Smith against Prince and another

Smith against Prince and another: IN ERROR. A conveyed certain articles of machinery to B, under an agreement between them, that B should pay for it the sum of 5000 dollars, of which 2000 dollars was to be paid on delivery of the machinery, and the residue in manufacturing cloth for A, at a certain price per yard. If B performed the agreement on his part, the machinery was to be absolutely his ; but if he failed to do so, it was to revert to A, who, in that event, was to retain so much of the 2000 dollars paid by B as would indemnify A for the damages he might have sustained, by the depreciation of the machineryin value, or otherwise. B, upon the delivery of the machinery, paid A 2000 dollars, and commenced the manufacture of cloth for A, pursuant to the agreement. In this state of things, B mortgaged the machinery to C, to secure him for his indorsement of JB’s two notes at the bank, by a deed containing the usual covenants of warranty and seisin, duly executed, acknowledged and recorded. A and B then united ⅛ a conveyance of the machinery to D, who undertooktopay A the balance of 2135 dollars due to him, and to satisfy all other liens ontheproperty, including the mortgage to C. The creditors of D afterwards attached this machinery, and sold it on execution, subject to all incumbrances, to E. C was subjected on his indorsement of B'$ notes. On a bill of foreclosure brought by C against E, it was held, 1. that the agreement between A and B was not an executory agreement to convey the property after the terms were complied with, but, upon its delivery, an immediate title was vested in i?,defeasable by a failure to perform the terms ; 2. that by the covenant in B’s deed to C, B and all claiming under him with notice, were estopped from impugning the right of C; 3. that by the record of the deed, all persons coming in by subsequent title had notice of its contents ; 4. that E, who bought the title of D subject to all incumbrances, was justly bound to redeem the incumbrance of C, or surrender the security: consequently, that C w*as entitled to a decree in his favour against E, Where a mortgage is given as security for the indorsement of certain notes, the renewal of the paper, if the indorser remains liable and is ultimately compelled to pay the debt in consequence of his original indorsement, does not affect the lien created by the mortgage. This was a bill for the foreclosure of mortgaged premises, brought by Asa Prince and Augustus Ormsbee. The following, are the material facts in the case. On the 12th of May, 1837, Isaac C. Stetson and Lewis R. Blake entered into a contract with Daniel Remington and Daniel R. Whitman, by which the latter, among other things, agreed to furnish the former with a certain quantity of factory machinery, of the value of 5000 dollars; for which machinery, Stetson and Blake agreed to pay, on the delivery thereof, 2000 dollars, and the balance, by manufacturing cotton cloth for Remington and Whitman, at 3f cents per yard, they paying 3 cents, and crediting f of a cent per yard, until the sum so credited should amount to such balance; and when payment should be fully made in this manner, the machinery was to become absolutely the property of Stetson and Blake ; but if they should fail to fulfill the contract on their part, it was to revert to Remington and Whitman, and the 2000 dollars, or so much thereof as should be necessary to indemnify Remington and Whitman for all damages they might sustain thereby, in the diminished value of the machinery or otherwise, should be forfeited to them. In pursuance of this contract, Remington and Whitman, on the 12th of May 1837, delivered to Stetson and Blake factory machinery, of the value of 5000 dollars; and upon such delivery, Stetson and Blake paid to Remington and Whitman the sum of 2000 dollars, and thereupon commenced manufacturing cloth with such machinery, at their mill in Thompson. On the 25th of May, 1838, Prince and Ormsbee, the plaintiffs in this bill, by their contract in writing of that date, agreed to indorse the paper of Stetson and Blake at the Thompson Bank, for the period of one year from that time, for an amount not exceeding, at any one time, the sum of 800 dollars ; and thereupon the plaintiffs, in pursuance of such agreement, indorsed for Stetson and Blake two notes, payable at the Thompson Bank, one for the sum of 500 dollars, in three months, and the other for the sum of 300 dollars, in four months. Stetson and Blake were also, at that time, indebted to Prince, by their note, dated the 25th of May, 1838, for the sum of 15Ó dollars, payable in six months, with interest. To secure the plaintiffs for their liability as indorsers, and to secure to Prince the payment of said note of 150 dollars, Stetson and Blake thereupon executed to the plaintiffs, a mortgage deed, with covenants of warranty and seisin, by which they conveyed to the plaintiffs, all the articles of factory machinery before-mentioned; which were then the absolute property of Stetson and Blake. The condition of the mortgage was, that if Stetson and Blake should fully indemnify and save harmless the plaintiffs, for and on account of their indorsement of said two notes, and also such other indorsements as they should thereafter make, in pursuance of said agreement to indorse, and should also pay said note of 150 dollars to said Prince, said deed should be void, but otherwise should remain in full force. This deed was executed, acknowledged, and recorded according to law. At the same time, Stetson and Blake notified the plaintiffs that their interest in said machinery was only such as they derived by virtue of their contract with Remington and Whitman. On the 3rd of December, 1838, Stetson and Blake, having become embarrassed in their business, mortgaged all of said machinery to one Bowen, to secure a debt, which they owed him, of 800 dollars ; and about the same time, it was attached by William Sigourney and others, their creditors, on claims amounting to about 700 dollars. On the same day, an arrangement was made between Remington and Whitman and Stetson and Blake, of the one part, and D. C. Remington 4* Co. of the other part, by which the former conveyed all said machinery to D. C. Remington <f- Co.; and they, on their part, agreed to pay Remington and Whitman the sum then - due to them from Stetson and Blake, amounting to 2135 dollars, and also to pay the claims of said attaching creditors, the mortgage debt to Bowen, and also the claim of the plaintiffs against Stetson and Blake, secured by the first-mentioned mortgage, and the balance of the estimated value of the machinery, in cash. To secure to Remington and Whitman the fulfillment of this agreement, on their part, D. C. Remington Co. then executed to Remington and Whitman a mortgage of the machinery. Afterwards, sundry creditors of D. C. Remington ⅜ Co. attached said machinery, which, on the 19th of September, 1839, was sold, by virtue of executions against D. C. Remington <§• Co., (subject to all existing incum-brances) to Elisha A. Smith, one of the defendants, in whom is now vested the equity of redemption in said machinery. The note of Stetson and Blake for 500 dollars, mentioned In the condition of the mortgage to the plaintiffs, was renewed at maturity, by another note of the same amount, with the same parties. It was then paid, by a note signed by the plaintiffs and indorsed by Parley Jordan. This renewal note fell due on the 8th of January, 1839, and was then again renewed for the full amount, by another note, signed by D. C. Remington <$• Co., and indorsed by the plaintiffs. It was further renewed, from time to time, with the same parties, until the 5th of July, 1839, when having been reduced, by partial payments, all of which were made by D. C. Remington <§• Co., to the sum of 250 dollars, that sum then remained due thereon. The note of Stetson and Blake for 300 dollars, mentioned in the condition of their mortgage to the plaintiffs, was also once renewed, with the same parties, and then from time to time, by notes signed by D. C. Remington <§• Co., and indorsed by the plaintiffs, until the 5th of July, 1839, when the original debt had, by payments made at the several renewals, by D. C. Remington fy Co., been reduced to 200 dollars, which then remained due. Both these notes, viz. of 250 dollars and 200 dollars, were paid out of the proceeds of a note for 700 dollars, signed by I). C. Remington óp Co. and indorsed by the plaintiffs, which was discounted at the Thompson Bank. This note, by reason of the insolvency of D. C-Remington ⅝ Co., the plaintiffs were obliged to pay. The note of Stetson and Blake to Prince for 150 dollars, mentioned in the condition of the mortgage to the .plaintiffs, has never been paid. D. C. Remington Co., in becoming parties to said note at the bank, and in making said partial payments, did so in pursuance of their agreement with Remington and Whitman and Stetson and Blake, to remove the then existing incum-brances from the machinery; and the plaintiffs, in indorsing said renewal notes, did so, relying upon the security furnished them, by their mortgage. While said machinery was in the possession of D. C. Remington Co., they removed all said incumbrances therefrom, except that of the plaintiffs, and said sum of 2135 dollars, to secure the payment of which, they mortgaged said machinery to Remington and Whitman, on the 3rd of Decem-her, 1838, as before stated. On these facts, the court passed a decree of foreclosure in favour of the plaintiffs; and Smith, one of the defendants, thereupon filed his motion in error, bringing the record before this court for revision. Lamed and C. F. Cleveland, in support of the motion, contended, 1. That at the time the plaintiffs obtained the mortgage on the machinery, the mortgagors had no title thereto, and of course, the mortgagees could obtain no lien, which attached specifically to the machinery. 2. That the mortgagors never afterwards acquired any title to the machinery. 3. That when the contract was abandoned, by Stetson and Blake and Remington and Whitman, and the machinery was by them sold to D. C. Remington <jr Co., these purchasers acquired an absolute right of property, subject to no lien or claim whatever, except to Remington and Whitman on the new mortgage. 4. That the creditors of D. C. Remington <§• Co., who purchased the property under an execution sale against them, acquired a complete title thereto, not affected by any lien of the plaintiffs. 5. That if there could have been any lien in favour of the plaintiffs, it was entirely removed, by the subsequent transactions. Strong, contra, insisted, 1. That Stetson and Blake, when they executed their mortgage of the machinery to the plain- - tiffs, had an interest in it, which a court of equity will recognize and protect. That is sufficient for the purposes of this case. 2. That no act has been done by the plaintiffs to transfer their interest; nor has their lien been given up, or in any way destroyed. 3. That the condition of the mortgage has not been fulfilled. The debt to Prince has not been paid ; and the plaintiffs have not been saved harmless from their indorsements. The substitution of new notes did not pay the original debt. Olcott v. Rathbone, 5 Wend. 490. Higgins v. Packard & al. 2 Hall, 547. Porter & al. v. Talcott & al. 1 Cowen, 359. Raymond v. Merchant, 3 Cowen, 147. Cromwell & al. v. Lovett, 1 Hall, 56. Bill v. Porter, 9 Conn. Rep. 23. [Williams, Ch. J. suggested, that this point had recently been decided, by this court, in Pond v. Clarke & al. (ante, 334.)] [MAJORITY — Sherman, J.] Sherman, J. The first question in this case regards the title which the defendants in error acquired by the mortgage deed from Stetson and Blake, on the 25th of May, 1838. It is contended, that Stetson and Blake had no such title in that part of the property which they received from Remington and Whitman, as would enable them to pledge it for a debt. The machinery in question was conveyed to Stetson and Blake, on the 12th of May, 1837, and it was, at the same time, stipulated, that they should pay for it the sum of 5000 dollars. Of this sum, 2000 dollars was to be paid on delivery, and the residue in manufacturing cloth for Remington and Whitman, who were to give credit for a specified proportion of the price of manufacture, towards the balance due. If Stetson and Blake performed the contract on their part, the machinery was to be absolutely theirs. If they failed to fulfil, the property was to revert to Remington and Whitman ; who, in that event, were to retain so much of the 2000 dollars advanced, as would indemnify them for the depreciation of the property, and other damages they might sustain, by the non-performance of the contract. This was not an executory agreement to convey the property after the stipulated terms were fulfilled, but vested an immediate title upon its delivery, defeasible by a failure to perform the terms. The right of Stetson and Blake differed little from that of a mortgagor. It was defeasible until the fulfilment of the stipulations, and then to become absolute. Under these circumstances, while the contract was in force, and Stetson and Blake had an absolute right to perfect their title, they mortgaged the property to Prince and Orms-bee, the defendents in error. Had full payment been made to Remington and Whitman, in the manner prescribed by the agreement, the title of the defendants, as mortgagees, would have been perfected. The mortgage deed contains covenants in regard to the title, which estopped Stetson and Blake, and all claiming under them with notice, from impugning the right of these defendants. It was executed, acknowledged, and recorded, in the manner directed by the statute; and therefore, all persons coming in by subsequent title, were notified of its contents. While matters were in this condition, on the 3rd day of December, 1838, Remington and Whitman united with Stetson and Blake, in a conveyance of the property, for the consideration of 4500 dollars, to D. C. Remington &[ Co., who undertook to pay Remington and Whitman the balance of 2135 dollars, due to them — for which they gave a mortgage ; and to satisfy all other liens on the property, including the mortgage of Prince and Ormsbee. The creditors of D. C. Remington Co. afterwards attached the property, and on the 19th of September, 1839, sold it on execution, subject to all incumbrances, to Elisha A. Smith. He, therefore, has the ultimate equity of redemption, subject to the mortgage of Prince and Ormsbee, and the debt due Remington and Whitman. Their right to the property is precisely defined, by the mortgage which they have taken. All other incumbrances have been cancelled. The foreclosure and order for sale do not affect their interest. They make no complaint. The only plaintiff in error is Elisha A, Smith, who bought the title of D. C. Remington ⅜- Co., expressly subject to the mortgage of the defendants in error, and is justly bound to redeem it, or surrender the security. As against them he has no title, except what is derived from Stetson and Blake, which is obviously subordinate to theirs. It is further insisted, by the plaintiff in error, that the court below erred, in allowing the sums paid by Prince and Orms-bee upon their indorsements, on the ground that the renewal-of the paper discharged the lien upon the property. As this is not specified in the assignment of errors, it is not necessary that it be considered by the court. But the same point was presented in the case of Pond v. Clarke & al. (ante, 334.) at the last term of this court in the county of New-Haven, where we held, that the renewal of the paper, while the indorser remained liable, if he was ultimately compelled to pay it, in consequence of his first indorsement, did not affect his lien upon the mortgaged property. We are of opinion that the judgment of the superior court be affirmed. In this opinion the other Judges concurred, except Ciiurcii, J., who was absent. Judgment affirmed.