Eddy v. Traver

| New York Court of Chancery | Jul 4, 1837

The Chancellor.

Upon the facts disclosed in the master’s report, I think that the defendant Ross has an equitable lien upon the undivided interest of Traver and wife in the premises of which partition is sought in this case, to the extent of one fourth of the proceeds of the lands in which he had purchased their share, and which were sold under the surrogate’s order; and also for the interest on that amount from the time of the confirmation of the sale by the surrogate. It is an established principle of equity that sureties, or those who stand in the situation of sureties for those who pay a debt for them, are entitled to stand in the place of the creditor, or to be subrogated to all his rights as to any fund, lien or equity which he may have against any other person or property on account of the debt. And where the creditor has two funds to which he may resc-rt for the satisfaction of his debt, if he resorts to that which in equity is only secondarily liable, to the injury of one who has a claim upon the secondary fund only, or resorts to a fund belonging to a third person, which fund is only secondarily liable for the payment of the debt, the person who is the owner of or has a claim upon the fund thus taken is considered as a surety merely, and is entitled to stand in the place of the creditor as against the primary fund. (1 Strong’s Eq. 477, § 499. Idem, 588, § 633, &c.) It was upon this equitable principle that this court proceeded in the case of Clowes v. Dickinson, (5 John. Ch. Rep. 235,) in charging the payment of a judgment upon lands which had been aliened by the judgment debtor, in the inverse order of their alienation—the first purchaser in such a case standing in the situation of a mere surety for the payment of the judgment debt. In cases depending upon this equitable principle, as between the debtor and his sureties, it makes no difference, except as against bona fide purchasers or mortgagees, that the debt has been actually paid by the sureties, or out of their property, so that the creditors’ lien upon the property of the principal debtor is extinguished at law. Thus in the case of Watts v. Kinney, (3 Leigh’s Rep. 272,) where the sureties had actualy paid the debt, so that the lien of the creditor’s judgment was discharged at law, the court of appeals in Virginia decided that the sureties were in equity entitled to the benefit of the judgment, as a lien upon the land, as: against the claims of an attaching creditor. (See also Cuyler v. Ensworth, ante, 32 ; Burrows v. Wham, 1 Desaus. 409; and Sprigg v. Braman, 6 Louis. Rep. 206.).

Applying these equitable principles to the case under consideration, there is no doubt of the right of Ross to be substituted in the place of the creditors of the intestate who have been paid their debts by a sale of that part of the property which had been conveyed by Travcr and wife, instead of charging such debts upon the property which still remained unsold. If the creditors had brought their suit against the heirs for the payment of the debts of the ancestor, the real estate which remained in the hands of Travel' and wife unsold must have been applied for that purpose; and that which had been previously sold and conveyed to Ross would have been discharged. I am inclined to think the surrogate had the power to direct the sale to be made in such a manner as to protect the equitable rights of the purchasers fmm *he he-% ?t law. But whether he had such power or not, this court has jurisdiction and authority to protect all the equities of one who was standing in the situation of a mere surety for Traver and wife, so far as the debts of the ancestor remained a lien upon the lands which they had sold to him. And neither the want of such power in the surrogate, nor the neglect to exercise it if the power in fact existed, can in this case deprive the defendant Ross of his equitable claim to be substituted in the place of the creditors of the intestate as to the lien which they had, before the sale under the surrogate’s order, upon the lands of Traver and wife held by them in right of such wife as one of the heirs at law to whom such lands had descended, charged with the payment of such debts.

The exception to the master’s report was, therefore, well taken. The amount of the proceeds of the sale of Ross’ interest in the lands sold under the surrogate’s order, together with the interest thereon and his costs, must be paid out of the fund set apart by the decree for that purpose ; and the residue of that fund must be distributed according to the principles of the decree.