Gossin v. Brown

The opinion of this court was delivered by Bell, J. It is conceded that the conveyances from Gossin to Denny being modified by unrecorded defeasances, are to be regarded as unrecorded mortgages, and, therefore, subject to be postponed to the subsequent mortgage executed to Harding. This leaves, [531] as the only question in the cause for decision, whether Brown, the plaintiff below, is entitled to the benefit of the latter security by way of substitution ? This question, we think, under the principles settled by repeated decisions in Pennsylvania, admits of but one answer, almost to be deduced from a simple statement of the facts. On the 5th of February, 1842, Gossin borrowed from Harding a sum of money for which he gave his note, with Brown as endorser, and, at the same time, executed to Harding a mortgage as collateral security. Harding testifies this mortgage was intended to secure Brown against any loss from his endorsement, he, as lender, being satisfied with the security afforded by Brown’s name. Gossin’s note was not taken up at maturity, and an extension of the time was granted to Brown as endorser, on condition of his, Brown’s, confessing a judgment in favour of Harding. This was accordingly done on the 8th of February, 1843. This judgment was marked satisfied in July 1843, at which time Brown substituted for it a mortgage of a portion of his property to Harding, as a further security of the original loan to Gossin. On the same day that Brown confessed judgment in favour of Harding, Gossin assigned certain dioses in action to Brown, of a nominal value exceeding the debt due to Harding as collateral security against loss. Though an effort was made to effect it, nothing was realized from these dioses, which are agreed to be worthless. On the 5th of July, 1845, Brown paid the amount secured by his mortgage to Harding, and thus discharged the original debt due from Gossin, for which, as endorser, he was surety. On the 23d of September, 1845, Harding, at the instance of Brown, assigned to him Gossin’s mortgage, by an entry on the margin of the record. Brown had no notice of the conveyances to Denny when he endorsed Gossin’s note to Harding, but was informed of them prior to the date of his mortgage of July 1843. We have, in these facts, the naked case of a surety who paid the debt of his principal, and claims to be subrogated to the use of a mortgage which was, in fact, executed to indemnify hiin against loss. And why should he not be so subrogated ? Apart from the fact that the mortgage was given principally for his security, and may thus be regarded -as equitably belonging to him from the beginning; the equity he challenges is among the most familiar of those recognised by courts of chancery, and with us of almost daily administration. That a surety who pays the debt of his principal is entitled to the benefit of all the securities within the power of the creditor, is a doctrine acknowledged in this [532] state, unembarrassed by the difficulties and dispositions that elsewhere have obtained, in respect to such securities as might be esteemed as discharged at law. Following the older decisions of the English Chancery, we have ever held that, though there be but one security of the debt paid by a surety, equity will preserve its vitality for the benefit of such surety, for, as is said in Craft v. Moore, 9 W. 451, where this branch of our legal system is ably reviewed, “ what is very payment at law may not be payment at all in equity.” We have gone even further than this, by asserting a similar equity in favour of a co-surety in a joint judgment of one of several purchasers of land, encumbered by a joint judgment, afterwards paid by that one; and for the protection of a mortgagor who aliened the mortgaged premises with covenant that the alienee should assume the encumbrance: Fleming v. Beaver, 2 R. 128; Potts v. Nathans; Bank of Pennsylvania v. Potius; Lothrop’s Appeal; Duncan v. Drury, 9 Barr, 332; Champlin v. Williams, Ib. 341; Morris v. Oakford, Ib. 498. But the question of a security extinguished by payment, can scarcely be said to be presented here. The security actually discharged was Gossin’s note to Harding, or, at most, Brown’s mortgage to the latter. There was no formal discharge of Gossin’s mortgage, and therefore, even in England, it could not be considered as discharged, or, in the language of Lord Eldon, got back to the principal debtor. There is, in fact, no pretence for saying that it was actually paid, either by Gossin or Brown. The judgment confessed by the latter, and the mortgage afterwards executed by him, were, strictly speaking, to secure payment of his endorsement; and the subsequent payment of the mortgage was but in discharge of his original liability. Gossin’s mortgage therefore remained intact for every equitable purpose, and would be everywhere so esteemed. But, I repeat, had it been the only evidence of the debt incurred by Gossin and Brown, payment by the latter of the sum due, would not have extinguished the security to the detriment of the surety. It is true that payment by a surety, with intent to discharge the security, may operate to extinguish it in equity as well as at law; yet such an intent is not to be presumed without proof of its existence. It is difficult in any case to conceive the object of a surety to be extinguishment, in detriment of his own interests; and therefore payment by him is primd facie to be accepted as intended for personal relief, leaving his remedies untouched. To this effect are all our authorities; and from them has been deduced the general rule that where there are no special circumstances manifesting a determination to obliterate the original [533] obligation, and to destroy tbe securities taken for its payment, equity will regard the duty as still existing at the option of the surety: Croft v. Moore; Morris v. Oakford, supra. Now what has Brown done or omitted to do, which, as sufficient evidence of intent, can operate to withdraw his pretensions from the influence of this rule ? Certainly such an effect is not to be imputed to his acceptance of the choses in action, transferred by Gossin as collaterals. This can scarcely be pretended. In accepting additional means of safety, it is not to be supposed he intended to extinguish those he already possessed. Nor is such a result to be aseribable to his omission to ask an assignment of the mortgage immediately on payment of the debt. Actual assignment was altogether unnecessary. The power to use the mortgage as a means of reimbursement was conferred by his unassisted right of subrogation, and it would, therefore, be strange indeed to ascribe an effect, destructive of this right, to a mere negligence to exact the performance of an unessential ceremony: Kinley v. Hill, 4 W. & S. 426. This omission did not put it in the power of the mortgagee to compromise the right of the surety by the entry of satisfaction on the record of the mortgage, as seems to be thought by the counsel of the plaintiff in error. Such an attempt would be regarded as fraudulent and wholly inoperative as against the surety, for whom, after payment, the mortgagee is considered as a trustee: Roberts v. Halstead, 9 Barr, 32. If further answer to this objection be required, it is found in the fact that, within a reasonable time, a request preferred to the mortgagee was followed by a formal transfer of the mortgage; a step in itself sufficient to dissipate every lingering doubt as to the intention of the party principally interested. The fact that Brown, before the execution of his mortgage to Harding, had notice of the conveyance to Denny, cannot, of itself, operate to alter the relative rights of the parties. Before this, Brown had incurred the liability he was ultimately obliged to discharge ; and this, too, on the faith of Gossin’s mortgage to Harding. Judgment affirmed.