Pruyne v. Adams Furniture & Manufacturing Co.

The appellants insist that the lien of the mortgage or trust deed given to the respondent by the Adams Furniture & Manufacturing Company, Limited, is inferior to the lien of their judgments, because it was not properly acknowledged,, or attested by one witness, as required by the statute. Rev. St. (8th ed.) p. 2451, § 137. We are of the opinion that the proof or- acknowledgment was a sufficient compliance with the statute, and that the trust deed or mortgage, when thus acknowledged and delivered, became effectual against subsequent purchasers or incumbrancers. We find no statute which prescribe® any particular form of proof or acknowledgment of a deed or mortgage made by a corporation. It was in form like the precedent in Jenkins’ Clerk’s Assistant, which has been in use and followed for many years. No case is cited and none has been found where the precise question involved has been decided, yet the cases we have examined, so far as they bear upon the-question, tend to sustain the validity of the acknowledgment. Lovett v. Association, 6 Paige, 54; Trustees v. McKechnie, 90 N. Y. 618 , 621.

In Merrill v. Montgomery, 25 Mich. 73 , where a conveyance was sealed by the corporate seal and signed by the president and cashier it, was held that an acknowledgment.by the cashier was sufficient.. The same doctrine was laid down in Devi. Deeds, § 468. In Claflin v. Smith, 15 Abb. N. C. 241 , 248, the rules of construction applicable-to certificates of acknowledgment are collated and commented upon. In the opinion in that case, among other things, it is in effect said that where no form of certificate is prescribed, it need not be in any particular form, and that:

“ It is the policy of the law to uphold a certificate when substance is found, and it should be the aim of courts, in cases of defective certificates, -to preserve and not to destroy, and the court should be astute to find means to make official acts effect

If correct in our conclusion that the mortgage or trust deed was properly acknowledged or proved, it follows that it was a lien upon the premises superior to that of the appellants’ judgments.

The appellants, however, insist that, even if the mortgage -was valid, it was discharged by payment of the bonds it was given to secure. When this mortgage was given, the capital stock of the corporation was $20,000. The bonds were all taken by stockholders. It was subsequently determined that the capital stock should be increased to $40,000. The stockholders who held the bonds were then requested to, and in pursuance of a resolution adopted by the board of directors of the corporation did, exchange them for stock of the company. The bonds were then surrendered to the company by the holders for the purpose of having them guaranteed by individual stockholders and sold to persons who were not connected with the corporation. It was expressly agreed and distinctly understood that the bonds were not to be canceled when surrendered, but were to be thus resold. This was done. The contention of the appellants is that this mortgage was discharged by the surrender of the bonds, and that their resale, without the further consent of the stockholders, or a further resolution of the directors, before the rights of the appellants had accrued, rendered the mortgage invalid as to them. If these bonds had been surrendered for the purpose and with an intent to discharge the debt secured thereby, it would, perhaps, follow that the mortgage would be invalid as to the appellants’ judgments. But, manifestly, that was not the intent. The bonds were surrendered for the purpose and under an express agreement or understanding that they were not to be canceled, but were to be resold to raise money to conduct the business of the company. Under these circumstances, there was no merger, as clearly such was not the intention of the parties. Beach, Mod. Eq. Jur. § 450; Smith v. Roberts, 91 N. Y. 470 ; In re Estate of Gilbert, 104 id. 200; 5 St. Rep. 673 ; Asche v. Asche, 113 N. Y. 232 ; 22 St. Rep. 799 . Indeed, there does not seem to be any question of merger involved in this case. The question is whether the surrender of the bonds, in pursuance of the agreement between the holders and the corporation, operated as a payment and consequent discharge of the mortgage given to secure them. As a general rule, the payment of a debt secured by a mortgage will extinguish the mortgage.

But the intent of the parties will govern, and the mortgage will not be extinguished by the payment if it was the intention to still keep it alive. Beach. Mod. Eq. Jur. § 57; Coles v. Appleby, 87 N. Y. 114 ; Harbeck v. Vanderbilt, 20 id. 395; Kellogg v. Ames, 41 id. 259, 263; Champney v. Coope, 82 id. 543; Hubbell v. Blakeslec, 71 id. 63; Houseman v. Bodine, 122 id. 158; 33 St. Rep. 332 . It is manifest that it was ■ not the intention of the parties that this mortgage should be extinguished. But the agreement between them shows conclusively that thev intended that it should con

Thus we are led to the conclusion that the contention of the appellants cannot be sustained, that the mortgage was a valid security for the payment of the bonds, and was a lien upon the premises prior and superior to that of the appellants’ judgments Judgment affirmed, with costs.