
    Drovers Deposit National Bank of Chicago, Appellant, v. Louis M. Newgass, Respondent.
    First Department,
    April 17, 1914.
    Bills and notes—action on promissory note — affirmative defense — evidence insufficient to establish oral release and discharge—conveyances as security.
    In an action on a promissory note it appeared that the plaintiff was requested by a separate instrument in writing to discount the same for the payee. Said writing contained the following: “ We do hereby promise and agree to pay said notes at maturity, according to the tenor thereof, and we do hereby waive notice of the acceptance of this guaranty.” This was signed by the defendant and others. The defendant pleaded as an affirmative defense an oral release and discharge from all claims and demands by the plaintiff, based upon conveyances of his property to a director of the plaintiff.
    Evidence examined, and held, insufficient to establish the alleged release and discharge;
    That the conveyances by the defendant were in the nature of mortgages as security for the debt.
    The plaintiff was entitled to sue upon the debt, irrespective of the security.
    Appeal by the plaintiff, Drovers Deposit National Bank of Chicago, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 28th day of April, 1913, dismissing the complaint upon the decision of the court after a trial before the court, a jury having been waived.
    
      Henry H. Abbott of counsel [Hiram Thomas and Edward A. Craighill with him on the brief], Breed, Abbott & Morgan, attorneys, for the appellant.
    
      J. Brownson Ker of counsel [Lawrence C. Hull, Jr.], for the respondent.
   Clarke, J.:

The action was brought to recover the amount due and unpaid on a promissory note for £2,050, drawn by Alfred J. Nicholson to the order of Tichenor-G-rand Co. By a separate writing dated Chicago, 111., September 30, 1909, the plaintiff was requested to discount for said Tichenor-Grand Co. five promissory notes for £2,050 each, made by Nicholson. Said writing contained the following: “We do hereby promise and agree to pay said notes at maturity, according to the tenor thereof, and we do hereby waive notice of the acceptance of this guaranty.” This was signed by M. H. Tichenor, W. D. Grand and the defendant Louis M. Newgass.

It was conceded that under the law of Illinois all joint obligations and covenants shall be taken and held to be joint and several obligations and covenants. It was proved that the balance due was $5,428.48. The court held that the paper in question was an original undertaking. In his answer the defendant pleaded, inter alia, a release and discharge from all claims and demands by the plaintiff. The learned court has found: “That the defendant on or about February 11, 1911, transferred by conveyance absolute in form to William A. Tilden, the President of the plaintiff bank at Chicago, Illinois, for the benefit of the plaintiff, all the property which he owned, consisting of various parcels of real estate situated in the State of Illinois, worth more than the total amount of his indebtedness to the plaintiff, and that said bank accepted said conveyances of said real estate from defendant in full payment, satisfaction and discharge of all claims and indebtedness whatsoever which the plaintiff had against defendant including his personal liability upon the undertaking set forth * * and, as a conclusion of law, “that by reason of the transaction found by the fifth finding of fact herein, the defendant paid, satisfied and discharged the claim of the plaintiff against the defendant upon [said] undertaking,” and was entitled to judgment dismissing the complaint.

The defense set up was affirmative and the burden was upon the defendant of establishing it by a fair preponderance of evidence. The finding of fact quoted supra is erroneous in stating that the conveyance referred to on or about February 11, 1911, was to William A. Tilden, president of the plaintiff bank. He had been the president of said bank down to June 2, 1908. The evidence is undisputed that since that time he has not acted for the bank in any capacity except as a director, and was such director on said February 11, 1911.

Assuming all the other facts to be true, a serious question would be presented whether a mere director of a bank would have the power to release rights and claims of his bank based upon written notes and guaranties. That question has not been argued, but, nevertheless, it is in the case. We proceed to consider the record as presented.

The defendant testified that he had known Mr. William A. Tilden and had done business with him for more than twenty years, and that they were very friendly; that he had a business of his own in Chicago which had nothing to do with the Tichenor-Grand Co., and “we did our business with the Drovers Bank and, of course, when the Tichenor-Grand Company went into the hands of a receiver, it did' not help my business any. I owed Mr. Tilden’s bank, the plaintiff in this action, about $38,000. I went to Chicago and we had &■ meeting, and he asked me what I was going to do. ‘Well,’ I says, ‘you know me; you know what I have always done — always made good in every way, shape and form.’ He says, ‘Tes, you have.’ ‘Well,’ I says, ‘I am going to make good now.’ I says, ‘ I have got so many shares of bank stock in your bank; I own this property on Oakwood Boulevard,’ my home it was, where I lived. That property was free and clear. It cost me $45,000. It was a very, very pretty place. * * * Well, I turned over everything I had in the world for what I owed him and he thanked me very much and said he would release me from all claims in every way, shape and form, if I would do that, which I did. That was two years ago in February, this month. I gave him everything I had. * * * When I gave him this he said it was for the money that I owed his bank. Well, I always did business with him, he was the President. I deeded this property to him in consideration of his releasing and discharging me for that. * * * When I deeded all this property that I have mentioned and described to the plaintiff in this action, Mr. Tilden, its president, said that it cleaned up all indebtedness of every kind which the bank had against me. * * * I had this conversation with Mr. Tilden in which he said that if I would deed this property to him, he would not hold me responsible, about the 11th of February, 1911. Q. At the time you deeded this property to Mr. Tilden, didn’t you get back a receipt or some kind of an agreement regarding that ? A. Not that I know of; I might have received something which I don’t remember now. Q. Well, do you recall receiving a letter from him dated February 13, 1911, a letter from him in that form (showing paper) ? A. I never got anything like that, sir, not that I know of. Q. You say you never got any receipt whatever ? A. No, sir; I don’t think anybody else did.”

The paper about which he was asked is as follows:

“Mr. L. M. Newgass,

“Chicago, 111.:

“Dear Sir.—If you pay and discharge all of the indebtedness of yourself and of M. Newgass & Son to the Drovers Deposit National Bank within one year from the date hereof, T will convey to you the property that you have conveyed to me, described as follows [then follows the description of five lots]; otherwise the property to be sold and applied on said indebtedness.”

Mr. Adams, an attorney practicing in Chicago and representing the bank, testified that he had an interview with Mr. Newgass after February, 1912, and prior to April 30, 1912, in his office in New York. “ Mr. Newgass told me that Mr. Til-den had always been his friend, and proceeded to relate how he had assisted Mr. Tilden to make collections in the TichenorGrand matter — how he had helped him, and had given Mr. Til-den the deeds of all his property in Chicago, and how he thought Mr. Tilden should not press him, but should get after the others. I stated that I knew all about that, but he had Mr. Tilden’s letter, and knew as well as I did that the bank did not want his property; that the bank was not in the real estate business, their business was lending money; they did not want the property-—• they were only holding it as security, they wanted their money. I told him that he could take Mr. Tilden’s letter to any lawyer, and they would tell him that Mr. Tilden was liable to account for the full amount received from the property.”

Mr. Tilden’s deposition was received by consent. He testified: “That it is correct, as stated by the defendant, that he owed the plaintiff the Drovers Deposit National Bank, upwards of $38,000 on account of his personal indebtedness and the indebtedness of M. Newgass & Son, of which firm he was a member, such indebtedness being over and above the amount of the liability of the defendant as a guarantor of the notes of Alfred J. Nicholson. That on or about the 13th day of January, 1911, defendant conveyed to deponent certain real property belonging to him in the State of Illinois, which property is described in plaintiff’s Exhibit 2 of February 19, 1913; that on or about said 13th day of January, 1911, deponent signed the letter, plaintiff’s Exhibit 2, at the request of the defendant Newgass, and had the original sent in to the defendant Newgass, who was at that time ill and stopping at the Annex Hotel in the city of Chicago. Deponent further says that the only understanding of any kind or character he ever had with the defendant Newgass with respect to the receipt of the property described in plaintiff’s Exhibit 2 is set forth in the writing, plaintiff’s Exhibit 2, and that he never had any other or different agreement with respect thereto. That when the defendant deeded this property to deponent, deponent did not say, directly or indirectly, that this cleaned up all the indebtedness of every kind which the plaintiff bank had against the defendant, nor was anything to that effect said by deponent directly or indirectly. * * * That deponent still has title to the property described in plaintiff’s Exhibit 2 and is holding the same pursuant to the terms of plaintiff’s Exhibit 2, and has caused defendant to be notified that if he would pay his indebtedness to the plaintiff, deponent would redeed to him the property -described in plaintiff’s Exhibit 2.”

There was also in evidence two letters from the defendant to Mr. Tilden dated May 3, 1912, and June 24, 1912, in reference to the institution of this suit against him containing personal appeals, but in no way claiming release or payment or referring to any such matter.

I am of the opinion that the alleged verbal release and discharge being an affirmative defense, the defendant did not sustain the burden. His story is in the highest degree improbable. It was positively contradicted by Mr. Tilden, who was corroborated by Mr. Adams as to the interview with the defendant. Mr. Tilden’s account is supported by his contemporaneous letter which described the lots with care and particularity and 'stated the conditions upon which they were held. Said paper is really a declaration in trust.

In Hutchins v. Van Vechten (140 N. Y. 115) the court said: “ By chapter 322 of the Laws of 1860 the Legislature restored the law to its original condition by an amendment to the seventh section, substantially providing that a declaration of trust in lands might be proved by any writing subscribed by the party declaring the same. It is not necessary now to produce a deed or a formal writing intended for the purpose in order to prove the trust, but letters or informal memoranda signed by the party, and even admissions in a pleading in another action between other parties, if signed by the party with knowledge of its contents, will satisfy the requirements of the statute, if they contain enough to show the nature, character and extent of the trust interest.”

Section 242 of the Beal Property Law (Oonsol. Laws, chap. 50; Laws of 1909, chap. 52), providing for conveyances and deeds in writing, provides: “But this section does not * * * prevent any trust from arising or being extinguished by implication or operation of law, nor any declaration of trust from being proved by a writing subscribed by the person declaring the same.”

The paper would clearly estop Mr. Tilden from denying that he held the property except upon the terms and conditions therein stated. “A person having voluntarily assumed the character of trustee, shall not be permitted to deny either as to his cotrustees or the cestuis que trust that he held that character, or to disavow his acts done in that capacity.” (Easterly v. Barber, 65 N. Y. 262.) And if he should sell the property the defendant could recover the surplus proceeds. (Bork v. Martin, 132 N. Y. 280.)

The conveyances were of the nature of mortgages as security for the debt. The creditor may sue upon the debt irrespective of the security. The defense has not been made out by a preponderance of the evidence and the judgment appealed from should be reversed and a new trial ordered, with costs and disbursements to the appellant to abide the event.

Ingraham, P. J., McLaughlin, Laughlin and Scott, JJ., concurred.

Judgment reversed and new trial ordered, with costs to appellant to abide event. Order to be settled on notice. 
      
       Amdg. 2 R, S. 135, § 7.—[Rep.
     