Case ID: ny-st-rep_71/html/0198-01.html
Source: Caselaw Access Project
Author: {"author": "Per Curiam.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

La Fayette E. Pruyne, as Trustee, etc., Resp’t, v. Adams Furniture and Manufacturing Company, Limited, et al., App’lts.
    
      (Supreme Court, General Term, Fourth Department,
    
    
      Filed December 26, 1895).
    
    1. Mortgage—Acknowledgment—Corporation.
    The acknowledgment oí a mortgage by a corporation is sufficient, where it is made by the secretary, and recites due authority to execute the instrument and attests the genuineness of the signature of the president and oi the seal thereto affixed.
    
      3. Same—Payment.
    The surrender of bonds for the purpose and an express agreement or understanding that they are not to he canceled, hut to bo resold to raise money to coueluct the business of the company, does not operate as a payment and consequent discharge of the mortgage given to secure them.
    Appeal from a judgment in favor of plaintiff.
    The action was to foreclose a mortgage or trust deed executed by the Adatns Furniture & Manufacturing Company, Limited, to the plaintiff. It was dated the 15th of August, 1889, recorded on the 28th of the same month, and given to secure thirty-six bonds of $500 each, payable on the 15th day of August, 1899, with semiannual interest, payable on the 15th day of February and August of each year. It was given pursuant to the consent of the stockholders and to a resolution passed at a meeting of the directors of the corporation. It was attested:
    “In witness whereof, the party of the first part has caused its corporate seal to be affixed hereto, and these presents to be subscribed by its president and secretary, and by the party of the second part, the day and year first above written.
    “ [Signed] De Alton Dwight, President.
    
    “L. E. Prdyne.
    “Attest: John Sinclair, Secretary.”
    The proof or acknowledgment was as follows:
    “State of Hew York, County of Jefferson —ss.: On this 22d day of August, 1889, before me personally came John Sinclair, to me known and known to me to be the secretary of the Adams Furniture & Manufacturing Company, Limited, of the village of Adams, Hew York, the corporation mentioned and described in the foregoing mortgage or deed of trust as the party of the first part thereto, who, being by me duly sworn, did depose and say that he resided in the village of Adams, N. Y.; that he is the secretary of the Adams Furniture & Manufacturing Company, Limited, and knows the corporate seal thereof; that the seal on the foregoing mortgage or deed of trust is the corporate seal of said company, and was affixed thereto by the order of the board of directors of said company, and especially authorized by the stockholders of the company in meeting duly assembled; and that he signed his name thereto by like order as secretary of said company. And deponent further says that he is acquainted with De Alton Dwight and knows him to be the president of said company; that the signature of said De Alton Dwight, subscribed to the foregoing mortgage deed of trust, is in the genuine handwriting of said Dwight, and was thereto subscribed by like order of said board of directors in the presence of said deponent.
    “[Signed] John Sinclair.
    “Sworn to before me August 22, 1889.
    “A. F. Saunders, Hotary Public, Jefferson County.”
    It was acknowledged on the 27th of August by such trustee.
    The thirty-six bonds secured by the mortgage or trust deed were issued and sold at par to the stockholders of the company. A year or so after, the company failed, and went into the hands of a receiver. Subsequently, the capital stock was increased, and the then holders of the bonds were requested to surrender them and take stock therefor, which they did. They were surrendered for the purpose of being guaranteed, and then sold to persons not connected with the corporation. It was expressly agreed and understood that they should not be canceled when surrendered, but be resold for the benefit of the company. In pursuance of this understanding the bonds were surrendered, guaranteed by individual stockholders, and resold by the officers of the company, without any new consent of the stockholders or any written resolution of the directors. The defendants the Citizens’ National Bank of Adams and Martha A. Sinclair are judgment creditors of the corporation, their judgments having been obtained in March, 1895.
    On the trial, the special term held that the plaintiff’s mortgage was a lien prior of the judgments of the defendants, and ordered the usual j udgment of foreclosure.
    
      Lansing, Lansing & Jones, for app’lts;
    
      Rogers & Atwell, for resp't.
   Per Curiam.

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 effectual; ” citing Morse v. Clayton, 21 Miss. 373; Wells v. Atkinson, 24 Minn. 601.

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 continue in existence as security for the bonds after they were resold by the corporation.

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.