for $2,500, to be taken by him at par, and applied upon the debt; but this latter stipulation as to the issuing of the stock, it appeared by the evidence and was found by the Justice who tried the cause, had been abandoned and never performed. Among the debts of Jimmerson and Beers, as indemnity against which the mortgage in suit was made, was one to D. Willis for $207.34. This claim was not paid, and suit was commenced for its recovery against Beers and Jimmerson, which was pending at the time of the trial of this action. Another of the liabilities of Jimmerson and Beers, which the plaintiff claimed to be indemnified against by the mortgage, was an item for taxes on the premises occupied by the stage establishment, which were held under leases to Jimmerson and Beers binding the lessees to pay the taxes. Beers was obliged to pay these taxes with the interest accrued upon them, the amounts thus paid being one of $356.18, paid January 15th, 1857, and one of $181.45, paid December 31st, 1855. The landlords paid the taxes and Beers refunded to them. The plaintiff’s mortgage was filed in the register’s office, February 2d, 1854. Within a year thereafter, on the 1st of February, 1855, a copy of the mortgage was filed, together with a statement for its renewal, and a copy of the agreement modifying the time of payment of the notes. The statement for renewal, after certifying that the notes which had become due had been paid in the manner provided in the agreement, stated “that the notes which, by the terms of said agreement, have not become due, have not been paid, but remain owing to me thereupon at the date hereof, “the amount of which unpaid notes constitutes the amount of my interest in the property claimed by me, and therein mentioned and described, by virtue of the said mortgage, and I claim to hold the said property.” The statement made no reference to any outstanding liabilities other than the notes mentioned, but the agreement, of which a copy was filed with the statement, did refer to such liabilities. Subsequently, the Stage Company executed a second mortgage covering the same property, to one Downing and others, for $50,000, which second mortgage was foreclosed by an auction sale of the mortgaged property. Beers appeared at the sale, and gave notice that the sale would be subject to his prior mortgage, stating the amount due on the notes as the amount unpaid thereon. The property was sold to the defendant, Waterbury, who subsequently sold it to the defendant, Youngs. In the present action, the plaintiff sought a foreclosure of his mortgage, and a personal judgment against the two latter defendants, as well as the Stage Company, for any deficiency. The defendants, Jimmerson and Husted, and the Stage Company, suffered the complaint to be taken as confessed. Waterbury and Youngs alone defended. Their answers alleged that the Stage Company had performed the agreement of July 26th, 1854, to give the plaintiff $2,500 in stock, and that the defendants were entitled to the $2,500 credit for that stock, as a payment on the plaintiff’s claim on the notes. That the plaintiff held 200 shares in the Stage Company, and that the defendant, Waterbury, held a judgment against that Company, on which execution was issued, and returned unsatisfied; and that the plaintiff, as stockholder, was liable for the amount of the judgment. The defendant put in a reply to this counterclaim, alleging that Waterbury was himself a stockholder in the Company, and could have no recourse for collection of his judgment against any other individual stockholder, unless in a suit for contribution, making all the stockholders. parties; likewise denying his alleged ownership of the two hundred shares. Upon the trial the defendants proved that Beers was a stockholder in the Stage Company to the extent of four shares, and signed the original articles of association. It appeared, also, that the plaintiff had once signed a conditional agreement to take two hundred shares of its stock; but before the Corporation was legally organized, he requested to have his name stricken off from this conditional subscription or promise; and no certificates for these two hundred shares were ever issued or tendered to him, and no claim was made against Mm on account of them until after the company had become insolvent. The defendant, Waterbury, became a stockholder in the Company to the extent of five shares, and afterwards, also, a director. The defendants, Waterbury and Youngs, admitted, for the purposes of the suit, that they had jointly consumed or converted $4,000 in value of the mortgage property. The Justice who tried the cause, at Special Term, found and decided, among other things, that there remained due to the plaintiff of the debts secured by the mortgage, notes to the amount of $5,243.50, with interest, and two sums of $356.18 aud $181.45, paid by the plaintiff for taxes, which were original liabilities of Jimmerson and Beers; and that there remained due a debt of Jimmerson and Beers to D. Willis, for $207.84, against which the plaintiff was entitled to indemnify. He also found that the mortgage was properly refiled, and that the copies and statements filed for renewal were sufficient to entitle the plaintiff to have satisfaction out of the mortgaged property, not only of the amounts due to him on the notes, but also as to indemnity against the outstanding debt to D. Willis and the payment for taxes. To this end judgment was given, appointing a receiver of the mortgaged property, with directions to sell it, and from the proceeds discharge the liability to Willis, and pay the debts due to the plaintiff; and there was a decree over for any deficiency ‘ against Waterbury and Youngs to the extent of the $4,000 by them converted, and likewise against the Stage Company, upon their personal liability for the entire deficiency; From this judgment Waterbury and Youngs now appealed. I. As to the claim for the debt owing to Willis, the mortgage was for indemnity only, and the plaintiff was - not damnified. He must have actually paid to be damnified, and could not recover it without first paying it. (Campbell v. Jones, 4 Wend., 312 ; Taylor v. Higgins, 3 East., 169 ; Cumming v. Hackley, 8 J. R., 202.) If he should become insolvent, or never pay, he could not recover on a contract of indemnity. (St. Albans v. Curtis, 1 D. Chip., 164 ; Pond v. Warner, 2 Vern., 532.) I. As to the taxes. The mortgage was to indemnify against the obligations mentioned in the schedules, and the schedule in that regard only contains “ Taxes, $300.” The complaint avers that these were the taxes for the year 1853, in arrear. But the judgment has allowed not only that sum, but an additional sum for taxes of $181.45, with interest from December 31st, 1855, without any other evidence in the case than simply the fact that plaintiff paid that amount. This allowance was- not included in the complaint or in the mortgage, and it was not proved that it was for taxes, or for what year, or on what premises. III. The amount of stock agreed to be taken by the plaintiff, $2,500, ought to have been deducted from the plaintiff’s claim as of the 26th July, 1854. IV. The covenant in the mortgage, as to its lien on substituted property, is personal, binding only on Jimmerson & Husted, the mortgagors, and not at all on persons taking title from them, unless taken subject to that covenant. Dorr v. Peters, 3 Edw. R., 132 ; Sug. on Vend., 252 ; 1 Story Eq. J., § 576 ; 4 Kent, 421 ; Cumberland v. Codrington, 3 J. Ch., 329 ; Billinghurst v. Walker, 2 Bro. C. C., 608.) 1. There is no evidence that the mortgagors ever made any substitutions. 2.. The only evidence of any substitution by any one, is the stipulation which is of substitutions by Waterbury & Youngs, and not by Jimmerson & Husted. 3. Waterbury & Youngs cannot be bound by this covenant, unless they so agreed. 4. How, the transfers were from the Stage Company to their mortgagees, Downing and others, in trust; from the mortgagees on foreclosure to Johnson; from Johnson to Waterbury; and from Waterbury to Youngs, for a full and fair consideration paid, and in no instance subject to the mortgage, but in direct conflict with it. 5. All that can be brought home to Johnson, Waterbury & Youngs, is the knowledge that plaintiff claimed there was some $5,000 due him on the mortgage. 6. That cannot be enough to compel the additions they make to the stage line, to be subject to the mortgage. 7. The mortgage could operate only in presentí, and could not include or bind future acquisitions. (2 Story Eq. J., § 1021 ; 4 Kent Com., 144 ; Carleton v. Leighton, 3 Mer., 667 ; Gardner v. McEwen, 5 Smith, 125 ; Van Heusen v. Radcliff, 3 Id., 582 ; Edgell v. Hart, 5 Seld., 213 ; Otis v. Sill, 8 Barb., 102 ; Milliman v. Neher, 20 Id., 37.) V. The whole ground of this action against Waterbury & Youngs, is, that the property was sold to them subject to the mortgage. 1. The evidence is, that they took in hostility to the mortgage, and not subject to it. 2. Mere notice to them is not enough for this purpose. 3. This action must therefore fail, as to their personal liability, particularly as to Waterbury, who never assumed the obligations of the mortgage, and is not the owner of the property. 4. The decision is therefore wrong in charging them with any personal liability, whatever may be the liability of the property. 5. So far as they are concerned, it is a liability for the debt of a third person, and void under the statute of frauds. YI. Waterbury & Youngs were hona fide purchasers, exempt from the lien of the mortgage. 1. The mortgage was not properly renewed in 1855; it had no statement of the amount due. (2 R. S., 3d ed., 196, § 11 ; Fitch v. Humphrey, 1 Denio, 163 ; Ely v. Carnley, 3 E. D. Smith, 490 ; S. C., 19 N. Y. R., 496.) VII. Waterbury’s counterclaim was valid. (Spear v. Crawford, 14 Wend., 20 ; Simonson v. Spencer, 15 Wend., 548 ; 3 Hill, 190.) Beers was a stockholder. The statute makes the stockholders liable to creditors jointly and severally, (Laws of 1854, p. 329, § 10 ;) and Waterbury was a judgment creditor, with an execution returned unsatisfied. VIII. It having been proved that plaintiff was a subscriber for $5,000 of the stock, which he had never paid for, and for which he is still indebted to the Company; that amount, with interest from the time of his subscription in May, 1854, ought to be deducted from his claim. (Same cases.) I. The validity of the mortgage, and the regularity of its filing are beyond dispute. The copies and statements filed for renewal are in proper form and sufficient. ' But, if any question of their regularity or completeness could otherwise be raised, all the defendants are precluded from raising any such question—the Stage Company, because by their purchase from the assignee of Jimmerson .& Husted, and by the agreement of July 26th, 1854, they ■expressly assumed the mortgage debt, and affirmed the mortgage, and because they suffered the complaint to be taken as confessed, and the defendants Waterbury and Youngs, because they purchased with express notice of the mortgage. II. The finding of the Judge that the Company had failed to-perform the agreement of July 26th, 1854, for the delivery of $2,500 of its stock must be regarded as conclusive, and moreover no different finding upon the point would have been justified. III. The other - items established in plaintiff’s favor by the judgment, viz., the two sums' of $181.45 and $356.18, paid for taxes, are clearly established by the testimony, as liabilities of the firm of Jimmerson & Beers, which Beers was compelled to pay, and-against which, by the terms of the mortgage, he was entitled to indemnity. IV. The outstanding debt to D. Willis for $207.84 is one for which Beers stands in the relation of a surety, and it is a specific lien on the property. In equity, he has a clear right, as surety, to compel the principal debtor to pay it for his exoneration, and to enforce the lien upon the property which stands as security for it. The judgment, according to well established rules, does not direct the payment of the debt to the plaintiff, he not having paid it, but gives him the equitable relief of exoneration from this liability, to which he is entitled, by directing the payment of the debt directly to the creditor, by the receiver, out of the proceeds of the property on which the plaintiff has a lien for his exoneration. (Story’s Eq. Jur., §§ 327, 730 ; Burge on Suretyship, 378 ; Gibbs v. Mennard, 6 Paige, 258, 260.) V. The defendants’ exception, for not allowing any sum against the plaintiff upon his alleged subscription for two hundred shares of stock in the Stage Company, is groundless. 1. No counter-claim of this kind is setup in the answers. The plaintiff’s ownership of two hundred shares is referred to merely by way of inducement, as a basis for the claim to charge the plaintiff, as a stockholder, with a personal liability for Waterbury’s judgment against the Company. There is no allegation of an unpaid subscription for this stock, nor any claim set up as in favor of the Stage Company against Beers for the price of it. 2. The so-called subscription of Beers for these two hundred shares, was a mere expression of willingness to take that amount of stock in a corporation contemplated to be formed. Before it was actually formed, Beers retracted. When the corporation was organized, Beers subscribed in form, but for four shares only. VI. No counterclaim can be made in this suit against the plaintiff, upon his statutory liability as stockholder for Waterbury’s judgment against the Stage Company. 1. The general act under which this Company was incorporated, (Laws of 1854, ch. 142, § 10,) makes all the stockholders jointly and severally individually liable for all the debts of the Company. Waterbury, being himself a stockholder, could maintain no action against a co-stockholder to charge him individually with the debt, but only an action for contribution against all the stockholders, charging each with his due share upon an accounting, and of course he can make no set-off of this debt, as an individual liability of Beers. (Bailey v. Bancker, 3 Hill, 190.) 2. If Waterbury had a valid claim against the plaintiff, individually, it could not be set off in this action. The personal liability for the mortgage debt, which is sought to be enforced in this action, is not of Waterbury, but of Jimmerson & Husted, the original debtors, and the Stage Company as debtors by assumption. Waterbury and Youngs are made parties merely by reason of their having subsequently come into possession of the mortgaged property. Being made parties only as such possessors, they could not introduce into the litigation, by way of counterclaim, personal claims of their own against the plaintiff. But it appears that Waterbury was not even in possession of any part of the mortgaged property, having, before the suit was brought, transferred it all to Youngs. Certainly, Youngs could not make a set-off of a claim due to Waterbury. (National Fire Ins. Co. v. McKay, 21 N. Y. R., 191.) The only personal liability with which Waterbury is charged by the judgment, is a joint charge of him and Youngs, for their joint conversion of mortgaged property to the extent of $4,000, and this judgment is to have effect only in case the sale of the mortgaged property, by the receiver, shall prove insufficient to pay the plaintiff’s claim, Against this joint and contingent liability a set-off of a demand against the plaintiff in favor of Waterbury alone, could not be made.