Court Opinion

ID: 8270238
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:30:55.476151+00
Date Added: 2024-06-11T16:43:29.235868
License: Public Domain

Ogden, J.,
(dissenting.) This proceeding involves the rights of contending judgment creditors to moneys which were raised upon executions issued against the property of their common debtor, and paid into the Supreme Court.
In the latter part of the year 1853 the sheriff of the county of Essex sold the stock of dry goods of one Benjamin Park.hurst, a merchant in the city of Newark, by virtue of sundry executions against, the said Park hurst, some issued out of the Supreme Court, and others out of the Circuit Court of that county. ,
The net avails of the sales, amounting to the sum of $7951.10, were directed, by the Supreme Court, to be paid to their clerk, to await a decision upon an application made to them to have those moneys distributed pro rata among certain specified judgment. creditors, to the exclusion of these defendants, who hold the first judgment.
In June Term, 1855, after hearing the matter debated, the court ordered and directed that the moneys thus raised should be paid over to these defendants, which order, with the proceedings connected therewith, has been removed by writ of error into this court.
All the judgments were entered by confession upon warrants of attorney without bonds; and as to (he form of the affidavit prescribed by the statute, all are full and corred.
The judgment in favor of Ely, Clapp, and Bowen, who are the defendants in this court, was signed, on the 2d day *597of November, 1853, for §10,000 damages with costs, and was entered in the minutes of the Supreme Court on the fourth, and an execution was immediately issued thereon, and duly levied on the stock of goods in Park hurst’s store. The judgment in favor of Clapp, Kent and Buckley was signed on the 14th of November, in the Supremo Court, for §3122 damages, with costs, and the execution issued thereon was levied upon the same property on the 15th of November, eleven days after the levy was made under the execution in favor of these defendants.
The judgment in favor of Lord and Brown was confessed in the same court, on the 16lh of November, and the execution was levied on the 17th, upon the same property. Two judgments were confessed in the Circuit Court of the county of Essex, one in favor of Oliver-E. llosmer, for §2769.95, besides costs, and au execution issued thereon, was levied upon the same property, on the 17th of November, and the other, in favor of Norman Cutter, whose execution was levied on the 19lh of November. These junior executions, if entitled to priority in payment, will absorb all the moneys which are under the control of the Supreme Court. The dates of the respective judgments and levies have been thus particularly set out, because a reference to time will be material, in my view, for properly settling the rights of the parties.
Two reasons are assigned, by the plaintiffs in error, why the prior judgment of the defendants in error should be postponed to (heirs.
First. They say that the affidavit which was produced to tiie justice of the Supreme Court when he signed the/Li, and which was filed with the papers in the case, did not set forth the true consideration of the note on which the judgment was confessed; and lienee, that the judgment is voidable, whether the departure from the statute, which prescribes the form and character of the affidavit, arose from mistake or from intention.
Seooiul. They say that there was «dual fraud in the transaction on the part of Ely, Clapp and Bowen.
*598A preliminary question has been discussed, involving the right of judgment creditors to make an application of this character.
It is now well settled, by repeated adjudications in this state, that subsequent judgment creditors cannot, on motion, impeach a prior judgment for mere irregularity. Such irregularity does not necessarily make the judgment void, nor can it create aii equity in favor of other creditors; because, though irregular in form, the judgment may be honest in fact, and if the defendant sees proper to overlook the irregularity, the judgment is binding as to all others. Courts, however, will exercise a control over their judgments, and when successfully impeached for fraud or covin they may be postponed in favor of subsequent bona fide judgment creditors.
It should be borne in mind that applications for such relief are addressed to the equitable powers of courts, and are founded on facts showing that justice requires their interference. Evans v. Adams, 3 Green 373; Hoyt v. Hoyt, 1 Harr. 138, and the cases therein cited; Den, ex dem. of Vanderveer, v. Gaston, 1 Dutcher 615.
A suspicion of injustice, or doubts of a substantial compliance with the requirements of the law, should not destroy the security of a judgment. “ Its invalidity should clearly be established.” Caldwell v. Fifield and Matthews, 4 Zab. 154.
Hence it follows, that unless the case before us shows either actual fraud or legal fraud, by which the applying creditors were injured in their rights, the decision of the Supreme Court was correct.
The affidavit made by D. C. Clapp, one of the firm of Ely, Clapp and Bowen, seLs out that the judgment was confessed upon a promissory note, made and delivered by Park hurst to their firm, bearing date the 2d of November, 1853, payable on demand, to them or order, for the sum of $1.0,000, for valu.e received ; and that the true consideration of the note was goods, wares, and merchandise sold *599and delivered by their firm to Parkhurst, at his request, and money lent and advanced by them to him, at his request; and further, that the debt for which the judgment was confessed was justly and honestly due and owing to him and his partners from Parkhurst; and that the judgment was not confessed to answer any fraudulent intent or purpose, or to protect the property of Parkhurst from his other creditors. In form and substance, it, is a full and complete compliance with the language of the 5th section of the statute* Nix. Dig. 69.
The justice of the Supreme Court, to whom the papers were presented for hh fiat, could not look behind the affidavit, nor inquire into its truth ; the party was entitled ¡o his signature, and when it was affixed it created a judgment at common law. The object of the section requiring an affidavit was answered ; its force was spent when the conscience of the creditor was tested, and the inhibition against entering the judgment was fully taken off.
If, then, the testimony before us does not show a state of facts contradictory of the affidavit, and either necessarily tainting the transaction with legal fraud prejudicial to the rights of the subsequent judgment creditors, or with actual intentional fraud, the plaintiffs in error should not prevail before this court.
Properly to determine the just bearing of the depositions upon the truth of the affidavit, it is necessary' to collate the material facts, which it is insisted that they disclose. It is evident, from the testimony, that on the day the judgment for $10,000 was confessed to the defendants in error, Parkh.ur.st was certainly indebted to them in the sum of $3052.94, for goods theretofore sold and for money lent; and that such amount was then justly and honestly due and owing to them upon the most strict construction of the statute. This sum included a note of $ 1000, given to them by Parkhurst, when he made a composition with other creditors, in or about February, 1853, *600which note is now assailed, as having been required by and given to them in fraud of (iiose creditors, as the condition upon which Ely, Ciapp and Bowen would sign the composition.
This objection is sufficiently answered by the fact that when the $1000 note was given, Parkhurst owed Ely, Ciapp and Bowen more than the amount of it, in addition to the sum which they agreed to take in common With other creditors. He had a legal right subsequently to secure the payment of that note, without thereby committing a fraud upon his creditors; and the creditors now before this court, cannot justly object to bis having so done, or contend that the note did not form a bona fide debt, which could legally be included in a confessed judgment.
It is also established by the proofs, that, in October, 1853, Parkhurst was pressed for money to carry on his mercantile business,'and that Ely, Clapp and Bowen, who then wore his creditors to a large amount, agreed, at his request, to advance-to him for that purpose, in goods and iii cash, $6947.06, if he would confess a judgment to them for $10,000, which amount of $10,000 .would also cover the ‘then existing indebtedness; that such arrangement was entered into between ihem, and in fulfillment thereof, that Parkhurst gave his note for $10,000, upon which the judgment in question was confessed ; and that, at the same time, they gave their note, payable to him or his order on demand, for $6947.06, the amount then agreed to be advanced by them; and they delivered the same to him, which note Was to be available to Parkhurst in goods and money, as he might thereafter order or appoint, to meet the then emergencies of.his business; that the payment of the difference in cash, by giving a check upon their bank of deposit in New York, was talked of by Mr. Clapp, and that the mutual counsel of the parties advised them that a note payable on demand would be legal and right, if the transaction between them was bona fide; that *601after the papers were prepared for effecting the confession of the judgment, Mr. Runyon the attorney and counsel of the parties, for the purpose of preventing a transfer or appropriation of the note of Ely, Clapp and Bowen by Parkhurst before the security through the judgment could be completed, prudentially asked and obtained from him the custody of the note, to bo retained only until the judgment and the lien contemplated by it should be perfected, holding said note, as understood by both parties, subject to the control and order of Parkhurst; that Paikhurst began on the following day, and from thence continued so avail himself of the benefit of the fund which the note secured to him for the purposes theretofore agreed upon between him and these defendants, by drawing, on that day, in cash $700, and by taking, on the day thereafter, a bill of goods to the amount of $100; and within a week after the entry of the judgment, and before any other lien was created or contemplated, by applying for and receiving from them a check for $-1965.73, which amount was drawn by him in money, and applied to the payment of his pre-existing indebtedness; and that Mr. Bowen, on the 11th November, presented to Mr. Runyon a written order from Parkhurst, dated the 10th, requesting him to give up the note to Ely, Clapp and Bowen, as he, Parkhurst, had received the value for it. And it likewise appears that, when the note was given up to Ely, Clapp and Bowen as satisfied, which was three days before Parkhurst confessed any other judgment, or the plaintiffs in error had any right to question the judgment of the defendants in error, even for palpable positive fraud, because they then had no interest in the property affected by it, the defendants had advanced to him, in goods and in cash, upon their said agreement, represented by the note for $6947, the sum of $6189.48, for the security of which advances, if these defendants had not previously taken a judgment covering the amount of that note, on which they were advised by counsel that *602they could rely for security, they- at that time could have asked ami obtained of Parkhuist a second warrant of attorney fur the confession of a judgment, and upon the production of an affidavit to a judge, drawn in the precise language of the one before this, court, could have obtained his fiat, which judgment would not have been assailable upon the ground now-set up by the plaintiffs in error, and they could have procured a levy to have been, made before any other lieu had fastened upon the stock of goods.
It appears, from the evidence, that the money for the check of $4965.73, given by the defendants to Parkhurst, went to pay his indebtedness to Carter, Quinan and Deforest, of the eiiy of New York, who, in August, 1853, had obtained a judgment by confession against him in the Supreme Court of this state, as security for the payment of that indebtedness ; which judgment then remained in full force, and was a lien upon the property sold by the sheriff, prior to any of the judgments held by the parties who are before this court. Aud if it had not been satisfied with the moneys so advanced by these defendants, it would have been entitled to priority in payment out of the moneys now in controversy.
The advance of that sum by the defendants expressly for that purpose, upon no consideration other than the supposed validity of their judgment for $10,000, created a strong claim in them to have an equitable interest, in that judgment, by an implied assignment of it, and to be subrogated to the rights ■ of Carter, Quinan & Co. in that security. These facts, which I have gathered from the mass of testimony taken under a rule of the Supreme Court, in my opinion, fully support two important conclusions'.
First. That no actual fraud, calling for an exercise of the equitable powers of the court, appears to have been meditated or committed agaiusjt the plain tiffs in error, or any of them, in the negotiations or transactions between Parkli.urst. and. Ely, Clapp and Bowen in the inception of the judgment of $10,000.
*603Second. Thai, on (ho day Parkhurst confessed the judgments to the several plaintiffs in error, Ely, Clapp and Bowen had as strong equities upon which to claim the appropriation of the moneys subsequently raised by the sheriff, as the junior judgment creditors possibly could have. And hence it follows, that having such equitable rights, coupled with a legal advantage over the others, acquired through their prior judgment and levy, they ought not, upon' safe and sound principles of law and equity, to be divested by this court of their legal preference over the plaintiffs in error, as established by the judgment of the Supreme Court, unless that preference has been absolutely forfeited by a fraud in law invalidating their security.
If the testimony upon which the argument before the court was founded had disclosed any facts tending to raise a fair presumption or well-grounded suspicion that the judgment of Ely, Clapp and Bowen was not based upon an actual honest indebtedness, but on the contrary, that it had been contrived to create a fictitious lien for the purpose of covering and protecting the property of the debtor, to the detriment of his honest creditors, the court would not here settle the fact of fraud or no fraud, but it would direct a feigned issue, whereby the important question could be settled by a jury. But while, in a liberal exercise of its equitable jurisdiction over confessed judgments, the court, on proper occasions, will lend its aid for the detection of alleged frauds, and will look behind the affidavit, it ought not, in a case like the present, to withhold from the defendants in error their remedy through their judgment, and subject them to the expenses incident to an investigation before a jury, when, upon the case made by the applicants, no fact has been established on which the suspicion of mala jides or of positive intentional fraud can justly rest.
The larger portion of the consideration for the note of $1000 being neither money actually lent nor goods- sold *604and delivered at or before the date thereof, but it being a simultaneous engagement of these defendants to furnish the one or the other, when required by Parkhurst, recognized and declared by the delivery and receipt of their negotiable note for the amount of the advances thus agreed upon, payable on demand, the questions must be met and disposed of, whether the affidavit is a substantial compliance with the requirement of the statute; and if it is not, whether the variance is such a fraud in law as should make the judgment voidable in favor of'subsequent judgment creditors, whose rights, as such, were not acquired until after the whole amount agreed upon between Ely, Clapp and Bowen and Parkhurst had been advanced.
It is manifest that the draftsmen of the affidavit supposed that the note for $6947.06, which was given by Ely, Clapp and Bowen to Parkhurst, in fulfillment of their agreement to aid him, was in legal contemplation equivalent to a loan and advance of so much money; because if he had not thus have viewed the transaction, ho might have stated the true consideration of that portion of the $10,000 note as the fact really was, namely, a negotiable note of the plaintiffs, payable on demand, transferable by the defendant, at his option.
Such, I think, would have been the more correct, mode of setting out the consideration, because it would have shown the case as it existed. To meet the requirements of the act, a statement of the manner in which the debtor .owes the debt is obviously called for, that is, the cause of the indebtedness, or “ the price of the debt,” a statement of •the manner in which it occurred, according to the facts made in terms sufficiently precise to disclose-the real nature of the .transaction.
, A minute' detail of sums and of dates, as in a bill of particulars under the practice act, is not.required ; but the true consideration should be intelligibly staled in general terms. Scudder v. Coryell, 5 Halst. 340; Latham v. Lawrence, 6 Halst 322.
*605What, then, should be the legal effect, upon the security of a failure minutely to set out iu the affidavit all of the true consideration of a note or other indebtedness upon which a judgment, is confessed ? If it plainly appears that another creditor has been thereby misled, and innocently prejudiced in bis rights, such facts should induce the court to postpone the judgment in favor of that junior judgment creditor. No such instalment, however, has been made in behalf of any of the creditors before this court. The irregularity cannot per sa affect the validity or priority of the judgment while it stands unreversed.
It has been decided, in Den, ex dem. Vandervere, v. Gaston & Mason, 4 Zab. 818, and recognized in another suit between the same parties, in March Term, 1856, reported in 1 Dataller 615, (hat a judgment by confession without an affidavit is not absolutely void and fraudulent.
The power of allowing judgments to be signed at chambers, in this state, is not conferred upon the judge of a court of common law jurisdiction by the provisions of the statute under consideration. Such power is an incident to the nature and constitution of the court, and the statute can only regulate the exercise of an existing inherent jurisdiction. Judgments thus entered are not null and void simply for lack of compliance with the provisions of tiie act, but they can only be attacked for such mere irregularity by a party to the record, because they injure none others, and none other can have a writ of error. Iu this aspect of the case, the judgment in favor of Ely, Clapp and Bowen must be recognized as a valid subsisting judgment.
The constitution of courts for the trial of small causes is entirely different. They are statutory tribunals of limited jurisdiction, having no powers excepting those conferred by tiie act constructing them, and no course of proceedings, excepting as it i's marked out in that act, and its supplements. The first statute, entitled “An act constituting courts for the trial of small causes,” was passed *606in 1798, and the 19th section of it permitted parties to enter without process any action before a justice of the peace, to the decision of which he was competent, if process had been issued; and it authorized the justice to proceed thereon to judgment and execution in the same manner" as if. a warrant or summons had been served. Without that section, no such proceeding in that court would have been valid, because the issuing and return of a process, duly served according to the provisions of the statute, were necessary to give the court power to proceed to trial or judgment. In the second section of the act to prevent the fraudulent confession of judgments, passed on the 29th of January, 1817, it is declared that no judgment shall be entered by confession where parties thus go before a justice of the'peace without process, unless an affidavit, made in compliance with the 1st section of that act, be made and filed with the justice. Hence an omission to fulfill the requirements of both acts, in a proceeding in that court, raised a question of original jurisdiction, and the Supreme Court were required, in cases on certiorari where such omissions were established, ■ to declare the judgments void, because the court had no jurisdiction nor power to proceed to judgment. But in the superior courts, which derive their powers from the common law, the rules for applying regulating statutes are different. Jurisdiction over the parties and the subject 'matter is inherent in those courts without the aid of a statute, and they proceed to judgment according to the course of the common law. Hence the early decisions of the Supreme Court declaring judgments void rendered in courts for the trial of small causes, which were not supported by proper affidavits, do not apply, in the full force of their language, to judgments entered in ¡the Supreme Court or other courts of general jurisdiction. In common law tribunals of general jurisdiction, a judge at chambers, before the passage of the-act of 1817, upon the production of a warrant of attorney., could make his written fiat for a judg*607meet which became as operative as a judgment obtained upon process and regular proceedings. The absolute prohibition of judgments by confession in the courts for the trial of small causes lasted only one year. On the 12th of February, 1818, the act of 1798, and the second section of the act of 1817, “to prevent the fraudulent confession of judgments,” were repealed : and it then was enacted that parties might enter an action by consent before a justice of the peace, who shall proceed thereon to final judgment and execution. But it was also provided that if judgment by confession be entered against a defendant, unless an affidavit shall be made as directed in the 1st section of the act of 1817, such judgment shall not operate or have any effect against any person or persons not parlies in said action, but shall be binding and have its full effect as far as relates to the parties in the suit only. This section authorized the entry of judgments in that court by confession without the production of an affidavit, but it limited their operation. So the law stands at the present time in the courts for the trial of small causes, excepting as the act directing the mode of entering judgments on bonds and warrants of attorney, has changed the matters which are required to be set out in the affidavit.
If this contention of the plaintiffs in error be corrected, to wit, that proof df a material variauce between the facts, as set out in an affidavit, and those which really exist, makes a judgment confessed in a common law court, upon the production of such affidavit., void, although no actual fraud exists, then we have this anomaly in our judicial system, that a judgment in a statutory court of limited jurisdiction may be good for some purposes, and a judgment entered up in a qpmmon law tribunal of general jurisdiction, under the like circumstances, and tested by the policy of the same law, (whether it be directory or prohibitory,) shall be absolutely void and for nothing holden. I have always thought that, in enacting that a *608judgment might be lawfully entered upon a voluntary appearance in a'justice’s court without affidavit, and be binding upon the parties to it, the legislature .intended by statute simply to clothe that tribunal with a portion of the power which the courts of record in the state inherently possess, notwithstanding the language of the acts which have directed the production of affidavits, and not to give judgments in tiiat court an efficacy beyond what attaches to those rendered in the common law tribunals.
In Parker v. Griggs, 1 South. 161, which was a case of confession of judgment in a justice’s court without the production of the affidavit, the judges said—“the words of the statute are peremptory; the justice had no authority: the judgment is fraudulent.” Again—“ the affidavit is absolutely necessary to give the justice power to enter a judgment. His proceeding without it isa perfect nullity.” So in Cliver v. Applegate, 2 South. 479, the court rnled that a judgment confessed before a justice without the affidavit, was void, and «oí a valid judgment.
The fact to which the attention of the court was directed in the case of Sheppard v. Sheppard, 5 Halst. 250, Was a levy made under an execution issued out of a justice’s court, where a judgment W'as entered on confession by an appearance without process, the affidavit produced being defective upon its face. The cases above cited are referred to in this case, and the ruling of the Supreme Court is placed on the Same ground as it was in those cases. "
The ease of Reading v. Reading, 4 Zab. 359, was relied Upon- by the plaintiffs in error as sustaining their proposition, that judgment creditors can prevail in. setting aside a judgment in a common law court ibr the non-conformity of the affidavit with ¿he provisions of the statute. In that case the court, was' called upon' to reverse an order of the' Court of Common Pleas, made upon- the application of the defendant ib the judgment, which order set aside a judgment- entered by confession in that court, because the *609affidavit produced did not show upon its face even a substantial compliance with the statute. The judgment liad been impeached by a party who could bring a writ of error—the defendant himself; and he could well say to the court that the judgment entered is not the one I intended to confess, because it is not accompanied with the affidavit, which my creditor was bound by law to make. The Supreme Court affirmed the order of the Pleas upon the inspection of the affidavit. It was said by one of the justices, in his opinion, and not gainsaid by any of his associates, “ that courts derive their power to render judgments on warrants of attorney from the common law ; but the statute of this state has limited the exercise of that power to cases wherein a prescribed affidavit is produced to the officer. If a judge or other officer signs a judgment contrary to the provisions of the statute, the court having control over its records, upon good came shown, may vacate and set aside such judgment.” Again, it is said, in the same opinion : “ As the legislature, in seeking to secure fairness, honesty, and good faith in such transactions, in their wisdom have directed upon what condition alone an honest creditor can exercise his common law right of securing a just debt by a judgment, this court, when called upon to act, must, ex debito justillos, see that the requirements of the statute are not evaded or misunderstood.” The affidavit was declared to be insufficient, and the order of tile Common Pleas was affirmed.
In the opinion of another justice, read in the same ease, this language is used in commenting upon the ease of Evans v. Adams: “The judgment in the Pleas was reversed, not upon the application of creditors, but upon that of the defendant himself, and this makes a very different case,” to wit, from that of Evans v. Adams. “ The question here is not whether creditors had a right to move for reversal of a judgment below on the ground of a defective affidavit, which was the case of Evans v. Adams, but whether, after the defendant himself had got a judg*610ment against him reversed in the court below for ground which was available for him, we can, even at his own request, now set aside that reversal on writ of error. The reversal below was right; how can we say it was wrong?” The difficulty in applying the case of Reading v. Reading to the one now before this court is this, that the motion was there made by the defendant in the judgment for a defect in the proceedings, patent upon the face of the judgment papers; whereas the present application comes from junior judgment creditors, seeking to invalidate a judgment entered according to law upon the production of an affidavit full and perfect upon its face, and who rely for equitable relief upon matters in pais, extrinsic of the papers which were in the cause when the fiat was made and the judgment was recorded, and the execution issued and levied.
At this point in the case a question presents itself, whether a common law judgment is such an entirety that in all instances it must be treated as indivisible, and, ex necessitate, be held as good or as bad in whole. In the case of Silvers and Brittin, ads. Reynolds, 2 Harr. 275, a judgment was entered by confession on warrant of attorney against two persons, and it was held, upon motion and cause shown, that it might be set aside, as to one of them, and stand good, as to the other. Justice Ford said, “ If’ the cause was before ns on a writ of error, I do not say that we could reverse the judgment as to one defendant, and affirm it as to the other; but courts of law have, immemorial ly, exercised an equitable power over judgments entered by their authority on warrants of attorney by confession.” Justice Dayton had some difficulty in his mind about the entirety of the judgment, and the propriety of relieving one of the defendants; but he finishes his opinion by saying: “As we have exercised a species of equity power over judgments entered on bond and warrant of attorney, and substantial justice will be best attained in this way, I concur, upon this point, in the view *611taken by Justice Ford.” The four judges ordered Brittin’s name to be stricken out of the proceedings.
Upon the principle recognized in that ease, it certainly would be equitable and just that the judgment of the defendants in error should be held to be valid, and entitled to priority in payment for at least the sum of $3052.94 and the interest, inasmuch as that amount was justly and honestly due to them from Parkhurst, for goods sold and delivered, before Mr. Clapp commenced the negotiation with Parkhurst which resulted in the confession of a judgment for $6947.0(1, additional to the debt then conceded to be due. If the court could so apply equity to a judgment by confession, as to declare it inoperative as to one of two defendants, and binding upon the other, by the exercise of the same power, it can direct that a judgment shall be divided as to the amount, and that such portion of it as is just and upright, and within the language of the statute directing the production of an affidavit, shall be good and available, and that the portion which is successfully impeached shall be postponed in favor of junior judgment creditors.
But the most important question that was involved in the discussion is yet to be examined—-can a judgment be confessed in New Jersey to secure future advances?
There is no doubt of the validity of such a judgment between the parties to it. A judgment contrived to defraud creditors is good between the parties. At common law, a judgment to secure such advances (if bona fide) would stand as firm as a morlgage. Lord. Cowper held, in Gordon v. Graham, 7 Viner’s Ab. 52, letter E, pl. 3, “that if a clause be inserted in a mortgage, making it a security for future loans, subsequent loans will be taken as parts of the original transaction, and will be paid before a second mortgage intervening, with notice of the clause.”
Chief Justice Marshall ruled, in the case of Shirrass v. Craig, 7 Cranch 34, “ that a mortgage given to secure future advances was a protection for all advances made prior to the receipt of actual notice of a subsequent title.”
*612In 6 Barb. S. C. R. 346, Truscott v. King, Parker, J., says—“Unless actual notice is required in such cases, neither a judgment nor a mortgage is of any value as .security for future advances,” meaning actual notice of an intervening encumbrance.
In the case of Averill v. Loucks, 6 Barb. S. C. R. 19, it is said, by the court, “ that a judgment, or other security, may be taken and held for future responsibilities and advances, to the extent of the amount of the judgment or security ; but, to enable a creditor to hold a judgment or other security for future responsibilities or advances, it must be a part of the original agreement that the judgment or security should be a security for such responsibilities or advances.”
The same doctrine was held in Brinkerhoff v. Marvin, 5 Johns. Ch. 325; Monell v. Smith, 5 Cowen 441; Livingston v. McInlay, 16 Johns. R. 165. The court say, in the case last cited, “ If it was a part of the original agreement, a judgment may be entered as a security for future advances beyond the amount then actually due, in like manner as a mortgage may so be held.”
There is a limitation, however, to the preference which is given to such encumbrances. When a subsequent judgment or mortgage creditor intervenes before the whole advance agreed on is made, and notice thereof is given to the prior encumbrancer, advances made after that period will not be covered in preference to the claims of the subsequent creditor.
In Ter-Hoven v. Kern, 2 Barr 96, it is said, “A judgment or mortgage, taken to secure an existing debt, and debts or liabilities to'be created in future, has been held to be good and valid by numerous decisions.” The judge cites, among other cases, Gordon v. Graham, 7 Viner’s Ab.; Lyle v. Ducomb, 5 Binney 585; 4 Kent's Com. 175, anti he adds, “But if a prior encumbrancer makes future advances on the faith of his judgment with actual notice of a new intervening encumbrance, ho will be postponed as to such subsequent advauce¿.'
*613It may be taken, as clearly settled at common law, that a judgment can he confessed to secure an existing debt, as well as to cover future advances, to the extent of the judgment, beyond the amount actually due, made in fulfillment of an agreement entered into when the judgment is given; and that such judgment will be available for the security of all advances made upon it in good faith, before actual notice is received of an intervening mortgage or judgment encumbrance.
Did our statute alter the common law in regard to the validity of such judgments? The language used does not declare them to be void. Does the scope of the enactment show' that the legislature intended to prohibit the creating of such securities?
The section closes with a requirement that the affidavit shall state “ that the judgment is not confessed to answer any fraudulent intent or purpose, or to protect the property of the defendant from iiis other creditors.” This regulation is literally complied with when the friend of an honest debtor, who is embarrassed for money to meet his commercial engagements, agrees to advance him means, as he may require them, to a fixed amount, and within a limited time, to save him from failing, and to enable him to pay his creditors, and to protect his business standing in the community, and in good faith and for honest purposes takes a judgment by confession as security for their re-payment.
The object of the act of the legislature unquestionably was to secure fairness, honesty, and good faith; but I think it was not designed for preventing an honest debtor from providing, by means of the security of a judgment by confession, such pecuniary aid as lie foresees the exigencies of his business will require.
The question which must test the legality of such a judgment, is not whether, if it had not been entered, some other creditor might have obtained a legal preference, but it is whether the parties to the judgment have *614done anything mala fide or in violation of the provisions of the statute.
It is manifest, from the testimony taken in this cause, that Parkhurst did not complain of Ely, Clapp and Bowen because there was not a full consideration for the judgment; but his antagonism to them was caused by their insisting upon the sheriff’s bringing the stock of goods to sale at an earlier day than Parkhurst had expected, and perhaps in violation of their stipulation to give more time.
After Ely Clapp and Bowen refused to delay the sale under their execution, Parkhurst confessed to the several plaintiffs in error their respective judgments,, as it would seem that they might aid him in attempting to defeat a recovery, by Ely, Clapp and Bowen, of the money secured by their judgment and levy, or to delay them in obtaining a sale. Those creditors filed their bill in chancery, not to set aside the judgment of Ely, Clapp and Bowen for irregularity, but to obtain ;i preference over them upon equitable grounds and for an injunction to stop the sale. As appears from the evidence, those judgments were given and taken for the purpose and intent of delaying and hindering these defendants in the recovery of their just demands.
There was still another objection taken, which is founded upon the remaining clause of the 5th section of the statute. It provides “ that the affidavit shall further set forth that the debt or demand for which the judgment is confessed is justly and honestly due and owing to the person to whom the judgment is confessed.”
The question has been asked, how an agreement to make a future advance can honestly be sworn to as a debt justly due and owing; and it was argued, that the legislature, in using those words, intended to prevent judgments being confessed by way of security, and to limit them to “debts absolutely due and payable.”
A satisfactory answer has been given to this question *615by Chief Justice Ewing, in the case of Scudder v. Coryell, 5 Halst. 345. He said the word “due” has more than one signification, or is used, on different occasions, to express distinct ideas. At times it signifies a simple indebtedness, without reference to the time of payment ; at others, it shows that the day of payment was passed. In the former sense it appears to have been used in the statute, as it is connected with a word of like signification, “due and owing.”
This construction of the act was subsequently adopted bv Chief Justice Hornblower and Justice Ryerson in Hoyt v. Hoyt, 1 Harr. 138, and lias since been practised upon as the settled law of this slate.
In the case last cited, the Chief Justice concludes “ that, as the object of the statute was only to secure fairness, honesty, and good faith in the transaction, and not to abridge the common law right of securing a just debt by a judgment, we must not give it that effect by mere implication.”
lu the same case, Justice Ryerson says that promissory notes of bankers, under some circumstances, have long been treated as cash, not only in commerce, but in courts of justice; and ho adds, “ that he perceives no reason why the notes of other persons may not be treated in the same way, when such is the agreement and assent of the parties;” and I may add, when the transaction is beneficial to the parties, injurious at the time to no one, and is free from actual fraud.
The facts in the ease of Hoyt v. Hoyt, which were last cited, not fully appearing in the report in 1 Harrison, and being misapprehended on this argument, I have referred to the files in the office of the clerk of the Supreme Court, and find them to be as follows : The judgment was entered by confession in favor of Enos Hoyt v. Lorenzo Hoyt, in the Court of Common Pleas of the county of Essex, on the 15th day of July, 1835, for $1116.35, upon a promissory note, given by the defendant to the *616plaintiff, dated July lltli, payable on demand, and made for the purpose of forming a consideration for.a judgment by confession for securing'an existing liability. The affidavit sets out, among other things, that $701.50, a part of the consideration of the note of the defendant made on the 11th of July, was money lent and advanced by the plaintiff ±o the defendant, and that the whole demand of $1116.35 was justly and honestly due and owing from L. Hoyt to the plaintiff. After the entry of this judgment, Wilbur and others obtained several judgments against L. Hoyt in courts for the trial of small causes; and upon their application to the Court of Common Pleas of the county of Essex, the judgment in favor of E. Hoyt was postponed in payment to theirs. In the state'of the ease, signed by the attorneys of the litigant parties, it appears that Enos Hoyt, instead of advancing $701.50 in money to L. Hoyt, as was stated in the affidavit, on the 9lh of May, 1835, less than three months before the judgment was confessed to him, had given his note for $600 of the amount of $701.50, drawn in favor of L. Hoyt, or order, payable twelve months from date, which note was endorsed by L. Hoyt to one Aaron Price, in payment of horses and carriages, and that said note was held by Price as an unsatisfied demand against Enos Hoyt when, the judgment was confessed, no part of it having then been paid or secured, and Lorenzo remaining liable to be fixed as an endorser, if it should be dishonored at .maturity.
It is stated itv the ease, that after the several judgments were obtained in the justices’ courts, E. Hoyt, on the 10th of November, 1885, paid to Price $200 on account of the note, on the 11th, $100, on the 26th, $80, and the balance before the argument upon the rule to show cause was made before the Court of Common Pleas, and that the judgment thus confessed before any of the money was paid absorbed all the property of L. Hoyt.
Upon the facts thus presented before them, the Supreme Court vacated the order which had been made by *617the Court of Common Pleas, and restored the judgment of Enos Hoyt to its priority. That decision has remained undisturbed and unquestioned since September Term, 3837.
, if in the present ease, Mr. Clapp, before this affidavit was made, had paid the money to Mr. Parklmrst, with an understanding that it was to be used by him for purchasing goods and paying his notes as they became due, and sustaining his credit, but on the day after the levy, Parklmrst had constituted Ely, Clapp and Bowen his bankers, by depositing the funds with them, and taking their negotiable note for the amount, payable on demand, could it be successfully maintained that the judgment would be constructively fraudulent? I think not.
Wherein does this ease substantially differ from the one now put? In each, we must recur to the intent, the animus which pervaded the transaction. If it was honest and pure, seeking to promote the benefit of the parties, and not to injure any one, and actual injustice has not been done, no sound principle of law, of morals, or of public policy can demand that such a construction should he given to an act of the legislature designed to place a cheek upon the conscience of a party, and to provide against the entries of improper and fraudulent judgments, as would require a mere form of proceeding to bo mechanioally observed for the purpose of saving the integrity of a judgment available at common law, and intended for honest purposes, from the invalidating effect of that statute.
Upon the literal construction contended for by the plaintiffs in error, how could a merchant secure and protect his confidential endorser? A’s notes for large amounts,, endorsed by B as accommodation,, payable at different times, have been put in circulation by A in the regular course of bis trade. Before any of the notes arrive at maturity, A, discovering that he must fail in business, wishes to indemnify and save B from loss through his *618contingent liability on such paper. The notes are so scattered among the commercial community that it is not within B’s ¡lower to find them, and anticipate their payments, as each shall become due; bis liability upon it will be absolutely fixed by protest and notice, but before they all will mature, A must inevitably become insolvent. If B cánnot enter into such an engagement with A for making sufficient future advances for the payment of those notes, when at maturity, as will enable him to take a valid judgment by confession against A, because the amounts of the notes have not at the date of the affidavit been actually advanced and paid, and lienee the money be technically due and owing from A to B, B must be remediless.
Such, I think, is.not the understanding of inerohanfs,.or of commercial lawyers ; and if it be the proper interpretation of our statute, further legislation is demanded-; because if will cheek and restrain that confidence which generally pervades a healthy business community, and will paralyze the laudable efforts of many young men who begin the world witli valuable business talents, but without sufficient capital to encourage and sustain their honest industry without the aid of their friends. '
If, in the language of Chief Justice Ewing in the case of Scudder v. Coryell, the design of the statute, in requiring the affidavit, was simply to prevent the entering up of judgment’s where no indebtedness existed really aiid in good faith, and to defeat fraudulent purposes, and, as he successfully argued before the Supreme Court in the case of Warwick v. Matlack, 2 Halst. 165, “ the fifth section of the act was merely meant to place a cheek upon the conscience of the party, and to provide against the entering-of improper and fraudulent judgments,” then the judgment in this case, embracing the moneys as well then due as the advances at the time agreed to be made, and after-wards made in good faith within a. reasonable period, and before any oilier creditors had acquired rights by judgments and levy, is no such departure from the statute, *619and tends to no such evils as should vitiate the judgment;” nor do the facts presented against the bona jides of the transaction bring the case within the mischief contemplated in the statute of frauds.
It was also contended, upon the argument, that if one promissory note be a good consideration, within the meaning of the statute, for another promissory note, two parties might exchange notes of equal amounts, and each confess a judgment to the other, and thus cause their respective properties to be covered by executions and levies. Grant that they might, yet, cui bono, if neither of them had creditors “ with certain claims upon his property,” who could impeach the transaction? If in such a case judgment creditors of either or both of the parties should apply to a proper tribunal for a preference of lien, the court would unquestionably order that one judgment should bo set off against the other, thus paying the collusive parties in their own coin, and leaving the property of each to respond to the demands of his bono fide judgment creditors.
From the view which I have taken of the whole case, I conclude—
First. That a judgment good at common law cannot be attacked for a mere irregularity in the proceedings by any one not a party to the record.
Second. That a court should liberally exercise its equitable jurisdiction over confessed judgments for the detection of fraud and the promotion of fair dealing between debtors and creditors, and in a proper case they may award a feigned issue for a jury to try the fact of fraud.
Third. That a judgment by confession at common law without an affidavit is not absolutely void and fraudulent because of a non-compliance by either of the parties with the directions of the statute, but that the irregularity in the proceeding may be questioned by the defendant on a writ of error, and the absence of an affidavit may be looked upon as strong, if not a conclusive badge of fraud, in proceedings between contesting judgment creditors.
*620Fourth. That, a judgment may be confessed in New Jersey to secure a pre-existing debt and future advances, or future advances alone, furnished in either case in fulfillment of an agreement originally made that the judgment should be a security for such advances’—they being taken, when made, as parts of the original transaction; but that advances made after actual notice of an intervening encumbrance will not be protected by the judgment.
Fifth. That in the ease before the court, neither actual fraud nor legal fraud has been established against the senior judgment creditors, and that they are entitled to priority in payment to the amount of the pre-existing indebtedness and of the advances actually made before the other judgments were confessed, notwithstanding the manner in which the consideration of the note is set out in the affidavit.
These conclusions, I think, maintain the law, as it has been settled and received in New Jersey for upwards of twenty years past; and if it be the prevailing sentiment of the bar and of the community that judgments by confession, which do not literally conform to the provisions of the present act respecting affidavits, ought to be absolutely void as to’subsequent judgment creditors, and also that such creditors should be at liberty to attack judgments for irregularity in the proceedings, the legislature can pass a supplement to the statute in language which will put the question at rest for the futuro.-
In my judgment, the order and rule of the Supreme Court should be affirmed,, with costs-.
For Affirmance—The Chancellor, and Judges Ogden, VEEDENJ3ÜÉGH, CORNELISON and1 WOOD.
For Reversal-^The Chief Justice, and Judges POTTS, Ryerson, Ris'ley, Swain arid Valentine.
The tefn-t of office of Judge Arrowsmith, one of the judges who heard the argument, having expired February 6th, 1858, he was not present when the case was.decided.
*621On the announcement of the above vote, the court ordered the following rule to be entered in the minutes.
“This cause having been re-argued at tiie last term of the court., in presence of the Chancellor, Chief Justice, Justices Ogden, Potts, Vredenburgh, and Ryerson, and Judges Arrowsmith, Cornelisou, Valentine, Risley, Swain, and Wood, (Justices Elmer and Haines having rendered the judgment of the Supreme Court in (he case), and the court having taken time to advise thereon until this term, and the question being now taken on motion to reverse the judgment of the Supreme Court, the vote was as follows: For reversal—Green (C, J.,) Ryerson, Risky, Swain, for reversal as to all except the sum of three thousand and fifty-two dollars and ninety-four cents, the amount due the defendants in error when their judgment was confessed, and for that amount affirmance, Potts and Valentine. For affirmance—Williamson (Chancellor,) Ogden, Vredenburgh, Cornelisou, and Wood; whereupon the court announced that the judgment of the Supreme Court stood in all things affirmed, according to the act of the legislature, which declares that no judgment, of the Supreme Court shall be reversed by this court, unless a majority of those members of the court who are competent to sit on the hearing and decision of the case shall concur in such reversal; and thereupon the counsel for the plaintiff in error moved for leave to discuss the construction and validity of said act, and the court ordered that counsel be heat'd thereon, in full court, at the next term of the court, the cause to have priority on the list of causes at that time.”
At June Term, the court decided that the above-mentioned law was unconstitutional, and that, even if it was constitutional, a majority of the judges competent to sit at the decision of the cause were in favor of reversal, and ordered that the judgment of the Supreme Court should be reversed except as to the sum of $3052.94.