Butler v. Elliott

Waite, J. 1. The principal question involved in this case, is, whether Elliott Doolittle are chargeable for the property received of Read Sp Williams, at the invoice price, or only for the net avails arising from the sale of the property. [203] It is apparent from the report of the committee, that if the latter rule is adopted, the plaintiffs have no claim upon them. For the net avails of all the property mortgaged to them, and received of Read Williams, together with all the interest in the real estate conveyed by the mortgage deed to the bank, will not be more than sufficient to remove the prior incum-brances upon the property, mortgaged to the plaintiffs. And they are not entitled to any portion of that property, until the debts for which it was previously mortgaged, are satisfied. But it is claimed, that Elliott Doolittle are chargeable with the property received of Read <§• Williams, as purchasers, at the invoice price. It is true, the property was received under an agreement that they should discharge to that amount the indebtedness of Read cf* Williams to the bank. This, however, was a mere compromise between these parties ; Elliott Doolittle, as endorsers, endeavouring to get what they could of the acceptors, who were primarily liable, and in failing circumstances. When we look at the arrangement made, immediately after-wards, with J. P. Bunce ⅜ Co., the drawers of these drafts, and Coley <§■ Smith and Smith <f* Sherman, the other endorsers, we see the true character of the arrangement. Elliott <$• Doolittle are not treated as the purchasers of the property, but as the agents of the parties interested to take this property, and dispose of it at their best discretion, and apply the avails in payment of the debts due the bank. For any balance that may remain of these debts, the parties were to remain liable. Under this arrangement, they sold the whole property, retaining no part of it to themselves. But it is said, the plaintiffs were not a party to this arrangement, and consequently, are not bound by it. It is true, they were not a party ; and the reason is obvious,— their mortgage embraced no part of that property ; and consequently, the parties interested were under no obligation to make them a party in any negotiation respecting it. How stand these plaintiffs in relation to the property received of Read ¿y Williams ? J. P. Bunce Co. had drawn drafts to a large amount upon them, which had been accepted, and discounted at the bank. Upon the greater part of [204] these drafts, Elliott 8f Doolittle were endorsers. To secure these and other debts due the bank, J. P. Bunce <f- Co. executed to the bank a mortgage. They then execute another mortgage to Elliott <§• Doolittle, to indemnify them for the endorsement of these drafts and certain promissory notes. Afterwards, they execute another mortgage of the same property to the plaintiffs, to secure certain notes due to them. Now, all the plaintiffs can require of the bank and Elliott 4' Doolittle, the prior mortgagees, is, to act fairly and reasonably in their efforts to collect what they can of Read 4’ Williams, the party primarily liable upon the drafts, so as thereby to remove the prior liens upon the property mortgaged to the plaintiffs. But in their negotiations with Read Williams, they are not bound to make the plaintiffs a party, or even to consult them in relation to the subject. It is not in the power of these plaintiffs to say to them, you shall not negotiate with Read 4* Williams, without our consent. A court of chancery, in marshalling securities for the purpose of protecting the interests of a subsequent mortgagee, will take care that no injustice be done to him who has the prior security. The committee, in this case, have found, that when the arrangement was made with Read Sf Williams, they were in doubtful credit; and, in all probability, a larger amount could not, in any way, have been obtained from them, on account of their indebtedness to the bank, than the net avails of the property turned out to Elliott 4’ Doolittle ; and all that was done by the latter, was done by them in good faith, in the exercise of sound judgment, and with the expectation of promoting the interests of the parties concerned. This is all that the plaintiffs can require of them. It is further said, that the arrangement made with Read Sf Williams operated as payment of their acceptances, and consequently, the property mortgaged to the plaintiffs became discharged from the prior liens on account of these debts. But this is manifestly not so. These acceptances were holden by the bank, which was no party to the arrangement. The directors probably considered the endorsers sufficiently responsible for the debts due to the bank, and therefore, took no part in the arrangement [205] with the acceptors. That was made entirely by the other persons liable. Notwithstanding the arrangement, Read - Williams continued liable to the bank, and were never discharged from that liability until the drafts wore paid by Elliott fy Doolittle. It is also insisted, that the report of the committee is contrary to the admission of Elliott tf* Doolittle in their answer. They do, indeed, say, that the property was received of Read Williams, at the prices annexed thereto in the bill of sale. But they afterwards go on to explain the manner in which it was received. They say, that it was received with the knowledge and assent, and at the request, of J. P. Bunce <§• Co., and that they were to be responsible only for the net avails. 2. It is further said, that the court erred in not rejecting from the report of the committee the answer given by Hotch-kiss to the question put by Elliott Doolittle. We consider it unnecessary to enquire whether that answer was admissible in evidence ; because it can have no effect upon the decree. If it were entirely stricken out of the report, the decree must remain as it is. And whether it was formally rejected in the decree of the superior court or not, is of no importance. 3. The testimony of Bunce stands upon different ground. It was received, and had influence with the committee, as material evidence in the case. The ground of the objection was,-that he was interested in the event of the suit. He was a party on the record. But that constitutes no valid objection, provided he was not interested, and was willing to testify. Woodruff & al. v. Westcott, 12 Conn. Rep. 134. Cowles & al. v. Whitman & al. 10 Conn. Rep. 121. Had he any interest l The plaintiffs had prayed for no decree against him. The facts disclosed by the pleadings and the report of the committee, do not shew, that any decree could properly be made against him ; and he had waived all claim for costs. It is, however, said, that he might be subjected to the payment of costs. It is difficult to see how that could, with propriety, be done, if no other decree could be made against him. At any rate, the facts in the case do not shew any such liability. [206] Wo think, therefore, that there is no error in the proceedings of the court below; and that the decree must be affirmed. In this opinion the other Judges concurred. Decree affirmed.