Opinion
June Term, 1899.
Andrew F. Van Thun, Jr., and Cyrus V. Washburn, for the appellants.
J. Alexander Stitt, for the respondent.
On the 10th day of March, 1890, Frances A. Clayton, now deceased, wife of the defendant James S. Clayton, and the mother of the infant defendants and of the defendant Francis T. Clayton, made and executed a real property mortgage to secure the payment of a note made on the 1st day of February, 1890. This note was made by Frances A. Clayton, and payable to the order of James S. Clayton, in the sum of $3,000, and indorsed by James S. Clayton to Helen R. Sumner. The mortgage contained a provision that it should cease to be of effect upon the payment of this note, which was to fall due five years after its date. Helen R. Sumner assigned the said mortgage, together with the said note (the latter also by indorsement), to William M. Polk on the 19th day of November, 1891. On the 14th day of July, 1892, Polk assigned the said mortgage and note to Helen R. Sumner. On the same day Helen R. Sumner assigned the said mortgage and note to James S. Clayton, the assignment reciting that the mortgage was "granted, bargained, sold, assigned, transferred and set over, * * * together with the bond or obligation therein described, and the money due and to grow due thereon, with the interest." The note and mortgage thus became the property of the defendant James S. Clayton, husband of the maker of the note and mortgage; and, while the pleadings from the nature of the case (most of the defendants being infants) do not clearly raise the issue, there was evidence that the note and mortgage were given for the accommodation of the defendant James S. Clayton.
The peculiar obligation which rests upon courts of equity to safeguard the rights of infants justifies a more careful inquiry upon this point than seems to have been accorded. After the note and mortgage had come into the ownership and possession of James S. Clayton he assigned them to the plaintiff as collateral security for the payment of a note of $2,000. Default having been made in the payment of this latter note, the present action was brought to foreclose the mortgage.
The $3,000 note having been transferred to the plaintiff by assignment, rather than by indorsement, he did not take the note free from the equities of the infant defendants, and the plaintiff, as assignee of the mortgage, took it subject to all of the equities that might be urged against the assignor. ( Merkle v. Beidleman, 30 App. Div. 14; Bennett v. Bates, 94 N.Y. 354; Goshen National Bank v. Bingham, 118 id. 349, 355.) If, then, the note and mortgage were made for the accommodation of the defendant James S. Clayton (and the plaintiff testifies that Mr. Clayton told him that they were made for this purpose at the time he took the note and mortgage as collateral security for the loan of $2,000), when they were assigned to him by Helen R. Sumner they had fulfilled the purpose of their being, and they could not again be negotiated to the prejudice of the rights of the children of Mrs. Clayton. James S. Clayton, if the note and mortgage were issued for his accommodation, was the primary obligor, and payment by him canceled the instruments. ( Griffith v. Reed, 21 Wend. 502, 505.)
The plaintiff appears to have had notice of the fact that the note and mortgage were made for the accommodation of the defendant James S. Clayton, and he, therefore, took the instruments at his peril. ( Second National Bank v. Weston, 31 App. Div. 403.) We are not satisfied that the plaintiff has any such equities, as against the children of Mrs. Clayton, as to entitle him to the judgment in this action. The evidence is that the defendant James S. Clayton told the plaintiff that the note and mortgage were given to enable him to raise money; and, the instruments having served the purpose for which they were executed, the rights of the other defendants in the mortgaged property intervened, and they could not be divested by the acts of the defendant James S. Clayton in renegotiating the instruments as security for his own indebtedness.
The judgment appealed from should be reversed.
All concurred.
Judgment reversed and new trial granted, costs to abide the final award of costs.