
    Haggerty v. The Allaire Works.
    An agreement by a creditor, to take from his debtor, stock in an incorporated company, at its par value, and to appropriate the same, on account of the debt due the creditor, will be construed as relating, exclusively, to that portion of the debt which is unsecured; and it will be extinguished by the assignment of that debt to a third person, with the assent of the debtor. Or, if not extinguished, it follows the debt, and its performance devolves upon the person to whom the debt is assigned.
    Where a portion of a debt is assigned to a third person, with the debtor’s assent, the latter, in an action by the creditor, to recover for the part of the debt not assigned, cannot allege errors in the settlement of an account, between him and the plaintiff, in respect to the debt assigned, nor set off erroneous credits against the claims of the plaintiff. His remedy is to have them deducted from the debt assigned.
    An agreement between mortgager and mortgagee, to raise the interest upon a bond and mortgage, from six to seven per cent, is valid in law; the consideration of forbearance being necessarily implied, and the continuance of the agreement being necessarily co-extensive, with the forbearance.
    Such an agreement is binding upon purchasers of the mortgaged premises, though made after the purchase by them, if it appears that the agreement has been adopted and acted upon by them.
    (Before Oakley, Ch. J., Sandford & Doer, J. J.)
    November 3, 8, 29, 1851.
    Appeal from a decree, made at special term, by Justice Sand-ford.
    The complaint was filed by John Haggerty, to procure the satisfaction of four bonds, secured by mortgages on the lands and property of the Allaire Works, in the city of New York, by a foreclosure of the mortgages, as follows :
    1. Bond, by James P. Allaire, to the executors of G-. Smith, (and assigned in 1844 to plaintiff,) dated December 11,1824, for $11,000, and interest (raised from six per cent, to seven per cent, by agreement of Jas. P. Allaire, in December, 1842) from June 11, 1844.
    2. Bond, by J. P. Allaire, to the executors of Smith, (assigned in 1844, to J. Haggerty,) dated June 17,1826, for $3,000, and interest, at seven per cent, from June 7,1844.
    3. A bond of J. P. Allaire to Jas. Boorman, (for his firm,) dated June 6, 1839, (assigned to John Haggerty, June 6, 1849,) for $10,000, and interest at seven per cent, from January 22d, 1850.
    4. A bond of Jas. P. Allaire to John Haggerty, dated June 6,1839, for $10,000, and interest at 7 per cent, from date.
    These bonds were secured by three mortgages of Allaire, bearing even date with the bonds, respectively; the two latter by one mortgage. Jas. P. Allaire owned the lands at the date of the mortgages, on the 20th of January, 1842. John Haggerty conveyed to the Allaire Works, the premises included in the Boorman mortgage (which embraced the lands in the other mortgages), subject to the existing mortgages thereon, amounting to $58,350 of principal, which with the interest was part of the consideration, and was assumed to be paid by the grantees. The mortgages in suit were part of these existing mortgages. The defences set up by the answer were :—1. That the agreement to raise the interest on the $11,000 bond, was not binding on them, it having been made after the purchase of the mortgaged premises by them. That the interest on the $3,000 bond was only due from June 17,1844. That the interest on the $10,000 bond to John Haggerty was only due from January 20, 1844. 2. A claim for errors in an account which it was alleged was settled, April 5,1850. 3. A claim that J. Haggerty had agreed to take $30,000 of the stock of the United States Mail Steamship Company, at par value, on account of the debt of the Allaire Works, which stock they had offered to him and he had refused, and. on which the defendants claimed there was a loss of $5,000. The replication alleged, that on the 5th of April, 1850, besides the bonds and mortgages in suit, the defendants owed the plaintiff upwards of $110,000, and Jas. P. Allaire owed him upwards of $61,000. That a general arrangement was then made, to which the defendants were a party, which expressly acknowledged the amounts of the bonds and mortgages in the complaint to be due to the plaintiff, and to be unimpaired and unaffected, and by which the plaintiff, in consideration of $80,000, released Allaire from his debt and transferred to him the debt of the defendants, (excepting the debts secured by the mortgages mentioned in the complaint,) and also the stock J. Haggerty held in the Allaire Works ; Allaire undertaking to apply the amount, as far as necessary, to pay up in full the said stock of J. Haggerty in the Allaire Works, and to indemnify J. Haggerty against all claims of the company and its creditors against him as such stockholder ; which transfer and release embraced all transactions referred to in the answer, prior to its date. It also traversed the various allegations of errors, and also alleged that the amounts owing to the plaintiff by Allaire and the defendants exceeded what he received by the arrangement, by more than such alleged errors. And also set up that these errors, if any, were to be settled with Allaire, to whom the debt was transferred, and with whom the defendants settled, if they did settle it. It denied the agreement as to the stock in the U. S. Steamship Company, and denied any damages, and all right for the defendants to offer the stock to him in payment, or that anything ought to be thereupon deducted from the bonds and mortgages.
    The issues thus joined came on to be tried before Mr. Justice Sandford, without a jury, on the 20th day of March, 1851. The plaintiff gave in evidence the mortgage and bonds, the assignments and agreements mentionéd in the complaint, and also the instruments of release, transfer, and acknowledgment of April 5th, 1850, between the plaintiff and James P. Allaire, and to which the defendants were parties ; also, the agreements to raise interest on the $10,000 mortgage, made December 30, 1842, and receipts for interest thereon, at the rates of seven per cent., dated July 11, 1843, Feb. 12,1844, and July 27,1844— the two former from J. P. Allaire, and the two latter from the treasurer of the defendants ; and the deeds of January 20th, 1842, by which the defendants were to pay the interest. The agreement of April 5th, 1850, recited the bond of $10,000 to John Haggerty, of June 6th, 1839, and the interest thereon, as being due without any qualification.
    The defendants gavé in evidence a statement of January 20, 1844, signed by the plaintiff, showing the interest on this bond charged from 20 January, 1843, to 20 January, 1844, to form part of a balance of $2601 21, for which a note on demand was given by Allaire to Haggerty. This note was in J. Haggerty's hands, and was released to J. P. Allaire by the release of April 5,1850.
    As to the claim for alleged errors in the account of Haggerty, with the Allaire Works, it appeared in evidence that on the 5th April, 1850, J. Haggerty, with the assent and admission of the defendants, transferred to J. P. Allaire, for $80,000, not only this balance of $156,715 35, but also released Allaire from a bond for $42,837 19, the said note for $2,601 41, and a note for $1,400, with interest, and assigned and transferred to him 531 shares of stock in the Allaire Works.
    As to the U. S. steamship stock, it appeared that the Allaire Works were desirous of obtaining the contracts for the machinery of the steamers Pacific (amounting to $225,000) and Baltic ($240,000); but it was made a condition of their obtaining the contracts, that they should take $20,000 stock in the ship Pacific, and $10,000 in the ship Baltic on account of the work to be done.
    It was finally agreed, that the company, to get the contracts, would make the subscription for the stock, and that Mr. Haggerty, who was then pressing the company for his claim, would take the stock and appropriate it on account of the debt of the defendants, Mr. M’Hvaine understanding that it was to be credited at its value, and Allaire stating in his testimony that plaintiff was to take it “ in the same manner ” as the defendants.
    The contracts for the machinery did not speak of the taking of the stock in payment, which was a verbal understanding. The contracts were made before the actual subscription by the defendants for the stock. The subscription was Oct. 4, 1849. The payments on the contracts began as early as July 25,1848, and deductions were made from each payment under the contract, of ten per cent., so as to fill up the stock, and the $30,000 was not made up until June 5, 1850, when the defendants were entitled to it. The stock was issued about June 22,1850. No evidence was given of the actual value of the stock, nor of any loss sustained by the defendants in relation thereto.
    They held the stock at the time of the trial. No tender of the stock before suit brought was shown, but the defendants tendered to the plaintiff, in open court, a transfer of the $30,000 of stock, which tender the plaintiff refused to accept.
    The counsel for the defendants claimed and insisted, that the interest on the bond and mortgage to John Haggerty and Mary R. Smith, for $11,000, should be computed at the rate of six per cent., instead of seven per cent., per annum. That the interest on the bond and mortgage to John Haggerty, for $10,000, should be computed from January 20, 1844. That the sum of 99 dollars and 17 cents, paid for interest on the bond and mortgage to Robert Lenox, accruing prior to the 20th of January, 1842, should be credited to the defendants. That interest on the said sum of $99 17 should be allowed to the defendants, and that the amount of the cost of the $30,000 of stock, with interest, should be deducted from the amount due the plaintiff, and that he should be adjudged to receive a transfer of said stock in lieu of so much money. The counsel for the plaintiff resisted all the above claims of the defendants, and claimed judgment as prayed for in the complaint. The court thereupon, decided, 1st. That an agreement by the defendants to change the rate of interest on the bond and mortgage of $11,000, from 6 to 7 per cent., was sufficiently proved, and that interest should be computed at that rate on- the said bond and mortgage. 2nd. That the payment of the interest up to January 20,1843, on" the bond • and mortgage to John Haggerty, for $11,000, had been proved, but that the facts proved respecting the giving of the note by James P. Allaire to the plaintiff, for the interest from January 20,1843, to January 20,1844, in connexion with the subsequent compromise and surrender of said note, under the agreement of April 5, 1850, did not establish a payment of the said interest accruing January 20, 1844, and that interest should be computed on the said bond and mortgage from January 20,1843. 3rd. That the defendants were entitled to be credited with the sum of $99 17, paid on the Lenox bond and mortgage, but not with any interest on. that sum. 4th. That no allowance should be made to the defendants on account of the $30,000 of stock. That so far as the agreement respecting said stock was proved, the plaintiff was not bound to take the said stock, or to give credit on the mortgages in suit to the defendants for any sum whatever on account thereof. That the agreement, if legal, and proved, and whatever its construction might be, would only entitle the defendants to damages for the plaintiff’s refusal to take said stock ; that no such damages had' been proved, and that if proved, they could not be set off in this action. To each and every of the said decisions, as well upon the questions of law, as of fact, the counsel for the defendants duly excepted.
    The court then directed that judgment be entered for a foreclosure of the said mortgages, and a sale of the mortgaged premises to pay the amount due the plaintiff. That in computing the said amount there should be allowed to the plaintiff, 1st. On the bond to John Haggerty and Mary R. Smith, executor and executrix, dated June 17, 1826, $3,000, with interest, at 7 per cent, from June 17,1844. 2nd. On the bond to the same parties, dated December 11,1824, $11,000, and interest at 7 per cent., from June 11,1844. 3rd. On the bond to James Boor-man, dated June 6,1839, $10,000, and interest from December, 1849. 4th. On the bond to John Haggerty, dated June 6,1839, $10,000, and interest from January 20, 1843. And that from the above sums there should be deducted the sum of $99 17, above mentioned, without interest. To which directions severally the defendants’ counsel excepted, and from the judgment entered he appealed to the general term.
    
      
      D. Lord, for the plaintiff.
    
      H. F. Clark, for the defendants.
   By the Court.

Duer, J.

The decree of Mr. J. Sandford, at special term, must be affirmed as modified upon the following grounds:

I. The credit of $30,000, claimed by the defendants, is rejected, because, (1.) The agreement of the plaintiff to take from the defendants $30,000 of the stock of the New York and Liverpool United States Mail Steamship Company, and to credit the defendants with the same at its par value, assuming such agreement to have been proved, is construed by the court as relating exclusively to that portion of the debt due to the plaintiff, which was then unsecured, and consequently was extinguished by the assignment of that debt to Allaire, with the consent of the defendants; or if not extinguished, it followed the debt, and its performance devolved upon Allaire. (2.) That the articles of agreement and settlement of the 5th of April, 1850, even upon the supposition that the original intention of the parties was different from that which has been stated, are conclusive evidence that the whole principal of the debt secured by the bonds and mortgages was then due and owing, and this express admission of the defendants precludes the supposition that the debt so secured was subject to any deduction whatever on account of the credit which is now claimed. (3.) That as the legal construction and effect of the articles of agreement" could not be contradicted and varied by parol evidence, the proof offered by the defendants of the declarations made by the plaintiff, during the negotiation, which led to the articles of agreement, or at the time of the execution thereof, was properly rejected. (4.) That the rejection by the judge of evidence offered in relation to the stock of the steamship Panama, was immaterial. The evidence could only have been material' as bearing upon the question whether the $30,000 stock was to be taken at par, and for the purposes of our judgment this has been assumed to be the meaning of the agreement.

II. That evidence of the credits alleged to have been given erroneously to the plaintiff, in the settlement of his account of $156,715, was properly rejected, since if the defendants are not wholly precluded by the settlement from alleging the existence of such errors, they are entitled to deduct the sums which they involve from the debt as assigned to Allaire, but not to set them off against the claims of the plaintiff in this action.

III. That interest on the bond and mortgage for $11,000 was properly computed at 7 per cent, from the 11th of December, 1842. (1.) Because the agreement for raising the interest from 6 to 7 per cent., was valid in law, the consideration of forbearance being necessarily implied, and the continuance of the agreement being coextensive with the forbearance. (2.) Because it was sufficiently proved that the agreement was adopted and acted upon by the defendants, and it was therefore unimportant whether it was originally made by Allaire under their authority.

The court is of opinion that the judge erred in not crediting the defendant with the payment of interest on the bond of $10,000 from January, 1843, to January, 1844, and order the decree to be modified accordingly.  