Halsey v. Reed

The Chancellor.

The question whether the recovery of nominal damages in the supreme court is a technical estoppel to any further claim against the personal representatives of Halsey for the non-payment of the bond and mortgage, depends upon the true construction of the agreement which is recited in the deed from Reed to Halsey. If it was intended as an absolute and unconditional promise on the part of Halsey to pay the principal and interest of this bond and mortgage to Reed, so as to enable him to sue. and recover upon that promise in his own name, although he had not been compelled or required to pay any thing thereon to the holders of the bond and mortgage the whole contract with Reed was probably merged in the judgment upon such contract j although the amount of that recovery was merely nominal. But if the real intention of the parties to that agreement was that Halsey should assume the payment of the bond and mortgage to the then holders thereof, so as to give them the right to claim the benefit of that promise, as in the cases referred to by Chancellor Kent in Cumberland v. Coddington, (3 John. Ch. Rep. 254,) it was a mere contract of indemnity as between Halsey and Reed. In that case the latter could not recover until he had actually paid something on the bond and mortgage himself. And according to the. decision of the court for the correction of errors, in Wright v. Butler, (6 Wend. Rep. 284,) a recovery for the amount of a partial payment would not bar a new suit for monies which Reed had after-wards been compelled to pay to the holder of the bond and mortgage. Upon the best consideration I have been able to-give to this case, I conclude that the real intention of the parties to the deed of 1836 was, that Halsey should take the land subject to the payment of the whole amount due upon the bond and mortgage, and should indemnify Reed, as the obligor in the bond and as the owner of the residue of the premises included in the mortgage, against the payment of the mortgage debt or any part thereof, but that it was not the intention of either party that Reed should have the right to sue Halsey for this part of the consideration money before Reed should have actually been compelled to pay it for his own indemnity.

It is not necessary to inquire whether the holder of the bond and mortgage could have maintained an action at law against Halsey upon this promise, within the principle of the decisions in the case of Starkey v. Mill, (Style’s Rep. 296,) Dutton v. Poole, (2 Levintz, 210,) and of Schermerhorn v. Vanderheyden, (1 John. Rep. 139.) For whatever may have been their rights at law, there is no doubt that in equity the assignees of the bond and mortgage would have the right to a decree against Halsey or his personal representatives for the deficiency, upon a foreclosure and sale of the mortgaged premises, if the proceeds of the sale should be found insufficient to pay the debt and costs. For it is a well settled principle of this court that the creditor is entitled to the benefit of the collateral obligations for the payment of the debt which any person standing in the. situation of surety for others has received for his indemnity and to discharge him from such payment. (Bank of Auburn v. Throop, 18 John. Rep. 505. Curtis v. Tyler v. Allen, ante p. 432.) I am also of the opinion that a case like the present is within the equity of the provision of the revised statutes authorizing this court, in a foreclosure suit, to make a decree over for the deficiency against a third person who has become responsible for the payment of the mortgage debt; although it is not a case within the letter of the statute, (a) Even if Reed could not compel the holders of his bond and mortgage to resort to the personal liability of Halsey, or to his estate in the hands of the appellants, for the payment of the deficiency after a foreclosure and sale of the portion of the mortgaged premises conveyed by the deed of 1836, he would be entitled to have the decree so framed as to provide for the sale of that part of the mortgaged premises in the first instance. And if that was not sufficient to pay the debt and costs, and he was compelled to pay the deficiency to save his own property from being sold, or in discharge of his personal liability, the estate of Halsey would be clearly liable to him for that amount. Or if he had paid the amount of the bond and mortgage voluntarily to the present holders thereof, he would have had a right to demand an assignment of the same, to enable him to enforce payment out of the part of the premises conveyed to Halsey, and to obtain satisfaction of the deficiency out of the other estate of the decedent. The difficulty in sustaining the decree of the surrogate in this case, however, is that it charges the debt of the testator upon the wrong fund ; by decreeing its payment out of the personal estate exclusively, instead of compelling the creditor to exhaust his remedy in the first place against the part of the mortgaged premises embraced in the deed of 1836. This was unquestionably the primary fund for the satisfaction of the mortgage debt, in the contemplation of the parties to that deed. And by the provisions of the revised statutes it is also made primarily liable for that debt, where the testator has not otherwise directed by his will. For it is clearly within the equity of the section of the revised statutes which provides that whenever any real estate subject to a mortgage executed by an ancestor or testator shall descend to an heir or pass to a devisee, such heir or devisee shall satisfy and discharge such mortgage out of his own property without resorting to the executor or administrator ; unless there be an express direction in the will of such testator that such mortgage shall be otherwise paid. (1 R. S. 749, § 4.) In this case, it is true, the mortgage itself was not executed by Halsey the testator. But he had assumed the payment thereof, and the part of the mortgaged premises embraced in the deed of 1836, descended to his heirs charged with the payment of the whole mortgage debt. The note of the revisers to this section of the statute clearly shows that the intention was to make the premises charged with the mortgage the primary fund for the payment of the debt, in all cases as between the heir or devisee and the personal representatives of the testator or intestate who had assumed the payment of the debt; except where the decedent by his will had made a different provision for such payment. In other words, the object of this section was to abrogate the rule of this court which in certain cases compelled the personal representatives of the decedent to pay off incumbrances upon his real estate for the benefit of the heir or devisee of such real estate.

In the present case I am also inclined to think that the premises conveyed by the deed of 1836, in the hands of the heirs at law of the grantee, were primarily liable for the payment of the mortgage debt, independent of the statute or any understanding of the parties to that deed, according to the English cases on the subject. (See Noel v. Lord Henley, Daniels’ Rep. 330; Forrester v. Lord Leigh, Amb. 171; Tweddell v. Tweddell, 2 Bro. C. C. 101, 152; Butler v. Butler, 5 Ves. 534; 2 Powell on Mort. by Coventry, 863; and Cox’s note to Evelyn v. Evelyn, 2 Peer Wms. 664.) This part of the mortgaged premises therefore being primarily liable for the payment of the whole bond and mortgage, Reed could not by a voluntary payment to the mortgagee charge the personal estate in the first instance. Nor was it equitable for the surrogate to decree a payment of the whole bond and mortgage to the holders thereof, before they had exhausted their remedy by a foreclosure and sale of that part of the mortgaged premises which had descended to the heirs. It does not appear when the respondent Reed paid the $210 towards the interest of the bond and mortgage ; nor why he paid the costs of the complainants in the bill of foreclosure while that suit was still pending and undetermined. I must presume, therefore, that both payments were merely voluntary. The proper course for Reed, however, was to permit the foreclosure suit to proceed to a hearing, and then to ask for such a decree as would compel the complainants to exhaust their remedy by a sale of the portion of the land conveyed to Halsey and which had descended to his heirs. And then if there was a deficiency, so that he was obliged co pay it to save his own portion of the premises from being sold, he would have had a valid claim for the amount thus paid, and the costs to which he had been subjected in the foreclosure suit against the personal estate of Halsey, in the hands of his executor and executrix. For in those cases in which the real estate in the hands of the heir or devisee is primarily "liable for the debt, as between the owners of such real estate and the personal representatives of the decedent, the personal estate may still be liable to the creditor where the primary fund is insufficient for that purpose.

The surrogate, however, in decreeing distribution of the personal estate among the creditors of the decedent, should do what this court would do upon a bill filed here for an account and distribution of such estate in the hands of his personal representatives—compel the creditor who has an additional security upon another fund which is primarily liable, to exhaust his remedy against that fund, and only to come in as against the personal estate for the deficiency. And where it is necessary to make a distribution of the estate before such deficiency can be ascertained, he should direct a portion of the fund in the hands of the executor or administrator to be retained to meet the contingent claim for the deficiency. In this case I think the surrogate should have either dismissed the petition of Reed without prejudice to a future application ; or should have suspended proceedings thereon until the deficiency, if any, for which the personal estate might be liable, was ascertained by the result of the proceedings in the foreclosure suit. The will of the decedent is not before me, and I cannot, therefore, see whether the interests of the widow and heirs in the real and personal estate are the same or not. But the presumption is that they are different. For in the absence of any provision in the will on the subject, the widow would he entitled to one third of the personal estate absolutely i whereas in the real estate she takes but a life estate in the third thereof. It is therefore important to the interests of one of the appellants, at least, that the mortgage debt should be charged upon the proper fund.

The decree of the surrogate must be reversed, and the proceedings dismissed. But without prejudice to the rights of the respondents, or either of them, to institute new proceedings before the surrogate, after the remedy against that part of the mortgaged premises embraced in the deed of 1836 shall have been exhausted, to compel payment of the deficiency if any, and any other legal claims arising out of the contract of sale between Reed and Halsey, out of the personal estate in the hands of the executor and executrix, or otherwise, as the respondents may be advised. And neither party is to have costs as against the other either on this appeal or on the proceedings before the surrogate. As the rights of the parties also may have been materially changed by the proceedings in the foreclosure suit during the pendency of this appeal, any of the parties are to be at • liberty to file a bill in this court, if necessary, to settle their rights according to equity, if they shall be advised that it is proper to do so.

(a) See Curtis and others v. Tyler & Allen, ante p. 432