dissent">McLaughlin, J.

(dissenting):

I dissent. There is ample evidence to sustain the finding of the referee, that the bond and mortgage were usurious arid void, but it is proposed to reverse the judgment because. Squier’s trustee in bankruptcy and the American Exchange National Bank were not made parties to the action. Bennett was - the record holder of the title to the bond' and mortgage, and the plaintiffs had a right to deal with him alone. They could have paid him the amount due and obtained the discharge of the' instruments, which he alone could give, without regard for the equitable interests therein of the trustee and the bank.' Likewise, in this actipn, to have-the instruments- canceled and discharged because of usury, Bennett, being the .only person having any interest in them disclosed by the record, was the only necessary party defendant. •

■ Under the circumstances disclosed at the trial, while the trustee ■ might properly have been joined as a party defendant, there was certainly'no occasion for joining the bank. The bond and mortgage were assigned to Bennett by an instrument which was recited to be under seal, and conceding that the bank was the real party in interest and. that Bennett acted only as its agent or trustee, the plaintiffs could riot be required to look beyond him, if indeed they could be permitted to do so.

The fact that Bennett some time, thereafter executed an assignriiént in blarik of the bond and mortgage did not change the nature of the transaction. This assignment purported to have been executed and acknowledged on the 3d day of January, 1908, the same day. the bond and mortgage Were assigned to Bennett by’Squier and, according to the testimony, as part of the same transaction. Yet the assig.mrient recites that -Squier’s assignment to Bennett had been recorded in Rhode Island on’the Jth day of January, 190.8. This blank assignment Aas very obviously for the protection of the bank only, and there is rio warrant for the statement that the bank ever held the' legal title 'to • the bond and mortgage by reason of this instrument. The referee expressly refused so to find. Moreover, *675on the 19th of June, 1908, Bennett’s attorneys, who were also counsel for the hank in certain matters,” as his trial counsel testified, stipulated that Bennett was the then owner and holder of the bond and mortgage and thereafter entered into another stipulation whereby plaintiffs agreed to pay to Bennett the interest due, without prejudice, and he agreed not to assign the instruments.

There is no merit in the claim that, even if the instruments were - usurious, the bank could recover the principal under the provisions of the National Banking Act. No such defense was pleaded, and moreover it does not appear that the bank paid any consideration for the assignment which it took in Bennett’s name. It was alleged in the defendant’s bill of particulars that the bank, as consideration, extended the time for payment on obligations of certain corporations in which Squier was interested, but ..the attempt to prove such extension at the trial failed. All that was shown was that Squier assigned the bond and mortgage as additional security for his prior indebtedness to the bank. That being so, such a defense would not defeat the action, even if it had been pleaded and we could now consider it.

Conceding, howevei’, that the trustee and possibly the bank should properly have been made parties defendant, I do not think the judgment should now be reversed for failure to join them. The defect was raised neither by demurrer noy by answer. The defendant did move at the trial to dismiss the complaint on the ground that the trustee had not been made a party, but the proper practice, as suggested by the learned referee at the very commencement of the trial, would have been to move for an adjournment to the end that the other parties might be brought in. This the defendant’s counsel carefully refrained from doing. So far as the defendant Bennett was concerned, therefore, the defect was waived. (Code Civ.' Proc §§ 498, 499.)

The judgment is not a complete determination of the controversy in so far as it does not, in form, determine the rights of the trustee and the bank as between themselves, but it is a complete determination so far as the plaintiffs are concerned and they were not bound to consider the interests of the trustee and the bank. The trustee and the assistant cashier of the bank, who represented it in this transaction, testified as witnesses at the trial and, therefore, had *676notice of the action. Had they desired a complete determination of the controversy in this action, they might have taken steps to bring about such a result. The case is quite different from that of Steinbach v. Prudential Ins. Co. (172 N. Y. 471). There an action was brought to reform and recover upon an insurance policy. The persons to whom the policy was upon its face payable had not been made parties and it did not appear that they had any notice or knowledge of the action. The court held that although they were not, of course, bound by the judgment, the judgment in favor of plaintiff should be reversed “ not necessarily for the protection of the defendant as it had neglected its rights, but for their own protection, as well as the seemly and orderly administration of justice.” Here tile only person who had any interest in the action; so far as appeared from the record, was Bennett, the owner and holder of the legal title to the bond and mortgage, and he was made a defendant as' already indicated. All the parties in interest knew of the pendency of the action and had ample opportunity to protect their rights. So far as I can see, the only possible controversy which might hereafter arise would be from the trustee attempting. to hold the bond and mortgage valid against the bank and Squief’s indebtedness to it secured to that extent. But the bank could have obviated this by giving the trustee notice .of--the action and calling upon him to defend, and there are many indications that it did do so. For the reasons" stated the judgment against Bennett was binding upon the bank and if it did not give notice to the trustee, at least that is no reason why the judgment should now be reversed.

To reverse the judgment now would be to promote and encourage the abuse pointed out in the dissenting opinion of Haight, J.,- in the Steinbaoh case, and the case at bar does not present by any means the same reasons which controlled the majority of the court in the Steinbaoh case. There has been a thorough trial of the action upon the merits. The plaintiffs never refused to join the trustee so as to make the judgment in form binding upon him, since no proper application was ever made. They should not be deprived of the relief to which, upon the record before us, they are clearly entitled, simply because the judgment may affect the. rights of other parties which could properly have been determined *677in this action, when such other parties had .notice of the action and apparently acquiesced in its trial, upon the merits, and no steps were taken to have them made parties.

I think the judgment should be affirmed.

Judgment reversed, new trial ordered, costs to appellant to abide event.

Citation profile

Relationships

How this case has been treated — in progress