Black v. Shreeve

7 N.J. Eq. 440

• Court: New Jersey Court of Chancery
• Decided: December 15, 1848
• Status: Published

Opinion

The Chancellor.

The question proper to bo first considered is, what is the true construction of the covenant as to whether any of the covenanters who may be unable to pay the whole of his proportion of the loss or deficiency is to be absolved altogether from paying anything, or is liable to pay so much of his proportion as he may be able to pay.

The instrument recites, that the subscribers to it have agreed with the complainants that, if the property mortgag’ed shall prove insufficient to pay the sum loaned, so that a loss or deficiency shall happen, each of them and each of the complainants shall bear an equal portion of such loss or deficiency; and that in case any of them shall, before or at the time when such loss or deficiency shall be ascertained, become or be unable to pay his proportion of such loss or deficiency, then, such of them as remain solvent and able shall bear such loss equally with each of the complainants. And the parties to the instrument then covenant that, if a loss or deficiency shall happen, they will pay to the complainants such sum as will divide said loss or deficiency, equally, between such of them as remain solvent at the time such loss or deficiency is ascertained and each of the complainants. It is shortly this : they recite that they have agreed that each of them shall pay an equal portion of the loss or deficiency with each of the complainants ; and that if any of them shall, at the time when such loss or deficiency shall be ascertained, be unable to pay his proportion of such loss or deficiency, then such of them as remain solvent and able shall bear such loss equally with each of the complainants; and then covenant that if a loss or deficiency happen they will pay to the complainants such sum as will divide said loss or deficiency, equally, between such of them as remain solvent and each of the complainants.

I cannot think that it was the intention of this instrument that if, when the loss or deficiency should bo ascertained, one of the parties should be able to pay nine-tenths of his proportion of the loss, he should pay nothing at all if he was unable to pay also the remaining tenth. Nor do I think that the language of the instrument requires such a construction. It seems to me that the true construction of the instrument, as a whole, is, that the loss which shall arise, either from the deficiency of the mortgaged premises or from inability in any of the parties who subscribe the instrument to pay their full proportion of such deficiency, shall be borne equally by such of the subscribers as shall be able to bear an equal proportion of such whole loss with each of the complainants.

The other construction contended for would, it appears to me, be so unreasonable, and so difficult, I may say almost impossible to be carried out, that it is difficult to imagine that it could have been the sense of the parties. Why should not a party able to pay a half, or other proportion of his share of the loss, pay it. And how would it be possible to ascertain that a party able to pay nine-tenths of his proportion of the deficiency was not able to pay the other tenth. Could it possibly be done in any other way than by suing him for his proportion of the deficiency, and selling his property on judgment and execution. And can it be that, if on such a sale his property, by reason of a slender attendance of bidders, should bring a tenth less than the amount of the judgment, the product of the sale would belong to the defendant in the judgment 1 A jury might, from the testimony before them, believe that one of these parties had property sufficient to pay the whole of his proportion and give a verdict accordingly, and yet, on a sale on the judgment and execution, the proceeds of the sale of that property might fall short; in which case, the sale would shew that the verdict and judgment were wrong, and that the sale should never have been made.

Again, it is contended that the construction of the instrument is, that if any of the subscribers to it should not be able to pay his whole portion at the time the deficiency should be ascertained he should pay nothing. Now, how on the trial of a suit against one for his share of the deficiency, had, it may be, several years after the deficiency had been ascertained, would it be possible to show whether the defendant was able or not at the time the deficiency was ascertained 1 But, suppose he was able then, and was found so to be, and judgment was obtained against him and ex-edition issued, and on the sale of his property the proceeds fell short of paying his proportion. What then 1 The verdict and judgment may be right and must be taken to be so, for he may have been able at the time the deficiency was ascertained, and that was the point of inquiry on the trial. Must not the sum raised by,the sale, though loss than his proportion of the deficiency, be paid in such case, on account of his share of the deficiency ?

Here then would be a case in which, though a part only of one’s proportion of the deficiency should he raised, it would be required to be paid, though ho could not pay the whole.

Again, suppose one at the time of the trial, should be abundantly able to pay his full proportion of the deficiency, and'should setup that, though able at the time of the trial, he was not able at the time when the deficiency was ascertained, how would it he possible to settle such a question as that; and does the instrument really mean that such a defense m;ght he set up.

I think the construction contended for on the part of the complainants cannot he the true one; but that the construction I have above suggested is the true construction. If I am right in this, it follows, that all the subscribers to the instrument should have been made parties defendants.

Is there any reason founded on the frame of the hill why the demurrer for want of parties should not he allowed % There is no allegation in the hill that such of the said subscribers a.s are not made defendants were, at the time when the deficiency was ascertained, or are now insolvent. The allegation is, that Thbmas Haynes and other of the said subscribers, (naming them,) on the 2d of June, 1845, the time stated in the bill as the time when the deficiency was ascertained, had become and were unable to pay their respective proportions of such deficiency. They may, notwithstanding such allegation,each of them have been able to pay more or less of their respective proportions of the deficiency.

We have, then, an instrument set out at length in the bill, which (as is now thought,) requires every subscriber able to pay any part of his proportion of the deficiency to be made a party. The complainants in the bill put a construction on the instrument which they suppose relieves them from the necessity of making any subscriber a party unless he was able to pay all his proportion ; and the bill is demurred to for want of parties. Does the demurrer admit the correctness of the complainants’ construction of the instrument'? I apprehend not. If upon the true construction of an instrument set out in the bill, subscribers to it who are not made defendants should have been made defendants, the defect of parties may be taken advantage of by demurrer, though the complainant in his bill has put a construction on the instrument which would make it unnecessary to make such subscribers defendants. The construction I have given to the instrument as to the liability of the subscribers to it,that is,that each was liable for such part of his proportion of the deficiency as he was able to pay, notwithstanding his inability to pay the whole of his proportion, disposes, I think of two other of the causes of demurrer assigned, namely, that the complainants have a full and effectual remedy at law; and that they have shown by their bill no sufficient matter of equity to entitle them to relief in this court.

As to these causes of demurrer, I think a little reflection will shew that the demurrer cannot be sustained for either of them. If the plaintiffs are put to proceed at law, they must adopt one of two courses ; either sue each of the covenanters for his share of the deficiency, and proceed to judgment and execution, and in that way ascertain whether each is able to pay his proportion of the deficiency; in which case, if it turn out that one is unable to pay, a new set of suits against such as are able would be necesary, in order to recover from each one who is able, his aliquot part of the loss arising from the inability of any; and this might go an ad infinitum, so to speak; for if, in the second set of suits, one of the defendants should be unable to pay his proportion of such last mentioned loss, a third set of suits would be necessary against such as remained able, for their aliquot part of the loss arising from this last mentioned failure; and so on ; or else the complainants must take the course of suing such only of the covenanters as they may think they can show are the only ones able to pay any thing, and rely on proving to the satisfaction of each jury the total inability of all who are not sued to pay any thing at all, according to my construction of the covenant, or their inability to pay the whole of their respective proportions of the deficiency, though able to pay a part of it, on the complainant’s construction of the covenant; a more difficult matter still; and if one of the juries should not be satisfied of the total inability of any one not sued, or of his inability to pay all his portion though able to pay a part of it, according as the construction of the contract may be, and should therefore, by their verdict, fix a different ratio of contribution, the recoveries in all the other cases would be wrong in amount.

It seems to me that the complexity of this covenant, and the multiplicity of suits, and the successive sets of suits it might give rise to at law, are grounds on which this court may properly entertain a bill for the adjustment of the contribution called for by the covenant in one suit.

Another cause of demurrer assigned is, that Joseph Smith, one of the executors of Jonathan Smith, deceased, ought to have been made a party defendant.

Joseph Smith is one of the complainants, one of the three persons who made the loan to the Co., and who are seeking by this their bill, from the covenanters, the proportions of the respective covenanters of the sum borrowed. Jonathan Smith, since dec’d, was one of the covenanters, and bound to contribute his proportion of the deficiency. Jonathan Smith died after the 2d of June, 1845, the day on which the bill states the amount of the deficiency to have been ascertained, leaving a will of which he appointed James Shreeve, Barclay White and the said Joseph Smith, executors. Joseph Smith, in his individual capacity, is a complainant in the bill, and James Shreeve and Barclay White, the other two executors of the will of Jonathan Smith, are made defendants as such executors. The objection is, that Joseph Smith is not made a defendant as one of the executors of the will of Jonathan Smith.

It is clear that a man cannot in his individual capacity sue himself in his capacity as executor. Can he in his individual capacity sue himself and two others as executors of a will; or can he, because he is joined in his individual capacity with two other complainants, suing in their individual capacity, make himself as executor, either alone or with other executors of the same will, a defendant in the suit in which he in his individual capacity is a co-complainant. I think not. He cannot at the same time and in the same suit act both against and for the estate. In this bill he is seeking a decree against the estate; and the two other executors of the estate are made defendants. This is all that is required and all that can be proper.

Another cause of demurrer assigned is, that the Co., in and by the mortgage given by the Co., to secure the payment of the money loaned by the complainants, (the covenant being to secure to the complainants such portion of the loan as the mortgaged premises might be insufficient to pay,) covenanted that the proceeds and profits arising from the railroad should be applied, at the end of each half year from the date of the mortgage, to the payment of the interest, and that it is not shown or stated by the bill that such appropriation was made.

To this it may be answered, first: if there were any proceeds and profits to be applied to the payment of the interest, it was as much the business of the covenanters as of the complainants to see that the company so applied them ; the covenanters and the complainants being all members of the same company or corporation. But again, it does not appear by the bill that there were any proceeds and profits which were not appropriated. A demurrer can only be founded on a fact or omission appearing in the bill. It cannot set up a fact or omission not appearing in the bill and thereupon demur.

Another cause of demurrer assigned is, that the covenant set out in the bill as made by these defendants is only in aid of the moi tgage and the mortgaged premises; that said mortgaged property is the primary fund for the payment of the said loan; and that it does not appear that said mortgaged property has first been legally and rightfully applied to the payment of said loan.

The meaning of this I suppose to be, that all the property mortgaged to secure the loan has not been sold or otherwise applied for that purpose, (I do not suppose that the words “ legally and rightfully” can extend the idea beyond this,) and that, inasmuch as the covenant provides only for the payment of the deficiency after the mortgaged property, i. e., all the mortgaged property has been applied, the deficiency contemplated and to be provided for cannot be known until all the mortgaged property is applied. And I think this the correct idea resulting from the nature of the covenant. Certainly the complainants could not, after selling and applying half the property mortgaged towards paying the loan, stop there and call on the covenanters for the difference between the proceeds of half the mortgaged property and the amount of the loan, as the deficiency contemplated. If the bill shewed that state of things, it would be demurrable.

The question then is, have the mortgagees by their proceedings on the mortgage applied all the mortgaged property towards the payment of the money loaned ?

What was mortgaged % The language of the mortgage is, all the lands contained within the bounds of said rail road as at the date of the mortgage actually located, graded, excavated and embanked from the Delaware river to the head of New Lisbon pond, and all the materials of which said road was constructed, and the appendages thereof, and all dividends, proceeds and profits which might thereafter be declared, grow due or become payable from the use of the said road. It is a mortgage of the road and the materials of which it was constructed and all dividends, proceeds and profits to be declared, grow due or become payable from the use of the road.

Can it be supposed that this language extends the mortgage to dividends, proceeds and profits which might bo declared, grow due or become payable from the use of the road, after the road and the materials of which it was constructed should be sold under the mortgage?

It is said that the sale under the mortgage passed nothing to the purchaser except such lands, if any, as were outside of the road; that the charter provides that the road shall be a public highway ; that the purchaser under the mortgage did not take the franchises; that the Co. could not mortgage the franchises; that the purchaser could not remove the rails; that the mortgage and the foreclosure of it could not affect the public; that the Co.had the right or franchise of charging tolls, and the public had the right to travel; that the purchaser could take neither the franchise, nor the road, nor the materials of which it was constructed; that the decree on this mortgage should have been for the sequestration of the tolls; that this is the only kind of decree that could be taken on this mortgage.

On the other side it is admitted, that the franchises were not mortgaged or intended to be, and that they could not be ; and it is said, that if the franchises were not mortgaged, then they could not be sold under this mortgage ; and if the complainants have sold all that was intended to be mortgaged the covenant takes hold; that the bill states distinctly that all the property mortgaged was sold, and the demurrer admits it; that if the road remains, and the' franchises, then the Company still have them; that there is a power in the charter to convey any real or personal estate; that this has been held in our Court of Chancery to include a power to mortgage; that it does not appear by the bill that there are any tolls ; that sequestration could only be of the surplus after repairs ; and that it would destroy the Company to sequestrate the tolls, leaving nothing for expenses and repairs.

The bond was payable at a specified time, at the expiration of five years; and the Company mortgaged the lands, &c., and dividends, &c., to secure the payment of the bond; and the covenanters covenanted to pay the deficiency after-the application of the mortgaged premises. This shows that the parties acted on the idea that the Company could mortgage something, and that the property the Company could mortgage was such that it could be sold at the expiration of the mortgage, and the amount of the deficiency ascertained. This excludes the possibility of their contemplating a sequestration of tolls; for if under this mortgage tolls were to be sequestered, the amount of the deficiency to be paid by the complainants could never be ascertained. If it be necessary under this mortgage to go into a sequestration of tolls, then, inasmuch as tolls will be receivable as long as the Company and road exist, the primary fund could never be exhausted.

I am satisfied that the parties contemplated a sale under the mortgage of whatever could be sold under it, and that such sale and the proceeds of it should fix the deficiency to be made up by the covenanters.'

Any mistake that may have been made at-the sale as to what the purchaser would get on a sale under this mortgage, if any such mistake was made, cannot enter into our present inquiry.

I think that the only cause of demurrer that is sustainable is that for want of parties.