Court Opinion

ID: 3627854
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:08:04.309844+00
Date Added: 2024-06-11T14:07:38.714808
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 502 
[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 503 
Thomas and the two Lathrops were jointly liable to the plaintiff, as indorser of the note of Parsons  Johnson. It was so adjudged in the action brought by the bank against all the parties to the note; and though the form of the proceedings was not such as to estop the appellant, who claims, under two of those parties, such joint liability is a necessary legal conclusion from the facts found by the judge. Down to the 3d of December, 1856, they were members of the firm of Thomas 
Lathrops. They had dealt as such with Parsons  Johnson, by whom the note was made, and with the plaintiff, by whom it was discounted. In respect to them, so far as they acted on the faith of the continuance of the firm, the relation between its members must be deemed to have continued until notice was given of its dissolution. The indorsement of Thomas  Lathrops was that for which the makers applied. They had given security to the members of that firm for future indorsements. The indorsement was made in their known partnership name, and the note was discounted on the faith of their joint liability. The retiring partner chose not to make known his withdrawal from the firm. The associates, who purchased his interest, continued to use the old partnership name, and, on the day of the secret dissolution, the members of the old firm took from Parsons  Johnson a chattel mortgage, to save them harmless, among other things, from indorsements to be made for them thereafter by Thomas  Lathrops. Fifteen days afterward this indorsement was made. Twenty-five days later, and while the note was outstanding, the mortgaged property was delivered up by the makers to the indorsers; and it was not until the following month, when Thomas  Lathrop assigned it, with their other property, to Howard, that either the plaintiff or Parsons  Johnson were advised of the withdrawal of Jedediah H. Lathrop from the firm. Upon this state of facts it is clear that the three mortgagees were jointly liable, as indorsers, on the note made by the mortgagors and *Page 504 
discounted at the plaintiff's bank. (Vernon v. Manhattan Co.,
22 Wend., 183; Davis v. Allen, 3 Comst., 168; City Bank ofBrooklyn v. McChesney, 20 N.Y., 240.)
If the mortgagees had paid the judgment recovered against them by the plaintiff, they would have been entitled to reimbursement from the proceeds of the property embraced in the mortgage. By the terms of the instrument they were to be saved harmless "from the payment of any and all drafts, bills of exchange and promissory notes, which they have, or may at any time hereafter, indorse for the said party of the first part, or upon which they have or may become liable as makers, acceptors, indorsers or otherwise." It is manifest from the surrounding circumstances that such was the intent of the parties. The security was given by Parsons  Johnson as an inducement to Thomas  Lathrops to give them further credit, and to make further indorsements. Both parties contemplated the continuance of such indorsements. Thomas and the Lathrops knew what the mortgagors did not, of the concurrent arrangement between themselves, by which the other two partners acquired the interest of Jedediah in the business; but they also knew that, so long as they chose to keep that arrangement secret, they would all be bound by indorsements for Parsons  Johnson in the name of the firm, and they, therefore, required indemnity against such liability. The acts of both parties were in accordance with this view. Fifteen days afterward the mortgagors applied for and obtained an indorsement in the firm name of the mortgagees. Before the note matured they surrendered the mortgaged property. The plaintiff afterward recovered judgment against Thomas and the two Lathrops, in an action alleging their joint liability. It is denied by none of the defendants in the present action, except the appellant, who claims to hold the property under two of the mortgagees, but insists that the parties from whom he received it had no security upon it for their indorsements. In this view we cannot concur. We think the liability created by the indorsement, and fixed by the judgment, is within the plain intent, as well as the express terms, of the mortgage. (Hill *Page 505 
v. Packard, 5 Wend., 375; Staats v. Howlet, 4 Denio, 559;Hoffman v. Ætna Ins. Co., 32 N.Y., 405.)
The plaintiff is entitled in equity to subrogation, and, as the judgment is against the mortgagees as well as the mortgagors, the claim of the bank against the fund is entitled to preference over that of the mortgagees. (Bank of Auburn v. Throop, 18 Johns., 505; Ten Eyck v. Holmes, 3 Sand. Ch., 428; Curtis v.Tyler, 9 Paige, 432.)
The judgment should be reversed and a new trial ordered.
All the judges concurring,
Judgment accordingly.