Brown v. Farmers' Loan & Trust Co.

• Decision Date: 26 November 1889
• Citation: 117 N.Y. 266,22 N.E. 952
• Parties: BROWN v. FARMERS' LOAN & TRUST CO.
• Court: New York Court of Appeals Court of Appeals

117 N.Y. 266

22 N.E. 952

BROWN

v.FARMERS' LOAN & TRUST CO.¹

Court of Appeals of New York.

Nov. 26, 1889.

Appeal from supreme court, general term, first department.

Action by Augustus C. Brown, administrator of Mary R. Burnside, against the Farmers' Loan & Trust Company, to recover the value of certain bonds. Plaintiff appeals from a judgment of the supreme court reversing a judgment for him on the report of a referee.

Stephen A. Walker, for appellant.

David McClure, for respondent.

FINCH, J.

The argument in behalf of the appellant is extremely difficult to answer, if we suffer ourselves to be tied down by the form of the transaction, and shut our eyes to its substance. But if we have courage to cut through the techinical outside shell we shall find within nothing which the law condemns, or which drives us to the commission of a regretted injustice. Let almost everything urged on behalf of the appellant be admitted for the sake of the argument, though without so deciding. Let us concede that the will of Mrs. Burnside gave to her husband only a life-estate, with a power of sale, and liberty to appropriate the proceeds to his own use; that the construction of the will is to be governed by the law of Rhode Island, and so is not affected by our statute relating to powers; that, therefore, Gen. Burnside had no right under the will to pledge the bonds; that those in question were the individual bonds of Gen. Buckner, and not negotiable paper, within the meaning of the lawmerchant; that the defendant knew them to have formed part of Mrs. Burnside's estate, and was fully cognizant of the terms of the will,-admit all this, and yet I think the plaintiff must fail, as in the interest of justice it ought to fail. For consider what actually happened. Gen. Burnside borrowed $15,000 of the defendant corporation. It supposed its loan was secured by the pledge of the Buckner bonds. But that pledge was not made, because it could not be made, and the inevitable legal result was that they had loaned their money without security, and solely upon the personal responsibility of the borrower. The bonds were in the possession of the trust company, and had been registered as payable to bearer, but remained the property of the life-tenant, and subject to the provisions of the will. The loan became due; the debtor could not pay; and some way out of the emergency was necessary to be adopted. Gen. Burnside, under the will, was at liberty to sell the bonds, and appropriate the proceeds to his own use. That, the Rhode Island court without hesitation concedes. He was at liberty to put them upon the market, to sell them for such price as he could obtain, and use the proceeds, so far as they would go, in the payment of his loan. But undoubtedly the bonds were not salable, except at a very great sacrifice. They were the obligations of an individual, secured by a mortgage on land, and were estimated by the president of the defendant company to be worth only one-half of their face value. What happened was that the debtor, having lawful right to sell, did sell to his creditor; and, being at liberty to use the proceeds for his own benefit, did therewith extinguish his debt. The fact is sworn to distinctly and decisively by Mr. Rolston, who transacted the business. He testifies: ‘The general came to my office,-into the office of the Farmers' Loan & Trust Company,-and stated that it was impossible for him to pay that loan, and that we would have to take the bonds for the money we had advanced him. I cannot give you the exact words I said to that. I accepted his proposition. I know I said, ‘Very well, general.” The witness adds, later, that it was his intention to release him from any personal obligation. No note had been given for the debt, so that there was nothing for the defendant to surrender except the unsecured debt. That was discharged. No demand or claim for principal or interest was afterwards made by the vendee, and no offer of payment or intimation of existing liability proceeded from the debtor. The transaction between them ended then and there. The truth of this statement there is no just reason to doubt. The probabilities are strongly in its favor. Gen. Burnside could make no better or more advantageous disposition of his bonds than to cancel his debt by a sale to the creditor. The latter stood in an awkward position, and plainly could do no better. Gen. Burnside was poor and the creditor knew it; for Mr. Rolston says that outside of the bonds there was no means of recovering...