Cram v. Webb — 9 Abb. Pr. 245

Majority

p. 245

CRAM against WEBB.

Supreme Court, First Department, First District; General Term,

November, 1870.

Headnote

Legal Tendee.—Measure of Recovery.

Upon a contract made before the legal tender act of 1862, although the time of payment has been extended by an agreement made subsequent to that act, plaintiff is entitled to a judgment requiring payment in gold.

Appeal from a judgment.

This action was brought by Henry A. Cram, executor of Frances Hendricks, against James Watson Webb and others. The object of the action was to make partition of lands among the devisees of Jacob Cram. Alfred Tobias, the trustee of M. M. Hendricks, was made a party, as an incumbrancer, holding bonds and mortgages made by Jacob Cram in 1855. The mortgages became due by their terms in 1860. In 1866, the trustee then holding them made an agreement with Jacob Cram as follows :

“That the time for the payment of the said several mortgages so held by the said party hereto of the first part shall be, and hereby is, extended to February 1, 1871, with interest at seven per cent., payable semi-annually, on the first days of August and February, in each and every year, until February 1, 1871.”

The agreement omitted all mention of the bonds.

It was proved that between 1855, the time of the execution of the four bonds and mortgages, and 1866, the time of the execution of the agreement, the mortgaged premises had greatly risen in value, until they became

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worth from four to six times the amounts of the mortgages.

The referee, before whom the question came, reported that the mortgages should be paid in legal tender notes. To his report the defendant, Tobias, excepted.

Mr. Justice Beady, at special term, sustained , the exception of the defendant, and ordered judgment that the mortgages be paid in coin. From this judgment the present appeal was taken to the court at general term.

Lewis L. Delafield, for the appellants.

I. The agreement extending the time for the payment of the mortgages, is a new and independent contract for the payment of money, and having been made after the legal tender act went into effect, can be satisfied by the payment of greenbacks. This agreement has all the elements of a new contract, {a.) The parties are different on both sides. The mortgages were made between Jacob Cram and wife and the executors of Frances Hendricks ; the agreement between Jacob Cram alone and the trustees of M.. M. Hendricks. (5.) The time of payment fixed by the mortgages was May 1, 1860. The time named in the agreement was February 1, 1871. (c.) The consideration of the mortgages was nineteen thousand dollars. That of the agreement was one dollar. (d.) The mortgages recite the bonds; the agreement does not mention them.

II. The intention- of the parties at the time of executing the bonds and mortgages and at the time of executing the agreement, was entirely different. The immense rise in value of the mortgaged premises between these periods, is in evidence. The amounts advanced on the bonds and mortgages bore a large proportion to the value of the lots, and it was desirable at that time that there should be a personal obligation on

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the part of the borrower. This was provided in the bonds. When the agreement of February 24, 1866, was made, all this was changed. The property had become very valuable, and the loan bore a small proportion to the value. The personal obligation was no longer necessary, and was waived by the trustees. This is clear from the words of the agreement. It extends ‘1 the time for the payment of the said several mortgages.” Not a word is said of the bonds. The time for their payment was not extended, because they had fulfilled their purpose, and were abandoned. That this was the intention of the parties is made more evident from the words used “the time for the payment” of the “mortgages.” The time for the payment of the mortgages would never come, except under this agreement. The payment would be made on the bonds. This intention also appears from the words that follow: “ with interest at seven per cent., payable semi-annually on the first days of August aiid February in each and every year, until February 1, 1871.” If this agreement extended the time for the payment of the old bonds, this last clause is unmeaning and surplus-age. The court will not construe the solemn words of a sealed instrument as surplusage, if by any reasonable construction a meaning can be given them harmonious with the probable intention of the parties. If the parties intended nothing more than the extension of the time of payment of the bonds and mortgages, this agreement, drawn by careful counsel, would not have been made. A simple parol agreement would have answered (Dodge v. Crandall, 30 N. Y., 294 ). The supreme court have based their decisions of payment in gold or currency upon the intention of the parties, which they have endeavored to gather from all the circumstances of each case, as I have done here (Bronson v. Rhodes, 7 Wall., 245 ; Butler v. Horwitz, Id., 259 ).

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III. The parties consummated their intention of extending the time for the payment of the mortgages, and releasing the bonds, when they executed the agreement in 1866. In Merritt v. Bartholick ( 36 N. Y., 46 ), the court say that if in a written assignment describing the mortgage alone, nothing is said of the bond, it is impossible to hold that the intention is to assign the bond. So, in this case, the time of extending the mortgage alone being mentioned, it cannot be supposed that they intended to extend the time for the bonds. But the effect of discharging the bonds and extending the mortgages, in the absence of such an agreement as this, would be to discharge the debt. The bonds were the principal; the mortgages, the incident. A discharge of the bonds without mentioning the mortgages, would discharge the mortgages. An assignment of the bonds, without naming the mortgages, would carry the latter. But an assignment of the mortgages without naming the bonds, would pass no interest in the mortgages (Cooper v. Newland, 17 Abb. Pr., 342 ; Merritt v. Bartholick, 36 N. Y., 44 ; S. C., 47 Barb., 253 ). But such an assignment has the effect of extinguishing the mortgages. “ The mortgage cannot exist as an independent debt. If by especial agreement it does not accompany the security assigned, it is ipso facto extinguished, and ceases to be a subsisting demand.” Sutherland, J., in Langdon v. Buell ( 9 Wend., 80 ). To avoid the discharge of the mortgages upon the release of the bonds, the agreement was made to extend the “time for the payment of the mortgages,” thus securing the principal sum ; and to provide anew for the payment of interest, a new clause was inserted, securing the latter. The agreement takes the place of the bonds. It re-affirms, revises and restores the mortgages which otherwise would have fallen. An action of forelosure would lie, not upon the bonds and mortgages, but the agreement and mortgages. The princi

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pie of substituting a new agreement and attaching the old collateral ty it, is familiar tó our law. It is in this way that mortgages are kept alive in all cases where land is conveyed subject to the payment of a mortgage which the grantee assumes to pay as part of the purchase money, and where the original mortgagor has been discharged by the original mortgagee. The land then becomes the primary fund, and the mortgage, which can only exist as an incident, upon the discharge of the bond becomes collateral to the agreement contained in the deed assuming to pay it as part of the purchase money (Bently v. Vanderheyden, 35 N. Y., 677 ).

IY. If the court should come to the conclusion that the money is due upon the bonds of 1855, the inquiry arises, whether the case of Hepburn v. Griswold ( 8 Wall., 604 ), applies. This case only decided that a promisory note made and falling due before the legal tender act was passed, must be paid in gold. It must be followed wherever it applies, but it is respectfully submitted that as it was decided by barely the requisite number of judges, in a small court, with three dissenting voices, it should not be stretched to cover other dissimilar cases, unless the court are satisfied that the train of reasoning followed is justly applicable to each new case. There is a marked distinction between bonds and mortgages and promissory notes. The latter form part of the circulation of the country; are drawn for short periods; are negotiable; are discounted at high rates, and put upon the market at great expense ; have no collateral security, but derive their value from the confidence of the community in the ability of the maker to redeem them. The promise is to pay dollars. What dollars ? Why, the same dollars that were received by them. Bonds and mortgages are not negotiable; are made for long periods and at little expense; do not depend upon the character of the

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bondsman ; and provide for their payment in “ dollars, lawful money of the United States.” What dollars? Whatever dollars are lawful money of the United States when the day of payment comes. The words are used prospectively. In the Griswold case, when the note was made and when it fell due, and suit was ' brought, gold was the only legal tender. The rights of the parties became fixed at that time, and the subsequent passage of the legal tender act could not divest them. In the case at bar, the bonds and mortgages were made in 1855, and become due in 1871. In the former year there was only one kind of legal tender, viz: coin. In the latter there are two, viz: coin and greenbacks. But Coin is not the medium of circulation, and greenbacks are. The debtor has the right of selecting which currency he will pay in when both are legal. It is an ancient rule, that “in case an election is given of two several things, always he that is the first agent, and which ought to do the first act, shall have the election” (Coke Litt., 145 a). Take the reverse of this case. Suppose a contract made now for the payment of money. When it matures, suppose greenbacks, although legal tender, have disappeared, except as curiosities, and gold has taken their place. The debtor tenders gold, and the creditor claims greenbacks. If you hold that the creditor can select what kind of currency he will be paid in, in the case before you, you must decide in the same way in the supposed case. This would seem to be a reduetio ad absurdum.

Y. The time of payment determines the kind of currency in which payment shall be made, and when there is more than one kind, the party paying - has the election. ■ Many familiar instances can be given;—e. g., in agricultural leases, reserving so many bushels of merchantable winter wheat, it is unnecessary that the grain each year should be equal to that existing at the

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date of the lease; it is sufficient if it is equal to the crop of the year in which it is paid. A contract made to-day for the sale of merchantable potatoes next year, does not require of the seller potatoes as good as those of this season ; it is sufficient if they are equal to the potatoes which are merchantable next year. Stripped of its character of legal tender, money is to be treated like any other commodity, and governed by the same rules. In determining the question before you, it must be so stripped.

YI. The case of Hepburn v. Griswold is no controlling authority over the case at bar.

Samuel Riker, for the respondent.

I. The debt having been contracted and having fallen due prior to the legal tender act, can, according to the decision of the supreme court of the United States, be discharged by payment in gold and silver, and not otherwise (Hepburn v. Griswold, 8 Wall., 603 ).

II. The claim of the appellant that the instrument executed in February, 1866, by the debtor and the creditor, extending the time of payment of the debt, makes the debt payable in United States notes, is untenable. To give this instrument that effect is to assert that it created the debt of nineteen thousand dollars ; for it is only a debt contracted after February 35, 1863, that can be paid in United States notes (Hepburn v. Griswold). But it could not have created an indebtedness in 1866, without discharging the original indebtedness of 1855, and annulling the bonds and mortgages ; and this demonstrates the absurdity of the proposition. Again: contracts are to be construed according to the manifest intention of the parties, and it, would be hostile to the actual intent of the parties to that paper, to adopt the construction put upon it by the appellant. The sole object the parties sought to accomplish by the extension, was to postpone to Feb

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ruary 1, 1871, the time of payment. To hold that by that paper they canceled the original indebtedness, with all its securities, and created a new debt with no security, would disregard the plain intent of the contracting parties. Again: when the paper of February, 1866, was executed, the debt was payable in gold and silver only. The parties to that paper alter the time of payment of the debt, and that alone.

We are unanimously of opinion that the judgment directing the mortgages in this case to be paid in gold was correct, and it must be affirmed.

Judgment affirmed.