Court Opinion

ID: 6573643
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:32:16.121543+00
Date Added: 2024-06-11T15:57:00.101039
License: Public Domain

The opinion of the court was delivered by
Redfield, J.
The subject of marshalling securities and assets is one of very frequent recurrence in courts of equity, and is sometimes attended with no inconsiderable difficulty.
In regard to the proper parties in the present suit I have not deemed it important to spend much time. All the parties interested in the subject matter being before the court, if a proper case is made *408out for the interference of a court of equity, we would hot ordinarily order the suit dismissed in that court on account of any mere informality in the position, in which the parties are presented before us. Suits for a similar object to the one here sought are frequent in the English chancery. They are there brought by the creditors, or by one creditor for himself and as many others as see fit to prove their debts before the master upon the final decree, if one is obtained ; and upon the bringing of such a bill the entire distribution of the assets is taken from the Bishop’s court, on account of the superior facilities which courts of equity have, for making a final disposition of the matter; and it is there finally ended.
But here the principal and exclusive jurisdiction of all such matters is in the courts of probate. All proceedings, which can be entertained in a court of equity, must be in aid, merely, of the probate court. In cases like the present, where no collusion is alleged between the administrator and the creditors, or any of them, the proper orator is ordinarily the administrator himself. But when collusion is alleged and proved, we have no doubt the bill may be sustained in the name of a creditor. And if the administrator is a party to the suit, and a case is made out in proof, where, if he had brought a bill, he would be entitled to relief, and he declined to stand as orator, the chancellor should consider that, of itself, sufficient evidence of collusion and proceed to pass a decree in the name of the creditor.
We must, then, look at the merits of this case; and the first inquiry is, whether the allowance of the demands is conclusive upon this proceeding in equity. And as the claims were allowed in the names of the creditors and have never been actually paid to this day, we do not well see how the allowance of them could have been resisted at law. The relief sought is, it seems to us, exclusively of an equitable character; and such relief is not concluded by a judgment at law. One might have a claim against an estate, which could not be resisted at law, and upon which, nevertheless, he is not in equity entitled to a dividend.
In the present case, if the defendant Fullerton is to be esteemed a co-surety, merely, with Porter, Brown and Lovell, then it would follow, that if the allowance in the names of the creditors is really and exclusively for the benefit of Fullerton, the estate would be en*409titled to have the funds in Fullerton’s hands applied to the extinguishment of the common debt, and in that way reduce the allowance to the amount, which Lovell was bound to contribute to the final loss of Fullerton.
But such does not appear to us to be this case. The allowance may be mainly, perhaps exclusively, for the benefit of Fullerton. But we cannot view Fullerton as standing in the same position, as it regards this corporation, with those who applied to him to give his credit. Aside from the fact, that in his answer he expressly denies ever having lent his credit to the corporation, it is almost absurd to suppose that he did or would have done so. It would require very strict proof to convince me, that he did not sign solely upon the credit of the stockholders and directors ; and whether he knew that it was the proper debt of the corporation, or not, is not very important; but it certainly is not satisfactorily shown, that he even knew of the existence of the company, at the time he signed.
He then had a full claim upon all the other signers for indemnity. He stood as guarantor for them and might be said to have their joint promise of indemnity. We do not know why such a joint promise should be viewed differently from any joint undertaking; and in all such cases the creditor may proceed against the estate of a joint promissor for the whole debt, or against the surviving promissors. Devaynes v. Noble, 2 Rus. & Mylne 495. And if he have any security, which is merely ^collateral to the principal undertaking, this will not prevent his proceeding for a dividend upon the whole debt.
It is true, that if the security has been converted into money, and it is between debtor and creditor, it ceases to be collateral and operates directly as payment; so that the debt is thereby reduced and the creditor can only go for the balance. And if the fund, which is collateral, is such, that the dividend will more than make up the deficiency, then, upon the payment of the whole debt, the creditor must assign. This was the only remedy at the civil law. In England and in this country, in such case, the court of chancery will often times compel the party to apply the funds in his hands and only proceed against the other funds for the balance, and, if the funds are not money, will require them to be reduced to money. But in no case, where the security is merely collateral, will a court *410of equity compel its application, merely for the purpose of reducing a dividend, unless the debtor stands in the relation of a co-surety.
This case is not, in principle, to be distinguished from that of a mortgage security merely, — which the party may hold, and still take a dividend .upon his whole debt.
The decree of the chancellor is affirmed, with costs.