Babcock v. Morse , 1854 N.Y. App. Div. LEXIS 121 ( 1854 )

By the Court,

T. R. Strong, J.

The mortgage in this case was executed the 4th of March, 1848, by the defendants, Morse & Wiggin, and the wife of the latter, to the plaintiff and one Burnap, to secure the payment to the mortgagees of all such sums as they should become liable for by accepting or signing for the mortgagors any notes or drafts or bonds; and of all moneys advanced to the latter, or either of them; and all debts, liabilities and claims that the mortgagees, or either of them, should have or hold against Morse & Wiggin, or either of them. Soon after, or about the time of the execution of the mortgage,Morse & Wiggin drew drafts on the mortgagees to the amount of $850, which the latter accepted, and other drafts were subsequently drawn and acceptances given by the same parties, upon renewals from time to time, until the 22d of March, 1851, when there was due thereon the amount named. It is conceded by the counsel for the defendants, that this mortgage was at that time a valid security for that sum. The plaintiff was then the sole owner of the mortgage, having taken an assignment from Burnap of his interest. At that, date, the defendant Morse, in pursuance of an arrangement which had been made between him and the plaintiff and a firm of Babcock, Dubuisson & Ball, of which the plaintiff was a member, made a draft on that firm, and on the 4th of April following drew another draft on them, both payable in July then next, each of which drafts he procured to be discounted about the time it was made, and the proceeds of which, being $350 and $500, he thereupon remitted to the plaintiff, to meet the acceptances of the plaintiff and Burnap,. The arrangement referred to was, that Morse might draw on the firm for the purpose of meeting the acceptanees last named, and that the plaintiff would indemnify them against loss. It is found, by the referee, that the firm did not rely upon the mortgage for their security, but looked only to the plaintiff to indemnify them. This action was commenced the 14th of April, 1852; and the default in complying with the condition of the mortgage, alleged and relied upon in the complaint, is the. omission to pay the sum of $850, which became due the 22d of March, 1851. The defendants Edgall, G-ould and Smith only have appeared in the action, and they have interests in the mortgaged premises which accrued subsequent to the mortgage in question, and prior to the 22d of March, 1851. The defense set. up by them is, payment of the sum due on the mortgage at the date last aforesaid.- The defendants’ counsel insists that the receipt by the plaintiff of the proceeds of the drafts upon the said firm, to meet the acceptances of the plaintiff and Burnap, was a payment of the debt for which the mortgage was then security, and that therefore this action cannot be maintained; and so the referee decided. I understand the referee to hold that the debt arising from the acceptances of the plaintiff and Burnap was thereby paid and extinguished ; that the drafts upon and acceptances of the firm created a new debt; and that if the plaintiff has any claim against Morse, it is only one arising out of his being surety for Morse to the said firm; and that the complaint is not adapted to such a demand.

The evidence in the case does not show that was intended by Morse, or the plaintiff, that the proceeds of the drafts of the firm should be payment of the claim then held by Babcock, whether those drafts should be paid or not; and as those drafts have not been paid by Morse, it would certainly be highly unjust to the plaintiff to hold, in the absence of such evidence, that they were such payment, if the effect would be, as the defendants claim, to deprive the plaintiff of the security of the mortgage. It clearly appears that it was not intended that the mortgage security should be in any respect impaired.

If Morse had drawn upon the plaintiff to meet the acceptances of the plaintiff and Burnap, and the plaintiff had accepted his drafts and received the proceeds to the full amount due on the mortgage, it would not be contended that the demand secured by the mortgage was thereby paid; the transaction would be simply a renewal of the evidence of indebtedness, and an extension of credit for the period the drafts were to run. It has often been held that a renewal of notes secured by mortgage, or judgment, is not a satisfaction or extinguishment" of the original debt, so as to affect the continuance o'f the security. (Dunham v. Dey, 15 John. 554. Brinckerhoff v. Lansing, 4 John. Ch. 65. The Bank of Utica v. Finch, 3 Barb. Ch. 293.) So if the plaintiff had given his promissory notes and taken up the drafts on him and Burnap, the effect would be the same; it would be a mere renewal. And if he had procured others to unite with him in the note, as his sureties, it is not perceived that the result would be different.

[Monroe General Term, December 4, 1854.

Johnson, Welles and T. R. Strong, Justices.] .

What difference is there in principle, between the present case and the case supposed? The plaintiff, by the arrangement with Morse and the acceptances of the firm, and receipt of the proceeds by him, has not been discharged in whole or in part from any liability, nor has his liability been substantially changed, except in respect to further credit. He procured the firm to accept the drafts, upon his promise to indemnify them. As between him and the other' members of the firm, they are his sureties; and he is the principal debtor. His .position is not materially different from what it would be if he alone had given those acceptances. As to him, the transaction was but a renewal of drafts. This appears to me to be plain; and thus regarding it, the mortgage continued to be security for his liability, and the drafts upon the firm not having been paid by Morse, the indebtedness on the 22d of March, 1851, has not been satisfied, but still remains.

It follows that the judgment appealed from must be reversed, and a new trial granted; costs to abide the event.