
    William Barry, Resp’t, v. Orson Coville and Gabriel A. Morrill, Impleaded, etc., App’lts.
    
      (Supreme Court, General Term. Fourth Department,
    
    
      Filed July 20, 1889.)
    
    1. Evidence.
    Parol evidence is admissible to show that a deed absolute on its face was given as a security only.
    3. Deed—When intended as security only.
    Plaintiff assigned certain interests in patent rights to defendants, to whom he was indebted, and the latter agreed to furnish him with funds, the agreement providing that it might be terminated, and that upon payment to them of the indebtedness to that time they would assign such interests. Held, that the assignment was intended as collateral security; that plaintiff was entitled to an accounting, and upon the amount found due being paid or tendered, to a reassignment of said interests in the inventions.
    3. Evidence—Privileged communications.
    An attorney cannot be permitted to testify that he was employed by the plaintiff to draw the deed in question, nor that he applied to him for counsel on matters relating to the subject-matter thereof.
    Appeal from an interlocutory judgment entered in Onondaga county upon a decision made at special term in that county declaring that the plaintiff was entitled to a reassignment and reconveyance of certain interests in several patent rights or inventions upon paying to the defendants whatever indebtedness might exist for which it was claimed said inventions were turned out as security, and ordering a reference to state an account between the parties and allowing an application to be made to the court upon the referee’s report for further and final judgment.
    
      B. N. Bailey and I. D. Garfield, for appl’ts; Baldwin, Lewis & Kennedy, for resp’t.
   Hardin, P. J.

Before the Code allowing legal and equitable remedies to be had in the same action, it was held that paroi evidence was admissible, independent of proof of fraud or mistake, to show that a deed, although absolute on its face, was in fact intended by the parties as a mortgage. Strong v. Stewart, 4 Johns. Ch., 167; Whittick v. Kane, 1 Paige, 202; Van Buren v. Olmstead, 5 id., 9; Lansing v. Russell, 3 Barb. Ch.. 325.

Since the adoption of the Code of Procedure it has been repeatedly held that paroi evidence is admissible in all classes of actions, whether legal or equitable, to show that a deed absolute on its face was given as a security only. Despard v. Walbridge, 15 N. Y., 374; Horn v. Ketelas, 46 id., 605.

When the instrument of October 2, 1884 (exhibit 1), was executed by the parties to this action, the plaintiff was indebted to the defendants, and they also agreed to “furnish funds;” and it was stipulated in the agreement that the defendant “will pay the indebtedness for goods to September 16, 1884, to wit, $168.16, thirty-five dollars in cash heretofore paid to procure patent, etc., on the willow stripping machine herein mentioned for all goods had since September 16th aforesaid, and all moneys hereafter paid or advanced, and goods and provisions had hereafter.”

In that agreement, the defendant reserved “the right to terminate ” the agreement, and following the reservation of that right were the words which were quite significant in determining the intention of the parties; they are as follows: “but shall retain their interest and claims herein till they shall be fully paid their said indebtedness up to such time as they shall terminate this agreement; but they shall, upon payment to them of their said indebtedness, reassign their said interest in said inventions herein to said Barry.” The right to terminate the agreement was extended by a stipulation of the parties to July 1, 1885.

First. It is apparent that the parties executing the agreement of October 2, 1884, treated the assignment of the plaintiff’s interest in the several patents as .collateral security for his indebtedness to the defendants.

Second. It is obvious, from reading the testimony found in the appeal book, that such was the intention of the parties, and the finding of the learned trial judge to that effect must, therefore, be sustained.

Third. The finding of the learned trial judge, “that there is no evidence of any fraud or deceit attempted or practiced toward the plaintiff by defendant, either in regard to exhibit No. 1 or exhibit No. 4,” and also his finding “that plaintiff knew the contents of both exhibit No. 1 and exhibit No. 4 when he signed them (fol. 119),” are not inconsistent with, or at war with, his conclusion that the defendants held the several transfers which they received from the plaintiff as collateral security for any indebtedness or advances.

Fourth. We are of the opinion that the evidence warranted the finding that the several assignments were held by the defendants as security for any indebtedness, and when they elected to terminate their relations to the defendants, existing in virtue of said assignments, we think the plaintiff is entitled to an accounting, and upon that accounting the amount being found due to the defendants paid or tendered, the defendants ought to assign to the plaintiff the several inventions which they took under the circumstances disclosed by the findings of the trial judge.

Fifth. When Cornelius W. Smith was upon the stand as a witness, it appeared that he drew the deed known as exhibit No. 4, and that bp was an attorney-at-law, and that' the plaintiff applied to him to draw the deed and also for counsel in regard to matters relating to the subject-matter of the deed. While his testimony was being given, and subsequently on a motion to strike the same out, the question of the admissibility of his evidence was raised, and the court intimated an opinion that his testimony was inadmissible because he was not at liberty to violate the privilege existing between attorney and client in respect to confidential communications. The court finally struck out his testimony, except so far as it related to the fact that he drew the deed. The defendants took an exception.

We are inclined to the opinion that the learned trial judge kept within the rule laid down in Root v. Wright (84 N. Y., 72), where it is said the “rule prohibits him from testifying to such communications as an action between his client and a third person.” It is also said in that case that the rule “extends to communications in reference to all matters which are the proper subject of professional employment. Citing Williams v. Fitch, 18 N. Y., 550; Yates v. Olmsted, 56 id., 632.”

Sixth. As the trial judge found that there was no evidence of fraud or deceit practiced, and that the plaintiff knew the contents of both exhibits No. 1 and No. 4, when he signed them, the ruling was not prejudicial to the defendants, and we ought to disregard their criticism in re-spec^ to the same. Code Civ. Pro., § 1003. We see no occasion to interfere with the interlocutory judgment.

Judgment affirmed, with costs.

Martin and Merwin, JJ., concur.  