Case ID: miss_14/html/0139-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Mr. Justice Clayton", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joseph Terry et al. vs. Joseph Woods et al.
    The assignment of a note, secured by mortgage, carries the benefit of the mortgage along with it, to the assignee.
    Where the assignee of one of a series of notes, all secured by mortgage, sues the debtor at law, and arrests him upon mesne process, and afterward, from the inability of the debtor to give bail, and, out of clemency, discharge him from the arrest, the mortgage lien of such assigned note will not thereby be divested, or taken away. It seems it would be otherwise, if the discharge were upon an arrest on final process.
    Where the holder of one of a series of notes, secured by mortgage, upon the arrest, on mesne process, of the judgment debtor, discharges the debtor from the arrest, and, at the same time, receives a steamboat from him as collateral security, which he afterwards exchanges with the debtor for notes, also as collateral, which prove worthless ; the holder of the assigned note does not thereby discharge the lien of the mortgage as to the note so held by him.
    Where a decree was rendered at the suit of the holder of one of a series of mortgaged notes, against the mortgage debtor, subjecting the property mortgaged to the payment of the mortgage debt, and in neither the pleadings nor proof did it appear that the mortgaged property was an inadequate security for all the mortgaged debts : Held, that, at the mere suggestion of counsel that such might be the case, the decree would not be reversed.
    Where the holder of one of a series of mortgaged notes indorses the note to a third person before due; and after its maturity and nonpayment, takes it up, and becomes again the holder thereof, he will not thereby lose his recourse upon the mortgaged premises, but will be substituted again to his original rights.
    On appeal, from the district chancery court at Carrolton; Hon. Henry Dickinson, vice chancellor.
    Joseph Woods, Robert Woods, John Bell, and Jane Bell, partners, under the firm of Yeatman, Woods & Co., exhibited their bill in the district chancery court at Carrolton, against Joseph M. Terry and others, averring that, in the year 1835, Hugh B. Johnson, deceased, and Robert H. Sterling, bought a tract of land arid some negroes, of Joseph M. Terry, on a credit, for $100,000, for which they executed various notes and bills of exchange, with personal security, together with a mortgage on all the property thus sold, to secure their payment; that one of the bills of exchange thus made and secured for the sum of $12,212, due in April, 1838, and accepted by Byrne, Herman & Co., of New Orleans, was sold by Terry, and by him regularly indorsed to the complainants, after the execution and registration of the mortgage, for cash; the interest and usual charges for advancing money, being deducted. That at its maturity this bill of exchange was protested; but that $6200 81 had been paid upon it by Johnson; the residue, with interest and damages, being still due; to foreclose the mortgage upon which was the object of the bill. ■
    The heirs and personal representatives of Johnson ; Sterling, Terry, and one Augustine D. Statham, who was averred to be in possession of, and to claim title to the mortgaged property, through some right derived from Terry, were made defendants to the bill. The prayer being for an account, and a sale of the mortgaged property.
    Terry, in his answer, admitted the execution of the mortgage, and the bill of exchange, but denied the sale of the latter to the complainants; he averred that he sold it to a broker in New Orleans, at a discount of 15 or 20 per cent.; he denied all knowledge of the protest, and averred that he had never received any notice of the non-payment of the bill. He avers also that Sterling, besides the sum paid by Johnson, paid the complainants about $8000. He denies the right of the complainants to the relief they pray for; and by way of cross-bill, charges that the complainants received of Sterling the said sum of $8000, by a steamboat, which they attached in Louisiana, of his, called the “ Choc-chu-ma,” and which they received in discharge of all claims against said Sterling, on said bill of exchange, and in payment of $8000 thereon ; and at the same time dismissed an action at law which they had brought against Sterling, in person, on the bill of exchange; that they delivered the steamboat to Sterling, binding him to keep them harmless, as owners, against the expenses of running it, to keep her insured, to re~ turn it when called upon, and to make up the deficiency between her value, when returned, and the $8000. Terry further avers, that this attachment suit against the steamboat, and the personal action against Sterling, on the bill of exchange, were fully settled in Louisiana, and operated as a discharge and satisfaction of the bill. That the complainants recovered a judgment against Johnson, in his lifetime, in Louisiana, which but for fraud, or gross neglect, they might have realized in full, as Johnson had ample property there; which, he also contended, worked a discharge of the mortgage. That while the complainants held the bill, they indorsed it to one James Irwin, who indorsed it to the New Orleans Canal and Boating Company ; and that, while thus held by Erwin, he was advised to sue Johnson on it in Mississippi, which he refused to do, on the ground that he would be paid in depreciated paper; and that by the settlements made by the complainants in Louisiana, with Sterling, the acceptors, Byrne, Herman & Co. were discharged from their liability on the .bill; any or all of which, Terry contended, freed him and the mortgaged premises from liability on the bill of exchange. Sterling, in- his answer, admits the execution of the bill and mortgage, and the payment of the sum by Johnson, which he says is all that the plaintiffs have received, so far as he knows. He says that a steamboat, owned by him, called the Choc-chu-ma, was attached by the plaintiffs in New Orleans, and he was also personally sued, and judgment recovered against him, in Louisiana, on the bill; that fearing, lest his boat, by exposure to public sale, might be sacrificed, he agreed with the complainants to convey it to them at the nominal price of $8000, but purely as collateral security for the bill of exchange; he to take charge of the boat, with the agreement to return and account for it, whenever called on; that afterwards, in order to effect a total release of his boat from this liability to immediate seizure and sale, he deposited in lieu and discharge of his boat, but still as collateral security for the original bill of exchange, $35,375 77 in amount, of promissory notes, with William M. Beal, to pay out of the proceeds the sum due on the bill of exchange to the complainants; that at the time he and the complainants thought the notes valid, and the consideration good; but since, the notes had proved worthless, and the complainants had realized nothing out of them, nor out of the steamboat, while in their possession, or since. That Johnson was fully privy to the seizure and discharge of the steamboat, and at the time confessed judgment in Louisiana for the amount of the bill. That he had previously sold out to Johnson all his interest in the land and negroes bought of Terry, • and had. Johnson’s bond to save him harmless from all the debts growing out of the purchase.
    The agreement in writing, with reference to the steamboat, between Sterling and Yeatman, Woods & Co., was filed with Sterling’s answer, and contained the express stipulation, that the steamboat was only received as collateral security, and was 'hot to impair any rights growing out of the bill of exchange.
    The answer of the administrator of Johnson averred the declaration of the probate court of the insolvency of the estate.
    Statham answered that he had purchased the land and negroes from Terry, in ignorance of the rights of the complainants.
    Yeatman, Woods & Co. answer the cross-bill, and deny that they ever discharged Sterling from his liability on the bill of exchange, or that the judgments obtained by them in Louisiana against Sterling, were ever discharged. They proceed to answer the charges with reference to the steamboat Choc-chuma, and the notes of West & Phelps, for $35,375 77, substantially to the same eifect as stated by Sterling, and exhibit a copy of the agreement, with their answer. They state further, that Johnson offered, afterwards, to confess judgment on the bill of exchange, in Louisiana, if they would give up to him these notes of $35,375 77, which had proved valueless, and which were deposited by Sterling with Beal, but which were all payable to Johnson, and were really his property, and had been lent by him to Sterling, to be used to effect the discharge . of his steamboat. This arrangement was made, the judgment confessed, and the notes delivered up’. They deny that, either by fraud or neglect, they failed to realize this judgment out of Johnson; they used all efforts, but failed.
    
      They admit the truth of the charge with reference to the indorsement to Erwin, and by Erwin to the Canal Bank, but say that, upon the non-payment by the acceptors and indorsers, they were obliged to take it up again.
    They deny that Byrne, Herman & Co., the acceptors, were ever released from the bill; but aver that they are still liable upon it, but insolvent; and that the whole of the bill is still due to them, except the sum credited.
    They filed with their answer a record of the judgment and proceedings, in the parish court for the parish and city of New Orleans, in their suit against Sterling, on the bill; by which it appears that Sterling was arrested on mesne process, on the affidavit of the plaintiffs. That he was a non-resident, and the steamboat was attached at the same time.
    The'agent of the plaintiff directed the sheriff, in writing, “ to give up to R. H. Sterling the steamboat Choc-chu-ma, attached by them, as the attachment had been settled.” They directed the sheriff, also, to permit Sterling “ to go wheresoever he might think fit, in or out of the city, at their risk, as they had no disposition to interrupt the personal comfort or movements of Sterling.”
    The testimony of Joseph W. Walker, taken by the complain.ants, proved the execution of the agreement, with reference to the steamboat Choc-chu-ma, and its reconveyance to Sterling; and that the complainants became the owners of the bill of exchange, about the 9th of January, 1837; it contains also statements of the dates and amounts of the judgments against Johnson & Sterling, and the reasons why the debt was not made out of Johnson’s property in Louisiana, and other matters, which it is not deemed material'to notice.
    James Irwin proved that, as agent of the plaintiffs, he had Sterling arrested, and discharged him from the arrest, because he could not give bail, and at the same time received from him, as collateral security, the steamboat Choc-chu-ma; his testimony on this subject, is the same with the statements of Stirling, in his answer.
    Upon this state of pleading and fact, the vice chancellor ordered an account to be taken of the sum due to the complainants; which was reported to be $>9802 89; upon which the chancellor appointed a commissioner to sell the real estate conveyed by the mortgage, or enough of it to pay the sum due to the complainants, to make deeds to the purchasers, and to bring the proceeds of sale into court; from which decree the defendants prayed this appeal.
    
      William Thompson, for appellants.
    1. It is contended, that levying the attachment sued out in Louisiana by complainants, on the steamboat Choc-chu-ma be-belonging to the mortgagors, was a satisfaction of the debt due to complainants; to obtain satisfaction of which out of the mortgaged property in Mississippi they filed their bill. See 1 How. R. 48, and1 also the case of Redus v. Wofford, decided by this court at the present term. And that the subsequent release of the property by complainants, and the release also of the defendant Sterling from arrest, in a suit against him in New Orleans for said debt, (all which appears in the record) would be bad faith to Terry, if they could now subject the mortgaged property to their debt in whole, or by a pro rata division with the other debts secured to Terry by the mortgage.
    2. It is contended that the evidence in the record shows that the boat was taken in payment by complainants at $>8000, which paid off all their debt, except the amount paid subsequently by Johnson, as appears in the answer of complainants to Terry’s cross-bill.
    3. When the complainants had their attachment levied on the boat, and their debtor arrested in New Orleans, they had a security for their debt, which in good faith to Terry, who was interested with them in the property mortgaged in Mississippi, required them to have held on to; and to have had appropriated to the payment of their debt the property attached, and if it was not sufficient, to have availed themselves of the benefit and advantage growing out of the arrest in New Orleans.
    Conceding, for argument sake, that they had an interest in the mortgage while the note was in their hands; and that at law they could sue the debtors on the note, Sterling and Johnson, after having paid the bank and taken it in; still that does not prove that they are in equity remitted to their right on the mortgage, which they had parted with when they indorsed the note.
    5. This bill in chancery was filed in the fall of 1842, and it is alleged that the acceptors were insolvent then; but there is no allegation or proof that they were insolvent when the bill of exchange fell due the 4th of April, 1838, and we contend that the complainants released them by their arrangements with Sterling and Johnson, if they Were accommodation acceptors. And if they had funds, they ought to have sued them and made the debt; good faith to Terry required this.
    6. If Terry had been served with notice on the protest of the bill, the course taken by complainants in relation to the drawers would have released Terry, because of its being a violation of good faith, if they intended to look to him. Does not the same principle apply, and forbid their resorting to the mortgage which Terry had an interest in with them, to say the least in favor of his rights ?
    
      7. In answer to the argument of counsel for the complainants, that the answer of defendant, Terry, does not set out and show how much was due to him, it is replied that the "bill does not charge that the other debts were paid. The pleadings and the mortgage show that four of the instalments were not due when the bill was filed, and indeed two of the instalments are not now due.
    8. The complainants have at least acted in such disregard of the rights of Terry, in the indulgence of their kind and benevolent feelings for the debtors, Sterling and Johnson, as to forbid their expecting the chancellor to require Terry to bear with them the loss which has been sustained by the surrender of the securities which they had.
    9. There is no order in the record appointing the guardian ad litem, to answer for the infant defendants.
    
      
      A. C. Baine, on same side,
    contended :
    1. That the complainants wholly failed by the proof to sustain the allegation in their bill as to their right to the bill of exchange ; the allegation of the bill was denied by the answer of Terry, and there was no proof of the mode by which the complainants acquired the bill in the record. The want of correspondence between the allegata and probata, was an obstacle in the way of their getting a decree, which they would not be allowed to surmount by resorting to the fallacy of “ shifting their ground.”
    
      2. That the equity of the assignee to foreclose the mortgage was itself a creature of equity; and the chancery court having no jurisdiction, territorial or otherwise, of transactions in Louisiana, it would not undertake to declare the effect of contracts made there, from respect both to its own character and that of the foreign state. Civ. Code, Art. 3280, p. 498; 11 Louisiana R. 28.
    3. That the equitable right to foreclose a mortgage was not assignable indefinitely; that it was a mere equitable right, an equitable lien in the assignor, which passed with the first assignment, but could go no further; and could not be retained in the assignor for the benefit of the remote assignee. 1 Bland Ch. R. 522; 1 Paige Ch. R. 506.
    4. That the assignment of the mortgage went with the assignment of the debt, as an incident to it; that the mortgage was not of greater compass or legal energy than what is derived as an auxiliary of the principal contract of indorsement; and if the assignor was discharged for want of notice from the legal liability of his indorsement, so also was the mortgaged property discharged, falling as it would, with the debt. 12 Louisiana R. 392; 9 Ibid. 335 ; 7 Ibid. 307.
    5. That the bill was demurrable, because 1st, it did not pray that the residue of the indebtedness secured by the mortgage to Terry, which was not yet all of it due, might be foreclosed and reduced for a pro rata dividend. 1 Paige Ch. R. 557; and 2d, because the bill did not aver notice of the protest to Terry, the assignor, and that the right in the assignee 'to avail himself of the mortgage was dependent upon first fixing the liability of the assignor.
    6. That the complainants had been guilty of gross negligence or of fraud, in discharging the boat and releasing the notes; either of which would make them responsible. That they had in their hands the means of discharging the debt due them, and voluntarily relinquished it, which worked a discharge of the debt claimed by them, so far as it affects the rights of others. 1 S. & M. 105-108; 1 Sto. Eq. 232, § 326; 2 Swanst. 185; 4 Johns. Ch. R. 123; 1 Con. Eng. Ch. R. 543 ; 2 Brown’s Ch. R. 579 ; 2 Sto. Eq. 171, § 883 ; 9 Wheat. 680.
    7. That the effect of the judicial seizure of the boat was to transfer to the complainants the right to the boat, which was pro tanto a payment of so much of the plaintiff’s debt, and their' subsequent release of the boat was a release of their debt. 13 Johns. R. 517; Oldham v. Ledbetter, 1 How. R. 48 ; Redus v. Wofford, 4 S. & M. 579.
    8. It is discretionary with equity, whether it will relieve the complainants, even if they establish a right. 2 Sto. Eq. 79, § 769 ; King v. Hamilton, 4 Peters, 328 ; Cathcart v. Robeson, 5 Peters, 264; 2 Sto. Eq. 52, § 750.
    9. That the boat, the property of Sterling, by the judgment against him, became subject to the judgment in favor of the complainants, and their discharging it from the lien of the judgment, operated as a release of the judgment, so far as it affects the rights of others.
    
      Sheppard, for appellees.
    1. Terry, in his* cross-bill admits that the bill of exchange was indorsed to Yeatman, Woods & Co. The answer of Sterling admits the same fact, and their bill is fully established by all the proof in the cause.
    2. The assignment of the debt carries with it the mortgage security. The mortgage is a mere incident which secures the debt, in the hands of any holder. Jackson v. Blodget, 5 Cow. R. 206 ; Green v. Hart, 1 J. R. 590.
    3. The only bar to the relief disclosed by the pleadings, is that charged in the answer and cross-bill of Terry, the mortgagee, that the debt had been paid by Sterling & Johnson. This charge is denied by the answers of complainants, and their answer is sustained by tbe admissions of the answers of Sterling, the mortgagor.
    The act passed before the notary, conveying the steamboat Choc-chu-ma, is shown by the agreement in writing of the parties of same date, to have been only designed as collateral security.
    Equity regards the intention of the parties, and will give it full effect, no matter what form their contract may assume. Kent v. Allbutian, 4 How. R. 322; 2 Story’s Eq. 283.
    By a subsequent arrangement the Choc-chu-ma was reconveyed to Stirling, in consideration that he had substituted other security for the payment of the bill. This security consisted of claims put in the hands of William Beal, which, as shown by the proof, were productive of no benefit to complainants.
    And, subsequent to these arrangements, it is shown by transcripts of the records, that judgment was obtained against the mortgagors, Sterling and Johnson, in the district court of the state of Louisiana, on the bill of exchange, which conclusively establishes against them the existence of the debt,, for the payment of which they pledged the mortgaged property. And the court below did not err in decreeing a foreclosure and sale of their property for the payment of the debt.
    It is shown that Terry was discharged as indorser, and he could not, therefore, ever resort to any securities which might have been taken by complainants, for in every case such right is based upon a personal liability of the party who claims to be substituted. No case can be found of such substitution, unless the party seeking it is either liable, or has paid the debt.
    ■ The levy of the attachment was not a satisfaction, as it is shown that it was discharged by the agreement and consent of the defendant, who alone could have insisted on it as a payment.
    All the securities were taken after the discharge of the indorser, and were pursued with the utmost diligence by the complainants.
   Mr. Justice Clayton

delivered the opinion of the court.

It is now conclusively settled that the assignment of a note, secured by mortgage, carries the benefit of the mortgage along with it, to the assignee. Evertson v. Booth, 19 Johns.

This being so, there is but one question in the cause, whether the complainants, the appellees, by their acts or conduct have lost their right to resort to the mortgage for payment of the note assigned to them. The contest is between the holders of the assigned note and the original mortgagor, who assigned it to them, and who holds other notes secured by the same mortgage.

It is not necessary to decide whether the indorser is personally discharged; the question is, whether the property, which was devoted by the mortgage to the payment of the note, has been released. If the complainants had been entirely passive, and taken no steps for the collection of their debt, there would have been no pretext for saying that the mortgaged estate was released. Is the case at all different, when they have used active efforts of diligence, and those efforts have been unavailing 1

It is insisted that they once had the debtor in custody, under arrest, and discharged him, and that they thereby discharged the mortgaged estate. This principle only applies where the arrest has been under final process. The levy of the ca. sa. is' regarded as a satisfaction of the execution, and the release of the body by the creditor prevents his resort to any other means to enforce the collection. But here the debtor was only in custody under mesne process, and he was discharged through the clemency of the complainants, because of his inability to give bail. We do not see that this can affect the mortgaged property.

Again, it is insisted that, as the complainants received the pledge of a steamboat as collateral security when they released the body, and afterwards exchanged the boat with the debtor, for certain promissory notes, also as collateral,-which proved worthless, that they thereby released the mortgaged estate. If a man have two separate' securities for a debt, he may resort to either for payment; he may release one, without affecting his right to the other. It is true, that if another person has a lien on one of the securities, he may file a bill to have them marshalled, and compel the creditor who has the two, to resort to the one on which there is no other incumbrance, and exhaust that, before he comes upon the one on which there is a joint claim. Aldrich v. Cooper, 8 Ves. 381; 19 Johns. 493. But if no such bill has been filed, nor any steps taken to compel the creditor having two securities to take such course, we are not aware of any principle which will deprive him of one, because he has not made the other available.

Another objection is, that the bill had been transferred by the complainants to a bank in New Orleans; and that they had taken it up after it had been protested for non-payment. The indorsement to the bank was a new, distinct, and independent contract. The payment to the bank was not a discharge of the bill, but of the contract of indorsement. Upon its payment the complainants again become the holders of the bill, and restored to their original situation. Bayley on Bills, 142; Callow v. Lawrence, 3 M. & S. 95.

There is nothing in the pleadings or the proofs to show, that the mortgaged estate is insufficient to pay all the claims upon it; consequently there is no room for the consideration of the point pressed in argument, that all the bills and notes secured by the mortgage, should be equally and ratably paid. It has been decided by this court, that all debts secured by mortgage or deed of trust, due at the time the bill is filed to foreclose, or at the time of sale under the deed of trust, should be paid pro rata, out of the estate, if insufficient to pay the whole. Parker v. Mercer, 6 How. 320; Cage, Executor v. Iler, MS. But as the state of facts disclosed in this record does not give rise to the question, and as there is no proof to show that the estate is not fully sufficient to meet all the incumbrances upon it, we cannot, upon a mere suggestion of counsel, reverse the decree.

Decree affirmed.