Belknap et al. v. Wendell, Plaintiff in Review, 31 N.H. 92 (1855) - Opinion

The instructions of the court below seem to us correct. By the express provisions of the Revised Statutes, “ No mortgage [of personal property] shall be valid against any person except the mortgager, his executors and administrators, unless possession is delivered, or the mortgage is sworn to and recorded in the manner herein prescribed.” Rev. Stat. ch. 132, § 7; Comp. Stat. 294. By section 3 of the same chapter, the form of the oath, in case of a debt, is prescribed, and by-section 4 it is provided that “if such mortgage is given to indemnify the mortgagee against any liability assumed, or to secure the fulfilment of any agreement other than for the payment of a debt due from the mortgager to the mortgagee, such liability or agreement shall be stated, truly and specifically, in the condition of the mortgage, and the affidavit shall be so varied as to verify the validity, truth and justice of such liability-or agreement.”

The principle of these enactments was first clearly stated by the judge, and was then applied to the case in hand, which was that of the acceptance of orders, drawn by the mortgager upon the mortgagee, by stating that by those acceptances, if according to the understanding of the parties, they were absolute and to be paid by the mortgagee at all events, a debt was contracted by the mortgager to the acceptor for the amount for which the notes and mortgage might be properly given, and the mortgage was in fact what it appeared to be on its face, a security for a debt, and the condition and affidavit were in proper form. But if, in fact, the acceptances were understood by the parties as merely securities, given by the mortgagee for the debts of the mortgager, which the latter was himself to pay, though the notes might be available as indemnity notes, the mortgage would be void, because the statute requires that the true character of the claim secured, either as an absolute debt or a mere contingent liability, or special agreement, should be truly-stated in the mortgage. If it is not given for a debt, but some other agreement, it must not be stated as a debt. We do not learn from the plaintiffs’ argument what is the precise point in which the instruction is supposed to be objectionable. The question relative to the validity of the mortgage is essentially distinct from any such question relating to the notes, though the counsel seem to have a different impression, as they say “ Of course, if the notes are valid the mortgage is valid.” On general principles, this would undoubtedly be so, and it has been often held that a mortgage of real estate, given in terms to secure the payment of promissory notes, would be a valid security, though it appeared that the notes were themselves given as collateral security, or as an indemnity, or on some other special agreement of a contingent kind. No statute regulates the manner of making such mortgages, except our statute which prohibits mortgages of real estate for the security of future obligations or liabilities. Rev. Stat. ch. 131, § 3; Comp. Stat, 291. Independent of the statute first cited, the same rules would be applied to mortgages of personal property. And the general rule would be, as contended, that if the notes are valid, the mortgage, so far as it depends on them, is valid. But this is not so under the statute. A note, given as an indemnity or security, is valid, and a recovery may be had upon it for the amount which may be found equitably due between the parties; Haseltine v. Guild, 11 N. H. Rep. 390; even against subsequent attaching creditors. The notes, in this case, so far as any thing appears, were valid, founded on a sufficient consideration, whether they were absolute, as if given upon an exchange of obligations, or merely conditional, to indemnify the payee, if he should be required to pay his acceptances. It is, however, true, as is suggested by Parker, C. J., in Haseltine v. Guild, “that the plaintiffs had, upon the execution of these notes, [supposing them to be designed as an indemnity,] in fact, no debt against the defendant, such as appeared on the face of the notes to exist. Purporting, as it does upon its face, to be an absolute contract for the payment of the sum of money therein specified, and to be evidence of an existing debt to that amount, a note is objectionable, on account of the use which may be made of it to deceive other creditors, who have, ordinarily, but limited means of knowledge and proof respecting its true consideration.” "We, doubtless, see in this statement the reasons of the statute respecting personal mortgages, and we think it manifest that it was the intention of the Legislature to make the validity of such mortgages depend on the fact that the true character of the mortgage, as given to secure a debt, or a contingent liability, or a special agreement, should be stated in the condition and verified in the affidavit, whatever might be the form of the papers adopted, in other respects. So that though there was no legal objection to a note given as an indemnity against a liability, still if a mortgage was given to secure such note, its true character as an indemnity, and for what, must be stated in the condition, or it will not be valid against creditors.

It can make no difference if these notes were, at the date of the mortgage, merely an indemnity, that the notes have subsequently, by the payment of the acceptances, become due absolutely, and, consequently, debts. By the express provision of the statute, the true character of the liability, as it then existed, must be stated in the condition and verified by oath, or the mortgage cannot be valid against creditors.

Neither does it make any difference that the claim secured by the mortgage is, in part, well described as a debt, if a part of the claim described as a debt is, in truth, not a debt, but a contingent liability. The statute is express that no mortgage shall he valid unless sworn to as prescribed. It may operate hardly, that a failure to comply with the terms of the statute, in regard to a part of the claims secured, should vitiate the whole mortgage; but this hardship cannot change the legal effect of the statute.

Actual fraud is not necessary, to avoid a mortgage for this cause; the objection is a failure to comply with the law; and this is equally decisive, whether it was intentional or otherwise.

The court below did not take the ground suggested in the argument, that an acceptance of Mugridge’s orders, without funds, was not a valid consideration for notes of a corresponding amount. The question was on the validity of the mortgage, upon alleged defects existing in it, and not upon the validity of the notes. The notes might be valid thongh given as an indemnity, and might be a valid foundation for a mortgage, if described in the condition in their true character; while the mortgage might be void against creditors, if the same notes were described, not as indemnity notes, but as notes payable absolutely, that is, as debts. In the argument, it is suggested that the court did not leave it to the jury to inquire whether Belknap, Hale and Jones were principals, as they appeared by their acceptances, or only sureties for Mugridge’s debt; but instructed them that if the former accepted the orders of the latter without funds, they were accommodation acceptors, and merely sureties for Mugridge’s debt, as between him and them. But after a careful examination of the instructions, we are unable to perceive any just ground of complaint in this respect. In substance, the court say that if Belknap, Hale and Jones, at a time when Mugridge had no funds in their hands, accepted orders drawn by him, their acceptances were for his accommodation, and they were his surety as between him and them; and such acceptances would not be a valid concideration for the notes, sufficient to uphold the mortgage, since the parties have sworn that it was given to secure a debt, and for no other purpose. But if, in that case, at the time the mortgage was given, or before it was understood and agreed between the parties that such orders, so accepted, should, as between them, be their debt, and not Mugrige’s, and so the object of the notes and mortgage was not to indemify, but to secure an absolute debt to the full amount of the notes, then the mortgage, if taken in good faith, would be valid. This charge seems to us to leave the question of fact, whether these notes were given as an indemnity or for a debt, fairly to the jury. If the understanding of the parties was that the company were to pay the orders at any rate, the notes and mortgage were valid; if not, the mortgage was invalid as to creditors.

The principle that the contract ordinarily implied by the law, on an acceptance for the accommodation of the drawer is, as was stated by the judge, a contract to indemnify, is stated in Chitty on Bills 317, 708, &c. It would be otherwise where bills or notes are exchanged; and whether there was an exchange of bills, and one bill was transferred, *103[accepted, &c.] in consideration of the other, must be determined by the particular circumstances of such case. Ibid.

An exception was taken on account of the rejection of the copy of the account rendered by the mortgagees, of the amount due on their mortgage. There are many suggestions made in the argument, for which we find no color in the case sent to us; as that this account was part of an officer’s return, improperly separated from the rest, and the record mutilated. Nothing of this kind appears in the case. By the case, it appears that an account rendered by the mortgagees was used at the former trial, and a copy of it was among the papers produced as the copy of the case, at the trial of the review. That the plaintiff proposed to read it, as a part of the case, but it was objected to and rejected. It seems to us this ruling was correct. It has never been understood, so far as we are aware, that a copy, though furnished with other copies in the case, can be used, if objection is made, where the original is within reach. In this ease, it appeared that the original.was on the files of the same court where the trial was had. In cases of controversy as to the genuineness of papers, it would materially change the burden of proof, and the position of the parties. No principle or practice is known to us which would give countenance to such a doctrine. It does not appear clearly that this was the point relied on in support of this exception. The paper in question was an account rendered by the present plaintiff, of the amount due on his mortgage, rendered upon an application under the statute. On the former trial, it was put in evidence by the now plaintiff. The defendant now offers the copy of his own document. It was clearly evidence against him, as his own written statement, his admission of facts. As evidence in his own favor, it is, as clearly, not admissible, since a party’s declarations are not, in general, evidence for himself. Some special ground of exception must be shown, to take the case out of the general rule. He may claim that it is admissible, on the ground that the mortgagee having chosen to call upon him to state an account of his claim, under oath, is bound by such statement; or that, having used such statement as evidence, on the former trial, he has made it evidence against himself. But neither of these grounds seems to us sustainable.

It is suggested in the argument, that the call for an account was made on the mortgagee, by the defendant, as a deputy sheriff, and that the account was made part of his return on the writ, by virtue of which the demand was made; that the account would be admissible on the same ground, and between the same parties, as the residue of the return. But the case does not present these facts, and the court cannot treat them as facts because they are so stated in the argument; and, besides, if the return were taken to be evidence between these parties, it would not make this account evidence. The sheriff returns that he demanded an account, and such an account was rendered. This might well be conclusive as to the facts stated, but the officer makes no return as to the truth of the account he received, and neither he nor his employer, the plaintiff, are bound by such account.

The disclosure of one of the plaintiffs in the original suit, made by him as trustee in another case, was offered in evidence. It appeared that this disclosure was read on the former trial, and it was now taken from the files to be again used, but no copy of it was certified by the clerk, among the copies furnished by the plaintiff in review. The evidence was objected to on that account, and the plaintiff in review then asked and was allowed time to furnish such copy. Exception was taken to this order, and to the refusal of the court to order a nonsuit for the want of.this copy. It seems to us clear that this disclosure was admissible in evidence, whether a copy was certified among the papers or not. It has never been understood that evidence admissible at common law, is to be rejected on review, because it was not placed on file, so that a copy might be certified with the others required to be produced by the reviewing party. The statute requires that the “ party bringing any action of review shall produce attested copies of the writ, pleadings, judgment, and all papers used and filed at the former trial, otherwise a nonsuit shall be entered.” Rev. Stab, ch. 192, § 8. And we think, if the party bringing the review produces the usual copies, certified by the clerk to be copies of all the papers used and filed in the case, as seems to have been done here, he will not be subject to a nonsuit because it appears that a copy of a paper known to have been used upon the former trial, is not among them. The presumption in such a case would be, that though used, it was not filed, and therefore the plaintiff in review was not bound to produce it. If it was not placed upon the files, and the party insists that it shall be filed, and a copy produced, and the court should think it proper that that should be done, we think the court had full power, and that it was a reasonable exercise of their discretion to permit that to be done, and to allow a reasonable time for the purpose.

We are unable to adopt the rigid construction of this statute provision contended for by the counsel for the defendant in review, that the copies must all be produced, and accessible to the other side, at least as early as the beginning of the trial. The statute imposes no such rigid rule, and the court has, in this case, as in others, a discretion as to the manner of conducting the trial, and ample power to suspend the proceedings, to give time to supply any casual omissions, where the substantial justice of the case seems-to them to require it.

If the court were called upon to establish any imperative-rule in relation to this matter of copies, instead of the rule insisted upon by the counsel, it would probably be one to require any objection on account of the want or absence of' copies, to be made before the trial was commenced, and that if not then taken, the objection was waived. The want of this copy was, at most, ground for a non-suit under the terms of the statute; it was not an objection to the evidence offered, since nothing in the statute appears designed to affect the admissibility of any paper as evidence, whether copied or not.

The exceptions, then, being overruled, there must be