Cherry v. Monro , 1848 N.Y. LEXIS 190 ( 1848 )

The Chancellor.

If Seymour had been within the juris diction of the court, so that he could have been personally served with process, the defendant Beardsley probably would have had a right to insist that he should be made a party, for his benefit. For, in that case, Beardsley might have been entitled to a decree that Seymour should pay off the mortgage, so as to relieve the premises from the lien thereof. The complainant too, in that case, would have had an interest in malting Seymour a party. For he would have been entitled to a personal decree against him,- in the first instance, to pay off the mortgage; so as to relieve the complainant as well as Beardsley from the payment of the debt for which they each stood in the situation of a surety for Seymour. ' But as he was an absentee, and had no property in this state which could be reached and applied to the payment of this demand, he probably was not a necessary party for any purpose. (Bigelow v. Bush, 6 Paige’s Rep. 343.) One defendant in this court, however, cannot object that another defendant, having no interest in the subject matter of the suit, is improperly made a party. (Welf. Eq. Pl. 281. Crane v. Deming, 7 Conn. Rep. 387. Butts v. Genung, 5 Paige’s Rep. 256.) It is only where the complainant has some ground of relief against each defendant, and where his claims foi relief against them respectively are improperly joined in one suit, so as to make the bill multifarious, that each defendant has the right to demur, upon the ground that the other defen dan's are improperly joined with him in the suit..

The decree of the vice chancellor upon the merits, is clearly right. It is wholly immaterial whether, at the time of giving the bond and mortgage, the land or the bond was the principal security for the debt. For the agreement between Cherry & Seymour, upon the dissolution of their copartnership, and the conveyance of Cherry’s undivided half of the mortgaged premises, constituted the relationship of principal and surety, not only between the parties personally, but also in reference to the interest of Seymour in the mortgaged premises. After that arrangement had been made, and the interest of Seymour in the mortgaged premises had been thus conveyed, the equitable rights of the parties to that transaction were the same as though Seymour had owned the whole lot originally, and had mortgaged it to secure his own debt, and Cherry had joined with him in the bond for the same debt, as a mere surety. Had that been the real form of the transaction originally, no one can doubt, that as between the owner of the equity of redemption in the mortgaged premises and the surety in the bond, the land would be the primary fund, for the payment of the debt. And if the surety should be called upon by the mortgagees for payment, be would have the right to be subrogated in their place; and to their remedy against the land, for the payment of their debt.

Nor did it make any difference as to the equitable right of the complainant to subrogation to the remedy of the principal creditoi against the mortgaged premises, that a bond of indemnity had been given to him by Garrow and others. For as Seymour was. insolvent, his sureties in the indemnity bond had an equitable right to insist that Monro, the sun iving mortgagee, should resort to the mortgaged premises for payment; instead of collecting it from Cherry, and thereby charging the debt upon them as the sureties of Seymour in the indemnity bond. To understand the rights of Cherry and the sureties in the indemnity bond, in reference to the primary liability of the mortgaged premises for the payment of the debt for which the mortgage was given, it is necessary first to contemplate them as they existed immediately after the conveyance of the 10th of August, 1834, and the giving of the indemnity bond of that date; and then to see if their equitable rights, as sureties, have been lost by the subsequent conveyance of the mortgaged premises to Beardsley.

At that time there was a debt due to Monro, as surviving mortgagee, from Seymour as the principal debtor, for the security of which debt Monro held a recorded mortgage upon land which then belonged to such principal debtor. He also held a bond for the same debt, in which Cherry stood in the situation of a mere surety of Seymour; and Cherry held the bond of Garrow and others also as sureties of the principal debtor, to indemnify Cherry against being called upon for the” payment of the debt due from Seymour, the mortgagee. Had Monro, at that time, attempted to collect his debt by a suit upon the bond against Cherry, instead of resorting to the mortgaged premises which belonged to the principal debtor, can any one doubt that Garrow and the other sureties in the indemnity bond, who were bound to protect Cherry against the consequences of such a suit, would have had a right to demand a transfer of the bond and mortgage to them for their protection and indemnity, upon advancing the money then due thereon ? And if they had the right and neglected to do so, Cherry himself would have had the same right to a transfer of the mortgage, for his own indemnity. For he was not bound to rely upon the sureties in the bond of indemnity; who were only secondarily liable as between them and the owner of the premises, which were primarily liable for his indemnity under the agreement and conveyance of the 10th of August, 1836. It must also be recollected that Cherry held that bond of indemnity as his security against the payment of debts, to the amount of $8,000, due to the mortgagees of other lots; his half of which lots were conveyed to Seymour at the same time. ■ And as the penalty of the indemnity bond, to protect Cherry from liability to the mortgagees for all those debts, and to indemnify him against the debts of the firm, was but $3000, it is perfectly evi dent that all the parties to the arrangement made at the time of the dissolution of the partnership, must have understood that the several lots which were .conveyed to Seymour, subject to the mortgages thereon, were to be primarily liable for the payment of the debts which were secured by mortgages upon those lots respectively.

The deed from Cherry to Seymour, -under which Beardsley derived his title to the premises in question in this cause, showed upon its face that there was a mortgage upon the lot, to Jones and Monro, of about §1900, and that -the premises were conveyed, subject to that mortgage. This -would have been constructive notice of the mortgage, and of the .equitable right of Cherry to have the debt charged upon the mortgaged premises, as the primary fund, even jf the mortgage itself had not been upon record. But this is not a case in which a notice of the prior equity of Cherry, and of the sureties in the indemnity bond, was -necessary to preserve their rights. For B.eardsjey did not and could not claim any strictly legal right to have the debt charged upon the .complainant personally, instead of upon the lot on which it was charged by the mortgage. And as be tween mere equitable claims, he who is first in time is superior •in right. Cherry had done nothing to impair his equitable claim to have the debt charged upon the interest of Seymour in the land which was primarily liable for the d ebt secured by the mortgage. And jf Beardsley, at the time of his purchase, had inquired of the complainant, or of the surviving mortgagee named in the deed of Cherry, as a prudent purchaser ought to have done, instead of relying upon Seymour’s representation that the incumbrances were' paid, or upon his covenant against the incumbrances, he would have ascertained the true state of the facts. The subsequent attempt, therefore, .of these defendants to defeat the prior equity of the complainant, by charging this • debt upon him personally, was inequitable and unconscientious. And the vice chancellor would have done the defendant Monro np injustice if ho had refused to allow him for the §30 costs which .he had improperly made in the action at law upon the bond. For it is evident that the action upon the bond was not brought for the sole purpose pf collecting his debt, but for the improper purpose of charging it upon the surety personally, and relieving the mortgaged premises from the lien, of the mortgage.

¡¡Even if Monro was ignorant .of the complainant’s equitable rights when the action at law was commenced, he could not have been ignorant of them when the bond of indemnity was shown to him, and the amount due, and the costs, were tendered, and he was requested to assign the bond and mortgage for the protection of the complainant and to enable him to obtain repayment out of the mortgaged premises. The vice chancellor, therefore, very properly charged Monro, as well as Beardsley, with the costs of this litigation.

It was not necessary for the protection of the rights of Beardsley that he should have the benefit of the bond as against Seymour. For if Seymour should ever be worth any thing, he would be directly liable to Beardsley upon the covenants in his deed. The decree, so far as it is appealed from by the defen dants Monro and Beardsley, must therefore be affirmed with costs.

Upon the matter of the cross-appeal, I think the decision of the vice chancellor was wrong. The defendants gave notice of a motion to strike out all the testimony, on the part of the complainant, which had been objected to before the examiner. This embraced a great portion of the testimony of the complainant which was clearly relevant and proper, to show that Seymour was insolvent, and that his property had been sold upon executions against him for its full value; and to prove the exhibition, to Monro and Beardsley, of the indemnity bond, growing .distinctly the equitable rights of the complainant; and the production of papers which they were requested to sign to give effect to such equitable rights upon the payment of the money tendered by him. Yet the complainant was charged with the costs of that motion, in the final decree, because the vice chancellor thought it >vas not necessary for the complainant to prove that, in the offer which he made to the defendants, he consented to give Beardsley an interest in the indemnity bond if it could be any benefit to him. As the substance of the motion was denied, it was not proper to charge the complainant with costs even if the decision was right as to the immaterial part which was granted. I think the decision was wrong, however, in granting any part of the application. As the sureties in the indemnity bond had an equitable right to insist that the debt should be charged upon the mortgaged premises as the primary fund, it was not necessary that the complainant should tender to Beardsley an interest in that bond. But that tender having been made, at the same time, and as a part of the offer which it was necessary for the complainant to show, for the purpose of putting the defendants clearly in the wrong, and charging them with the costs of the litigation, it necessarily became a part of the proofs in the cause, and could not be separated from the rest of the transaction. The whole motion, therefore, should have been denied; and the costs ‘of opposing it would have been properly taxable against the defendants as costs in the cause. The part of the decree which was appealed from by the complainants must therefore be reversed with costs.