Wright v. Holbrook — 25 N.Y. Super. Ct. 516

Majority

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John S. Wright, plaintiff and respondent, vs. William R. Holbrook et al. executors, &c. defendants and appellants.

Headnote

1. A pledge, by a testator, prior to his decease, of stocks, to secure collaterally the payment of a prommissory note given for the purchase money of land agreed to be conveyed, does not amount to such a mortgage, under the provisions of the Revised Statutes, '{yol. 1, p. 749, § 4,) which makes an heir or devisee primarily liable for a mortgage by his ancestor or devisor, upon real estate descended or devised to him from or by such ancestor or devisor, as to bar a recovery upon such note, against the .executor of the maker.

2. The statute changes the common law as to mortgages, only. It does not refer to any other change, incumbrance or. lien upon the land, legal or equitable. So that where a promissory note is given, by a purchaser, for the purchase money, under an agreement binding the ve'ndor to sell the land, and apply the proceeds of the sale towards the payment of the note, before he can maintain an action upon it, if such contract can be regarded in the light of a lien upon the land,' to be enforced in equity, it will not bring the case within the statute.

(Before Robertson, Ch. J., and Monell and Garvin, JJ.)

Heard Octctober 22, 1864;

decided December 16, 1864.

Appeal from a judgment entered upon the verdict of a jury. The complaint was upon a promissory note,, made by the defendants’ testator, Darius Holbrook, for $8000, dated at Boston, January 21,1856, and payable to the order of the plaintiff, twelve months after date, with interest.

The facts sufficiently appear in the opinion of the court.

A. W. Bradford, for the appellant.

I. By the terms of the agreement, the equitable title to the land therein mentioned was vested in the purchaser Holbrook, subject to be defeated only, in case of non-payment of the note, and the exercise by the plaintiff of the power of sale contained

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in the agreement. The nominal title was in the plaintiff, but the real interest and ownership were in the purchaser. (2 R. S. p. 111, § 66. Thompson v. Gould, 20 Pick. 134 . Seton v. Slade, 7 Vesey, 264-274. Story’s Eq. Jur. §§ 738, 790.) The parties did not prescribe forfeiture on default of payment of the note, but agreed expressly for a sale of the land and the application of the proceeds.

II. The effect of the whole agreement, taking the note as. part thereof, was to vest in the plaintiff an equitable mortgage upon the lands, which could be foreclosed only by decree in equity or by an execution of the power of sale contained in the agreement. The rights of the parties and their remedies were precisely the same as if the plaintiff had in fact conveyed to the purchaser and taken back a bond and mortgage for the consideration. (Story’s Equity, 440, § 1217. 4 Kent’s Com. § 58, pp. 151, 144, 3d ed. and cases cited.) The case is to be treated then as an action against executors on a bond secured by mortgage. (Neate v. Duke of Marlborough, 3 Mylne & Craig, 407-415. Bac. Abr. Heir & Ancestor, H. 1. 2 Tidd’s Prac. 9th ed. pp. 936-938.)

III. The testator being domiciled in the state of New York, the law of this state affords the rule for the administration of his personal assets. (Suarez v. Mayor, &c. of New York, 2 Sandf. Ch. 173 . Story’s Confl. of Laws, §§ 485-7. Lyman v. Parsons, 20 N. Y. Rep. 103 .)

IV. By the laws of this state, whenever any real estate, subject.to a mortgage by any ancestor or testator, shall descend to an heir, or pass to a devisee, such heir or devisee shall satisfy and discharge such mortgage out of his own property, without resorting to the executor or administrator of the ancestor or testator, unless there be an express direction in the will of such testator that such mortgage be otherwise paid. (1 R. S. marg. p. 749, § 4.)

(a.) The effect of this provision is to throw the payment of the mortgage in the first instance on the land as the primary fund or security, so that the holder of the mortgage must ex

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haust his remedy upon the land before resorting to the personal estate.

(b.) The land becomes the principal, and the personal estate the surety

V. This being the rule of administration, according to the law of the domicil of the testator, under or through whom the devisees must claim, it will be applied to onerate the devisee, and exonerate the personalty wheresoever the lands may be situate.

VI. By invoking the aid of the forum of the domicil, the. plaintiff submits to and mtist be ruled by the rules there prevailing and regulating the administration of the personalty. (Story's Confl. of Laws, § 18, et seq. Huberus, in Story, § 29.)

(a.) He certainly can have no greater rights on a.mortgage upon lands situate out of the state, than on a mortgage upon lands situate within the state.

(6.) The mortgagee claims to charge the personal estate in the first instance ; that estate is administered according to the law of the domicil; and by the law of the domicil the personal estate is not chargeable in the first instance.

(c.) The question involved pertains to-remedv, and all remedies are governed by the lex fori. (Story’s Confl. of Laws, § 634, a.)

VII. If.it be said there is no proof of the domicil of the testator, the answer is, that in the absence of proof the presumption is, that the domicil is in the place of the forum where judicial action is invoked. (Best on Presumptions, Law Lib. vol. 31, N. S. p. 144.)

VIII. In the absence of any proof as to the law of Massachusetts, where the contract was made, and where the land is situate, the presumption is that the law conforms to the rule existing here. (Leavenworth v. Brockway, 2 Hill, 201 . Robinson v. Dauchy, 3 Barb. 20 .)

F. N. Bangs, for the respondent.

I. There being an express provision of the Revised Statutes, (2 R. S. 88, § 32,) which would prevent the issue of an execution

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in this cause, without leave of the surrogate, no question as to the fund out of which the judgment shall be paid can arise here. That will arise upon an application to the surrogate. The only question that admits of debate in this forum, is whether the note was a valid obligation of the testator, and whether the matters stated in the answer discharged the obligation.

II. The section in question was intended to introduce a rule in the marshalling of assets in the proper forum, but not as a bar to an action at law. It does not, by its terms, purport to affect the rights of creditors, but only to readjust equities as between heir" and administrator. Johnson v. Corbett, (11 Paige, 265,) was originally a proceeding in the surrogate’s court) involving the marshalling of assets. It will be time to apply the rule when we apply to the surrogate for leave to issue execution. If the action had been against a person still in life, it might as well have been pleaded that his family biblfe was all he possessed, and that thus, by law, his entire estate was exempt from execution.

III. Although the Code has given admissibility to equitable defenses in what were formerly actions at law, yet the answer does tiot set up even an equitable defense. At most, if at all, it only asserts, by way of bar to an action on a promissory note, that a state of facts may exist which requires the testator’s assets so to be marshalled as to exonerate his personal estate in Whole or in part from the payment of this demand. This is no reason why the court should not pronounce judgment as to the validity of the obligation.- A court of equity would not have stayed the prosecution of an action at law on that ground alone.

If the above points are not decisive of the appeal, then we contend:

IV. As a rule for the marshalling of assets, the section would be inapplicable, even in the forum, viz. the surrogate’s court, where it might be proper to discuss it.

1. The case is not within the terms of the section. There is no 11 mortgage given” by the ancestor. There was a power

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to sell, expressly reserved by the vendor, but that is no more than impliedly existed in Johnson v. Corbett.

2. The section relied upon is not a rule for the executor in the distribution of the personalty, but is a rule governing the tenure of real estate.

3. The lands are outside of the operation of the statute. They are in Massachusetts, where they.would descend or be taken by devise, pursuant to the law of that state, which is presumed to be the same as the common law. (Holmes v. Broughton, 10 Wend. 75 . Starr v. Peck, 1 Hill, 270 . Abell v. Douglass, 4 Denio, 305 . Throop v. Hatch, 3 Abb. Pr. 23 .)

4. Therefore, neither the heir nor the land would be chargeable with the debt, unless the executor, upon-an accounting here, could show that the common law created the charge. The plaintiff could claim the benefit of our statutory rule of distribution, without being barred by a rule which has no subject within this state to operate upon.

V. Notwithstanding the section relied upon by the defendants, the personal estate of the testator is the primary fund for the payment of the note, even in the surrogate’s court, either at common law or under our statute. (Livingston v. Newkirk, 3 John. Ch. 312. Champion v. Brown, 6 id. 398.) These cases were decided before the Revised Statutes; but Johnson v. Corbett, (11 Paige, 265,) is an authority to the same effect, since the Revised Statutes went into operation.

VI. As explanatory of the position above taken, and of Johnson v. Corbett, it is submitted that in the marshalling of assets, before the time of the Revised Statutes, there were two cases in which the rule prevailed that the personal estate must exonerate the realty from an obligation of the ancestor. The first was where the ancestor had borrowed money on mortgage. (5 Edmonds’ R. S. p. 338, Bevisers’ note to this section. Duke of Cumberland v. Codrington, 3 John. Ch. 229.) The reason was, that as the personal estate had got the benefit, temporarily, and the ancestor intended and was bound to repay the money, the fund which had got the benefit must bear the burden. The second case in which the rule prevailed was,

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where the ancestor had contracted to buy real estate, and had died before the contract was consummated by a conveyance. In this case the reason for the rule must have been that the ancestor intended to aggrandise his real estate permanently, at the permanent expense of his personalty, an intention perfectly plain in the case at bar. The section in question was intended only to reverse the rule in its application to the former case. (Revisers’ note, ubi supra.) Its intended effect is, therefore, fully given to it by limiting its application to the first class of cases, as in Johnson v. Corbett. And, to that extent, the rule was altered, as the revisers’ note shows, not because it was a bad one, nor because the reason for it was not a good one, but solely in deference to the presumed understanding of persons making wills.

VII. The fact that the plaintiff held stock as collateral security constitutes no defense, either at law or in equity.

By the Court,

The plaintiff in his complaint demands judgment against the defendants as the legal representatives of Darius B. Holbrook, deceased, upon a promissory note for the sum of $8000 with interest at the rate of six per cent, alleging the note to he due and unpaid, and that the defendants having in their hands or under their control moneys and property of the deceased more than sufficient to pay the amount of said note and interest, and averring demand of payment. The defendants admit in their answer the allegations of the complaint; except that in relation to the sufficiency of assets. And further allege by way of defense: (1.) That the note was given for the price of certain lands in the state of Massachusetts. (2.) That by a certain agreement for the sale of said lands, the plaintiff has a right to sell said lands, at public auction, three months after said note should fall due, and apply the proceeds of such sale towards the payment of the note. And the defendants claim that no cause of action exists against them as such executors, until the plaintiff’s remedy is exhausted against the said lands, and the said lands shall have been sold under the provisions of the said

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agreement and the proceeds applied upon the note. That certain stock mentioned in the agreement was taken and held by the plaintiff as collateral to said note, and the plaintiff should account for the proceeds thereof and deduct the same from the amount of said note. Upon the trial of this action' the plaintiff made his case by putting in evidence the note, with a computation of interest, and rested his cause. The defendants’ counsel offered in evidence the agreement and other matters set up in the answer, tó which the plaintiff objected; which objection the court sustained. The plaintiff had a verdict under the direction of the court, for the sum of $10,322.63, to which decision and direction the defendants duly excepted. Judgment was entered upon the verdict, with costs, and the defendants appealed.

It is insisted, and this is the only point of importance in the case, that the plaintiff is bound to sell the land and apply the proceeds towards the payment of the note, before he can maintain an action upon it against the defendants. If this position can be maintained the plaintiff cannot recover; it being conceded that no such sale and application has been made. We are referred to 1 B. B. 749, § 4, as upholding this position and conclusively barring the plaintiff’s right of recovery. This statute provides that whenever any real estate subject to a mortgage given by any ancestor or testator shall descend to an heir or pass'to a devisee, such heir or devisee shall satisfy and discharge said mortgage out of his own property— thus changing the common law rule only as to a mortgage, but does not refer to any other charge, incumbrance or lien upon the land, legal or equitable. Even if this contract is to be regarded in the light of a lien upon the land, which could be enforced in equity, it does not bring this case within the statute. (Lamport v. Beeman, 34 Barb. 239 .) This statute does not in terms confine the mortgagor, for a recovery of his debt, to his remedy upon the mortgaged premises, in the first instance; it only fixes the liability to pay the incumbrance upon the heir or devisee out of his own property without resorting to the executor or administrator of his ancestor. It does

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not bar an action upon the bond until the mortgage has been foreclosed. As between the heir or devisee and the executor or administrator, the former must satisfy and discharge the mortgage out of his own property, unless there be an express direction in the will that it be otherwise paid. There is nothing in the statute to prevent the mortgage creditor proceeding by action upon his bond or foreclosing his mortgage as he shall see fit. It is sufficient to say that this is not the case of a mortgage, and the statute does not bar a recovery upon the note in question. If I am correct, the evidence offered by the defendants was properly excluded, and the judgment should be affirmed, with costs.

Cases cited

Robinson v. Dauchy 3 Barb. 20 N.Y. Gen. Term 1848-05-02 p. 518
Holmes v. Broughton 10 Wend. 75 N.Y. Sup. Ct. p. 520
Throop v. Hatch 3 Abb. Pr. 23 N.Y. Sup. Ct. p. 520
Lamport v. Beeman 34 Barb. 239 N.Y. Sup. Ct. 1861-09-02 p. 522