Steele v. Babcock — 1 Hill & Den. 527

Majority

p. 527

Steele vs. Babcock.

Headnote

Where assignees of personal estate in trust for creditors requested A. to purchase a judgment against their assignor, then a rabsisting lien on his real estate, whereupon A. accordingly did so, giving his own notes for the judgment and taking an assignment of it directly to himself; Held, no extinguishment of the lien, though the purchase was intended for the assignees’ benefit, and they subsequently paid A.’s notes out of the trust funds.

The result would have been the same had the assignees purchased the judgment without the intervention of A., jit not appearing that a satisfaction was intended; and this, semble, as well in equity as at law.

In equity, if trustees, by an unauthorized use of the trust funds," purchase a judgment, the cestui que trust may elect either to stand as the equitable owner of it, or to consider the purchase a wrong, and call the trustees to account for the funds thus misapplied; in which latter case the judgment will be regarded as belonging to the assignees in their own right. Semble.

A mortgagor who has parted with the equity of redemption, but against whom there are judgments constituting liens on the mortgaged premises, has still an interest that the property, when sold on the mortgage, shall bring enough to satisfy all the incumbrances; and hence where he withdrew a bid made by him at the sale, and allowed the owner of the equity of redemption to purchase under the mortgage, the latter agreeing, in consideration thereof, to pay off the judgments: Held, a promise upon sufficient consideration, on which, after a failure to comply with it, the mortgagor might maintain an action.

An express promise to one having a personal interest in it, entitles him to sue

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in his own name for a breach, though the circumstances are such that its per- • formanee must have enured chiefly to the benefit of others.

Assumpsit, tried before Gridley, C. Judge, at the Oswego circuit, in June, 1839. The case, as it stood upon the evidence given, and the evidence offered by the defendant and rejected by the judge, was this: The plaintiff owned two pieces of land in the county of Oswego, and on the 27th of April, 1830, mortgaged the same to Richard Varick, to secure the payment of $1000, with interest. On the 14th October, 1833, he mortgaged the same premises to Rudolph Bunner— the amount of this mortgage not appearing. On the 11th July, 1834, Mather Sp Marvin recovered two judgments against the plaintiff, amounting to $828,07, which were liens on the same premises. In July, 1835, the second, or Bunner mortgage, was foreclosed by advertisement and sale under the statute, and the premises were purchased by Rudolph Bunner, jun. who on the next day conveyed the property to the defendant. And in November, 1835, the plaintiff released and quit-claimed all his right, title and interest in the property to the defendant.

The eldest, or Yarick mortgage, was afterwards foreclosed in chancery, and the sale took place on the 27th September, 1836. When- the property was put up by the master, the defendant first made a small bid, and the plaintiff then made a larger one. The defendant then requested some delay, and had a conversation with the plaintiff. The defendant said that if the plaintiff continued to bid, it would oblige him to ran the property up and make him the trouble of raising a large sum to pay into court. The plaintiff said he wanted to have the • property pay the judgments, and the parties spoke of the property as of sufficient value to pay all the incumbrances. The defendant said, that if the plaintiff would withdraw his bid and allow the defendant to become the purchaser, he would pay any judgments which had been recovered against the plaintiff and were a lien on the property, and which would be entitled to a surplus. The plaintiff accepted this proposition and withdrew his

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bid, and the defendant became the purchaser and received the master’s deed. This action is brought upon the defendant’s promise above mentioned, and the plaintiff claims to recover on the ground that the defendant has not paid the two judgments in favor of Mather &' Marvin. The defendant insisted that the promise was void for the want of consideration. The judge overruled the objection, and the defendant excepted.

In May, 1834, the plaintiff made a voluntary assignment of his choses in action and other personal property to Grant, Morgan & Hatch, in trust for the benefit of his creditors. On the 2d September, 1836, before the chancery sale, William F. Allen purchased the two judgments in favor of Mather & Marvin, and took an assigmnent of the same in his own name, and gave his two notes for the purchase money, being half of the amount then due on the judgments. Although he took the assignment in his own name and gave his own notes, he acted as the trustee of the assignees of the plaintiff, and subsequently paid the notes out of moneys which came to his hands as the avails of the plaintiff’s property which had been transferred to the assignees. On the day of the trial, Allen made a formal assignment of the judgments '* to the assignees, to whom they before equitably belonged. The defendant insisted, that the purchase made by Allen amounted to a payment of the judgments, and consequently that they were not liens upon the property at the time the promise was made. Overruled, and exception. He also insisted, that the promise to the plaintiff was for the benefit of the assignees, and that the action should have been brought in their names. Overruled, and exception. Verdict for the plaintiff, for the amount which Allen paid for the judgments with interest—$558,06. The defendant now moved for a new trial on a bill of exceptions

W. Duer, for defendant.

W. F. Allen & J. A. Spencer, for plaintiff.

It is quite clear that the statute foreclosure of the mortgage to Bunner did not cut off the ..lien of the judgments. (2 R. S. 546, § 8.) Mather & Marvin had the right to come in and redeem from the purchaser. Nor do I see how the assignment to Allen could destroy the lien. Although he consulted with the assignees and intended the purchase for their benefit, he took the assignment in his own name and gave his own notes for the purchase money! At law, he must, I think, be regarded as the owner of the judgments: and as such he stood in the place of Mather & Marvin at the time the promise was made on which the action is founded. He might have redeemed from the defendant, who had acquired the title of the purchaser under the Bunner mortgage. In other words, the judgments were still subsisting liens upon the property.

If we are at liberty to look at the case as it would be viewed in a court of equity, it will not change the result. The assignees did not intend by the purchase to extinguish the. judgments. On the contrary, they took an assignment in the name of a third person for the very purpose, as we must presume, of keeping the judgments on foot. This was not injurious to the creditors whom they represented. The real estate of the plaintiff was not assigned to them, and by purchasing the judgments and causing them to be satisfied out of the real estate, they relieved the trust fund to be derived from the personal property from the burden of these two debts, and thus increased their means of satisfying the other creditors.

But whether the purchase was beneficial to the creditors or not, I think a court of equity would not declare the judgments satisfied. It may be true, as the defendant insists, that the trustees could not deal in this way with the trust fund; and then it is quite clear that they could not make a profit to themselves by the transaction. When a trustee misapplies the funds in his hands, the loss, if a loss results, will fall upon him; and if he make a profit, he must account for it to the cestui qué trust. If the purchase of the judgments was an unauthorized use of the

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fund in the hands of the assignees, the creditors whom they represent might either have claimed the benefit of the purchase, in which case they would stand as the equitable owners of the judgments; or they might -have treated it as a wrong done to them, and call on the assignees to account for the money paid for the judgments. Had the creditors taken the latter course, it would not have worked a satisfaction of the judgments, but they would have belonged to Grant, Morgan & Hatch—not as assignees, but in their oxvn right. A court of equity would not go beyond requiring them to account for the money, and overturn their title to the property purchased with the trust fund. That would be a double punishment.

The formal legal title to the judgment at the time of the promise was in Allen. But if we regard him as a trustee, and look for the equitable title, we shall find it either in the assignees for the benefit of the plaintiff’s creditors, or in the assignees in their own right; and in either case the judgments were a lien on the land at the time of the promise. If the lien continued, it follows of course that the owner of the judgments, whoever that owner may be, was entitled to the surplus money arising from the sale after satisfying prior incumbrances. The plaintiff has therefore succeeded in making out a breach of the defendant’s agreement.

The next inquiry is, whether there was a sufficient consideration for the defendant’s promise. And here I am not able to perceive any serious difficulty in the case.. The property was of sufficient value to satisfy all the incumbrances. The plaintiff, who was personally bound by the judgments, had an interest in having them satisfied by the sale; and the defendant was willing to take the property and, pay the judgments, if he could be relieved from the necessity of raising and paying the money into court. The plaintiff thereupon withdrew his bid, and permitted the defendant to become the purchaser without competition, on his undertaking to pay off the judgments; That there was a sufficient consideration for the promise I cannot doubt.

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As the plaintiff’s deed to the defendant was a mere quit claim, it imposed no obligation on the plaintiff to pay off the judgments for the defendant’s benefit. The defendant took the land subject to the lien of the judgments. And although the plaintiff had parted with the equity of redemption, yet as the judgments were a personal charge, he had an interest in having them satisfied. He had the same right as any one else to bid at the sale under the Varick mortgage, and if he had become the purchaser and thus satisfied the judgments, he would have obtained an equivalent in the title to the land, and the defendant would have lost all that he acquired by the sale under the Bunner mortgage. The plaintiff relinquished his right to purchase, on the defendant’s undertaking to pay off the judgments. There was a loss or the relinquishment of a right by one party, and a benefit secured to the other; and it seems impossible to deny that there was a sufficient consideration for the promise.

Although Allen, or. the trustees, or some other third person, might derive a benefit from the performance of the defendant’s undertaking, yet as there was an express promise to the plaintiff, and he had a personal interest in its performance, the action was well brought in his name.

New trial denied.