Parker v. Mercer

Mr. Chief Justice Sharkey

delivered the opinion of 'the court.

It is contended by the appellant’s counsel, that the chancellor adopted a wrong rule; that the note first due should have been first paid, and that if Gwin had paid the money he’would have been entitled to be substituted to all the rights' of Mercer. In. support of the position taken, we are referred to a’ case reported in 1 Randolph, 466. A deed of trust was made to secure the payment of three promissory notes. The first note was paid; the second was assigned to one person, and the third to another,, the-last assignee talcing also an assignment of the trust deed. He filed his bill to have the trust fund applied to his debt, inasmuch as he had taken the assignment of the deed. This the court refused to do but held that the deed of trust was equally a security to the first assignee, and ordered that his debt should be first satisfied according to the order fixed in the deed. This authority does not bear the counsel out. It is to be presumed from the language of the court, that the deed itself expressed the order of payment, and it does not appear whether the last note was due or not, and this, in addition to the structure of the deed, might materially affect the rights of parties. The case settles no principle, except that the transfer of the note first due, operated as a transfer of the security.

We are also referred to a case reported in 1 Bibb, 149. From this we only learn that where instalments are secured by mortgage, the mortgagee may proceed to foreclose for the first instalment before the others become due; and that if the others become due before the decree, they may all be included. It is not decided which note should be first paid. The same points were decided in the case referred to in 8 Porter. None of these decisions afford a precedent in point, and we must therefore settle the case without their aid.

The indorsement of Gwin was evidently intended to secure to Mercer the amount of the note first to fall due, and the mortgage was intended as an additional security for that sum, as well as a security for the balance. Now suppose the mortgaged premises should not produce enough to pay the whole amount, and that Gwin has a right to have the note indorsed by him first paid, then it would follow that the object of the security would be defeated. Mercer’s security would be greatly diminished, and Gwin, although he contracted to run the risk of payment, has run no risk at all.— The mortgage, instead of being a security to Mercer, would be converted into a security for Gwin. This would be a perversion of the manifest intention of the contracting parties. Why would Mercer have required personal security, if that security had a right to extricate himself by coercing the appropriation of the mortgaged fund to the note which he had indorsed? It was either an act of folly to require such security, or it was not intended that such an appropriation should be made. The fairest inference is, that the indorsement of Gwin was considered as additional security. Mercer’s was the primary interest, Gwin’s was but secondary; but if he is to have the mortgaged property applied for his benefit, although it may prejudice Mercer, his would become the primary interest. Such an interpretation of the contract cannot be maintained, nor can it have any such effect consistently with the principles of equity. With greater propriety might we go the full length required by the counsel for the appellee, and apply the funds arising from the sale of the mortgaged premises, first to the extinguishment of the notes which are without indorsement.— This, however, we do not feel at liberty to do. Gwin was but an accommodation indorser without consideration, and if there is to be a loss, equity will exempt him from the whole burthen. A mortgage taken by a creditor, it is said, must be held hr trust as well for the secondary interest of the surety, as for the more direct interest of the creditor. 4 J. G. Rep. 129. If then it be intended as an indemnity as well for the surety as the principal creditor, it must operate equally. When a loss is to fall upon them, it must fall in proportion to the amount at risk. On this principle Gwin receives the same benefit from the security that Mercer does, and he surely cannot justly ask more. The decree of the chancellor is based on this ground, and we think properly.

The doctrine of substitution which was urged at bar for the purpose of showing the relative rights of the parties, can have no influence whatever in the case. Payment by an indorser or surety is a precedent condition to the right of substitution, and this has not been performed. The doctrine on this subject was correctly laid down, but it will be time enough to adjudicate the question when a case is presented in which the facts will justify the application of the law. .

The decree of the chancellor must be affirmed.