Potter v. Holden

Dutton, J. On the 5th of November, 1859, Oliver S. Bradley mortgaged the property, now sought to be foreclosed, to Zelotes W. Holden, and gave him authority on breach of the condition to dispose of it. The instrument purported to secure four negotiable notes of f5,000 each, payable to the order of Holden, six months from date. The real object of the parties was to secure various indorsements which had been made or were to be made by Holden, for the accommodation of Bradley. Holden conveyed the legal title of the property and indorsed the notes to the petitioner for the benefit of the Bank of North America and others. This was done before Holden had become liable on any of his indorsements. The other respondents have no higher equitable rights than the mortgagor. The superior court dismissed the petition on the ground that the petitioner, not being the owner of any of the notes for the indorsement of which the security was given, and having taken the convey [393] anee of the property before there was any liability on the indorsements, had no standing in court. We think this conclusion was erroneous. Where creditors are not concerned we think parties may in general make sucht contracts, not in violation of law, as they think proper. A mortgagor may secure an indorser for his own personal liability only, or he may secure the notes which he has indorsed. It is frequently doubtful which of these was intended, but there can be no doubt that the parties can do whichever they choose. In this case the mortgagor evidently wished to secure the indorser personally, and not only so, but to make the indorser’s security available to him in the transaction of business. Eor this purpose it was put into the form of negotiable notes. These no^es would be collectible in the hands of a bona fide holder, whether the indorser became liable on his indorsement or not. We see no reason why, by agreement of the parties, a future liability could not be made a sufficient consideration for a note, rendering it collectible by the promisee as soon as the liability should become fixed. We understand that it is a common practice for banks to take the notes of a promisor as collateral to discounted paper, and we can easily see that it would frequently be a great convenience. In the present case Holden held such negotiable paper, secured by a mortgage of personal property, with full power to dispose of the same if the mortgagor should fail to pay the indorsed paper, and apply the avails either to the payment of the debts or to indemnify himself. Before he had become liable on his indorsements, he indorsed the negotiable paper which he held as security and transferred the mortgaged property to the petitioner, giving him the same power to dispose of it which he himself had. There was no consideration for this transfer, but the object was to make the petitioner a trustee or agent to carry into effect the ai'rangement between the mortgagor and Holden. We see no reason why, in the absence of all adverse claims of creditors, Holden could not in this way vest in the petitioner the legal title to the property, and at least his equitable title to the negotiable notes. If so, the petitioner became not immediately, but as soon as Holden had become liable upon the [394] paper which he had indorsed, authorized to dispose of the notes and mortgaged property for the benefit of Holden, or of such persons as he had directed or should direct. Holden, who would have had the right on payment of the mortgage debts to collect the money, had transferred this right to the petitioner, giving to him the same rights and powers which he would have had himself. In this view of the case we see no reason why the petitioner is not entitled to relief, and we think the superior court erred in dismissing the bill. The ground which we have taken is sustained by good authority. In Shirras v. Caig, 7 Cranch, 34, the condition described a bond of $30,000 to all the mortgagees, whereas the mortgage was intended to secure various individual liabilities. The court held the mortgage good between the parties for that purpose, and it is not intimated that the bond was not secured by it. In Mix v. Cowles, 20 Conn., 603, the mortgagor gave a note for $200, the consideration of which was goods sold and to be sold by the mortgagee to the mortgagor. The mortgage was held to be good even against creditors, to the extent at least of the goods sold when the mortgage was given. These cases cover the whole ground claimed by the present petitioner. He holds the legal title to the property, and is the indorsee and holder of the four $5,000 notes. There is another view of the case, which, without taking into consideration the point already discussed, shows with equal clearness that the decision was erroneous. It is not denied that the condition of the mortgage has been broken and that some one has/a right to a foreclosure. But the petitioner holds the legal title to the mortgaged property, and therefore must be a party to any bill brought for that purpose, and he has clearly a right to be a plaintiff. We have then a bill pending, in which there are at least some of the proper parties both for and against the suit. It is a well settled rule in equity that a bill should never be dismissed for want of necessary parties. If there are any other persons besides the petitioner who have an interest in this mortgage, they can come in and make themselves parties voluntarily, or they can be summoned in. Nash v. Smith, 6 Conn., 421; New London Bank v. Lee, 11 id., 112. [395] It may well be doubted whether it was not too late to take the objection for want of parties. Chipman v. City of Hartford, 21 Conn., 488; Bunnell v. Read, id., 586. The petitioner professes as trustee to prosecute this suit solely for the benefit of others. If they acquiesce in this course, why should the respondents object to it? Chancery frequently authorizes a petitioner to prosecute for the benefit of others as well as himself. New London Bank v. Lee, 11 Conn., 112. The decree of the superior- court must be reversed and the case remanded. In this opinion the other judges concurred.