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allowance of their securities in the same way as has been legal for hundreds of years past. The debtor might neglect to make an assignment at all, and then it would look as if the act of preference would be legal. The statute of 1887 at any rate does not cover such a state of facts, and we do not feel at liberty to enlarge its provisions by construction so as to bring such facts within the condemnation of the statute." I think we have here a controlling decision which requires me to hold that a mortgage, pledge, or bill of sale to a creditor with the intent only to secure such creditor to the amount of his lawful demand against the debtor, not followed by a general assignment, is not invalid because by that means a creditor obtains in payment of or as security for this demand a sum greater than one-third of the debtor's property at the time such payment was made or security given.

In this case the one question, therefore, is, was there a general assignment? It is clear that there was not a general assignment made by the debtor, within the meaning of the act of 1887. To constitute a general assignment, it must, in the first place, be general; that is, it must include all of the debtor's property. The assignee must be a trustee, and not the absolute owner, mortgagee, or pledgee. “The assignee is merely trustee, and not absolute owner. He buys nothing, and pays nothing for the performance of trust duties.” Brown v. Guthrie, 110 N. Y. 441, 18 N. E. Rep. 254. And the essential difference between a general assignment to an assignee in trust and a pledge is that in one case the absolute title passes to the assignee, while in the case of a pledge the title remains in the pledgor; and it is the right of possession, and to hold or apply the pledge to secure the debt, that is vested in the pledgee. The instrument sought to be set aside in this case contains none of the elements of a general assignment. It transfers property to certain creditors themselves, not to an assignee in trust; and, while it is in form a grant, bargain, sale, and transfer, it is only of specific property, not by any means all of the debtor's property, and the title in the grantee is limited by the language used in the transfer, which is: "To have and to hold to the said banks as security for the said indebtedness to them, respectively, with authority to the said banks to hold or sell the same at public or private sale, and to apply the proceeds to the payment of the indebtedness, rendering the overplus, if any, to the bailors." The legal effect clearly is a pledge of the property to the creditors to secure the payment of their demands. Upon payment to the banks of the amount due to them, any right or interest they had in property covered by the transfer would have been divested, and the right to possession of the property would have revested in the debtors, and they could have maintained replevin to recover the goods. Under the authority contained in this instrument, the banks took immediate possession of the property, sold and transferred the saine as authorized by the instrument, and applied the proceeds to the payment of Uleir debts. At that time, so far as appears, there was no intent to make a general assignment, and none was in fact ever made. If, as was expressly held in Manning v. Beck, supra, the defendant had the legal right to give to these creditors a pledge of their property to secure the payment of the indebtedness, and intended to do nothing else except what they were thus legally entitled to do, there could be, in the nature of things, no intent to defraud creditors, within the provision of the Revised Statutes as to fraudulent conveyances. Vindoubtedly they intended to pay to these creditors their demands, and to do so by the trausfer to them of this property, and the application of the proceeds thereof to the payment of such demands; but there was no intent to follow such a provision by a general assignment, so as to put all the rest of their property out of their control, and thus to avoid the prohibition of the statute; and the fact that they did subsequently make pledges or transfers of their other property to other creditors to secure other demands cannot effect this valid exercise of a debtor's power to provide for the payment of one demand before that of his other creditors when the transferrer had no knowledge that such subsequent transfer was intended.

The case of Abegg v. Bishop, 20 N. Y. Supp. 810, decided by the general term in this department in October, 1892, is distinguished from this case by the fact

that there a general assignment immediately followed the transfer attacked, and the rule laid down in the case of Berger v. Varrelmann, 127 N. Y. 281, 27 N. E. Rep. 1065, was applicable; and the fact of that decision is, as I understand it, that where by any method or scheme in which a general assignment for the benefit of creditors is a part a greater preference is allowed than is provided for by the statute, with intent to evade the statute, such a scheme is void, under the provisions of the Revised Statutes in reference to transfers made with intent to hinder, delay, and defraud creditors. Thus the presiding justice, delivering the opinion of the court, says: “Now, in case a party contemplating making an assignment for the purpose of evading the restrictions of the assignment law knowingly makes transfers of his property as security to creditors in excess of that which is allowed by the assignment law, and thereby attempts to evade the provisions of the statute, such transfer is made with intent to hinder, delay, and defraud his creditors, and therefore, under the express words of the statute, it is void, whether the transferee has knowledge of such intent or not." This rule, however, does not apply where the making of an assignment is not contemplated, and where no assignment was ever made; and Manning v. Beck, supra, as I understand it, expressly holds that the statute of 1887 does not affect any transfer that is not contained in the general assignment, or made in contemplation of the making or as a part thereof. Applying the rule thus stated, I am unable to see that the debtors in this case did anything except what they had a lawful right to do, and intended to do nothing except what they did, and that they did not intend to hinder, delay, or defraud their creditors. The defendants should therefore have judgment, with costs; decision and judgment to be settled on notice.

C. Donohue, for appellants.
S. B. Brownell, for respondents.

PER CURIAM. Judgment affirmed, with costs, on opinion of the court below.

(70 Hun, 498.)
BARBER et al. y. PALMER et al.

FIRST NAT. BANK OF CHAMPLAIN V. SAME.

(Supreme Court, General Term, Third Department. July 8, 1893.) 1. MORTGAGES BY PARTNERS-PRIORITY.

The lien of a mortgage made by one partner on his interest in the partnership property is subordinate to a subsequent mortgage by the firm to

secure a firm debt. 2. SAME-WHAT INTEREST OF PARTNER INCLUDED.

Where a partner joins his copartner in a mortgage on the partnership property without reservation, the mortgage includes his interest under a prior mortgage to himself on his copartner's interest in the premises. Appeal from circuit court, Clinton county.

Two actions, one by Charles O. Barber, George E. Barber, and Herbert Barber against George W. Palmer and others, and the other by the First National Bank of Champlain against George W. Palmer and others, to foreclose mortgages. The two actions were tried together by the court, without a jury, and plaintiffs in each case had judgment on the findings of the trial court. De fendants appeal. Affirmed.

The opinion of Mr. Justice KELLOGG, at special term, is as follows:

The two actions above entitled were tried together, the issues being practically the same, and the material evidence the same. These actions are brought to foreclose mortgages-one made by G. W. & F. Palmer & Co. to Charles 0. Barber and others; one made by the same party to the First National Bank of Champlain. Both mortgages are signed by George W. Palmer, Frank Palmer, Owen A. Palmer, and Charles G. Palmer, being all the copartners in the firm of G. W. & F. Palmer & Co.

The defendant Edwin G. Moore, as trustee, etc., makes answer that he is the owner of a mortgage given in 1887 for $1,000 by Owen A. Palmer to Frank Palmer, on an undivided one-twelfth of this land covered by plaintiffs' mortgage, and the lien of this mortgage upon the fractional part must take precedence to plaintiffs' lien. The defendants William M. Foote and others, executors, answer also that they are the owners of a mortgage given by Charles G. Palmer to Frank Palmer in 1887 for $1,000, on an undivided onetwelfth of the land covered by the plaintiffs' mortgage, and that the lien of this mortgage must also take precedence of the lien of plaintiffs' mortgage. These two mortgages, set forth in the answers of these defendants, antedate the mortgages of the plaintiffs in both of these actions, and they were both recorded in Clinton county clerk's office before either of the mortgages here sought to be foreclosed was given. In the mortgage running to the plaintiff the First National Bank of Champlain, reference is made to the fact of the existence of such mortgages, but the language used is simply declaratory of the fact which the record makes constructive notice of, and, the fact being declared in the mortgage, neither adds to nor detracts from the right of parties.

We are of the opinion that the contention of the defendants cannot prevail, for the reasons: First, it is undisputed that this copartnership was formed in June, 1879; that at that time the lands in question became with other lands the property of the copartnership, and formed the staple of their stock in business. The business of the copartnership was the making of iron, using charcoal in Catalan forges, and covering a large wooded territory, of neces sity. It makes no difference in whom the title to the realty stood, so long as it was conceded to belong to the copartnership. It is clear from the evidence-indeed, is undisputed—that at the organization of this company, in June, 1879, the land became the property of the company, and was ever afterwards used in its business. It is hardly worth while to inquire what the interest of each copartner was at the date of the organization; and in view of the facts that these copartners, George W. Palmer, Frank Palmer, Owen A. Palmer, and Charles G. Palmer, at that date agreed upon the terms of the copartnership, and the business and the property which should be long to it, and agreed that the lands in question, with other lands, should belong to the company so formed, and from that date such lands were used and treated always as the property of the copartnership, it is hardly worth while to inquire upon what terms the said Owen and Charles were to increase their shares in the copartnership by acquisition from either of the other partners. Whatever changes were contemplated or afterwards carried into effect by original agreement, or otherwise, the ownership of the property never changed, it was always the property of the copartnership. While the interest of each copartner might increase or diminish at any time by agreement among themselves, the copartnership remained intact. Any deed or other evidence of transfer from one to the other did not affect the company, or the title of the company, as a whole, to the assets, real or personal. The effect could only be to determine, as between themselves, the rights to profits or liability for losses, and the share of each in the surplus after the company's debts were discharged and the copartnership equities adjusted.

The claims of these defendants, therefore, that the mortgages given by Owen and by Charles to Frank Palmer were the outcome of an agreement between these parties, made at the organization of the copartnership, or later, to pur. chase a portion of the interest of Frank Palmer in the business or the property of the copartnership, and by so much increase their holding, and diminish the holding of Frank Palmer in such copartnership, has no bearing to detract from, or give additional force to, the lien of such mortgages. It must be

considered at this date almost elementary law that the lien of a mortgage made by one copartner upon his interest in copartnership property attaches only to the surplus, after all the copartnership debts are paid. Menagh v. Whitwell, 52 N. Y. 153. Rapallo, J., says, (Id., p. 154:) "Assuming, however, that the mortgage was intended to pass the undivided interest of the mortgag. ing partners, * * it is clear that the remaining partner was entitled to control the firm property so long as he retained his interest, and apply it to the firm debts, and that the mortgagee acquired only a right to the surplus, if any, which would be found to belong to the mortgagor on the settlement of the assets."

The suggestion here occurs, what would have been the effect upon the interest of George W. Palmer in the copartnership if the contentions of the defendants were sound in law? George W. Palmer, it seems, under the copartnership agreement, owned two-sixths of the business and property of the copartnership, and was not a party to the deal between Frank Palmer and Owen and Charles. His interest was created when the copartnership was created. It was then definitely determined that these lands were copartnership lands, and liable as a whole to company disposition, and for use in the company business. Could Frank Palmer, through his mortgages from Owen and Charles, take out of the copartnership these lands, one-sixth of the company's property, and leave the whole interest of George W. Palmer liable for the company's debts? Obviously not. In Tarbell v. West, 86 N. Y. 286, Justice Andrews says: “It is now well settled that a purchaser from a partner of his interest in the partnership acquires no title to any share of the partnership effects, but only his share of the surplus, on accounting, and the adjustment of the partnership affairs." In the case last cited, the title to the lands was not in the company, but in a third person; but the court held that a mortgage from the person holding title would not improve the mort gage if the mortgagee had notice that these were company lands, and he would take by his mortgage a lien only on the surplus, after all the partnership debts were paid. This cannot be otherwise, on the theory that a copartnership is an entity, and deals as such with all the world. The property of the company is held "pro indivisio," by all the partners, and in trust, responsible for the debts of the partnership, and subject, after debts paid, to division; and while a partner may mortgage and sell his interest in the part. nership, whether to purchase an increased interest or otherwise, or whether to a partner or a stranger, such mortgage or sale affect only the surplus after debts are paid and the equities of partners are settled. If it were otherwise, the rights of the other partners and of creditors would be always in peril, and practically under the control of a single partner. The copartners can unitedly dispose of the corpus of the partnership property for any purpose when not insolvent, and when enough is retained to satisfy creditors; but no individual partner can divest himself of his interest, or in any manner incumber it to the injury of the copartner or creditors; and this is the reason that mortgages by an individual copartner are interpreted as attaching only to the surplus after debts are paid and the equities of partners are settled. For such reason the mortgages given to Frank Palmer must be construed to attach only to the surplus after payment of the company's debts, and subject to the mortgages given by all the partners uniting in security for partnership debts.

The other reason why the contention of the defendants cannot prevail would be operative if the foregoing were insufficient. The defendant Frank Palmer was the owner of these two mortgages, and mortgagee named in them when the mortgages were executed by the company to the plaintiffs in each of these actions. He was also an owner, as one of the copartners, of an undivided interest in all the lands. He knew that the land was the property of a copartnership. He knew the property was in equity first liable for partnership debts. He knew that, after the partnership property was applied, he was individually liable for the claim of plaintiffs in each case. He, without reservation, executes these mortgages, which are here sought to be foreclosed. From these facts the inference is natural and imperative that he intended, when he joined the other copartners in the execution of these mortgages, that they should embrace all the interest he had in the property, whatever that might be, whether as owner or mortgagee; so that, if it be comes a matter of interpretation or construction founded in intention, he must be concluded by the findings which the court is impelled to make upon this point. The philosophic reasoner may urge that because of the change in the common-law rule which declared the title in the realty vested in the mortgagee, to the present holding of the courts that the title remains in the mort. gagor, therefore the mortgagee takes no interest in realty which he can affect by subsequently joining in a mortgage upon the same property. But the reasoning is specious, and rather a play upon terms and words than a sensible dealing with the substance. The mortgagee takes some substantial interest in the realty covered by his mortgage. The words used are apt and sufficient for a grant of the fee. A seal is necessary to a valid mortgage of real estate, because some interest in the real estate is taken through the mortgage. The law applicable to the recording of deeds and conveyances of any realestate interest is held to be applicable to mortgages. That such an instrument, intended to convey some interest in realty as security, is held not to convey the title, but only the right to reach the title in case of default, is no warrant for holding that such an interest is not a substantial interest in the realty. The mortgage given to secure a note or any other promise to pay is not different from one given without any promise to pay by the mortgagor; but, when a mortgage is given without a promise to pay, all the mortgagee can do is to resort to the land in case of default. Ruger, J., in Spencer v. Spencer, 95 N. Y. 353, says: “The mortgagee should look to the premises mortgaged." Surely, some interest must have been vested in the mortgagee through his mortgage in such a case; some substantial interest in the realty, though he may be forced to take steps to make such interest ripen into a fee. Why, then, is not such an interest mortgagable in equity? Any interest whatever in realty may be in equity mortgaged. Whether such interest be a contract interest, an interest in remainder, an interest in equity, where the title is actually vested in another, (Tarbell v. West, 86 N. Y. 280,) or any other conceivable interest, legal or equitable, it may, as well as the fee itself, be the subject of a mortgage; and, when the mortgage contains language found in the two mortgages herein sought to be foreclosed, to wit, “have granted, bargained, sold, conveyed, and by these presents do grant, bargain, sell, and convey, [description of land,) and all the estate, title, and interest of said parties of the first part therein," it would be absurd to say that the mortgagors meant to limit the subject matter mortgaged to the fee simple. The mortgagor says he meant to mortgage, not the fee only, but “all the estate, title, and interest" which he possessed. He could hardly have employed language which would embrace more clearly every equitable interest which he owned.

In the mortgage to the plaintiff the First National Bank of Champlain, in addition to the language above quoted, is found this language, describing the lands, etc., mortgaged: “All that portion of lot 110 [the land covered also by defendants' two mortgages]

which was purchased by G. W. Palmer & Co., and is now owned by said G. W. Palmer & Co., or by any of the members of said company, which conipany is composed of the malo persons named as parties of the first part herein;" such persons being the same named also in the findings of the court herein as forming such company. Here, also, is an express declaration at the time the mortgage was given, and $2,000 in money-a new loan-was obtained by the company, that such lands were company lands, and purchased by that company presumably, as the evidence in the case discloses, at the date of formation of the copartnership, in June, 1879. There is no evidence of any purchase since. While this view is supported by every reason, and appears to be the only aspect in which the subject is capable of being viewed without wholly overlooking general principles universally recognized, we are not left entirely without judicial declaration for our guidance. That a mortgagor who is also part owner of the fee, and also owner of an interest in same lands, as mortgagee, does, when he executes his mortgage, presumably include in such mortgage (unless an intent is apparent to exclude such interest) all his interest, legal and equitable,

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