Haven v. Foley & Papin

GtAMBIiE, Judge, delivered the opinion of the court. Haven claimed the personal property for which this action was brought, under a mortgage made by one James Shepard, dated August 1, 1850. The defendants, Foley & Papin, who were in possession of the property, claimed to hold possession under a deed of trust, which had been given by James Shepard on the 22d of July, 1850, to secure one Elihu H. Shepard, as his indorser, on two promissory notes, executed by James Shepard in favor of one Emerson. The answer states the de-fence, in substance, as follows : That James Shepard made the notes to Emerson; that they were indorsed by Elihu H. Shepard ; that James Shepard, by the deed of trust, conveyed [138] the property to a trustee, tbe trust declared in tbe deed being, “ that if tbe said James Sbepard shall well and truly pay tbe above described notes, when they become due and payable, and save harmless tbe said Elihu H. Sbepard from bis indorsement aforesaid, then this deed shall be void and tbe property released ; but if tbe said James Shepard shall fail to pay either or both of said notes, then this deed shall remain in force and tbe trustee may proceed to sell,” &c. Tbe proceeds of a sale, if a sale should be njade, were to be applied to tbe payment of tbe expenses, and next, to tbe payment of tbe notes or so much thereof as should remain unpaid. Tbe answer further states, that afterwards, on tbe 15th of August, an agreement was made between Emerson, tbe bolder of tbe notes, and Elihu H. Shepard, the indorser, and tbe defendants, Eoley & Papin, that tbe defendants should execute their notes for tbe same amounts as those made by Jas. Sbepard, and payable at the same times, which should be indorsed by Sullivan & Co., and be delivered over to Emerson, and that Emerson should deliver to tbe defendants the notes of Jas. Sbepard, indorsed by Elihu H. Sbepard, and that tbe deed of trust should be assigned and delivered to tbe defendants. The answer alleges, that tbe defendants made their notes, had them indorsed and delivered to Emerson, as agreed ; that Emerson delivered tbe notes of James Sbepard to Elihu H. Sbepard, to be delivered to tbe defendants, which be promised to do ; that tbe deed of trust and tbe property therein mentioned, were assigned and delivered to tbe defendants by tbe trustee and by Elihu H. Sbepard, but that Elihu refused to deliver tbe notes to tbe defendants ; that James Shepard, before this assignment was made, bad become insolvent and bad absconded and has never paid tbe notes which be gave to Emerson. Under this state of facts, the defendants claimed to bold the possession of the property against tbe mortgage of tbe plaintiffs, which was subsequent in date to tbe deed of trust. Tbe court struck out of tbe defendant’s answer tbe defence thus set up, and tbe only question is, whether tbe facts stated could be available as a defence. [139] 1. The debt that James Shepard owed to Emerson, and which was secured by the indorsement o£ Elihu H. Shepard, has not been paid or extinguished. Emerson, as the creditor of James Shepard, was entitled, in equity, to the benefit of all securities which James Shepard had given for the indemnity of E. H. Shepard, his indorser. Wright v. Morley, 11 Ver. 22. Mause v. Harrison, 1 Eq. Cas. Ab. 93. Curtis v. Tyler, 9 Paige, 432. 1 Story Eq. §§502, 638. Vail v. Foster, 4 Comstock, 312. 2. The securities thus given are regarded in equity as further security for the payment of the debt. That debt is now due to the defendants. The transfer to them of the notes of Shepard, by Emerson, and of the property which had been conveyed in trust, and of the rights under the deed of trust, was all one transaction, and is to have such effect as the intention of the parties requires and the rules of law admit. Emerson, as the creditor, was entitled to the benefit of the security or indemnity held by Elihu H. Shepard ; and all the parties agree, that the defendant shall become the creditor instead of Emerson, and the counter security held by Elihu H. Shepard shall be turned over to the defendants as the creditor. This agreement is actually carried out, except that the notes of James Shepard, coming into the hands of Elihu, for the purpose of being delivered to the defendants, are not so delivered, but the security held by Elihu is turned over to the defendants. In such case, the defendants are entitled to have the property applied to the payment of the debt which they hold against James Shepard, and as they hold the title thereto which was in the trustee and the cestui que trust, they are not to be divested of the possession by the plaintiff under his junior mortgage. Upon the supposition that the facts stated in- this part of the answer are true, the defendants were entitled to make the defence and the court should not have stricken it out. The judgment is, with the concurrence of the other judges, reversed, and the cause remanded.