Court Opinion

ID: 6126518
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:32:13.550974+00
Date Added: 2024-06-11T08:33:54.299982
License: Public Domain

Learned, P. J.
(dissenting):
The doctrine that a creditor who has received securities from a principal debtor must hold them for the benefit of sureties, and that a surrender without their consent discharges them fro tanto, is purely equitable. It is not a legal or arbitrary doctrine, but is one to be enforced solely to do equity between all parties. It rests therefore on knowledge by the creditor of the facts constituting this obligation to others, and is enforced because he has acted in violation of an obligation of which the facts informed him.
In this case the bond in suit was executed to Jenett M. Clark, December 19, 1871; was held by her until April 12, 1872, when it was assigned to Maria B. Clark; was held by Maria B. Clark till January 8, 1875, when it was assigned to Slocum; was held by Slocum till September 18, 1879, when it was assigned to the plaintiff.
*281I see no evidence that Jenett M. Clark, or Maria B. Clark or the plaintiff knew anything of the power of attorney executed by Stephanie Barbour to Slocum, or that they had any control over it or over Slocum.
So far as appears this power of attorney was an arrangement between Stephanie Barbour and Slocum, by which she endeavored .to set aside a part of her income for the payment of debts in order to guard herself against her own excessive expenditures. It does not appear to have been an instrument to which Jenett M. Clark was a party. Unless -some duty was imposed upon her and accepted by her in respect to this power of attorney she could not be affected by the acts of the parties thereto.
For instance, if á creditor held the note of a debtor with a surety thereon; and if the debtor should afterwards make an assignment to secure that note; and if the aésignee without the consent of the surety should surrender assigned property, this-transaction could not affect the creditor, unless he took some part therein.
So in this case, as far as I can discover, Jenett M. Clark, was not a party to the power of attorney, although if it had been acted upon, it might have inured to her benefit. But she had nothing to do with it, and did not cause or consent to the action of Slocum in respect to it.
On the 23d of May, 1872, Slocum consented to the revocation. Now if we assume that that was such an act as would have released Coster and Mrs. Barklie from any liability, as sureties, on a debt then owing to Slocum, how could it affect a debt then held by Maria B. Clark ? If it could, then it was in the power of Mrs. Barbour by a transaction inter alios (that is, by a transaction between herself and Slocum) to discharge Coster and Mrs.-Barklie-from their liability-on a bond held by Maria B. Clark. I know that the referee finds that the bond in suit was delivered to Slocum, as agent of the obligee. So he might have been for the purpose of receiving the bond. But there is nothing which shows that the obligee had knowledge of the power of attorney, or accepted him as her quasi trustee to act under that power. There is nothing, in short, which imposes on her that obligation in regard to the security created by the power of attorney, on the breach of which obligation the defendants rely. The wrong doing alleged was committed by Slocum.
*282But it is said this equitable right became a counter-claim when on January 8, 1875, Slocum became the owner of the bond, because it arises out of the contract or transaction set forth in the complaint. This was the view of the learned referee. But what has been said above shows, I think, that this cause of action does not arise out of the contract or transaction set forth in the complaint. (Edgerton v. Page, 20 N. Y., 281.) If it arose out of that transaction it would seem to follow that it would be a defense as against Jenett M. Clark, the original party to the transaction set forth in the complaint. And that I have shown could not be. Nor can the defense be allowed under section 501, subdivision 2, because it is not a cause of action on contract. The case cited by defendant of Glen and H. Man. Co. v. Hall (61 N. Y., 226), was an action to restrain the violation of plaintiff’s trade-mark. The counter-claim allowed, was held to be connected with the subject of the action set forth in the complaint. The case therefore is no authority upon subdivision 2. If, as said above, Slocum had been the original creditor and had .held the securities for his benefit; then it might be said that the alleged cause of action set up by defendants arose out of the transaction set forth in the complaint.
The defendants’ claim is, that Slocum held the rights given by the power of attorney as a quasi trustee for their benefit. We cannot say that a breach of such quasi trust is a breach of contract.
It seems to me therefore that the defense is not a counter-claim allowable in this action.
Judgment affirmed, with costs.