Brown v. Scott ( 1865 )

The opinion of the court was delivered by

Strong, J.

The plaintiffs in error are terre-tenants of the land upon which the mortgage rests. They bought subject to it, and they are now attempting to defend against the scire facias sued out to enforce it. The grounds of defence taken by them.on the trial in the court below were three. The first was that an execution-attachment against Scott, the mortgagee, had been laid upon the debt some years before the scire facias issued, that the attachment ■ remained undisposed of, and that it was a bar to any proceeding on the mortgage. Of this branch of the defence it might be said that it is not properly before us. No exception was taken to the charge of the court respecting it, and if there had'been it could have availed the terre-tenants nothing. The pendency of an attachment-execution is no bar to an action against the garnishee, at the suit of the legal holder of the debt attached. It has been said thajb it is pleadable in abatement, but even that is not strictly true. It neither abates nor bars an action, and pleading it can have no other effect than giving notice of the claim of the attaching-creditor, and to enable the, court to mould the judgment to protect the rights of the parties. Especially in this case was the attachment immaterial. The claim of the attaching-creditor was only $292.79, with some interest, while the sum due upon the mortgage exceeded $1600. It would be a great hardship if a creditor should be barred from recovering a judgment for any part of so large a debt by an attachment of so insignificant proportions when compared with the debt itself. Besides, the groundlessness of the position taken by the terre-tenants is more manifest, if possible, in view of the fact that the jury was allowed to deduct the entire amount claimed by the attachment from the debt secured by the mortgage. They have therefore sustained no injury.

A second position taken by the terre-tenants was that the plaintiff could not proceed upon the mortgage, because he had taken from the mortgagor in the fall of 1859 or spring of 1860, negoliable promissory notes for the amount of the debt then unpaid, and had negotiated them. In reference to this the court below instructed the jury that if the notes were taken from the amount of the mortgage, with an agreement that they should be received as satisfaction in full or to the extent of the notes, it would amount to a satisfaction of the mortgage, and the plaintiff could not recover. But if the arrangement was that the notes should be received not as absolute payment, but to enable the mortgagee to raise money, and to be credited on the mortgage when paid, and if they had not been paid, and the mortgagee still remained liable for them, taking the notes did not amount to a defence. Thus far no just exception could have been taken, and none was taken. But the court was asked to instruct the jury that, should they find negotiable notes were given by Orr (the mortgagor) and, accepted by Scott (the mortgagee) for the amount of the mortgage, the legal presumption is that such notes were given and accepted in satisfaction and payment of the mortgage. This proposition the court refused to affirm, and the refusal is now claimed to have been erroneous. The complaint is, however, not sustainable. It is true, that in Massachusetts and in Maine it is held that if a debtor gives his negotiable promissory note for the amount of his precedent debt, the law presumes it a payment and discharge of the debt, in the absence of any agreement to the contrary. But such is not the general rule of the common law. No such presumption is raised. It is a question for the jury without any presumption of discharge of the antecedent debt. So it is held in the English courts, in those of the United States, and in the courts of the states generally: Sheehy v. Mandeville, 6 Cranch 553; Peter v. Beverly, 10 Pet. 567; Burdick v. Green, 15 Johns. 247; Davidson v. Bridgport, 8 Conn. 472; Elliot v. Green, 2 N. H. 526. And such is undoubtedly the doctrine maintained in this state. In Hart v. Boller, 15 S. & R. 132, it was asserted as a general rule that if one indebted to another by note gives another note to the same person for the same sum, without any new consideration, the second note shall not be deemed a satisfaction of the first, unless so intended and accepted by the creditor, and it was said the intention with which it was received must be submitted to the jury. See also Weakley v. Bell & Sterling, 9 Watts 280. Numerous other cases, holding the same doctrine, might be cited. And indeed some of the more modern cases seem to go farther, and intimate, if they do not decide, that in the absence of any proof of an agreement the presumption is, that the negotiable note of a debtor given for the amount of his pre-existing debt is only a cumulative security.

In answer to another point, presented by the plaintiffs in error, the court charged the jury that, unless they were satisfied the notes were received as absolute payment by Scott, the mortgagee, their being outstanding in the hands of third persons and unpaid by Orr, would not prevent the plaintiff from recovery. If still unpaid in the hands of third parties, and if those persons took the notes, believing they were secured by the mortgage, the court, for the holders’ protection, would control the execution, and would require the cancellation or a return of them for the protection of Orr, yet that their being unpaid was no defence for the terretenants to a recovery of the 'amount still due upon the mortgage, if any amount should be found due. This, it is insisted, was erroneous.

Undoubtedly there is a large class of cases in which it has been asserted that when a negotiable note has been given for an antecedent debt, though it may not have extinguished that debt, courts will not suffer the creditor to sue and recover on the original contract, unless the note has been lost or destroyed, or is produced and cancelled at the trial. And some of the cases go to the extent that the right to sue for the original consideration is suspended while the note is outstanding, in the hands of an assignee or endorsee for value. Such is the principle of Small v. Jones, 8 Watts 265. To determine rightly how far the principle is applicable, we must regard the reason upon which it is founded. That reason is, that if the creditor might sue on the original cause of action, the debtor would be exposed to two suits, one brought by the creditor and one by the holder of the note, which would be a hardship. The rule then is made for the benefit of the maker of the note, and is irrespective of the payment of the debt. The reason is inapplicable to the present case. It is not Orr, the mortgagor and the maker of the notes, who complains of the charge of the court, and this is not a suit against him, or even a proceeding against any property in which he has an interest. This writ of error has been sued out by the terre-tenants. They purchased the land subject to the mortgage. The scire facias is a proceeding “ in rem.” It does not seek a personal judgment against any one. The terre-tenants are exposed to no other suit. The outstanding notes of Orr cannot affect them. The only question in which they are interested is whether the debt secured by the mortgage has been paid. It matters not to them who is entitled to the debt. If by the ruling of the court Orr the mortgagor is left exposed to two suits for one debt, they are not injured by it, and they cannot therefore assign it as error. Whatever might be the rule, if Orr was still the owner of the land mortgaged, and had he set up as a defence to the scire facias, that his negotiable notes for the same debt were still outstanding, it is a defence which the terre-tenants cannot make. One other point proposed to the court below by the plaintiffs in error remains to be considered. The court was requested to charge “ that if the jury should find from the testimony that Orr gave negotiable notes to the full amount of the mortgage, and Scott received them for the purpose of securing the proceeds of the mortgage from the creditors of Scott, such an arrangement, entered into for such a purpose, would in law be a satisfaction and payment of the mortgage.” To this the court (after remarking that Brown and Campbell were not creditors of Orr, but purchasers, at sheriff’s sale, of the land covered by the mortgage) answered that the giving of the notes, if they were not taken at the time as absolute payment of the mortgage, but given merely to raise money on, and when paid to be a credit, would not be a fraud upon them (the terre-tenants), and thereby work a satisfaction of the mortgage, notwithstanding they may have been given to defraud creditors generally.

It is by no means clear that anything appearing in the case warranted the presentation of such a point. Certainly it does not appear that there was any other creditor of the mortgagee than the one who attached the debt secured by the mortgage, and, as already stated, his claim was less than $300, while the debt due from Orr was more than $1600. The attachment was laid in the autumn of 1859, and most of the notes were not given until April 1860. Even then they amounted to no more than about one-half the debt then due and secured by the mortgage. But assuming that the proposition was properly submitted, it was correctly answered. If, by his arrangement with Orr, Scott did attempt to defraud his creditors, it did not amount to actual payment of the mortgage unless the notes were received in payment. Concede that the fraudulent arrangement was void as regards his creditors, the terre-tenants were not his creditors; and if they were, their rights would extend no farther than to set aside the fraudulent arrangement and treat' it as a nullity. That would leave the mortgage unaffected. The right of creditors against whom a fraud has been practised, is to undo the fraud. But the attempt of the terre-tenants now is to make it successful; for can they succeed in maintaining that the mortgage was paid by taking the notes with an intent to hinder the creditors of Scott, they would be assisting him in perfecting his fraudulent scheme. It seems, however, to he supposed that in some way Scott is estopped from denying that the mortgage was paid, because, as the plaintiffs in error allege, he attempted to deceive his creditors. But if any such estoppel were possible, it would be an estoppel in pai§, and could be taken advantage of only by those who were misled to their hurt by his fraudulent conduct. Such are not the terretenants. It is true a person cannot profit by his fraud. He cannot use it to acquire any rights, or to protect himself against any claim. But the mortgagee here is suing -on the mortgage. He is not setting up the transaction which the plaintiffs in error denounce as fraudulent. He makes no use of the notes. . The intent with, which they were taken can therefore be no defence to the scire facias upon the mortgage.

We see no error in the rejection of the answers of John M. Orr to the interrogatories propounded to him as the garnishee of Scott. They were offered avowedly for the purpose of showing fraud on the part of the plaintiff, and to corroborate the testimony of Iluff, a Avitness of the defendants, as also to contradict his OAvn deposition and affect his credibility. So far as it Avas sought to use the answer for the purpose of shoAving fraud, what has been said proves that it was immaterial. Nor can we see hoAV it tended to corroborate the testimony of Huff, or to contradict anything which he had sworn in his deposition. The answer cannot be regarded as a declaration of one confederate, and therefore evidence against the other, for it Avas not made in the prosecution of the alleged fraudulent design. It Avas made months before most of the notes were given, and made in answer to interrogatories propounded in the attachment. When it was first offered his deposition had not been read. Then his declarations, sworn or unsAYorn, were not evidence against the mortgagee, for he was a party to the record and directly interested as the debtor, one of the pleas being payment. And when it was afterwards offered solely for the purpose of affecting his credibility and contradicting him, the offer encountered the rule in The Queen’s Case. It was therefore properly rejected.

This disposes of all the assignments of error, though not in the order in which they Avere presented.

The judgment is affirmed.