Ontario Bank v. Mumford

2 Barb. Ch. 596 | New York Court of Chancery | 1848

The Chancellor.

If a correct copy of the condition of the bond is set out -in the bill furnished me, a mistake has -occurred by inserting the word not in such condition; so as to make the bond void if B. H. S. Mumford should not indemnify the obligee against the mortgage, which was then a lien upon the premises. As G. H. Mumford was merely a surety in the -bond, if the proper construction of the language of the instrument itself does not make him responsible for the neglect of his principal to indemnify the obligee, the bond cannot be reformed, so as to render him liable, even if it was his intention to bind himself at the time the bond was executed. For the statute of frauds requires an agreement in writing, to bind a surety. And if the surety has not already - executed a valid agreement to answer for the debt or default of his principal, this court cannot compel him to execute such an agreement; upon the ground that he has attempted to do so, but has failed of accomplishing his object, by mistake or inadvertence: Whether the whole of this bond with its condition, when taken together, show the intention of the surety to agree and bind himself that his co-obligor should indemnify Hutchinson against all loss on account of the mortgage, so as to render the bond a good and available security at the time it was taken, is a question not necessary to be considered ; as I am satisfied the complainant must fail on another ground. In discussing other questions in the cause, therefore, I shall proceed upon the supposition that this is a bond to indemnify Hutchinson against the incumbrance of the mortgage, which was a lien upon the premises at the time of the conveyance to him, and to save him harmless from any damage which should be sustained by him, from the neglect of his grantor to pay off or procure a discharge of the mortgage; as the condition of the bond states he had agreed to do.

' The foreclosure suits were both commenced before the institution of the proceedings in bankruptcy; but the decrees were made subsequent to the vesting of the equity of redemption in Smith the assignee, by operation of law, if that equity of redemption was in Hutchinson when he was decreed a bankrupt. And to render the proceedings in the foreclosure suits regular, and to give a perfect title to the purchasers under the decrees of foreclosure, the assignee in bankruptcy should have been brought before the court as a party. Whether that was done in either of the foreclosure suits mentioned in the complainant’s bill does not appear. But upon the supposition that the bank has exhausted its remedy against the mortgaged premises, and that the sale under the decree upon the first mortgage exhausted the fund, which would have been appropriated to the payment of the bond and mortgage to the bank, if E. H. S. Mumford had paid off that prior mortgage, I think the complainant’s bill shows a palpable breach of the condition of the bond. It also shows that by the neglect of the obligors to indemnify and save him harmless from the prior mortgage, Hutchinson sustained damage to the amount of the deficiency, which he was decreed to pay to the complainant; even if the value of the premises conveyed to him, by Mumford, did not exceed the amount of the mortgage to the bank at the time of the sale of such premises under the decree upon the prior mortgage.

It remains to be considered whether there is any thing stated in the complainant’s bill which is sufficient to authorize the court of chancery to take jurisdiction of this case ; instead of leaving the bank, as the assignee of the bond, to seek its remedy by an action at law against the obligors in such bond. As a general rule this court will not entertain a suit brought by the assignee of a debt, or of a chose in action, which is a mere legal demand; but will leave him to his remedy at law, by a suit in the name of the assignor. (Carter v. United Insurance Company, 1 John. Ch. Rep. 463. Hammond v. Messenger, 9 Sim. Rep. 327. Moseley v. Boush, 4 Rand. Rep. 392. Adair v. Winchester, 7 Gill & John. Rep. 114. Smiley v. Bell, Mart. & Yerg. Rep. 378.) Where, however, special circumstances render it necessary for the assignee to come into a court of equity for relief, to prevent a failure of justice, he will be allowed to bring a suit here upon a mere legal demand. Thus, in the case of Lenox v. Roberts, (2 Wheat. Rep. 373,) where the first Bank of the United States, previous to the expiration of its charter, had made an assignment of a debt, the late Chief Justice Marshall decided that the assignees could file a bill in equity, in their own names, for the recovery of such debt; they not having the power to sue at law in the name of the defunct corporation. Here no provision is made, by law, authorizing the assignee of a chose in action, to sue in the name of the assignees in bankruptcy of his assignor, without their consent. And the bill of the complainant contains an express averment, that the assignee in bankruptcy of' Hutchinson refused to join in a suit for the recovery of the damage consequent upon the breach of the condition of the bond in question. I should, therefore, have no doubt as to the jurisdiction of the court of chancery, in the present case, if it was necessary for the complainant to bring an action at law in the name of the as signee in bankruptcy, as well as in the name of Hutchinson, the assignor; or to bring it in the name of the assignee in bankruptcy alone.

Where a debt is due to two'persons jointly, and one of them is decreed tobe a bankrupt, or -makes an. assignment under the insolvent acts, the action for the .recovery of the debt, an.a court of law, múst.be brought in the names of the other .creditor ¡and of the assignees jointly; and .neither can sue in his .own name alone. Nor can the-suit be brought .in the jqintmames.of .the original creditors, in such a case, except where .the bankrupt was a mere-nominal owner of the debt, as ¡trustee or otherwise. (Bird et al. v. Caritat, 2 John. Rep. 342. Eckhart v. Wilson, 8 Term Rep. 140. Broom on Part. 91.) But as early as 1748, Lord Chief Justice Willes had & notion that ¡the assignees in bankruptcy did .not take the .whole legal title iin the bankrupt’s property, as heirs and executors -.did; and .that-.nothing vested in the assignees, even at law, but .such estate .as the bankrupt had the beneficial, as well as the legal, interest in, and which was to-be applied by the assignees for»the payment of the.debts of the bankrupt. But as bis associates upon the bench were not prepared to -put the decision of the case then under consideration upon that ground, the .point was left undecided. (Scott v. Surman, Willes' Rep. 400.) That notion of this learned and distinguished jurist, however, was -subsequently followed, and has long since become the settled law, not only in England, but in this state. In Webster and others v. Scales, (4 Doug. Rep. 7,) which case came before the court of-king’s bench about forty years afterwards, the bankrupt .was one of several trustees, to whom an assignment had been made, for the payment of the creditors of the assignor, , of Whom the bankrupt was .one at the time of such assignment in trust. And Lord Mansfield held, that a suit upon a bond given to such trustees, was properly brought in the name of the bankrupt-and-the other trustees; although the.bankrupthad a beneficial interest in the .trust fund, which -had passed to his assignee in bankruptcy. Thereby .deciding ¡that a bankrupt trustee may sue as trustee for the" benefit ;of his assignees in bankruptcy and others, when he has a beneficial .interest as one.of.the.cesluis que trust, -in the instrument .upon which the suit is brought, at the time he became a bankrupt. .Thatdecjsion -goes very far towards establishing-the right of the complainant, in the case now under consideration, to sue, at law, in-the name of Hutchinson, the obligee in the bond, even.if the damage rsustained by the breach of the condition af the bond was more -than the amount.of the.deficiency due to the complainant; so as to. give the.assignee in bankruptcy an interest therein as such assignee. There is nothing in the complainant’s-bill, however,-to show-that-the.assignee in.-bankraptcy todk any beneficial interest whatever in the bond:of indemnity, -which had been previously assigned-to the complainant, as a part of the security for the payment-of-the..bank-debt. And as-the amount of the deficiency upon the foreclosure of the complainant’s mortgage, was considerably larger than the prior mortgage, I do not see how any one can infer that the assignees in bankruptcy can ever have any beneficial interest in the recovery which may be hád upon the bond. Nor does the fact that the assignment of the bond, and the damages to be recovered thereon, in the name of Hutchinson, was not absolute and unconditional, but merely as a collateral security, make any difference as to the right to sue in the name of Hutchinson alone. This was decided in the case of Winch v. Kelly, (1 Term Rep. 619,) which came before the court -of Icing’s bench in 1787. There the debt, for which the suit was brought, was assigned by the bankrupt previous to his bankruptcy, as a security for the pay.ment of a debt merely, with a condition that the assignment should be void if the debt was paid, at the time specified. And yet, the debt not having been paid, the court decided that the action for the recovery of the assigned debt was properly brought, by tbe assignee.thereof, in the name .of the bankrupt. Fonthe previous assignment constituted the bankrupt a trustee .of the mere legal right to bring the action; which action the cestui que trust had the right to bring in his name.

In Carpenter v. Marnell, (3 Bos. & Pul. 40,) it was again decided that the action in such a case must be brought in the name of the bankrupt, and that it could not -be sustained if brought in the names of the assignees in bankruptcy. The decisions in our own courts also are in accordance with the principles settled in the cases referred to from the English reports. (See Kipp v. The Bank of New- York, 10 John. Rep. 63; Hopkins v. Banks, 7 Cowen’s Rep. 650.) The vice chancellor was therefore right in supposing that the remedy of the complainant, if any, was by an action at law in the name of Hutchinson. Arid even if Hutchinson was dead, there would be no reason for coming into this court for relief. For the suit •might then be brought in the name of the bank, under the provision of the statute on the subject, if there was no personal representative of the decedent, or such representative refused to sue for the damage sustained by a breach of the condition of the bond. (2 R. S. 445, § 5, 3d ed.)

The decree appealed from must therefore be affirmed with costs.