Summary
In National Bank of Deposit v. Rogers (166 N.Y. 380) the action was brought to have a lien declared upon certain property which the defendant had agreed should be pledged to the plaintiff to secure the payment of a note held by the plaintiff.
Summary of this case from Medina Gas El. L. Co. v. Buffalo L., T. S.DOpinion
Argued February 14, 1901
Decided March 26, 1901
Thaddeus D. Kenneson for appellants. Ambrose G. Todd for respondent.
The defendants' exceptions raise the question whether the complaint states a cause of action, and, if these exceptions be sustained, whether the trial court erred in postponing their motion to dismiss the complaint and meantime receiving, notwithstanding the defendants' objections, evidence in proof of facts material to a cause of action, and then directing the complaint to be amended to conform to the proofs.
There is no allegation in the complaint that the demand note had not been paid, and this objection is presented by the defendants' exceptions. The note was in these words:
"$3,000. NEW YORK, Aug. 31, 1891.
"On demand after date, for value received, we hereby promise to pay to the National Bank of Deposit of the City of New York, or order, at said Bank, Three Thousand Dollars, with interest at the rate of six per cent per annum until paid, having deposited with said Bank, as collateral security for the payment of this note, and also as collateral security for all other present or future demands, of any and all kind, of the said Bank against the undersigned, due or not due, the following property, viz.:" Then follows a clause to the effect that Sardy, Coles Co. did then and there actually deposit twenty-eight cases of merchandise, describing it, with the plaintiff in pledge as security for the payment of the note, with power, upon its non-payment, to sell the same and pay the note from the proceeds. The name of "Sardy, Coles Co." was subscribed at the end of the note and pledge attached. Sardy, Coles Co. gave the plaintiff a paper of the same date in these words:
"Received of the National Bank of Deposit the following goods and merchandise specified in the bill of sale, dated Aug. 31st, marked and numbered as on memorandum dated Aug. 31st, 1891, herewith attached, and in consideration thereof we thereby agree to hold said goods in trust for said bank, and as their property to sell the same for their account; and further agree in case of sale to hand the proceeds to them to apply against any indebtedness to said bank on our account under loans on our account and for payment of any indebtedness of ours to said bank.
"The National Bank of Deposit may at any time cancel this trust and take possession of said goods, or the proceeds that may be found; and in the event of any suspension or failure or assignment for benefit of creditors on our part, or of the non-fulfillment of any obligations, or of the non-payment at maturity of any indebtedness made by us under said consignment by The National Bank of Deposit on our account, or of any indebtedness to said Bank, all obligations, acceptances, indebtedness and liabilities whatever shall thereupon (with or without notice), mature and become due and payable. The said goods while in our possession, shall be fully insured against loss by fire.
"NEW YORK, Aug. 31 st, 1891.
"SARDY, COLES CO."
If the question were presented upon demurrer we should probably hold the omission of the allegation of non-payment to be fatal to the complaint. ( Lent v. N.Y. Mass. Ry. Co., 130 N.Y. 504.) But in such case an amendment upon terms would be permitted. Where the defendant reserves the objection until the trial is moved, if the objection is sustained, it is no error for the court to refuse to dismiss the complaint; it may permit the amendment. Such amendment supplies "an allegation material to the case." (Code Civil Procedure, section 723.) The omission of the allegation was so obvious an inadvertence that its correction could not have misled the defendants. But the defendants urge that the court erred in postponing the amendment until it could not be granted without depriving them of the benefit of the exceptions they had already taken. This is an allegation of a grievance in form but not in substance. The trial court in its discretion reserved the consideration, both of the motion to dismiss and to amend, until it became possessed of the case upon the merits. Where the defendant, instead of raising the objection by demurrer, postpones it until the case comes on for trial upon the issues of fact, he cannot complain that the court takes whatever available time it may need to make a proper disposition of it. That the court may direct the trial to proceed while it holds the objection under advisement is within its discretion, unless the substantial rights of the excepting party are thereby injuriously affected. Manifestly, this discretion to permit an amendment, as well as the time and form of its exercise, should be used in the interests of justice. The trial court, in its final decision, stated: "I grant the motion of the plaintiff to conform the pleading to the proof * * * as to the loan of $3,000 not having been wholly repaid." This, in connection with the plaintiff's motion, was sufficiently definite and certain to advise the defendants of the nature of the amendment, and it would not have prejudiced them less if it had been made earlier. Undoubtedly, there are cases where justice requires that the amendment be made and inserted in the pleading during the trial, but it would not be wise to withdraw the matter from the discretion of the trial court. As the exceptions are based upon a curable omission, they fall with its cure.
Upon the merits, the facts are that on the day the plaintiff made the loan to Sardy, Coles Co. and took their demand note therefore with the accompanying pledge and trust documents, the goods in question were held in the custom house in New York awaiting the payment of duties. They had been consigned for Sardy, Coles Co. to Perry, Ryer Co., their custom house brokers. Perry, Ryer Co. held the bills of lading, but had no interest in the goods except to secure payment of the duties. Sardy, Coles Co. applied to the plaintiff for the loan of $3,000 in order to pay the duties, and stated the facts as above to the plaintiff, and produced the invoice of the goods. Perry, Ryer Co. confirmed the statement and produced the bills of lading, which the plaintiff's president examined and handed back to the latter firm, and thereupon the plaintiff made the loan and took the note and the documents accompanying it. The goods were not actually deposited with the plaintiff and by it returned to Sardy, Coles Co., nor did the plaintiff retain the bills of lading. Sardy, Coles Co. soon afterwards paid the duties out of the money thus borrowed of the plaintiff and took possession of the goods. Their title and possession were thus complete, and their duty was thenceforth to hold the goods precisely as if they had first deposited them with the plaintiff and the plaintiff had delivered them back under the terms of the surety agreements. This is what both parties intended should be done, and what the surety agreements were intended to cover the moment Sardy, Coles Co. should obtain the goods. The parties treated that as done which ought to have been done, and might have been done, and as Sardy, Coles Co. thereby obtained from the plaintiff $3,000, it is clear that equity and good conscience required them to treat it as done the moment the goods came to their hands, and continue so to treat it until the plaintiff should be reimbursed.
It is true the plaintiff knew all the facts, but it was impossible for Sardy, Coles Co. to obtain possession of the goods without payment of the duties, and for this purpose they must first obtain the money. Relying upon their paying the duties out of the money plaintiff was to loan them, and thus obtaining possession of the goods, both parties, for the purpose of securing the plaintiff for the loan, agreed to treat the possession thus to be obtained as already obtained, and the pledge of the goods to the plaintiff, and plaintiff's return of the goods to Sardy, Coles Co. in trust, as already made, and drew their agreements accordingly. As between themselves it was competent for them so to agree, and equity will do just what the parties themselves did, namely, treat that as done which ought to have been done. Thus, when Sardy, Coles Co. obtained possession of the goods, plaintiff held their contract which characterized their possession as in trust for plaintiff's security, and equity requires that such characterization shall be taken as true, to the end that the security both parties agreed upon and intended shall not fail. Effect can be given to the intention of the parties by holding Sardy, Coles Co. strictly to the letter of their contract. They had no equities going to the defeat of the contract. Nathaniel P. Rogers, their assignee, upon consideration of antecedent debts and as their trustee to pay from the assigned property debts to himself and to others, stood in their shoes, and thus had no intervening equities against the plaintiff. ( American Sugar R. Co. v. Fancher, 145 N.Y. 552.) Not to construe the contract as written would be a fraud upon the plaintiff, and the defendants thus are equitably estopped from asserting that that was not done, which the parties very naturally, under the circumstances, agreed to regard as done. A contract much like this was held to be conclusive against the party who obtained a loan upon it in Parshall v. Eggert ( 54 N.Y. 18).
A party cannot mortgage property which he does not have, but he can agree to mortgage it or give a lien upon it as soon as he gets it, and equity will enforce the agreement and establish the lien. ( Kribbs v. Alford, 120 N.Y. 519; Deeley v. Dwight, 132 N.Y. 59; Hale v. Omaha Nat. Bank, 49 N.Y. 626; Husted v. Ingraham, 75 N.Y. 251; Coats v. Donnell, 94 N.Y. 168; Hovey v. Elliott, 118 N.Y. 124; Smith v. Smith, 125 N.Y. 224. )
So, where the intent is to give a lien, and what is done to that end is too defective to create it, but is consistent with its creation, and not a contract for something else, equity will treat as done what was intended to be done, and the lien may be established and foreclosed in the same action. ( Sprague v. Cochran, 144 N.Y. 104.) Here the lien was intended to exist the moment Sardy, Coles Co. got the goods.
The defendants cite Webb v. Walker (7 Cush. 46). In that case the debtor gave his creditor a power of attorney to sell his interest in a brig in case the debtor made default in payment, and apply the proceeds to the payment of his debt. The debtor retained possession of the brig and sold his interest to the defendant. The court held that the debtor gave the creditor a mere power without any interest in the brig, but only in the proceeds; that there was no mortgage, pledge, transfer or hypothecation of anything, nor any trust or contract for specific performance; that the creditor, therefore, had but a naked power without interest, which the debtor could revoke. Hunt v. Rousmaniere (1 Peters, 13) is much like Webb v. Walker. In these and other cases cited by the defendants, the misfortune of the creditor was that he had a contract different from what he needed. Here the creditor's rights rest upon the contract precisely as written, and the defendants, in effect, seek to change it so as to avoid its just obligations. This equity should not permit.
The objection that J. Bard Rogers was a necessary party was not taken by demurrer. He might have been a proper party, but was not a necessary party, since the plaintiff could establish its case against Nathaniel P. Rogers without his presence. It was not necessary to vacate the assignment to him, but to establish the plaintiff's equitable lien upon the goods assigned and thus to reach them. This was not to defeat the trust, but to hold it to its proper subjects and separate the plaintiff's property from it.
The giving of the note and the security agreements was admitted by the answer. The defendants proved the assignment. The issue was as to the plaintiff's equitable lien upon these goods which the assignment embraced. The plaintiff needed evidence to prove that the assignors gave it the lien, but it no more needed their presence in the action than the assignee needed it in order to prove their assignment to him. The case is thus unlike First National Bank of Amsterdam v. Shuler ( 153 N.Y. 163), cited by the defendants.
As to the proceeds of the goods taken in replevin by the plaintiff, it is true that it has been adjudged that the plaintiff had no legal title to these goods, and, therefore, has none to the proceeds; but as it had an equitable title to the goods and thus to their proceeds, it is proper that that equitable title should be confirmed, and resort by the defendants to their legal remedy for the proceeds or upon the replevin bond be barred.
The other questions presented by the defendants involve findings of fact which are not without support in the evidence, and we must, therefore, accept them, notwithstanding a dissent in the affirmance by the Appellate Division.
The judgment should be affirmed, with costs.
PARKER, Ch. J., GRAY, O'BRIEN, HAIGHT, CULLEN and WERNER, JJ., concur.
Judgment affirmed.