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Truscott v. King

6 N.Y. 147 Court N.Y. English

Delivered by *150 Jewett, J.

Contents

Majority

p. 142
Truscott et al v. King

Headnote

FuMre advances. — Application of payments. — Remedy at Law.
Where judgment is confessed to secure future advances, and advances are made and paid to the extent of it, it cannot be set up as a continuing security for subsequent advances, as against an intervening incumbrancer; and these facts may be shown by paroi.
In equity, a general payment will be applied to the earliest items of indebtedness, though the creditor may hold security for them, and none for the residue of his claim.
The objection that the plaintiff had an adequate remedy at law, cannot be taken at the hearing, where the defendant has omitted to set it up in his answer.
Truscott v. King, 6 Barb. 346 , reversed.
Appeal from the general term of the Supreme Court, in the third district, where a decree of the late vice-chancellor of the eighth circuit, dismissing the plaintiffs’ bill, had been affirmed. (Reported below, 6 Barb. 346 .)
This was a bill in equity, filed in the late court of chancery, by George Truscott and John C. Green, against the defendant, King, to have a mortgage for $50,000 upon certain real estate in the city of Buffalo, given to them by Russell S. Brown and Rodman Starkweather, on the 15th September 1837, declared to be a prior lien to a judgment confessed by Brown and Starkweather, in favor of Richard S. Williams, for the sum of $40,000, which was docketed in the supreme court,, on the 14th October 1835, and subsequently assigned to the defendant.
*The complainants’ bill set forth that Russell -* S. Brown, being indebted to Truscott and Green
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in a large sum of money, in order to secure a part thereof, on the 15th day of September 1837, executed his bond to them in the penalty of $100,000, conditioned for the payment of $50,000, with interest as therein mentioned ; and that to secure the payment thereof, on the same day, Brown, and Rodman Starkweather and Martha his wife, executed to Truscott and Green, their mortgage upon certain premises situate in the county of Erie, particularly described, which was duly acknowledged, and afterwards, on the 16th day of October 1837, recorded in the office of the clerk of that county. That on the 5th day of March 1838, Truscott and Green, to secure Janet Stritch, of Exeter, in England, about $22,000, in which sum they were indebted to her, assigned said bond and mortgage to her, as collateral security. That default in payment of the interest having been made, the complainants, on the 31st day of January 1839, brought their bill in the court of chancery, before the vice-chancellor of the eighth circuit, for the foreclosure of the mortgage and sale of the mortgaged premises, and made the mortgagors, with Moses Baker, Augustus Rayner and Alonso Rayner, the only parties defendants. That the bill was taken as confessed, as against the three last-named defendants, and was put at issue by an answer of the other three, and a replication filed thereto. After which, and in March 1843, said Brown died, leaving a will, by which he devised all his interest in the premises mortgaged, to Starkweather, who was appointed sole executor. That after the death of Brown, his will was duly proved and recorded, and letters testamentary issued to Stark-weather, and the suit duly revived against the surviving defendants. That such proceedings were subsequently had in the suit, that afterwards, at a court of chancery held on the 9th day of December 1845, a final decree was entered, for the foreclosure and sale *of the .. ^ ^ mortgaged premises, in the usual form; and *- that, at the time of filing the bill in this cause, there
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was due to the complainants upon said mortgage and decree, including interest to December 1st, 1845,- the sum of $79,176.37, besides the costs in said suit.
That the complainants had been- informed, that prior to the execution of said bond and mortgage, and. on the 22d- day of April 1835, Brown & Starkweather executed their bond to Richard S. Williams, in the sum-of $40,000,-conditioned for the payment of $20,000; and also, at- the same time, executed to Williams a warrant of attorney, authorizing a judgment to be entered thereon; and that afterwards, on the 14th day of October 1835, Williams caused a judgment to be entered thereon, in the supreme court; for $40,000 of debt, and $18.79, damages and costs, which was duly docketed on that day.
That the complainants were informed and believed, that at the time of the execution of the bond and warrant, or at the time of entering the judgment, no part of the sum of $20,000 was due and owing from Brown & Starkweather to Williams; or, if anything, but a small part of said sum; arid the complainants charged, upon information and belief, that the bond and warrant were executed, and the judgment entered, for the purpose of securing such advances as Williams should thereafter make ón the drafts of Brown & Starkweather; and that, at the time of recording their mortgage, on the 16th day of October 1837, there was not anything due from Brown & Starkweather to Williams for such advances; or, if anything was then due, that the same was subsequently paid by them, or one of them; and that there was not then, nor at the time of the sale of the mortgaged premises under the said judgment, anything due, which had become due, or was secured by a judgment, prior to the recording of said mortgage.
The bill further averred, on information, that prior to the 16th day of October 1837, Brown & Starkweather, or one of them, had assigned and delivered'to Williams, as collateral security for the payment of the moneys se
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cured by the judgment, certain *choses in ac- „ ^ tian, which Williams subsequently surrendered *- and redelivered to Brown & Starkweather, or to one of them; that after the death of Brown, in May 1844, Williams commenced proceedings by scire facias to revive'the said judgment as against Starkweather and the devisees of Brown, and that he obtained judgment thereon, in January 1845, with $63.69 costs.
That after, the commencement of said proceedings to revive the judgment, but at what time the complainants were not informed, Williams assigned the judgment to the defendant, King, who .subsequently caused a fieri facias to be issued thereon, tested the 18th day of May 1845, directed to the sheriff of Erie; that the sheriff levied on the mortgaged premises, and afterwards, on the 4th day of August 1845, sold the same to the defendant King, and executed to him a certificate of such sale. That King claimed that the judgment, at the time of sale, was a lien on the mortgaged premises, prior to and superior to the lien created by said mortgage; and that, by his purchase, he had acquired a lien prior to the mortgage; and that his interest in the premises was not subject to the mortgage, and that the complainants had no interest in-the premises, except as subject and subsequent to the judgment.
It was then alleged, that' at the time of the execution of the mortgage, and of the recording thereof, there was nothing due to Williams for advances or liabilities incurred by him for Brown & Starkweather; or if there was anything due and secured by the judgment, it was afterwards fully paid by them, or one of them; and that, at the time of issuing the execution, and of the sale under it, the judgment was not a lien on the premises, prior to the mortgage. .And the complainants insisted, that if. there was anything due on the judgment, at the time of issuing the execution, it was for advances and liabilities incurred, by Williams, after the recording of
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the mortgage, and after notice thereof to Williams. The bill prayed for an answer, and that the mortgaged premises might be declared and decreed to be free and clear of and from the judgment; and that the sale by the sheriff might be declared void; and that King be * 154 1 PerPetaally *enjoined from taking a deed of the J premises under his purchase, and for general relief.
The defendant answered, that he was ignorant, and not informed, whether Brown was indebted to Truseott & Green, or whether he executed his bond to them, or whether Brown & Starkweather and wife executed a mortgage to them, or whether Truseott & Green made any transfer thereof to Stritch, or whether the complainants commenced proceedings to foreclose such mortgage, as stated in the bill. He admitted the death of Brown, and that he left a will; but was ignorant of its provisions.
The answer admitted that Brown & Starkweather executed to Williams a bond, as stated in the bill, and that such judgment was entered thereon; and alleged that, at the time of giving the bond to Williams, there was justly due to him, from Brown & Starkweather, more than $20,000; and that, at the time of recording the mortgage, there was justly due and secured by the judgment to Williams, $20,000 and upwards; and from that day to the time of the answer there was, and had been, at all times, due and owing to Williams, upon the judgment, more than $20,000.
The answer denied, that before or at the time of recording the mortgage, Brown & Starkweather, or either of them, had assigned, or put into the hands of Williams, as collateral security for the payment of the moneys secured by the judgment, any choses in action or other securities, or that he delivered back to them, or either of them, any such securities, or that Williams ever had any notice of the mortgage. It admitted the
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recovery of the judgment, and the assignment of it to the defendant, the issuing of the execution and sale of the premises, and the purchase thereof under the judgment as charged in the bill. It alleged that the defendant, at the time he purchased the judgment, was informed and believed, that there was due to Williams thereon more than $25,000, and that it was a lien upon the said premises; and the defendant insisted that, by such sale and purchase, he became equitably and legally entitled to all the interest which Brown & Starkweather had in the same, at the docketing of *the judg- # ment, subject only to the right of redemption given by statute. The complainants filed a replication.
The plaintiffs called Williams as a witness, who testified, in substance, that the judgment was confessed by Brown & Starkweather to him, to secure the firm of Bichard S. Williams & Co., of which he was a member, as well their then indebtedness, as such as should thereafter exist, for advances which the firm had made, and should thereafter make, upon acceptances of their drafts. After the judgment was confessed, in April 1835, the firm was in the habit of accepting their drafts, and they were in the habit of providing the firm with funds and means of payment. The firm charged them with acceptances in their books, and credited them with the funds provided, when received. The witness could not recollect, on his direct examination, whether Williams & Co. had paid any such drafts, without being provided the means, by Brown & Starkweather; but he had no doubt, that Williams & Co. received from them, between April and October, as much, money as the drafts which they had previously accepted amounted to. That between October 1835, and the 16th day of October 1837, they, Williams & Co., had continued, from time to time, to accept drafts and pay them for Brown & Starkweather, but whether they paid any, for which they had not been
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provided with funds, the witness could not say, though he thought that they had. That since the 17th day of November 1837, Williams & Co.' had received from Brown & Starkweather, or on théir account, a larger sum of money thán was due to them at that date.
After examining his memoranda, on a cross-examinatian, the witness further testified, that'on the 16th day of October 1837, there was a balance due from Brown & " Starkweather to Williams & Co. of the sum of $20,608; and that, as he recollected the state of 'the accounts between Williams & Co. and Brown & Starkweather, from the date of the'judgment, there was always a greater liability than $20,000. Williams & Co. had a settlement with Starkweather & Brown, on the 20th February 1839, when there was found á balance du.e to Williams & Co. * 156 1 *$22,742.26; and at the time the judgment -* was assigned to the defendant King, the balance was inore than $30,000. That Brown & Starkweather were never indebted to the witness', Williams, as an individual, at all.
On a re-examination by the counsel for the complainants, the witness further testified, that about $11,400 of the $22,742.26, accrued to Williams & Co. for moneys advanced to redeem their acceptances of Brown & Stark-weather’s drafts. That the balance was for moneys paid by them, before the 20th of February 1839, as indorsers for Brown & Starkweather, of two bills of exchange drawn by Green, Brown & Co., in their favor, and which they indorsed about the 7th of March 1837, under an express understanding that they were under, or covered by, the securities "which Williams & Co. held. In answer to a question put to the witness, whether there were any other securities put in their hands, besides the judgment in question, collateral with it, to cover their liabilities for Brown & Starkweather, he answered that there were; that the first was a mortgage on lands at the west, and ' the other, a mortgage drawn by Brown & Starkweather,
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on property in Buffalo; the mortgages were for $10,000 each. The latter mortgage was assigned to the defendant King (a decree had been previously obtained upon it, and the decree was assigned to the defendant), as collateral for the debt, with the judgment; and as to the disposition made of the other mortgage, the witness did not remember. In addition to these mortgages, Brown de livered to Williams a number of notes, which he said were part of the assets of Green, Brown & Co., and had been paid to him in some arrangement between those parties; that Williams & Co. received upon these notes, not far from $10,000. The witness thought that the amount received on the notes was credited in the account of the two bills of exchange which the firm indorsed, and on which they originally paid over $20,000, and the balance, after crediting the amount received on the notes, was about $11,000. That after the 16th of October 1837, the balance of accounts due Williams & Co. from Brown & Starkweather, was never less than $20,000.
*The execution of the bond and mortgage, recording, and assignment thereof, the proseen- *- tian and decree for foreclosure and sale obtained thereon, the death and will of Brown, the appointment of Stark-weather, as executor, as set up in the bill, were admitted on the hearing.
The case was heard on the pleadings and proofs; the vice-chancellor made a decree, dismissing the bill, with costs, from which the plaintiffs appealedand the cause having been transferred to the supreme court, under the constitution, the vice-chancellor’s decree was there affirmed; whereupon, the plaintiffs appealed to this court.
Taber, for the appellants.
Reynolds, for the respondents.

(after stating the facts.) — I cannot doubt, that the judgment, in its inception, was a valid security upon the mortgaged premises, to the extent of $20,000, with the costs of entering it, whether a debt in whole, or only in part, then existed, to that amount, or not, if it was agreed at the time, between the parties, that it should be given as an indemnity against advances or responsibilities to be thereafter made or incurred by Williams & Co. for Brown & Starkweather, to that amount, and such advances were afterwards made, or responsibilities incurred. The principle is well established, that a mortgage or judgment may be taken and held as a security for future advances and responsibilities, to the extent of it, when that forms a part of the original agreement between the parties; and the future advances will be covered by the mortgage or judgment, in preference to the claim under a junior intervening incumbrance, with notice of the agreement. The principle is, that subsequent advances cannot be tacked to a prior security, to the prejudice of a bond fide junior incumbrancer; but a mortgage or judgment are always good to secure future loans, when there is an intervening equity.

Thus, in Gordon v. Graham (7 Vin. Abr. 52, E., pl. 3), cited in Powell on Mortgages (ed. 1807) 544, where A. mortgaged his estate to B., for a term of years, to secure a sum of money already lent to A., and also all other sums as should thereafter be lent or advanced to him, A. made a second mortgage, to 0., for a certain sum, with notice of the first mortgage, and then the first mortgagee, having notice of the second mortgage, lent a further sum. Lord Cowper decreed, that the second mortgagee should not redeem the first mortgage, without paying as well the money lent after, as that lent before, the second mortgage was made; for, he added, it was the folly of the second ^mortgagee, with notice, to take such secu- * 158 i •, J nty.

In Livingston v. McInlay ( 16 Johns. 165 ), a judgment

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had been entered upon a bond for $4000, conditioned to pay $2000, the defendant being at the time indebted to the plaintiffs in only the sum of $1118 for money lent, but it was agreed, at the time, that further advances should be made to the defendant by the plaintiffs, and the plaintiffs gave the defendant a memorandum in writing, that no execution should issue for more than was actually due. The plaintiffs afterwards lent the defendant the further sum of $350, and thereafter issued an execution upon the judgment, with directions to levy $1653.91. A subsequent judgment-creditor of the defendant issued his execution for $289.53, and the sheriff having levied on the first execution $1322.49, and having paid over to the plaintiffs therein $966.17, held the residue, to be paid to either of the parties who should be held entitled to receive it. A motion was then made in behalf of the plaintiffs in the second execution, that the sum of $350 should be deducted from the amount directed to be collected on the first-mentioned execution. It was contended, that a judgment of the court could never be used by the plaintiff to collect any debt or demand arising subsequently, and which was not in-, eluded in the judgment, at the time it was rendered. But the court observed, that it was part of the original agreement, at the time judgment was entered, that it should be a security, for future advances, beyond the amount then actually due to the plaintiffs; and held, that there was no objection to that, any more than to a mortgage being held as security for future advances; so far, at least, as the amount of the condition of the bond. That if the amount of the advances, or responsibilities, exceeded the condition of the bond, it would present a different question.

In Brinkerhoff v. Marvin ( 5 Johns. Ch. 320 ), the chancellor held, that a judgment or other security might be taken and held for future responsibilities, to the extent of it. And so, in Jan es v. Johnson ( 6 Johns. 417 ), the chan

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cellar said, that in many cases, a subject.- pledged for a * 159 1 be considered as a security *for fur- -* ther loans 'and that he saw no possible objection to it, if no intervening right exists, to prevent the justness of the application of the rule.

In the case of the' United States v. Hooe ( 3 Cranch. 73 ), Marshall, C. J., says: - “ That the property stood bound for future advances, is, in itself, unexceptionable; it may, indeed, be converted to improper purposes; but it is not positively inadmissible. It is frequent, for a per- • son, who expects to become more considerably indebted, to mortgage property to :his creditors, as a security for debts to be contracted, as ■ well as for that which is , already due.” In that' case, the. facts, so far as respects this question, were shortly these; Fitzgerald, being appointed collector, Hooe executed a bond, with him as his surety, to the United States, and being desirous to procure Hooe to indorse his notes at a future day, to. enable him to- raise money upon- them at a bank, conveyed a part of his real estate to trustees, in ■ trust, to indemnify Hooe on account of his having become his surety to the United States, and on' account of notes tc be indorsed by him for the accommodation- of Fitzgerald, at such bank.

And so, it was held, in Shirras v. Caig ( 7 Cranch 34 ), that a mortgage should stand to secure the real equitable claims of the mortgagees, whether they existed- at the date of the mortgage, or arose afterwards, and before notice of the defendant’s equity. The bill, in that case, was brought to foreclose a mortgage of a lot, houses and wharf in Savannah, called Gardiner’s wharf, which were in the possession of- the defendants; the mortgage bore date the first day of December 1801, and the mortgagor had title to an undivided half part of the premises ; subsequently, each of the defendants became vested of an undivided third part of the premises. The defendants resisted the claim • to foreclose, on various

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grounds. The mortgage.purported, on its. face, to secure a debt of thirty thousand pounds sterling, due to all of the mortgagees, but it was really intended, to secure different sums, due at the time to particular mortgagees, and advances afterwards to be made, .and liabilities to be incurred, to *an uncertain amount. Marshall, „ ^ C. J., said, it was true,,that the real transaction *- did not appear on.the face of the mortgage; and that it was not to be denied, that a deed, which -misrepresents the transaction it recites, and the consideration on which it is executed, is liable to suspicion; that it must sustain a rigorous examination; that it was always advisable, fairly and plainly to= state the truth. But if, upon investigation, the real transaction should appear to be fair, though somewhat variant frqm -that which is. described, it would seem to. be unjust and unprecedented, to deprive, the person, claiming under the deed, of his real equitable rights, unless it be in favor of a person who has been, in fact, injured and deceived by the misrepresentation.' And it was held, that the complainants had a just title, under their mortgage, to subject one moiety of the premises described in the mortgage,-of-.which the mortgagor, at the time of executing if,, was seised, to the payment of the debts remaining-'due :.to them, which were. either due at the date of the. mortgage, or were afterwards contracted on the faith, of. it, either by advances actually made, or. liabilities incurred, prior to the receipt of actual notice of the subsequent title of the defendants.

Judge. Story -in Conard v. Atlantic Insurance Co. ( 1 Peters 386 , at p. 447), observed, that mortgages might as well be given to.secure future, advances and contingent debts, as those which already exist, and are certain and due. And again, in Leeds v. Cameron (3 Sumner 488), the same learned judge remarked, that nothing could be more clear,, both upon principle and authority, than that, at the common law, a mortgage bond fide made,

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may be for future advances, and liabilities for the mortgagor by the mortgagee, as well as for present debts and liabilities. And to the same effect, are the following cases: Hubbard v. Savage, 8 Conn. 215 ; Walker v. Snediker, 1 Hoffman Ch. 145; Commercial Bank v. Cunningham, 24 Pick. 270 ; Monell v. Smith, 5 Cow. 441 ; Lyle v. Ducomb, 5 Binney 585; 4 Kent’s Com. 175; Lansing v. Woodworth, 1 Sandf. Ch. 43 ; Barry v. Merchants’ Exchange Co., 1 Id. 314.[1]

* 1611 or(ler to secure good faith, and preJ vent error and imposition in dealing, it is necessary, that the agreement, as contained in the record of the lien, whether by mortgage or judgment, should give all the requisite information as to the extent and certainty of the contract, so that a junior creditor may, by inspection of the record, and by common prudence and ordinary diligence, ascertain the extent of the incumbrance. (St. Andrew’s Church v. Tompkins, 7 Johns. Ch. 14 ; Pettibone v. Griswold, 4 Conn. 158 ; Stoughton v. Pasco, 5 Id. 442; Shepard v. Shepard, 6 Id. 37; Hubbard v. Savage, supra; Garber v. Henry, 6 Watts 57 ; Walker v. Snediker, supra; Hart v. Chalker, 14 Conn. 77 .)

In the case of the Bank of Utica v. Finch ( 3 Barb. Ch. 293 ), it was held, that where a bond and mortgage were given to secure a particular debt mentioned therein, the mortgagee could not, as against subsequent purchasers or incumbrancers, hold it as a lien for an entirely distinct and different debt, upon paroi proof, that it was •intended to cover that debt also. But that a mortgage or a judgment might be given to secure future advances and responsibilities, or as a general security for balances which might be due, from time to time, from the mort

1 Lawrence v. Tucker, 23 How. 14 ; United States v. Lenox, 2 Paine 180 ; Ripley v. Harris, 3 Biss. 199 ; Ex parte Griffiths, 1 Low. Dec. 431 ; Ex parte Haake, 2 Sawyer 231 ; First National Bank v. Morsell, 1 McArthur 155; Bell v. Fleming, 1 Beas. 13, 490; McDowell v. Fisher, 10 C. E. Green 93.

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gagor or judgment-debtor. That such security might be taken, in either form, for a specific sum of money, large enough to cover the amount of the floating debt intended to be secured thereby, and such future advances and responsibilities will be protected by such security, to the extent of the sum mentioned therein, in preference to any claim under a junior incumbrance, with notice, although such security, on its face, does not specify that future advances or responsibilities to be made or incurred are provided for such sum. Parol evidence is admissible, to show the purpose and intent for which such security was executed, and it does not conflict with the principle, that such evidence cannot be admitted to contradict the written instrument.[2] But neither a mortgage nor judgment can be rendered available, to secure the party taking them, for future advances or responsibilities, by any subsequent paroi agreement, *in ;¡. preference to the lien of a junior incumbrancer. *- (Walker v. Snediker, supra; Ex parte Hooper, 19 Vesey 447 ; 4 Kent’s Com. 176.)

The record, in this case, shows that the judgment was confessed and entered up to secure Williams a specific sum of money, to wit, $20,000; and from the face of it, the presumption would be, that it was for a present debt due, and to that extent subsequent incumbrancers and purchasers would have notice of this prior incumbrance, by the record. And we have seen, that if the fact was otherwise, that instead of its being for a present indebtedness, some part, or all, was for a future indebtedness, incurred for advances or responsibilities assumed, which were agreed to be made and incurred, at the time, the judgment would be an available security, when made, to the amount so specified, if there should be no intervening equity arising to take preference. But the adjudged cases show, that if the debt amounted to the

2 Robinson v. Urquhart, 1 Bear. 515.

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sum specified in the condition of the bond, at the time of its execution, or advances .were subsequently made, as agreed upon at the time, to that amount, the judgment could not be' available, as a security for any additional indebtedness, for other advances or liabilities, although in the end, by payments made or funds received. by the creditor of .the debtor, the amount of the moneys advanced, from time to time, should be "satisfied," so that the balance did not exceed the sum specified in the security. It could not be regarded as a continuing security, covering the final balance which might be found due to the creditor from the debtor, after charging the original debt and subsequent advances and. responsibilities, and crediting the moneys received from the debtor, from time to time, although such balance should be no larger in amount than the sum specified, in the security, to be secured.

When the creditor has received of the debtor moneys, upon the security taken, equal in amount to the sum specified therein, to be secured, whether given for a present debt .or for future advances, it becomes satisfied and extinguished.[3] I think, the evidence in this case shows that the bond and warrant of attorney, *upon which the judgment was entered up, were -■ given to Williams, to secure to the firm of Williams & Co. the payment of $20,000, by Brown & Stark-weather, on account of responsibilities which had been already or were shortly thereafter to be assumed, and which were so assumed for them, to that amount, by accepting drafts drawn or to be drawn by them, to run from two to four months; and that the evidence war rants the inference, that Williams & Co., for the period of several years thereafter, and down to about the time of the death of Brown, were in the habit of accepting

3 But see Ex parte York, 3 Bank. Reg. 163; Pickersgill v. Brown, 7 La. An. 298.

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other like drafts, from time to time, for Brown & Stark-weather, and. that they were in the habit, during the same time, generally, of providing Williams & Co. with funds to pay them at maturity; and that whatever balances have been found to be due to Williams & Co. since the giving of the bond and warrant, they have been made up of the difference between the amount of such acceptances made since the bond was given, arid the money so provided for the payment, by Williams & Co., in addition to the acceptances and responsibilities, to secure which the sum specified in the bond was designed.

I also think, that the evidénce shows -at least two periods of time, after the bond was given, when Brown & Starkweather ceased to be the debtors of Williams & Co., upon the bond or judgment, although there may have been no time after the 16th day of October 1837, or even after the giving of the bond, when Brown & Stark-weather were not indebted to Williams & Co. in as large a sum as $20,000, for payments made on acceptances and indorsements of bills of exchange for them. First, the witness Williams testified, that from his recollection of the state of the accounts, which Williams & Co. kept, in which they charged Brown & Starkweather with acceptances, and credited them with moneys received, he had no doubt, but that they received from them between April and October 1835, as much money as the drafts or acceptances then outstanding; which I understand to mean, the time the bond and warrant were given in April. If so, the judgment became satisfied, it having been given to indemnify against acceptances which Williams *& Co. had made, at or before the date of the bond, or which they made shortly there- *-[4] after; it could not serve the purpose of a security for a new indebtedness, in addition to the debt of $20,000 for which it first stood as security. Again, although the witness testified, that on the 16th day of October 1837,

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Brown & Starkweather were indebted to Williams & Co. in the sum of $20,608, and from that time down, there was, at all times, a greater liability than $20,000, that on the 20th February 1839, the balance was $22,742,26, and at the time the judgment was assigned to the defendant, the amount due them was more than $30,000; yet, he also testified, that since the 16th day of October 1837, Williams & Co. had received on account of Brown & Starkweather, a larger amount of money than was due to them at that date.

The balances of $20,000 and upwards, due to Williams <fe Co. at all times after October 1837, were evidently made up, from time to time, by payments made on new acceptances, made after the acceptances contemplated to he made and secured by the bond had been made, and after the indebtedness originally created to secure which the bond was given, had been satisfied. For, we see by the evidence, that about half of the balance of the $22,742.26, found due on the 20th February 1839, was for money which Williams & Co. had paid for their indorsements of two bills of exchange, made about the 7th March 1837, nearly two years after the bond had been given, and in the meantime, Williams & Co. had received of Brown & Starkweather two mortgages of $10,000 each, and several notes, on which they had received in cash about $10,000 more.

Now, if it be true, as I assume, that the evidence shows that Williams & Co. were liable to the amount of $20,000 on account of their acceptances for Brown & Starkweather, between April and October 1835, and had received from them as much as that sum in money, to apply on their account, the bond and warrant of attorney became satisfied, and, of course, there could be nothing due or secured by the judgment, when it was entered up; or, if Williams & Co. received (as Williams *1 fifí 1 testified that they *did) from Brown & Stark- -* weather, as much, or a larger amount of money,

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on their account, after the 17th day of November 1837, than was then due to them from Brown & Starkweather, the judgment, if a valid security for the payment of any balance, when entered, became satisfied by such receipts of money, and application by Williams & Co., subsequently, and before the assignment; consequently, the defendant did not acquire any interest in the premises, under his sale and purchase.

There is, it is true, no direct evidence in the case, showing any express application of the moneys paid by Brown & Starkweather, upon the judgment, at the time of the receipts of the money; but the manner in which Williams & Co. kept the accounts between them, from 1835, and ascertaining the balance due to them, from time to time, show that the indebtedness for which the bond was given, on which the judgment was entered, was brought into the account and made a part of it, from the beginning, and that both parties intended to apply, and did, in fact, apply the first receipts of money to the first items of indebtedness. Williams & Co., from the beginning, kept an account, in which they charged Brown & Starkweather with their acceptances, and credited them with money when received, and from that account the balance due, from time to time, was found. Allen v. Culver, 3 Denio 284 .)

The defendant objects, that the complainants show no ground for equitable relief, that they have a perfect remedy at law. The answer to that is, that he has omitted to raise the objection in his answer, and that it comes too late at the hearing. (Le Roy v. Platt, 4 Paige 77 .)

Other questions have been made by the parties, but I think it unnecessary to consider them, having come to the conclusion that the evidence clearly shows that the debt and responsibilities which the judgment was given to secure, were fully satisfied by Brown & Stark-weather, before the assignment of the judgment to the defendant. The judgment of the supreme court, and the

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decree of the ^vice-chancellor should be reversed, and a decree-entered according to the .prayer of the bill, with costs in the courts below.

— It is well- settled; that a judgment for future advances'is good, not only against the debtor, but also against- subsequent incumbrancers, at least, up to the time when a subsequent judgment or mortgage should intervene. But when such subsequent incumbrance may" be said to intervene,/is not so well settled; "whether- at the time it is put upon the" record, or at the time the' prior' incumbrancer has actual-notice of it. The supreme court, in deciding this case, held that it ought to be only from the time of actual notice, because the docketing of a judgment, or' recording a mortgage, was, under the statute, notice only to subsequent, and not to prior incumbrancers.' In -this-1 am inclined -to think, the court were right, for as Chancellor Kent ■ remarked, in James v. Johnson ( 6 Johns. Ch. 429 ), it is only when the "rights -of third persons are prejudiced by want of notice, &c., that the extension of the security is prevented.

But-this is not, as the ■ court below supposed, decisive of this case; there is a'principle also involved, which is well stated by the same learned ' jurist. A mortgage is always good to secure future loans, when there is no intervening equity, but it is necessary that the--agreement,- as contained' in the record of the lien, should, however, give all the requisite information as to the extent and certainty of the contract, so that a junior creditor may, by inspection of the record, and-by common prüdence and ordinary diligence, ascertain the extent of ,the' incumbrance. This is requisite, to insure good faith and prevent error and imposition in dealing. (4 Kent’s Com. 175, and the cases'there cited.) - The importance and necessity of such a principle is manifest in this case. ■ The judgment under which defendant claims

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was to Williams alone, and on its face purported to be for a debt of §20,000 owing to Williams alone, on the 22d April 1835. There was nothing in or about the judgment that was calculated to convey any other idea, and no junior creditor could, by inspection of the ^record, or by common prudence or ordinary ... diligence, ascertain that it was aiiything else. *- The judgment was docketed on the 14th October 1835.

Now, from the testimony in the case, it does not appear what was due Williams at the date of the bond and warrant of attorney. He testified, that it was impossible for him to say, whether there was anything due him on that day, but he supposed there was due his house about $20,000, or that they were under implications for that amount of acceptances; but he adds, that he has no doubt that his house received, before the judgment was docketed, as much money as the drafts and acceptances then outstanding. He is equally uncertain as to what was the state of the accounts on the 14th October 1835, when the judgment was docketed. And then, as to the time when the plaintiffs’ mortgage was recorded, viz., 16th October 1837, he says, that Brown & Starkweather were not indebted to him, individually; that after that date, his firm did receive from them funds and negotiable paper, and that subsequently to the 17th November 1837, his house did receive from them a larger amount of money than was due them at that time.

Now, why should a judgment thus satisfied be held to be good against an incumbrance which then attached ? Not from anything which appeared upon the record, not from anything which could be ascertained by inspecting the record, or by common prudence or ordinary diligence, but because of a secret trust and understanding between the parties to the judgment, that it should be kept alive to give to debts afterwards to be contracted a preference over a debt already a valid incumbrance. This never would do; it would be a viola

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tian of all principle and good faith, and lead to great error and imposition. The decree ought to be reversed.

Decree reversed, and decree ordered in accordance with the prayer of the bill, with costs in the courts below.[4]

4 As to the authority of this case, which has been questioned, see Thomas v. Kelsey, 30 Barb. 275 ; Ramsey v. Lewis, Ibid. 415 ; Monnot v. Ibert, 83 Ibid. 28 ; Bank of Albion v. Burns, 2 Lans. 57 ; Hartshorne v. Union Mutual Insurance Co., 5 Bos. 557.

Cases cited