Drake v. Paige

Merwin, J. The only question before us is whether Clinton F. Paige has a lien or charge on the one-fourth interest of Frederick Lewis, acquired by plaintiff through the foreclosure of the mortgage of June S, 1873, for the amount he was compelled to pay by reason of the appropriation by Frederick Lewis of the Morgan and King mortgages. We must assume here that Paige was correctly charged by the surrogate with the amount of those mortgages by reason of the knowledge of Paige of the design of Lewis to misappropriate, and his assistance in enabling him to do it. The claim, then, of Paige is that he was in effect in the position of a surety for his co-executor, and that, when he paid the other parlies the moneys his co-executor had appropriated, he became entitled in equity to be subrogated to any remedy the other parties might have had against the share of Frederick Lewis for his misappropriation, and that one of those remedies was the riglit to have an equitable charge or lien on such share, in whosesoever hands it might be. It is, I think, true that, as betwen the parties themselves, if one had obtained more than his share, an equalization would be made upon a division of the balance of the common property, and that this right for equalization would inure to the benefit of one who as surety had been compelled to respond for a defaulting co-owner. I do not suppose that the fact that the parties sought a personal remedy through an accounting in the surrogate’s court would operate as a waiver of any other remedy, (Clapp v. Meserole, *40 N. Y. 281,) or affect the right of the surety. But the trouble here is, the rights of third parties have intervened. A large creditor of-Paige has obtained, as he claims, a lien by mortgage and a title by subsequent foreclosure, all before the discovery or ascertainment of the misappropriation, and, upon agreement with the judgment debtor, has advanced and paid out large sums in payment of judgments which are conceded to have Been liens on the share of Frederick, and were recovered before the misappropriation. I say “conceded,” because that fact is found by the referee upon the request of the defendants. So that the question, then, is whether the equity of the surety is superior to the right, be it legal or equitable, of the mortgagee, or those holding under him. Drake, when he took the mortgage, assumed new responsibilities. He agreed to and did advance moneys to take up prior judgments; he parted with value on the faith of the mortgage; and the referee finds that he then had no notice or knowledge of any misappropriation by Lewis. The evidence authorizes this finding. At the mortgage sale he was a purchaser for a valuable consideration, although the purchase money was all applied on the mortgage debt, ( Wood v. Morehouse, 45 N. Y. 376,) and his title was as of the time of the execution of the mortgage. ° Authorities are cited by the respondent to the effect that under the will no estate vested in the executors. They took simply a power in trust, and the [471] fee was in the devisees, subject to the execution of th ■> power. Reed v. Underhill, 12 Barb. 113; Crittenden v. Fairchild, 41 N. Y. 289; Hetzel v. Barber, 69 N. Y. 1. The will admits of this construction, and it does not seem to be disputed by the appellant. His answer is apparently on that basis, and his right to tenancy by the curtesy which he claims in his answer is on that basis. If the title vested in the devisee, he had a right to mortgage or sell. If the power to the executors was exercised simply for the purposes of division, then, according to the case of Ackerman v. Gorton, 67 N. Y. 63, the proceeds would be deemed realty for the purpose of the retention of liens on the legal estate. If the power was exercised in order to provide for charges and expenses imposed by the will, then the balance, after providing for such incumbrances, should be deemed still to retain its character of realty. Vernon v. Vernon, 7 Lans. 492. The premises described in the complaint seem to be such balance. The general rule, under the English cases, is that if a tenant for life, or other person having a partial interest, be an actor in a breach of trust, all the benefit that would have accrued to him, either from that trust fund or any other estate comprised in the same settlement, may be retained, as against him, his assignees in bankruptcy, or, except when the defense of purchase for value without notice is applicable, those claiming under him, until the amount retained, with the accumulations thereon, have compensated the trust-estate for the loss it has sustained. Lewin, Trusts, (2d Amer. Ed.) 609. The same rule should apply here, and the mortgagee, as a purchaser for value without notice, have the benefit of the exception, and be protected. There is another view of the case which supports the same conclusion. About $23,000 of the judgments that Drake assumed and agreed to take up, and did take up, were conceded liens on the one-fourth interest of Lewis before the misappropriation. Drake, having paid these at the request of lAwis, would be entitled to be subrogated to the benefit of theliens, for his protection as against subsequent claimants, (Gans v. Thieme, 93 N. Y. 232; Clute v. Emmerich, 26 Hun, 10, affirmed 99 N. Y. 342, 2 N. E. Rep. 6,) and thereby fortify the right which was obtained by the foreclosure. The amount of these was more than was realized upon the foreclosure sale. How much Drake in fact paid for these judgments does not appear. Presumptively, he paid the full amount. Nor does it, I think, affect the question that, instead of satisfying the judgments, he liad them assigned to himself and his wife. Keeping in form the legal lien would not injure his equitable rights. The judgments have all now, by lapse of time, ceased to be legal liens. But it is said that, under the rule laid down by Judge Denio in the Clapp Case, above cited, the share of Frederick Lewis may be followed, although he may have transferred or incumbered it before the misappropriation. That case differs materially from this. In that case the fund still remained in the hands of the trustee. It was a case where the title was in the trustee absolutely, and the determination was for the benefit of the beneficiary directly, and not of a party who claimed to be subrogated. Here a party who was an actor in the misappropriation seeks the benefit of the principle of subrogation. He is still executor, and the case shows there are assets still in his hands, but the amount does not appear, and no relief is claimed here as to them. The right of subrogation is an equitable one, and its application must depend upon the circumstances of each particular case. The continued insolvency of Lewis has brought about the present strife. He ceased to be executor in 1873, but nothing was done about an accounting until 1880. Having in view the origin of the claim of the appellant, he lias not, in my opinion, shown any equitable right superior to the right acquired by Drake, and through him by the plaintiff, in the share of Frederick Lewis in the property described in the complaint. It follows that the judgment should be affirmed, with costs. Hardin, P. J., concurred. Martin, J., did not vote.