New-London Bank v. Lee , 11 Conn. 112 ( 1835 )

Church, J.

That the debts of the plaintiffs are justly due, and such as the defendants, H. & S. Lee, are bound, as well at law as in conscience, to pay, is undisputed; and the important question is, whether the remedy sought is such as a court of equity will apply.

The original debtors, H. & S. Lee, by their mortgage deed to Samuel H. P. Lee, of 16th of October, 1832, made to indemnify him against these demands of (he plaintiffs, as well as against the claims of others, as averred in the bill, and described in the condition of said mortgaged deed, appropriated the estate thus described as a fund, to secure the payment of the several debts there mentioned. This fund has never been applied to its object; the debts remain unpaid ; and the purpose of the bill is, to enforce the application of the fund.

The principles upon which the plaintiffs, in their present application, rely, in support of the remedy they seek to enforce, are familiar to courts of equity. Does the present case fall within their operation ?

It has long been settled, and is conceded in argument here, that a surety who has paid the debt, may well claim all the funds appropriated for its payment remaining in the hands of the creditors. The plaintiffs insist, that the same reasons and equities apply, with equal strength, to their case, wherein they, as creditors, seek to apply the funds in the hands of the surety to the payment of the debts. And so we think. In both cases, the security or fund is created for the payment of the debt, and is a trust existing for that specific purpose ; and whether the creditor, as in the former case, or the surety, as in this, be the trustee, is very immaterial. The trust is created, ultimately. for the benefit of the creditor, or of him who stands in his place, by having paid the debt. Mayhew v. Crickett, 2 Swanst. 191. Ex partee Gee, 1 Glyn & Jameson, 330. King v. Baldwin & al. 2 Johns. Ch. Rep. 554. 2 Sw. Dig. 151. Wright v. Morley, 11 Ves. 12. 1 Law Library 150. Miller & al. v. Ord, 2 Binn. 382. And this principle has been frequently applied to cases like the present. It was holden, more than a century ago, in the case of Maure v. Harrison, 1 Eq. Cas. Abr. 93. that a bond creditor shall have the benefit of all counterbonds or collateral securities given by the debtor to the surety. And this principle has ever since been recog-nised as elementary in courts of equity. The cases on this subject are all collected and well considered, by Bissell, J., in the case of Homer v. Savings Bank of New Haven, 7 Conn. Rep. 478; and they entirely establish the general doctrine for which the plaintiffs contend; and their authority this court re-cognises. Nor are they to be distinguished from the present case, because they are conversant about personal, and not real, estate. Russell v. Clark’s executors, 7 Cranch 69. Moses v. Margatroyd & al. 1 Johns. Chan. Rep. 119. Phillips v. Thompson, 2 Johns. Chan. Rep. 418. Kip v. Bank of New-York, 10 Johns. Rep. 63. 65. Wright v. Morley, 11 Ves. 21. Craythorne v. Swinburne, 14 Ves. 162. 1 Law Library 150.

But the defendants contend, that if the general doctrine, as applicable to cases of the general character of the present, be conceded, as claimed by the plaintiffs, yet, in this case, special objections exist against any recovery by them under this bill.

And,

1. That the other creditors of H. & S. Lee, against whose demands Samuel H. P. Lee was also indemnified, by the same mortgage of October, 16th, 1832, are not made parties plaintiffs in this case; and no reason is assigned why they are not. The interest of the several creditors named in the aforesaid mortgage, although similar, is not joint; and no one of these creditors can act for the others, without their consent. The remedy sought by this bill is, essentially, as well for the benefit of these other creditors, as for these plaintiffs; and the bill, though not in form, is, in substance, as well in their behalf, as in behalf of the plaintiffs. Its prayer is, that the property mortgaged be sold, and the avails applied to the payment of the debts for which it was pledged ; and the cases are very frequent, in which it has been holden, that where a question in controversy is of general interest to many creditors, some may, in a court of equity, sue in behalf of themselves and the others. Mit. Pl. 224. Elmendorf v. Taylor & al. 10 Wheat. 152. West v. Randall, 2 Mason 181. 1 Cond. U. S. Rep. 507. in notis. Routh v. Kinder, 3 Swanst. 144. Boddy & al. v. Kent & al. 1 Meriv. 361. Weld v. Bonham, 2 Sim. & Stu. 91. Hanford v. Storie, 2 Sim. & Stu. 196. Lloyd v. Loaring, 6 Ves. 779. Brown v. Ricketts & al. 3 Johns, Chan. Rep. 553. Hallett v. Hallett, 2 Paige 15.

In cases where several individuals and interests are concerned, a court of equity will in general require all parties interested to be made parties in a proceeding affecting such interests, either as plaintiffs or defendants, for the purpose of preventing further and unnecessary litigation, as well also that a decree may be formed, which shall be safe for all who are bound to perform it. But even this rule is subject to the discretion of the court. Elmendorf v. Taylor, 10 Wheat. 152. Mallow & al. v. Hinde, 12 Wheat. 193. Mit. Pl. 164. And in this case, the other creditors are parties, though not plaintiffs: they are before the court, and may be bound by any decree which may be made, as well as if they had been joint plaintiffs with the present plaintiffs, or as well as if they had been called in, as is frequently necessary, by order of court, during the progress of the proceedings. Mit. Pl. 11. 164. Hendricks v. Robinson & al. 2 Johns. Chan. Rep. 283.

Besides, it may well be doubted, whether an objection for want of all the proper parties, should he permitted at this stage of the cause. An answer has been made to the bill; a com- mittee appointed; and that committee has made its report of the facts in the case; after which, for the first time, this objection is interposed. The court will not dismiss the bill, even if it should believe more patties to be necessary, but would direct it to stand over that they might be added. After all the expenses of this litigation have been incurred, it would be unreasonable to make such order; and indeed, the defendants have not re- quested it. Upon every consideration, therefore, this objection for want of parties, is unsustainable. Russell & al. v. Green, 10 Conn. Rep. 269. Nash v. Smith & al. 6 Conn. Rep. 421. Anon. 2 Atk. 15. Jones v. Jones, 3 Atk. 111. Harding v. Handy, 11 Wheat. 103.

2. That the plaintiffs have adequate remedy at law. To render this objection available, it must be shewn, that the pretended remedy at law is clear and complete. Mit. Pl. 25. in notis. (Am. ed.) Weymouth v. Boyer, 1 Ves. jr. 416. Rathbone v. Warren, 10 Johns. Rep. 587. King v. Baldwin, 17 Johns. Rep. 384. The supreme court of die United States, in discussing this subject, in the case of Boyce's exr. v. Grundy, 3 Peters 215. say: “It is not enough that there is a remedy at law; it must be plain and adequate, or, to other words, as practical and as efficient to the ends of justice and its prompt administration, as the remedy in equity.” If, in the present case, the court could even see, that the plaintiffs have a nominal remedy at law, by levying their executions upon an equity of redemption of some probable and yet unascertainable value; yet, it we believe, that such proceedings cannot probably be made to result in any substantial advantage to the plaintiffs, they ought not now to be turned round to seek such fancied legal remedy.

But that the plaintiffs have a nominal, legal remedy, does not appear from the facts here disclosed. The whole real estate of H. & S. Lee, the principal debtors, as well as of Samuel H. P. Lee, the surety, before the execution of the mortgage of the 16th of October, 1832, was mortgaged for very large sums of money; and whether an equity of redemption of any value remained, we are not informed. But if an equity of redemption existed, what was its situation? The lands of the Lees, both debtors and sureties, in this state, and in Ohio, were mortgaged to secure an entire debt due to the Connecticut school fund, of 15,210 dollars; the lands in each state being separately holden for the entire debt. Supposing what may be true, that the whole lands are of greater value than the whole debt; still, if the lands in Connecticut are not worth more than the whole debt, there is no equity of redemption here (and the same is true of the lands in Ohio,) which can be taken and applied to these debts, by the unassisted operation of the levy of the plaintiffs’ executions. In searching for the plaintiffs' remedy at law, by the levy of their executions, (and no other is suggested,) it will be found, that all the estate of H. & S. Lee, constituting this fund, is also under the incumbrance of this mortgage of Samuel H. P. Lee, of the 16th of October, 1832. How is the amount of this incumbrance to be ascertained? It cannot be to any practical or beneficial purpose, it is a mortgage to indemnify against unpaid debts. Its amount cannot be determined, until the debts, including these debts of the plaintiffs, are paid. Appraisers could well estimate this equity of redemption, if the executions were levied upon it.

Such, therefore, is the embarrassed state of the property of the Lees, that we do not believe the plaintiffs have any adequate remedy at law, by the levy of their executions. It was suggested in argument, that it does not appear, that the Lees are insolvent; and that, therefore, a remedy still remained at law to the plaintiffs for the collection of their debts. The bill does aver, and the committee have found, that H. & S. Lee are insolvent; and from the peculiar situation of the estate of Samuel H. P. Lee, as found by the committee, we can very well see the great improbability of enforcing payment of these debts, by a resort lo legal process against his body. It is not for H. & S. Lee, the principal debtors in this case, to say, that a remedy may be had against the body of the surety; and such an objection comes in a very inequitable character from Samuel H. P. Lee, while Ire is refusing to pay or to appropriate the pledge, and is setting these creditors at defiance. Middletown Bank v. Russ & al. 3 Conn. Rep. 135.

A very legitimate object of equity jurisdiction is the prevention of circuity of action and of ruinous litigation. These creditors ask, what the Lees cannot equitably withhold or deny, that they may be substituted in the place of the mortgagee, and as such avail themselves of the benefit of the mortgaged estate, as far as it can be made available, without the delay and expense of protracted and doubtful litigation, in payment of their debts. Mortgagees may go upon the pledge, if they please, without regard to the solvency or insolvency of debtors or sureties. Equitably, these creditors are the mortgagees. The mortgage was made for their ultimate benefit; and, as we have already seen, is a trust fund for them. W e see no necessity, nor even propriety, of sending these plaintiffs to make an experiment upon the body of Samuel H. P. Lee.

3. It was finally objected, that as these creditors had not levied their executions, and so bad not thereby obtained a lien upon the property mortgaged, they had no preferable claim to other creditors of H. & S. Lee, to call for the remedy here sought. If the views heretofore expressed of the nature and objects of the mortgage of the 16th of October, 1832, be correct, this objection is without force. We have seen, that the mortgaged property was a fund, created and set apart for a specific purpose, the payment of the debts described in it, and constituted a trust for their payment. These plaintiffs, therefore, are not the general creditors of H. & S. Lee without a lien, but they and the other creditors named in the mortgage, have an equitable lien upon the estate mortgaged; and the purpose of their bill, is, to render it efficient. The cases relied upon, by the defendants, Lees, in support of this position, have no application to the present case.

Samuel H. P. Lee is one of the creditors of H. & S. Lee. They owed him 3,000 dollars, secured by the same mortgage of October 16th, 1832. These petitioning creditors have no claim upon that debt. It was no part of the fund intended for their benefit. Nor have they any superior equity attachable upon the fund intended for the equal benefit of all, to entitle them to postpone this debt to their own. The mortgage was created for the equal benefit of all the creditors named in it; and all, including Samuel H. P. Lee, are to be equally interested in the avails of the property appropriated by it.

We are of opinion, therefore, that the superior court should be advised, that a decree in this case be made in favour of the plaintiffs, that unless their debts be paid, within such reasonable time as the superior court may determine, some suitable person be appointed, by said court, and empowered to sell the mortgaged estate, and pay the avails thereof into that court, for the' benefit of the plaintiffs, Samuel H. P. Lee and all the other creditors named in the said mortgage deed, in proportion to their several debts, and subject to the future order of said court.

Williams, Ch. J. and Bissell, J. were of the same opinion. Huntington and Waite, Js. gave no opinion, having been of counsel in the cause, and otherwise disqualified to judge therein.

Decree for the plaintiffs.