Mutual Life Insurance v. Smith

dissenting:

Two appeals were taken in this case, one by the plaintiff and one by the defendant Bowerman.

• The appeal of the plaintiff rests on the ground, sought to be maintained by a series of propositions, that the mortgagor had power to execute the mortgage which he gave, embracing the whole property described and not one-fourth of it only. On the previous appeal in this action we decided that question adversely to the *544plaintiff, and we see no reason to change tbe judgment then pronounced.

The defendant Bowerman invokes our consideration of several propositions in reference to his alleged liability for a deficiency. One of them is that there was no consideration for the bond which he gave as collateral to the bond and mortgage of Lawrence S. Smith, already referred to. What occurred in reference to the bond and what led to its execution is stated by Mr. Turner in the case, and is as follows: “I am one of the law firm of Turner, Kirkland & McClure; we do now, and in 1869 did, some business for the plaintiff; in 1869, I think, in the month of June, Mr. Winston, the president of the plaintiff, placed in my hands the mortgage of Lawrence Shuster Smith, executor, etc., now under foreclosure in this action; that was delivered to the plaintiff April 4, 1868, and I was directed to foreclose the same; I put in the requisite searches and prepared the complaint; before the papers were served the defendant, Lawrence Shuster Smith, called on me and offered to execute new papers, and to give personal security if the loan could be permitted to continue; the plaintiff agreed to this, and I prepared the confirmatory mortgage, which was executed by Mr. Smith and his wife, and also the collateral bonds of Bower-man, Cameron and Bolton, which they executed; on my delivering those to the plaintiff, I was authorized to discontinue the foreclosure proceedings, and did discontinue them and returned the original complaint to the plaintiff; no papers were served in the foreclosure suit; Smith paid the fee; there was no written agreement to my knowledge in reference to the matter.”

The bond itself is payable on demand; it thus appears that there was no agreement to extend the time for the payment of the original indebtedness. On the contrary, the pre-existing obligation remained in full force and the bond of Bowerman and others, which was a collateral security, was entirely independent of it. As already suggested, it was an. obligation which was payable on demand. There is no evidence in the case to show that there was any other understanding or agreement than that there should be a continuance of the bond and mortgage. But no definite period was named. The transaction was a mere indulgence therefore and for no stipulated period. There was nothing, from aught that appears in the *545case or the papers executed, to prevent the plaintiffs from demanding payment of the original indebtedness immediately after the execution of the bond itself. This is not a sufficient consideration within the authorities. It has been so expressly declared. (Atlantic National Bank v. Franklin, 55 N. Y., 235; Cary v. White, 52 id., 138.)

It appears that the learned judge who presided at the Special Term was asked to make certain findings with reference to the consideration and the character of the agreement, of which the bond of the defendant Bowerman and others was predicated, which he declined to do, and this presents the question discussed for our determination and imposes upon us the duty of reversing the judgment, so far as it affects him individually.

For these reasons I think the judgment appealed from should be affirmed except as to the defendant Bowerman, in regard to whom it should be reversed.

Judgment affirmed.

There is no foundation for the objections urged in favor of the defendants Smith, by their guardian, to that part of the judgment directing the sale of the property in controversy. For it has been in terms declared that they were the owners of an undivided three-fourths of the premises mortgaged, and that no title to those portions had passed to the plaintiff by either of the mortgages delivered to it. A sale of the property under the judgment would consequently leave their three-fourths entirely unaffected, and operate wholly and entirely upon the interest which was the proper subject of incumbrance by the mortgages. The first mortgage taken upon the property by the plaintiff was given in April, 1868, and the debts secured by it became due on the 1st day of June, 1869. The plaintiff contemplated a foreclosure of that mortgage, and took measures to institute such an action. While the papers were being prepared a proposal was made, to give a new mortgage, together with a bond to be executed by additional parties as further security for the payment of the debt. It was proposed to give these obligations, if the plaintiff would allow the loan to stand, which proposition was accepted by it, and the proceedings then on foot, preparatory to the commencement of the foreclosure action, were abandoned.

The additional mortgage was executed and the bond agreed upon was given upon the understanding that the loan should be allowed to stand and remain for the time uncollected. No particular period was mentioned or agreed upon for which the loan was to be allowed to remain uncollected, but as a matter of fact no proceedings were taken for its collection from that time down to the year 1874. These facts appear by the testimony of the mortgagor taken upon a previous trial of this action. It has been strenuously urged by the counsel for Bowerman, one of the persons who executed the bond given with the mortgage, for which the extension of the loan was obtained, that what transpired did not constitute such a consideration for the bond as will legally sustain it. The objection is placed upon the circumstance that no particular period was agreed upon through which the forbearance of the debt should be allowed to extend. And it has been urged that the cases of Cary v. White (52 N. Y., 138) and Atlantic National Bank v. Franklin, (55 id., *541235) maintained the propriety of this objection. But the point there presented and decided was not whether such a consideration would be sufficient to sustain an obligation of this description, but it was whether the holder of the obligation in suit could be regarded as a holder for value, in such a sense as would exclude defenses which the parties would otherwise he entitled to insist upon. An instrument for the payment of money may itself very well be founded upon a sufficient legal consideration, and for that reason be binding upon the parties executing it, even though a person afterwards acquiring it may not be in a condition to be a holder of it, for value, as that phrase has been construed and understood in the administration of the law. Whether the instrument itself has been founded upon a legal consideration is a point of an entirely distinct and different character, not controlled by authorities of the nature of those already referred to. For the purpose of constituting such a consideration all that is required is that it shall either benefit the person on whose behalf the instrument is made, or produce some injury to the party receiving it. And forbearance, or the extension of the time for the payment of an existing debt, has, within this rule, been regarded as sufficient to sustain an obligation executed to obtain that end. The accuracy of this' proposition is not denied in this case, but it is claimed that before the instrument can be sustained, for which the forbearance may be given, that some particular period over which it is to extend shall be made the subject of the agreement. But this proposition is not sustained by the authorities. In the early case of Mapes v. Sidney (Choke’s James, 683), it was held that a promise by the defendant to pay the debt, in consideration that the plaintiff would forbear to sue one F. S. upon it, was a good consideration for the promise inasmuch as it appeared that the forbearance had in point of fact been secured. No time was there agreed upon, but still it was held that the plaintiff was entitled to recover1, as the object the party had in view in making the promise was actually obtained. In King v. Upton (4 Greenl., 387) the action was upon a guarantee of a promissory note made after its maturity. It was alleged that the consideration of the guarantee was forbearance and further time for the payment of the note, and this was held to be sufficient as long as it appeared that the time had in fact been given *542to the debtor. The same l’esult was sustained in Elting v. Vanderlyn (4 John., 237), where it was said by the court that the consideration of forbearance generally is sufficient without setting forth any specific time. Watson v. Randall (20 Wend., 201), and the effect of the decision in Grocers’ Bank v. Penfield (7 Hun, 279, and 69 N. Y., 502), are substantially the same. In Oldershaw v. King (2 Hurlstone & Nor., 517), the consideration for the promise was that the creditor would not require immediate payment from the debtor, and it was held to be sufficient because that implied a reasonable extension. And as much as that may with equal propriety be inferred from the agreement made in this case to let the debt stand. The fact that the bond was made payable on demand was not inconsistent with its existence as long as it formed the consideration of that instrument. The facts of this case brought this portion of it within the principle established by these authorities, and for that reason the objection raised upon the alleged want of consideration should not be sustained.

It has been further urged in favor of the same defendant, that inasmuch as the bond was made collateral to the preceding bond and mortgage of .Smith, that the plaintiff has lost its rights to enforce it by reason of a failure to prosecute those obligations. But this position is entirely inconsistent with the purpose and object of giving the bond itself. It was to secure just that indulgence that this bond was delivered to the plaintiff, and the objection cannot now be consistently urged against its validity that the latter has observed, as it appears to have done, the terms of the agreement forming the consideration of the instrument. Upon the trial of this cause the counsel for this defendant also proposed to show that rents and profits of the mortgaged property had accrued, which might have been collected by the plaintiff and applied toward the payment of the mortgage debt. •

This evidence was excluded by the court and the defendant excepted. That exception is now relied upon in support of the appeal taken in his favor. But if the plaintiff had entered into the possession of the mortgaged property and collected the rents, the object intended to be secured by giving this bond would have been defeated. The inducement to it was that Smith, the principal debtor, should be relieved from proceedings for the collection of the *543debt, and that it should be allowed to stand. The plaintiff assented to that arrangement upon the delivery of this bond, and after doing so it could not properly have instituted an action and sequestrated the rents and profits of the property without violating the terms and spirit of the understanding forming its consideration. For that reason this offer was properly rejected. But if this evidence had been received the case would not have been brought by it within the authorities urged in support of the appeal taken by this defendant, for the rents never having been received by the plaintiff were in no sense held by it as a further security, and it did not have the ability to appropriate them to the payment of any part of the mortgage debt. It is only when the creditor has received and is able to control a further security, which is allowed to be appropriated to some other object, that the surety for the principal debtor has the right to complain. This was not a case of that description and it cannot be controlled by the authorities which have been cited. The order allowing Cameron, who was one of the persons executing the bond, to set up his discharge in bankruptcy, seems to have been properly made; and under the bankrupt law his discharge relieved him from liability for the payment of the debt mentioned in the bond. The point upon which the plaintiff’s appeal was taken has been fully considered and disposed of in the opinion of Mr. Justice Brady, and to his conclusion upon that subject complete concurrence is given. As the other appeals are ineffectual the judgment in the case should be affirmed.

I concur with Mr. Justice Daniels in the opinion that the appeal of defendants is not well taken.