Court Opinion

ID: 5550059
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:33:11.584456+00
Date Added: 2024-06-11T08:35:02.818206
License: Public Domain

The Chancellor.
The plaintiffs found their claim to the proceeds of the cargo, assigned by Ogden to S. Murgatroyd, on the 12th of February, 1806, as being property held by the intestate, in trust, for the payment of their notes. *128. „ trator, for the ire If this he or>ce conceded or ascertained, as a matter of fact# the conclusion follows, of course, that the proceeds were not assets in the hands of Thomas Murgatroyd, the adminisneral creditors of his intestate, but they existed in his hands subject to the trust. The cases of Deering v. Torrington, (1 Salk. 79. pl. 1.,) and of Kip v. The Bank of New-York, (10 Johns. Rep. 63.,) show that property held in trust does not pass to the representatives of the trustee discharged of the trust, but, if it can be traced and distinguished, it shall enure to the benefit of the cestuy que trust.
The assignment to Samuel Murgatroyd was absolute on the face of it; but it is admitted by the answer of the ad- ■ ministrator, and supported by all the proof in the cause, that the assignment was made, and taken by him, as a security or indemnity merely; this fact being admitted, the party interested has a right to go into parol proof to explain the^extent and object of the security. The admission of parol proof, to show the intent, becomes indispensable. The * defendant, (the administrator,) in his answer, admits the assignment to be different from what it purports to be. It does not, therefore, truly express the intent of the parties; and parol evidence is, then, clearly admissible to show that intent. The deed was false on the face of it, by the admission in the answer, but that admission does not go to impeach the general fairness of the transaction ; ythe difference between the deed as expressed, and the deed as intended, may have arisen from mistake, or ignorance, or accident; and it becomes necessary, in order to attain justice, that the court should let in parol proof to discover, and carry into effect the reai intention of the. parties in creating the security.
I have no doubt, then, of the competency of the parol proof in this case ; and the weight of that proof goes to establish the fact for which the plaintiffs contend, that the assignment was made to indemnify S. Murgatroyd against the endorsement of the notes in question. This appears *129from the evidence of Ogden, who made the assignment, and who testifies that he made it for that specific purpose, and for no other, and that he always considered that S. Murga7 . mi • i troyd, the assignee, so understood it. This appears, also, from the testimony of J. G. Bogart, and of D. A. Ogden, who state, that they understood the same from the administrator, Thomas Murgatroyd ; and it further appears, from the evidence of Wilkes, that when he demanded payment of the notes of th¡e intestate, he admitted, in respect to the ship, an assignment to him, by Ogden, as security for his endorsements. We have,, then, a very full and explicit admission of the fact from^all the parties concerned ;■ from Ogden, who made the assignment; from Samuel Murgatroyd, the assignee; and from Thomas Murgatroyd, his administrator, and one of the defendants.
I shall then consider this fact as well made out, viz. that the assignment of the 1.2th of February, 1806, though absolute on the face of it, was intended, by the parties to it, to be a security only to the intestate for his endorsement of the notes in question. This being the case, the plaintiffs, as holders of the notes, are entitled to the benefit of this collateral security, given by their principal debtor to his surety ; and the case of Maure v. Harrison, (1 Eq. Ab. 93. K. 5. Mich. 1692.,) is directly to this point. These collateral securities are, in fact, trusts created for the better protection of the debt; and it is the duty of this court to see that they fulfil the design. And whetherthe plaintiffs were apprized, at the time, of the creation of this security, is not material. The trust was created for their benefit, or for the better security of their debt, and when it came to their knowledge, they were entitled to affirm the trust, and to enforce its performance. This was the principle assumed in the case of Neilson v. Blight, (1 Johns. Cas. 205.)
The plaintiffs are, accordingly, entitled to the exclusive appropriation of the 11,150 dollars and 50 cents,.in the *130hands of Charles Wilkes, with the interest thereon, towards the payment of their notes.
The next question is, whether the surplus moneys now in this court, and arising on the sale of the lands mortgaged to Lawrence, shall go to the administrator for distribution, where they will be absorbed by the judgment confessed, or whether they shall be distributed under the direction of this court, pro rata, among all the creditors, as equitable assets. The administrator is not, as such, entitled to this surplus ; it is part of the real estate, and goes to the heirs, and would be assets in their hands. The heirs appear to be infants, and their mother^ Susan Storm, is before the court in the character of a creditor, in-behalf of her children, and holding a judgment confessed by the administrator. I am inclined to consider the moneys in question as equitable assets. It was held, in Plunket v. Penson, (2 Atk. 290.,) that the equity of redemption of a mortgage, in fee, forfeited in the lifetime of the mortgagor, was equitable and not legal assets ; and the same doctrine was held by the Master of the Rolls, in the case of Sir Charles Cox’s creditors, (3 P. Wms. 341.) But as the creditor has a remedy at law, with us, against an equity of redemption, it might be doubted whether it could be deemed equitable assets while unsold; but after it is converted into money, under the decree of this court, I think the money is to be treated as equitable assets; for the creditor must come here for relief, as the money is placed under the jurisdiction of the court. In Freenoult v. Dedire, (1 P Wms. 429.,) it was said, that where the estate descends to the heir, it is legal assets, but if the heir sell the land before suit, it then becomes equitable assets. The general doctrine is to encourage, as much as possible, the idea of equitable assets, because equality in the payment of debts is equity, and the rule of distribution, in chancery, is founded On principles of natural justice. Assets may be partly legal and partly equitable, dnd the court will, in such case, discriminate, and direct that such as *131arc legal, be applied in a course of administration, and such as are equitable, be applied pari passu. This was done in North v. Cox, (3 P. Wms. 344 n. 3.) In the distribution of legal assets, this court follows the rule of law, to prevent confusion in the administration of the estate; but whenever the assets are considered as equitable, then it is well and uniformly settled, that they are to bé distributed among all the creditors, pro rata, without giving preference. Morris v. Bank of England, (2 Cas. temp. T. 218.)
I conclude, then, that the surplus moneys now in court are to be treated and distributed as equitable assets ; and as no objection was made to the want of proper parties before the court, the decree must be entered accordingly;
1. That the plaintiffs are entitled to the 11,150 dollars and 50 cents, in the hands of Mr. Wilkes ; and,
2. That the surplus moneys, arising upon the sale of the mortgaged premises, ought to be distributed as equitable assets, rateably among all the creditors.