Mills v. Watson — 31 N.Y. Super. Ct. 374

Majority

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OTIS MILLS, Plaintiff and Respondent, v. JAMES S. WATSON, Defendant and Appellant.

Headnote

A purchaser of lands, encumbered by a mortgage before executed by the seller, agrees as part of the purchase price to assume and pay the mortgage' debt when due. By such agreement the purchaser, as between him and the seller, becomes the principal debtor for payment of the mortgage, and the seller Ms surety.

In such case, if the purchaser omit to pay the mortgage debt when due, the seller may lake an assignment of the mortgage to himself and foreclose the same, or sue on the agreement and recover the amount paid by him in obtaining the mortgage, not exceeding the amount unpaid on such.mortgage. In such an action, written receipts indorsed on the mortgage by the mortgagee, are competent evidence to show payments thereon. The plaintiff in such action can only recover the amount paid by Mm.

Before Barbour, C.J., Fithian and Freedman, JJ.

[Decided June 11, 1869.]

This case was tried at Special Term, before Mr. Justice Freedman.

This was an action in equity, in the nature of a bill quia timet, to compel the defendant specifically'to perform a covenant of payment and indemnity in favor of plaintiff.

In September, 1853, the plaintiff being the owner in fee of certain' lands and premises in the city of Charleston, South Carolina, executed and delivered his bond, and a mortgage on such premises, to one Baker, executor, &c., to secure the payment of $4,200, in five years from date, with interest annually.

• In November, 1855, Baker, the mortgagee, assigned this bond and mortgage to Charles M. Groves, trustee of Mary C. Dukes. Afterward, in April, 1856, the plaintiff Mills sold and conveyed the mortgaged premises to'the defendant, by a deed of indenture executed by both the parties thereto, in consideration of $500 cash paid, and the further consideration that defendant Watson did therein covenant and agree with plaintiff Mills to “ well and truly pay o/rhd satisfy ” the bond above described, and

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“ hold harmless the said Otis Mills, his heirs, executors, and administrators, from all loss and damage whatsoever, by reason of the said bond and mortgage.”

In June, 1860, one James M. Carson was appointed “ trustee of Mary C. Dukes,” in place of Charles M. Groves, and the bond and mortgage was thereupon assigned to Carson as such trustee. In May, 1863, the defendant Watson, not having paid the said bond and mortgage, or any part thereof, in pursuance of his co venant so to do, the plaintiff Otis Mills paid to Carson, the then holder of the bond and mortgage, $3,823.44, in full satisfaction of the amount then remaining unpaid on said bond and mortgage, and took from said Carson an assignment thereof to himself, by the description of “ Otis Mills, executor Est. E. A. Miller,” one thousand dollars of which sum was paid by crediting to Mills, as cash paid, a debt which he held for that amount against the holder of the mortgage, and the remaining $2,823.44 was paid by the check of “ O. Mills & Co.” on a bank in Charleston, and which check was paid by the bank in certain bills, called “ Confederate notes,” which were proven to be worth 20 cents per dollar only, in gold.

Afterward, Mills commenced this action to compel defendant to pay this bond and mortgage in full. It appeared that while the bond and mortgage was held by Groves’ trustee, there were indorsed by him, over his own signature on the bond, four several receipts, acknowledging the receipt by him, from the plaintiff Mills, of several payments of principal and interest on said bond, as follows: October 4, 1856, $294; February 21, 1859, $224; April 9,1860, $224; and January 18, 1858, $1,294. These receipts were offered and admitted in evidence on the part of plaintiff, to show payments by him of said amounts on the bond and mortgage. The receipts were objected to as incompetent evidence against defendant to show payments by plaintiff.

The justice at Special Term held that the action could be maintained to enforce the specific performance of defendant’s covenant to pay the amount of the bond and mortgage; that plaintiff was entitled, as assignee of the bond and mortgage, to

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recover the full amount thereof, and that the receipts were evidence against defendant. Judgment was accordingly entered that defendant pay to plaintiff §5,859.44, with interest on $4,200 from May 14, 1863. No interest was allowed on the three pay ments first receipted on the bond. The defendant appealed.

Mr. William G. Choate for appellant.

A grantee who covenants to pay a mortgage existing on the land granted, and to indemnify the grantor against the same, is hable on his covenant, after an accord and satisfaction of the mortgage debt by the grantor, only for the value or amount of such accord and'satisfaction; and there was error in the finding that the defendant owed on his covenant any greater sum by reason of the payment of Confederate notes, than the value of said notes:

Upon the conveyance of the equity of redemption to the defendant and his covenant, he became the principal debtor, and the plaintiff became his surety (Halsey v. Reed, 9 Paige, 446, 452; Marsh v. Pike, 10 Paige, 595 ; Harley v. Harrison, 24 N. Y., 171 ).

The plaintiff, then, has the rights and remedies of a surety.

A surety who extinguishes the debt by an accord and satisfaction can recover of his principal, not the amount of the debt extinguished, but the value of the property taken in satisfaction (Bonney v. Seeley, 2 Wend., 48 L; Ainslie v. Wilson, 7 Cow., 662 ; Sedgwick on Damages [4th ed.], pp. 323-325).

The plaintiff was not entitled to all the benefits of the bond and mortgage, as a purchaser. He was entitled to hold the mortgage as a lien on the land for the security of his claim against the defendant on the covenant (Lewis v. Palmer, 28 N. Y., 271 ; Story’s Eq. Jur., sec. 490, 490 d).

The bond was clearly extinguished by payment.

It was the plaintiff’s bond. Defendant could never have been sued on it, nor can he now ; and by its surrender to the plaintiff, upon satisfaction, it was extinguished. It cannot be said to be security in the plaintiff’s hands, for it was security only against

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himself. It might he otherwise if the bond were the bond of the defendant, and the plaintiff had joined in it as surety.

With the mortgage, however, it was otherwise. That binds by a valid lien the defendant’s land. It is collateral to the bond.

The plaintiff is in equity entitled to be subrogated; but neither justice nor equity entitles him to take advantage of this security to recover more than the amount due to him from the defendant. He too'lc the lien of the mortgage as security only. The receipts indorsed on the bond were improperly received as evidence of payment by the plaintiff (see Foster v. Beals, 21 N. Y., 249 ).

The plaintiff was a competent witness to prove those payments, if made, and he was not called.

The action is in the nature of a bill quic/j timet, to obtain specific performance of covenant to pay a debt of the plaintiff.

Yet, upon the findings of the court, the plaintiff is under no liability under that debt; the debt is discharged; and he has a claim at law against the defendant for damages only, with a right in equity to enforce the lien of the mortgage against the land, by way of security for his claim for damages.

That of which he asks the specific performance is already performed by himself.

Mr. John L. Cadwalader for respondent.

This Court, as a court of equity, has jurisdiction to decree the specific performance of the defendant’s covenant to pay and satisfy the bond and mortgage outstanding (Story’s Eq. Jur., vol. 2, sec. 880, p. 194; Milford’s Pleading, by Jeremy, 148 ; Farnham v. Mallory, 5 Abb., N. S., 380; S. C. [less fully], 40 N. Y., 527 ; Champion v. Brown, 6 John. Ch., 398, 407 ; Hayes v. Ward, 1 John. Ch., 132; Marsh v. Pike, 1 Sand. Ch. R., 210; S. C., 10 Paige, 595).

The covenant of the defendant was in part payment of purchase-money, and was not a contract of indemnity. It was an absolute engagement to pay; and an action could have been maintained, and the amount collected, the moment the mortgage became due,

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and without waiting for or setting up any damage, and the judgment would provide for the application of the money, as in this case. It was simply collecting the purchase-money of tl^e property sold to the defendant and paying the mortgage (Rawson’s adm’r v. Copeland, 2 Sand. Ch., 251 ; Post v. Jackson, 17 John. R., 238, also 479; in the matter of Negus, 7 Wend., 499 ; Wetherby v. Mann, 11 John. R., 516).

The plaintiff, therefore, was entitled to purchase the security and enforce it as any other person. But here he was obliged to pay, and the amount paid or the currency in which it was paid is not material. ‘ ¡Nor is the form of action material, whether it be an action to enforce the covenant or tp foreclose the mortgage. The Court will give the plaintiff the relief to which he is justly entitled in this action. But Farnham v. Mallory, supra, is a direct authority to enforce the covenant, whoever held the mortgage.

The payment of interest proved by the indorsements on the bond was properly received; and it is clear that, if the court had jurisdiction of the subject-matter in action, payment of the interest may also be decreed (Livingston v. Painter, 43 Barb., 270 ).

The evidence was admissible as a declaration and entry against the interest of the party making it, and also as a part of the res gestee, and a contemporaneous act done at the time of the payment.

By the Court:

I concur with the Justice at Special Term that this action can be maintained in equity. By the covenant in the deed from plaintiff to' the defendant, the latter, for a good consideration, undertook to pay plaintiff's debt to a third person. The defendant thereby, as between him and the plaintiff, became the principal debtor, and the plaintiff his surety. It is a well-settled rule of equity that a suit in equity may be instituted and maintained by a surety, to compel payment by the principal upon a covenant of indemnity; and unless there be some good reason shown to the contrary, the Court will decree specific performance,

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upon the same principle that they entertain a bill of quia timet (2 Story’s Eq., sec. 880, p. 194; Marsh v. Pike, 1 Sandford, Chy., 210; 10 Paige, 395).

The action is properly brought in the name of plaintiff individually. The assignment of the mortgage must be construed as the assignment to him in his individual capacity. The words “ executor est. B. A. Miller,” following plaintiff’s name in the assignment, must be rejected as surplusage, or considered as descriptio personas only, as in the cases of Peck v. Mattoon, ( 10 N. Y., 509 ), and Ogdensburg Bank v. Van Rensselaer ( 6 Hill, 240 ); especially so in this case, as there is no evidence of the existence or death of any such person as R. A. Miller, or that he left an estate, or that plaintiff was his executor.

I am also of opinion that the receipts were competent evidence prima facie to show payments by plaintiff upon the bond. There was no question as to the genuineness of the signature' of the then holder of the mortgage. The defendant, by his covenant, became the principal debtor on the bond and mortgage, and could be so considered and treated by whoever held the mortgage, and a personal judgment could have been obtained against him in an action to foreclose the mortgage. Assuming, as we must, that the law of South Carolina is the same as ours in that respect, in any such action, these receipts would be competent in favor of defendant to reduce the recovery. They are made against the interest of the party holding the mortgage, are indorsed upon the bond itself, and must be considered a part of the res gestee. Besides, I do not see how the defendant is bound in the premises.

Upon the law of the case, as claimed by the defendant, plaintiff was entitled to recover all that he had paid. Striking the receipts from the case, then the production and proof of the bond and mortgage, in the absence of any proof on the part of defendant to the contrary, would have been prima facie evidence of payment by the plaintiff of the full amount of it, while the evidence by defendant clearly shows that the sum paid by plaintiff, at the time of the assignment to him, was not in satisfaction

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of the whole amount of the mortgage debt, but only of what re mained after deducting these payments.

The remaining question is as to the amount of the decree.' While I am clearly of opinion the plaintiff cannot, upon the facts in this case, have a decree in equity for any greater amount than he has paid, yet, in the view'I take of the evidence, it is unnecessary to examine that question at length. In this case, the production of the bond and mortgage on the trial is proof of due assignment thereof to the plaintiff; and proof of the receipts was of itself prima facie proof of the payment of the full amount thereof by the plaintiff. The onus then was upon the defendant to show (if he claimed such to be the fact) that the plaintiff obtained the mortgage for a sum less than the full amount secured thereby. This the defendant has undertaken, but, I think, wholly failed to do. The only question is in respect to the item of $3,823.44, which defendant insists was not paid in full by the plaintiff. One thousand dollars of this item was paid by plaintiff, crediting thereon a debt of that amount,, owing to him by the holder of the mortgage. This debt was not disputed; it was therefore so much cash. “ The balance (about-$2,823.44) was paid by a check of O. Mills & Co., on a bank in Charleston.” It is true that in judgment of law the delivery to a creditor, by a debtor, of a check or note, for or on account of a precedent debt, is not of itself evidence that the check or note was taken in payment or satisfaction of the debt; yet-it may always be shown by proof that it was, in fact, so taken. Here the proof is positive that this check of 0. Mills & Co. was so taken. The only witness who did speak on the subject, and he one of the parties to the negotiation, swore “ the balance was 'paid ” by this check. The witness then proceeds to state: “ The currency at that time was Confederate treasury notes, and checks on banks at that time were paid in that currency.” The witness does not state, except inferentially, how this check of 0. Mills & Co. was paid, nor is it material to inquire. The question .is not what the payer of the check realized upon it, but what it was worth to the plaintiff, or what it cost him to obtain it. There is

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no evidence of the precise amount of the check on its face, but as it was given in payment of a certain balance, viz., $2,823.44, presumptively it was for that amount on its face. It must be presumed also, in the absence of proof to the contrary, that the drawers of the check had sufficient funds in the bank to meet it, and that it was accepted and paid by the bank. There was no proof of protest or complaint by the person to whom the check was paid. It must be considered, therefore, that the check was given for the amount it called for, and that was for the number of dollars and cents named therein, in the money of account of the United States. This Court cannot acquiesce in the right of the drawers or acceptors of the check, without the consent of the holder, to extinguish the obligation thereby created, in any other way than by the legal-tender money of the United States, any law or custom- of the State of South Carolina to the contrary notwithstanding. Had it appeared affirmatively that the plaintiff had purchased a certain quantity of illegal and unauthorized promises to pay, worth as property but twenty cents on a dollar of their face, and that, by a compromise between him and the holder of the mortgage, the holder had taken these promises at their full nominal face or value, in satisfaction of this mortgage, another question would have arisen. But it suffices to say no such facts appear; and there is no evidence in the case to negative the presumption that O. Mills’ check was worth its face in United States currency.

The judgment should be affirmed, with costs.