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of the property to the mortgage debts is concerned.

The question of usury, and the questions growing out of the claim of homestead, are not raised by the mortgage creditors, nor insisted on by them. They have no assignments of error which make those inquiries material or pertinent. It is only the judgment creditors who seek to raise these questions. The result of our rulings above, and the large amounts thus shown to be due the mortgagees, all of which have a lien on the property, prior and paramount to any claim the judgment creditors can assert, is to show clearly that only the mortgagees are interested in the proceeds of the real estate. It is manifest that under no circumstances will there be a surplus left after paying the mortgage debts. Any claim or pretense that because Adams, to induce Moses Bros. to permit the building and loan association to have a first lien, became surety or guarantor of the purchase-money debt Nalls owed them, he thereby armed other or subsequent creditors of Nalls with the right to demand that they (Moses Bros.) should first collect their demand out of Adams, finds no sanction in the doctrine of marshaling assets. Dollins v. Lindsey, 89 Ala. 217, 7 South. 234. Nor need we consider whether, at the suit of the judgment creditors, Adams can be compelled to exhaust his lien on the personal property embraced in his mortgage (possibly otherwise exempt) before he will be permitted to share in the proceeds of the real estate, which is also covered by his mortgage. It is obvious this is a question in which the judgment creditors have no interest, for the real property, supplemented with the personal property embraced in the mortgage to Adams, will not pay in full the mortgage debts which have the paramount lien.

As we have shown, Moses Bros. and J. R. Adams made an agreement that the loan to be made to Nalls by the building and loan association should be a first lien. On the strength of this agreement the loan was made; and it is not controverted that by virtue of that agreement, and the loan made on the strength of it, the building and loan association did acquire a paramount lien on the property. The contention of appellants is that the agreement of June 6, 1888, was a novation and change of the contract, giving to Nalls a materially enlarged term within which to make payment, exacting smaller monthly installments, and that this being done without their consent absolved them from their agreement to make the building and loan association loan a first lien, and remitted them to their original rights of first and second lienees. We think it very clear that the consummated agreement between Nalls and the building and loan association, of date June 6, 1888, was a novation, the entering into a new contract, having changed security, prescribing different methods of payment, and extending the time of final set

tlement. By the original agreement, made January 9, 1885, Nalls pledged his 100 shares of stock as security, and bound himself to pay $40 every month until the borrowed money debt should be thereby extinguished. Failing to make these monthly payments, as required by the by-laws of the corporation and by the terms of his contract, the mort gage would have become forfeited, and subject to immediate foreclosure. Making the monthly payments as stipulated, the mortgage debt would be paid in full, say, in 1892 or 1893. Under the substituted contract of June 6, 1888, the 100 shares of stock were surrendered up and canceled, 75 shares of new stock issued to Nalls, an agreement entered into to pay $30 per month until the debt should be extinguished, and the 75 shares of stock placed in pledge for a faithful compliance with the new contract. Under this second agreement, if its terms were never so faithfully complied with, the debt would not become extinguished within a shorter term from its date than the original debt would have from its date. This would probably delay the maturity until 1895 or 1896. This was an extension of more than three years; and it is manifest that, if Nalls should comply with the terms of the second contract in the matter of making the agreed monthly payments, the building and loan association had estopped itself from enforcing the contract of January, 1885, either by foreclosing that mortgage, or otherwise. This was clearly a novation. 16 Amer. & Eng. Enc. Law, 862 et seq.; 3 Brick. Dig. p. 152, 146.

It is a long and well established doctrine that a surety for the debt or duty of another has a right to stand on the very terms of his contract as made and agreed to by him; and if, by a binding agreement between the creditor and principal debtor, any material change is made in the contract, to which the surety's assent has not been obtained, this absolves the latter, whether the change increases his liability or not. 3 Brick. Dig. p. 715, § 36 et seq.; Brandt, Sur. § 342; Rees v. Berrington, 2 Ves. Jr. 540; King v. Baldwin, 2 Johns. Ch. 554. And guarantors are deemed sureties in the application of this principle. So, if one pledge his property as security for another's debt, he, like a personal surety, can invoke this doctrine. It is a doctrine in the interest of good faith, and is highly favored in the law. "When property of any kind is mortgaged or pledged by the owner to answer for the debt, default, or miscarriage of another person, such property occupies the position of a surety or guarantor, and anything which would discharge an individual surety or guarantor who was personally liable will, under similar circumstances, discharge the property." 1 Brandt, Sur. § 34. In White & Tudor's Leading Cases in Equity (volume 1, pt. 1, p. 137) is this language: "Every one is a surety, within these principles, who incurs the liability in person

or estate at the request and for the benefit of another, without sharing in the consideration." The case of Rowan v. Manufacturing Co., 33 Conn. 1, was very like the present one in principle. In that case Robbins & Lawrence had executed a mortgage on real estate to Sharp's Rifle Company, as security that they would repay to the latter certain advances made to them (Robbins & Lawrence) to be used in the manufacture of rifles. After this contract was entered into, Robbins & Lawrence made a contract with Fox & Henderson to manufacture for them a large quantity of rifles, the rifles to be made "with all possible dispatch." They (Robbins & Lawrence) were to receive an advance from Fox & Henderson, the repayment of it to be secured by a mortgage. Upon the solicitation of both parties-Robbins & Lawrence and Fox & Henderson-the Sharp's Rifle Company released certain of the property conveyed to it by Robbins & Lawrence, so far as to enable the said Robbins & Lawrence to give to Fox & Henderson a firstmortgage lien thereon, for the repayment of the money to be advanced by them. This agreement was carried into effect, the release executed, the mortgage given, and the money advanced. Under the contract as first made, and as it stood when the rifle company released its mortgage lien, Robbins & Lawrence, as we have shown, were bound to manufacture the rifles "with all possible dispatch." Subsequently, and without the consent of the rifle company, a supplemental contract was entered into, by which Robbins & Lawrence bound themselves to Fox & Henderson that 300 rifles per week should be delivered for a certain named time, and 600 per week thereafter, until the whole number should be delivered. The details of the first contract were changed in other particulars, not necessary to be noted. It was held by the court that under this agreement the Sharp's Rifle Company had all the rights of sureties to the contract, and that the property pledged for the performance was discharged by such changes as would have discharged a personal surety upon the contract. Held, further, that the changed term agreed on for the delivery of the rifles was such a change of the contract as to discharge the surety. The case of Poland v. Railroad Co., 52 Vt. 144, decides that a release of priority of lien, such as was executed by Moses Bros. and by Adams, is only an equitable mortgage or pledge of the mortgage interest vested in them, and making that interest a security for the debt in favor of which the release was executed. Applying that principle to this case, Nalls was the principal in the debt to the building and loan association, and the mortgage interests of Moses Bros. and of Adams stood in the rela

tion of sureties for Nalls that he would pay the debt. The consideration moved to Nalls, and he was the debtor. As between them, it was neither the debt of Moses Bros., of Adams, nor of their property; for, if he (Nalls) had paid the debt in full, he would have had no recourse against them, or against the mortgaged property, for the recovery of the money paid, or for contribution. See Jones, Corp. Bonds, § 38; 1 Jones, Mortg. § 942; 17 Amer. & Eng. Enc. Law, 917; Gahn v. Niemcewicz, 11 Wend. 312; Lewis v. Palmer, 28 N. Y. 271; Price v. Reed, (Ill. Sup.) 15 N. E. 754; Cherry v. Monro, 2 Barb. Ch. 618; Niemcewicz v. Gahn, 3 Paige, 614 If it be considered essential to the application of the principle stated that knowledge should have been traced to the building and loan association of the relations Moses Bros. and Adams sustained to the property, the answer is that the very paper executed by Moses Bros. and by Adams proves such knowledge beyond all peradventure. And the original bill filed in this cause by the building and loan association asserts, in substance, that such was the fact; and it rests its claim of paramount lien on the property on the said agreement of waiver which Moses Bros. and Adams entered into, and which, it says, induced and caused it to lend its money to Nalls. Under the principles declared above, we hold that the Home Building & Loan Association has discharged Moses Bros. and J. R. Adams from the binding effect of the waiver they entered into in favor of the Home Building & Loan Association, and that this case must be tried and decreed as if no such waiver had been given.

The decree of the chancellor is reversed. Let the costs of appeal, alike in the court below and in this court, be paid by the Home Building & Loan Association. Proceeding to render the decree the chancery court should have rendered, it is ordered and decreed that after payment of the costs of the suit out of the proceeds of sale, as decreed by the chancellor, the remaining proceeds will be applied-First, to the payment to Moses Bros., or whoever is rightfully entitled to that claim, of the amount reported and confirmed to be due to them, with interest thereon from the date of the report; second, to the payment of the sum reported and confirmed as due to J. R. Adams, with like interest; third, to the payment to the Home Building & Loan Association the sum reported and confirmed as due to it, with like interest. In all things else relating to the sale of the land, the making of title to the purchaser, and the distribution of the proceeds, the decree of the chancellor is adopted and affirmed. The register will report his proceedings under this decree to the chancery court. Reversed and rendered.

ANNISTON CARRIAGE WORKS et al. v. WARD et al.

Jan. 9, 1894.)

(Supreme Court of Alabama. ASSIGNMENT FOR BENEFIT OF CREDITORS

MORT

GAGE TO SECURE PRE-EXISTING DEBT. Under Code. § 1737, providing that every general assignment with a preference by a debtor, except a mortgage to secure a contemporaneous debt, shall inure to the benefit of all the grantor's creditors equally, where an insolvent debtor mortgages his entire stock of goods to secure a pre-existing debt, and this mortgage is subsequently satisfied by the sale of part of the goods, and the procurement of money from another person by a second mortgage. the money so received by the first mortgagee in satisfaction of his mortgage is a fund which is subject to the claims of all the mortgagor's creditors.

Appeal from city court of Anniston.

Bill by R. D. Ward & Co. and others against the Anniston Carriage Works and the Anniston Loan & Trust Company to have a mortgage declared an assignment for the benefit of creditors. From a decree for complainants, defendants appeal. Affirmed.

R. D. Ward & Co., and other creditors of the Anniston Carriage Works, on the 28th day of January, 1892, filed their bill in the city court of Anniston seeking to have a mortgage executed by the Anniston Carriage Works to the Anniston Loan & Trust Company declared a general assignment for the benefit of all creditors of said Anniston Carriage Works. It is alleged that on the 2d day of November, 1891, the Anniston Carriage Works executed a mortgage conveying to the Anniston Loan & Trust Company substantially all of its property, to secure a preexisting debt. The mortgage was due 60 days after date, and matured on the 1st day of January, 1892. The prayer of the bill is that the mortgage be declared a general assignment for the benefit of all the creditors, and that the Anniston Loan & Trust Company be held to account to the creditors for the value of the stock of buggies, carriages, and merchandise, alleged to be of value $11,000, for the benefit of the general creditors. The respondents, the Anniston Carriage Works and the Anniston Loan & Trust Company, answer the bill, and allege that the Anniston Carriage Works was indebted to the Anniston Loan & Trust Company in the sum of about $5,000 for advances made by said Anniston Loan & Trust Company, which was doing a banking business, in paying drafts drawn by said Anniston Carriage Works, and overdrafts made by the latter, the aggregate of which amounted to over $5,000, and for which it negotiated a loan with said bank, due 60 days after date, and executed a mortEage to secure the same upon its stock of buggies, carriages, and other merchandise, consisting, substantially, of all its property, prior to the maturity of this debt, and on The 3d day of December, 1891, the Anniston Carriage Works paid the debt in full, and the mortgage was satisfied, and the Annisv.14so.no.9-27

ton Loan & Trust Company, which had temporarily assumed possession of the mortgaged property, restored the same to the mortgagor, and the mortgage was canceled and satisfied. Afterwards, and before the filing of the bill in this cause, the Anniston Carriage Works executed a new mortgage upon the same property to one William Noble contemporaneously with the making of said mortgage, and subsequently made a bill of sale to William Noble in extinguishment of this mortgage. Both respondents pleaded that William Noble is a proper and necessary party respondent to the bill, and the Anniston Carriage Works filed a separate plea setting up the invalidity of the mortgage because it had not been authorized by a stockholders' meeting, nor had 30 days' notice of any meeting for that purpose been given to the stockholders, or any of them. Each of the respondents file demurrers for the nonjoinder of other creditors of the Anniston Carriage Works as co-complainants. The court below overruled the demurrer and plea, and entered a decree granting the relief prayed for by complainants.

J. J. Willett and Knox, Bowie & Pelham, for appellants. Cassady, Blackwell & Keith, for appellees.

COLEMAN, J. On or about the 2d day of November, 1891, the Anniston Carriage Works, a body corporate, being then indebted to complainants, the appellees, and other creditors, to secure a past indebtedness due and owing to the Anniston Loan & Trust Company, also a body corporate, executed a mortgage upon substantially all its property and effects. Complainants, creditors of the Anniston Carriage Works, filed the present bill, seeking to have the mortgage convey-. ance to the loan and trust company declared a general assignment for the benefit of all its creditors. The mortgage to the Anniston Loan & Trust Company was executed in the name of "Anniston Carriage Works, by Randolph St. John, Secretary and Treasurer." The evidence is sufficiently satisfactory that this mortgage was executed by authority granted by the board of directors. It was certainly subsequently recognized and ratified as binding. The main defense relied upon is that the mortgage debt was satisfied and the mortgage canceled on or about the 1st of December, 1891, long before the filing of the present creditor's bill. The facts upon which this defense is based, briefly stated, are as follows: The mortgage to the Anniston Loan & Trust Company was executed on the 2d of November, 1891, to secure a debt of $5,000, and it became due on the 2d day of January, 1892. The loan and trust company took immediate possession of the property. On the 1st of December, prior to the maturity of the mortgage, the Anniston Carriage Works borrowed from William Noble $4,000, and to secure

the payment of this indebtedness the Anniston Carriage Works executed another mortgage to William Noble on the identical property which had been mortgaged to the loan and trust company, except such portion as had been previously sold. The check of William Noble for $4,000, together with the check of the carriage company for $1,000, was applied to the loan and trust company in payment and satisfaction of the debt due it from the carriage company, and the mortgage of the carriage company to secure this debt was canceled.

Section 1737 of the Code reads as follows: "Every general assignment made by a debtor, by which a preference or priority of payment is given to one or more creditors, over the remaining creditors of the grantor, shall be and enure to the benefit of all the creditors of the grantor equally; but this section shall not apply to, or embrace mortgages given to secure a debt contracted cotemporaneously with the execution of the mortgage, and for the security of which the mortgage was given." It is averred in the bill, and proof shows, that the debt due the loan and trust company, to secure which the mortgage to that company was executed, was not contracted contemporaneously, but was a past-due debt. The proof also shows that the mortgage embraced substantially all the grantor's property, and that the grantor, the carriage company, at the time, was insolvent. It is clear that this mortgage was a general assignment, within the meaning of the statute; and if complainants had filed their bill before the execution of the mortgage to William Noble, and before the attempted cancellation of the mortgage to the loan and trust company, asking for its foreclosure for the benefit of creditors, we would be com.pelled to declare that the conveyance created a general assignment, and that it could be enforced for the benefit of the nonpreferred creditors. These complainants, and other creditors not named in the mortgage, had the same rights, and were entitled to the same privileges, in the conveyed property, by virtue of the statute, as if they had been named and specifically provided for along with the Anniston Loan Company, so far as the Anniston Loan Company is concerned. Possibly, the effect upon third parties, not charged with notice, would be different. Neither would this result be altered, if, under the power contained in the mortgage, the Anniston Loan Company had foreclosed the mortgage, and applied the proceeds to the payment of the debt secured by the mortgage. A court of equity, at the instance of nonpreferred creditors, would decree the conveyance a general assignment, and the mortgagee an assignee or trustee of the proceeds of the property for their benefit. Danner v. Brewer, 69 Ala. 191; Holt v. Bancroft, 30 Ala. 193. Can it make any difference in principle because the grantor, by a second mortgage on the same prop

erty, borrows money from a third person, and pays it over to the preferred creditor in satisfaction of a conveyance, which the law declares "shall enure to the benefit of all the creditors of the grantor equally?" The transaction shows that it was the understanding of all the parties that the money loaned by William Noble was to be paid over to the Anniston Loan Company, and that company was to cancel its mortgage, so that the carriage company could by a second mortgage, secure William Noble in the loan of $4,000. Suppose, in the first instance, William Noble had purchased the entire property for a cash consideration of $4,000, which is proven to have been worth then full $5,000; it could not be said he had paid a fair equivalent for the property. It is apparent that when the property was mortgaged to the loan and trust company it was worth $5,000, the full equivalent of the debt secured by the conveyance. In the mean time, before the execution of the mortgage to William Noble, $1,000 of this property had been disposed of. It was in the possession of the loan and trust company. It could not have been disposed of without its consent. We infer the check of the carriage company for $1,000 covered the value of the property which had been thus disposed of before the execution of the mortgage to William Noble. Thus, under and by virtue of the mortgage, which we declare to have created a general assignment for the benefit of all the creditors, the loan and trust company has realized the entire proceeds of the property conveyed. Equity looks at the substance and effect of a transaction. It will not permit the rights of creditors, secured to them by the law, to be circumvented or overreached. We hold that the bill is properly filed against the Anniston Loan & Trust Company, and that the proof sustains the averment that the mortgage was a general assignment inuring to the benefit of all the creditors. William Noble has no interest in what disposition is made of the money paid by him for the property. The mortgage to him was to secure a debt contracted contemporaneously with the execution of the mortgage, and it may be was not within the influence of section 1737 of the Code, but this section cannot alter the effect of the mortgage to the loan and trust company. It was this latter mortgage that enabled the loan and trust company to monopolize the entire assets of the carriage company. The money stands in lieu of the property, and is equally subject to the claim of other creditors. It is the proceeds of the property in the hands of the Anniston Loan & Trust Company which is sought to be reached and subjected by the bill. Notice should be given to all the creditors who are entitled to share in the proceeds to come in and prove their claims. This we understand to be the effect of the decree of the city court, and in so holding there was no error. Affirmed.

1

(45 La. Ann.) STATE ex rel. NEGROTTO v. JUDGES OF COURT OF APPEALS. (No. 11,402.) 1 (Supreme Court of Louisiana. Dec. 18, 1893.) APPEAL-SCOPE OF Review.

1. In case an exception of no cause of action is sustained in the district court, the suit dismissed, and an appeal is prosecuted to the circuit court of appeals, the latter is without authority or jurisdiction to dispose of the case finally upon its merits, on the theory that such an exception admits the truth of plaintiff's allegations for all the purposes of the case.

2. Such question does not involve the regularity or correctness of the judgment of said suit, but their right to render any judgment in that attitude of the case.

(Syllabus by the Court.)

Certiorari at the relation of D. Negrotto, Sr., against the judges of the court of appeals, to review a certain judgment of respondents. Judgment for relator.

J. Zach. Spearing, for relator. Branch K. Miller, for respondents.

WATKINS, J. Relator avers that he is defendant and appellee in the suit entitled "Frank Haas et al. v. D. Negrotto," (No. 1,062 of the docket of the circuit court of appeals in and for the city of New Orleans,) the object of which is to annul a tax sale; that to said suit he tendered, and caused to be filed, a plea of prescription, and also an exception of no cause of action, which were, upon the trial thereof, sustained, and the suit dismissed; that from said judgment the plaintiff prosecuted an appeal to the court of the respondents, and therein said exception and plea of prescription were fixed for trial, argued, and submitted, and that those were the only issues or questions that were prepresented to, or argued before, the respondent judges, or which could in any manner have been considered or taken as an answer to the merits; that no evidence had been offered, admitted, or taken in said cause at any time; that said exceptions were tried in the lower court upon the face of the papers, and the judge of the civil district court did not consider or determine the cause or its merits at all; that said cause was not tried in the court of the respondents on its merits, nor was said cause appealed to said court on its merits, the only trial or hearing of said cause in said court having been upon said exception and plea of prescription. Relator further avers that, notwithstanding said state of facts, the respondents did render a pretended judgment and decree upon the merits of said cause in favor of the plaintiffs, annulling his (relator's) title to the property in controversy, recognizing plaintiffs to be the owners thereof; that within the legal delay he applied to said judges for a rehearing, and was refused; and that his only remedy is by certiorari. He further represents that said proceedings and judgment of the respondent judges are absolute'Rehearing refused February 5, 1894.

ly null and void, and of no legal effect, and, if same are permitted to remain undisturbed, they will work him a great and irreparable injury, said judgment and decree having been rendered without the court having heard the relator or his witnesses on the merits of his cause; and that to permit an illegal, null, and void judgment to remain undisturbed would be to condemn relator without granting him a hearing or trial, and de prive him of his property without due process of law. Respondents substantially return that there was, in the suit of Haas v. Negrotto, "a joinder of issue of law on the exception filed by the defendant, to the effect that the plaintiffs' petition disclosed no canse of action which admitted that all the facts therein were true, in manner and form as alleged, and that there was thus a joinder of issue between the parties upon all the merits of the case propounded by the plaintiffs; and that upon this issue the parties were heard as they desired to be, and thereafter, and upon mature consideration, and according to the best judgment of respondents, the opinion and decree now complained of were rendered; [and] nothing has since occurred [that] has caused the judges of the court to doubt the correctness of their action in the premises." Hence, respondents submit that this court is without jurisdictional competency, either in the exercise of its appellate or supervisory powers, to inquire into and decide whether the proceedings and judgment of their court were, or were not, in conformity to law.

Respondents have sent up to this court, in connection with their return, the original papers and proceedings in the suit of Haas v. Negrotto, in order that their validity may be ascertained. The district judge states, in his reasons for judgment, that the defendant excepted that the petition disclosed no cause of action, and that plaintiffs' demand is barred by the prescription of three years; and, upon examination of the face of the papers, he decreed that "the exceptions herein filed are therefore maintained, and plaintiffs' demand is dismissed, at their cost." The judgment rendered is in exactly similar words, viz.: "It is ordered, adjudged, and decreed that the exceptions herein filed be maintained, and that plaintiffs' suit be dismissed, at their cost." But in the opinion and decree of the respondent judges no mention is made of the fact that, in the district court, judgment was pronounced upon the defendant's exceptions alone; and they proceed, broadly, to discuss the law of the entire case in all its bearings upon the merits of the controversy, it being concluded thus: "It is clear, beyond controversy, therefore, that for the foregoing reasons the judgment of the district court herein in favor of the defendant, Domingo Negrotto, Sr., is erroneous, and must be reversed, and a decree be entered therein in favor of the plaintiffs, as prayed for in their petition. It is therefore now here ordered, ad

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