Thurman v. Anderson.

of his dealings with the vendee in respect to the estate. (Parks v. Jackson, 11 Wend. 442. Gouverneur v. Lynch, 2 Paige, 300.) The defendants in this case took possession under a lease, valid as against West, for a term which has not yet expired. The lessor could not, so long as they performed the covenants of the lease, oust them from their possession, whether he perfected his legal title by the payment of the purchase money upon his contract or not. It is not necessary, to sustain this proposition, to refer to the doctrine of estoppel, by which a lessor who has demised premises with a covenant for quiet possession, either express or implied, having no title and subsequently acquiring a title, is precluded from making use of that title to the prejudice of the lessee, and by which such subsequently acquired title is made to enure to the benefit of the lessee. Such is the very familiar rule. (Jackson v. Murray, 12 John. 201. Jackson v. Stevens, 13 id. 316. Vanderheyden v. Crandall, 2 Denio, 9.) Here West, the lessor, had an equitable title and an inchoate legal title, and when that should ripen into a perfect legal title he would nevertheless be in under the same title that he had at the time of the lease. His deed would operate by relation, and become effectual from the time of making his contract, so as to protect all intermediate interests. (Moyer v. Hinman, supra. Parks v. Jackson, supra. Jackson v. Bull, supra. Jackson v. Raymond, 1 John. Cas. 86, note. Johnson v. Stagg, 2 John. 510.) The plaintiff became the assignee of the contract of purchase with notice of the lease to the defendants, and of their equities. As assignee of the contract, he was charged with all the equities resulting from the lease, and in all respects occupied the position of West, the vendee and lessor, except as to the personal covenants of West as lessor. As the assignee of the vendee he could not, considering his right to possession under the contract, have evicted the lessees of West and put an end to the lease. His equitable title was precisely the title of West. West could not convey to him interests or rights over the premises, or against the

Thurman v. Anderson.

occupants, which he had not. If the plaintiff had never obtained a deed of the premises from the original vendor, it will be conceded that he could not have disturbed the defendants in their possession, so long as they were entitled to retain possession under their lease. This being so, how could he acquire rights by performing the contract of purchase and paying the purchase price of the premises, which his assignee, the vendor, could not? The proof is that the plaintiff acquired his title, not in hostility to the contract to West, but in pursuance and fulfillment of it. His title, before equitable, became a legal title, but necessarily subject to all the legal incidents and equitable charges to which his equitable title was subject. Having purchased the equitable title with notice, he cannot be relieved from the consequences of that action, even by a subsequent purchase of the legal title. (1 Story's Eq. Jur. § 64, e.) But here is no purchase of the legal title. The payment, which was the consideration of the deed, is referable to the contract in pursuance of which the deed was given; and as the title of the vendee would have related back to the date of the contract, to preserve intermediate rights, the same effect must be given to the plaintiff's title acquired under the same contract. It is, in effect, as if West had purchased the deed and then conveyed to the plaintiff. (Van Horne v. Crain, 1 Paige, 455. Jackson v. Hubble, 1 Cowen, 613. Bank of Utica v. Mersereau, 3 Barb. Ch. R. 568.) The plaintiff received the deed because he was the assignee of West, as such assignee, and not independent of him. West cannot in this way get rid of the equities of his lessees; nor can the plaintiff thus profit by his acquisition of the legal title. Had there been an attempt to surrender the contract, equity would have entitled the defendants to come in for their own protection, and pay up the amount due and take the title as against West and all claiming under him with notice of their rights. The plaintiff has no equity, as against the defendants, and his legal title, having relation to the contract, as it does, is VOL. XXX.

40

Hungerford's Bank v. Dodge.

subject to the right of the defendants to occupy under their lease.

The judgment must be reversed, and a new trial granted; costs to abide the event.

[ONONDAGA GENERAL TERM, January 3, 1860. Pratt, Bacon, W. F. Allen and Mullin, Justices.]

HUNGERFORD'S BANK vs. DODGE and others.

Accommodation indorsers of a promissory note made by a corporation are not estopped by the " Act to prohibit corporations from interposing the defense of usury in any action," passed April 6, 1850, from alleging usury, as a defense to an action brought against them and the corporation jointly, upon the note. PRATT, J. dissented.

Such indorsers are in no sense strangers to the contract of loan, so as to preclude them from setting up the defense of usury when sued upon their indorsement, or from seeking affirmative relief by action, on the ground of usury.

They are sureties of the borrower, and as such are embraced in the term "borrower," as used in the 8th section of the revised statutes relating to usury, and in the 4th section of the usury law of 1837.

THE

HE plaintiff sued the Potsdam and Watertown Rail Road Company as maker, and the other defendants as indorsers of a promissory note, negotiated with the plaintiff and discounted by it for the benefit of the maker. The cause was tried at the Jefferson circuit, before MASON, J. without a jury, and it was proved that the indorsers were accommodation indorsers for the rail road company, and that the loan and discount to the company, upon and for which the note was given, was usurious. The rail road company suffered default, and the judge at circuit gave judgment against the other defendants, for the amount due upon the note for principal and interest, and from that judgment the defendants appealed. J F. Starbuck, for the appellants.

C. Andrews, for the respondents.

Hungerford's Bank v. Dodge.

W. F. ALLEN, J. The plaintiff loaned to the Potsdam and Watertown Rail Road Company money at a greater rate of interest than that allowed by law, and to secure the repayment of the money so loaned, with the illegal interest, the note in suit was given the individual defendants indorsing as the sureties and for the accommodation of the rail road company, the maker of the note. Judgment at the circuit was given against the indorsers, upon the ground that they were estopped by the "Act to prohibit corporations from interposing the defense of usury in any action," passed April 6, 1850, from alleging usury, as a defense to this action.

The defendants are in no sense strangers to the contract of loan, so as to preclude them from setting up the defense of usury when sued upon their indorsement, or from seeking affirmative relief by action, on the ground of usury. They are sureties of the borrower, and as such are embraced in the term "borrower," as used in the 8th section of the revised statutes relating to usury, and in the 4th section of the usury law of 1837. (3 R. S. 73, § 8, and 74, § 13, 5th ed. Post v. Bank of Utica, 7 Hill, 391. Cole v. Savage, 10 Paige, 583. Morse v. Hovey, 9 id. 197.) A mere stranger to the transaction cannot, ordinarily, allege usury in respect to it, but a party to a deed or contract, as well as those standing in legal privity with him, can, unless estopped or under disability of some kind, always show it to be void when it is sought to be enforced against him. The defendants are not, certainly, strangers to their own contract of indorsement. They and they only can allege the invalidity of their contract. (Dix v. Van Wyck, 2 Hill, 522. Green v. Morse, 4 Barb. 332.) They are not necessarily restricted, by their relation to the principal, to the defenses which may be made available to the maker of the note. They are not joint contractors with the maker, and the contracts of the maker and indorsers are entirely distinct, and governed by different rules. The contract of the one is conditional, while that of the other is absolute. An action against an indorser may be defeated by want of de

Hungerford's Bank v. Dodge.

mand and notice, by dealing with the principal debtor to his prejudice, when he occupies the position of a surety; and an indorsement may be void as obtained by fraud, or for some other reason, while the contract of the maker is valid. So too one party to a note, maker or indorser, may be estopped by his own acts from setting up a defense true in fact and common to both, and which would be fatal, while the other parties may avail themselves of it. (McKnight v. Wheeler, 6 Hill, 492. Holmes v. Williams, 10 Paige, 326. 3 Kern. 316, per Denio, J. Chamberlain v. Townsend, 26 Barb. 611. Dowe v. Schutt, 2 Denio, 621. Clark v. Sisson, 4 id. 408. Prescott v. Davis, 4 Barb. 495.) As one party may be estopped by his own acts from setting up a defense, so he may be estopped by act and operation of law, or by a statute describing him by name, or by his status or condition, or as a contractor in a particular form, without affecting the parties not named. The contracts of makers and indorsers of promissory notes are treated as they are in truth, separate and several contracts. They may or may not be supported by the same consideration, but a joint action will not lie against them although they may now, by statute, be sued together; but in such case the action is regarded, for all the purposes of protecting the rights of parties, and is prosecuted, as a several action against the several parties.

The validity of the contract of indorsement does not necessarily depend upon the validity of the engagement of the maker. It is true where both grow out of the same transaction, and depend upon the same consideration, if one is illegal both are necessarily so; but it does not follow, that because one is not in a situation to allege the illegality, the other shall be precluded. The law which forbids the borrower in this case to allege usury, is very direct in its terms and simple in its provisions. "No corporation shall hereafter interpose the defense of usury." Assignees and representatives of corporations, although not named, are within the spirit of the act, and therefore within its terms, and they are not permitted to avail themselves of a defense from which the corporation is