Brewer v. Staples

3 Sand. Ch. 579, 1846 N.Y. LEXIS 395, 1846 N.Y. Misc. LEXIS 43

• Court: New York Court of Chancery
• Decided: June 1, 1846
• Status: Published

Opinion

The Assistant Vice-Chancellor.

The validity of the claim made by The Trust Fire Insurance Company to have the complainant give to them the benefit of the Q,uin mortgage, depends upon their right as between themselves and Staples, to compel the application of the Q,uin mortgage towards the discharge of the complainant’s debt. This point necessarily arises between the complainant and the Trust Fire Company, although in the present state of the pleadings, it cannot be decided as between the latter and Staples.

On the 29th of May, 1843, when Staples conveyed the Staten Island lots to the Trust Fire Company, he was the owner of the lots, subject to the mortgage to the complainant on which $1200 was due, and to another mortgage executed to one Thurston for $1500. Both of these mortgages were given in 1836, and were accompanied by the bonds of Staples.

At the same date, Staples was the owner of the Q.uin mortgage, or rather of the surplus therein, he having assigned it in 1840 to Mr. Seeley, as security for the payment of the two bonds to the complainant and to Thurston, and to be re-assigned to Staples on payment of those bonds.

Thus the complainant and Thurston were mortgage creditors of these lots and of Staples, and they by their trustee, Mr. Seeley, held the Q,nin- mortgage as a security for the same debts. Staples was their primary debtor, the lots were their first security, and the Q,uin mortgage was their, second, or collateral secuiity.

At the same date first mentioned, Staples was the debtor of the Trust Fire Company, in a sum which he alleged he was unable to pay, and he had proposed a compromise of the debt; and after some negotiation, a compromise had been agreed upon, by the terms of which these lots were to be conveyed to the Trust Fire Company, subject to the mortgages held by the complainant and Thurston. The proposal originally made by Staples, did not include these lots, and there is no proof that the Q,uin mortgage was referred to, or entered into the terms of the compromise or the consideration of the parties.

The compromise was carried into full effect, and Staples complied with its stipulations. His conveyance of these lots, vested them in fee in the Trust Fire Company, and it conveys them subject in express terms, to the two mortgages to the complainant and Thurston. All the testimony concurs in establishing that this language of the deed was intended, and was in accordance with the agreement of the parties.

Staples did not transfer, or, so far it appears, intend to transfer. to the Trust Fire Company, any interest whatever in the Quin mortgage. If they have acquired any right or equity in- that mortgage, it must be by operation of law.

Upon the conveyance of the lots to them, they ceased to be creditors of Staples. They became purchasers of the lots, the consideration of their purchase was a portion of the debt against Staples which they discharged, and they took the lots subject to the two mortgages held by Thurston and the complainant.

The clear effect of all this was, that the lots in question became the principal debtor to the complainant and Thurston; and as between Staples and the lots, or their new owners, The Trust Fire Company, Staples became a surety for the latter, in respect of the two mortgage debts. The Trust Fire Company did not become personally liable to pay those debts, but the lots in their hands became the primary fund for such payment, and to the extent of those lots, the company were the principal debtors upon the two mortgages, and Staples was their surety in respect of his liability on the two bonds. It is impossible to distinguish this case in principle, from Jumel v. Jumel, (7 Paige, 591,) and Cox v. Wheeler, (7 ibid. 248.) The same doctrine was asserted by Chancellor Kent, in Tice v. Annin, (2 J. C. R. 128;) and it has been enforced in many other reported cases since that time.

The authorities relied upon by the Trust Fire Company, are 'applicable to creditors, who having a lien upon one fund only, are entitled in equity to marshal the securities of a creditor having a prior lien upon the same fund; and having also an effective lien upon another fund or estate. And the error of the defendants has arisen from their continuing to regard Staples as their debtor, in respect of that portion of their debt which they forgave to him without any, or if any, for a nominal payment; instead of realizing that they had discharged him, and become the purchasers of his lots charged with the burthen of these mortgages.

The Trust Fire Company have no right to compel the application of the Quin mortgage to the complainants debt. On the contrary, Staples has an equity to compel the lots to be sold for the payment of that debt, so that the Quin mortgage may be re- - stored to him.

I entertain no doubt whatever upon the question, and must make the usual decree for the complainant.