Nichols v. Smith
42 Barb. 381
N.Y. Sup. Ct.
1864
Check Treatment

*388 By the Court,

E. Darwin Smith, J.

If the facts stated in the defendants’ answers are true, it seems to . me they made out a perfect defense to the action. The note, when it was made, was given for the interest due on two mortgages upon land then owned by Allen Smith, and which he was bound to pay. He was the principal debtor, and the other makers were his sureties upon the note. The answer states that he afterwards sold and conveyed the land covered by said mortgages to Leonard Smith, one of the sureties, who assumed the payment of said mortgages, including the note. Leonard Smith thereupon became the principal debtor, as between himself and the other makers of the note, and was primarily bound to pay the same. While the bonds and mortgages and the note remained in the hands of Eleazer Carter, the owner of the same at the time of giving of said note, the rights of the parties were otherwise unchanged. If the bonds and mortgages which the answer states were after-wards assigned to the plaintiff had been assigned to Leonard Smith in his lifetime, such assignment would have operated to pay the same, and would also have operated to merge the legal and equitable estate in him. The assignment to the plaintiff, who is sole administrator of Leonard Smith, would have operated as payment, to the same effect, if made to him as such administrator. The presumption would have been that he had paid the amount requisite to procure such assignment from the personal estate of the deceased, and he would have been bound to discharge the mortgage and cancel the note in suit. But the assignment was not made to the plaintiff in his character as administrator, and as an individual .he was as competent to purchase with his own means and hold the same, as any other person. The fact that he was administrator of the estate of Leonard Smith did not disqualify him for holding and enforcing payment of said bonds and mortgages and note in his individual capacity. But it seems to me that as he represents the principal debtor as administrator, and has in his hands the funds of the intes*389tate, which is the primary fund for the payment of the debt, the defendants had the right in equity to require him in the first instance to exhaust such fund before he resorted to the sureties of his intestate. But I do not think that the defendants are bound to rely upon this, perhaps, debatable equity for a defense. This note was given, it is stated, as collateral security for the interest accrued on the bonds and mortgages at the date of the note, and the bonds and mortgages remain unpaid or uncanceled in respect to such interest, the note not being applied thereon. When, therefore, the plaintiff proceeded to foreclose said mortgages and took a decree or judgment in the foreclosure suit for the full amount of the bonds and mortgages, including the amount of the said note, he had elected to proceed in rem, and in equity, for the collection of said bonds and mortgages against the land covered by the mortgages, and was bound to exhaust his remedy by the sale of the mortgaged premises, which was the primary fund for the payment of the original debt, before he could proceed at law against other parties or property liable collaterally for the same. The plaintiff might have made the defendants in this suit parties to the foreclosure suit and had a decree against them for the deficiency after the sale of the mortgaged premises; but having omitted to do so, and having elected his remedy, he must abide by it and be confined to it until it is exhausted. He was required to state in his bill of foreclosure that no proceeding had been had at law for the recovery of such debt, or, if any judgment had been recovered at law, he was bound to show that an execution on such judgment had been returned unsatisfied, (§ 156; of art. 6, ch. 1. part 3, 2 B. 8. 191.) Section 153 of the same statute is as follows: “ After such bill shall be filed [that is, a bill for the foreclosure of a mortgage in equity] while the same is pending, and after a decree rendered thereon, no proceedings whatever shall be had at law for the recovery of the debt secured by the mortgage or any part thereof, unless authorized by the court of chancery.” It was *390therefore proper for the defendant to show, as he offered to do, the proceedings upon the foreclosure of the mortgages and the decision or judgment rendered therein. Such proceedings constituted a complete defense to the action, under this statute. It was error, therefore, to overrule such. evidence. The defendants were clearly entitled to give paroi evidence to establish that such note was given as collateral to the interest which had accrued on the bonds and mortgages. This was not to contradict the note, but to show its object or consideration. (Chester v. Bank of Kingston, 16 N. Y. Rep. 336.) I think, therefore, that there should be a new trial in the action, with costs to abide the event.

[Monroe General Term, September 6, 1864.

New trial granted.

Welles, \J. 0. Smith and A. Darwin Smith, Justices.]