Pond v. Clarke

| Conn. | Jul 15, 1841

Sherman, J.

It has been insisted, by the defendants, that the just construction of the condition of the first mortgage is such, as to the several indorsements which it specifies, that the indorsers are entitled to no indemnity for the damages they may have sustained, by becoming security upon new notes or drafts, given on renewal of the first. To sustain this position, the case of Peters v. Goodrich, 3 Conn. Rep. 146., is pressed upon our consideration. That was a writ of error on a decree of the county court on a bill in equity for the foreclosure of a mortgage. The plaintiffs in error were defendants in the court below. A note of 400 dollars, dated July 27th, 1813, was made by John Curtiss, payable to C. ⅝ D. Churchill, or order, at 90 days, and indorsed by them, and also by Goodrich, for the accommodation of Curtiss, and discounted at the Middletown Bank. In September, 1813, to secure Goodrich, a mortgage was made to him, by Curtiss, conditioned, “ that if Curtiss should pay the said note, when the same should fall due, and should in all respects indemnify and savejharmless the said Goodrich from his said indorsement, the deed should be void.” The case states, that Curtiss failed to pay the note, “ and the plaintiff, by means of his in-dorsement and by the liability incurred thereby, was, on the 28th day of October, 1813, compelled to pay the bank the sum of 83 dollars, 42 cents, in part of the sum included in the note, and for the remainder of that sum, to indorse another note of Curtiss for that amount, payable at the Middletown Bank : That on the 8th day of November, 1814, the plaintiff was compelled to pay the further sum of 110 dollars, part of said sum of 400 dollars, included in, and secured by, the original note, being the amount of a note given by Curtiss, on the 6th of September, 1814, payable at said bank, which the plaintiff, by means of his indorsement of said note for 400 dollars, had been compelled to indorse ; and that, on the 3rd of September, 1814, Curtiss mortgaged the premises to the defendants to secure them.” These facts were admitted, by a demurrer. One question which arose, was, whether the mortgage to Goodrich was a security for the payment made by reason of his second indorsement. The Chief Justice, in giving his - opinion, says, that Goodrich might be damnified, by the nonpayment of the first note, and that the contract of indemnity was “precisely co-extensive with this possible damage.” This is certainly a correct proposition, and would seem to warrant the conclusion, that if the plaintiff’ was compelled, by reason of that indorsement, to pay the debt to the bank; if, under this necessity, he indorsed a renewal note for Curtiss for the same debt, and was obliged, on its maturity, as the demurrer admitted, to pay, and did pay, the sum stated in the bill upon that second note, this was a damage necessarily resulting from his first indorsement, against which he was clearly entitled to indemnity, by the condition of the deed. But the Chief Justice came to a different conclusion, and held, that the mortgage was no security for the second indorsement. One other judge concurred in this opinion, and two dissented. In the case of Bolles v. Chauncey, 8 Conn. Rep. 389., the case of Peters v. Goodrich is doubted, by Judge Peters, in whose favour it was decided, although he yields to its authority.

As that case was decided by an equally divided court, contrary to what would probably have been the result, had they all been competent to act, and upon grounds to which we cannot assent, our opinion is unanimous, that we are not bound by its authority.

The payment which was ultimately made by Adolphus Baldwin, was as really the necessary consequence of his first indorsement, as if no intermediate notes had been given. The fact is found, that there wrere due protest and notice upon all the notes, as they respectively fell due. There was not a moment between the first indorsement and the final payment of the debt, when he was absolved from the obligation for which he took the indemnity. Nor was his right at all impaired, by the assumption of the liabilities of P. F. Frazee & Co., by Jesse J. Brown, or by the Substitution of new notes, by new parties. Had Baldwin made his indorsement on any note thus substituted, at the request, and upon the credit of new parties, the damage he finally sustained would not have been the consequence of his original indorsement, and would not entitle him to look to the mortgage for indemnity. But there is no proof of a new credit. On the contrary, it is found, that the obligation of his first indorsement was preserved through the whole series of renewals and substitutions, by a due observance, on the part of the bank, of the legal requisites for that purpose. It is expressly found, that the ultimate payment which he made, was for the same original debt for which he became security, by his first in-dorsement. Why then should we be called upon to conjecture, that a new agreement, or some other consideration than the palpable necessity resulting from the first indorsement, had induced him to continue his security, and finally to pay the debt?

What we have said of these indorsements of Adolphus Baldwin sufficiently illustrates our views of the rest, and renders a particular consideration of them unnecessary.

It has been contended, that the first mortgagees, by permitting the personal property to go into the possession of Jesse J. Brown <$- Co., lost their lien upon it, and that it should enure to the benefit of the second mortgagees. But the first mortgagees had a right to appropriate it to the payment of the debts for which they became security, and which the mortgagors had bound themselves to pay; and for this purpose, to employ those agents ; subject, however, to account for any loss sustained by the w7ant of due fidelity. It is found, that the value of this property was 5000 dollars, which has been applied in payment of debts, according to the condition of the deed. As the defendants took their mortgage subject to the payment of these debts, for the indemnity of the in-dorsers, they have the benefit of this appropriation. There has been no waste of the property, nor any apparent imprudence in the manner in which it was applied.

We are of opinion, that the defendants are not entitled to redeem, without payment of the sums advanced by Baldwin and Pond, by reason of their indorsements, and also the sums due to the respective mortgagees for their individual debts.

In this opinion the other Judges concurred.

Decree for plaintiffs.