Bearse v. Lebowich
| Decision Date | 20 June 1912 |
| Citation | 99 N.E. 175,212 Mass. 344 |
| Parties | BEARSE v. LEBOWICH et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
A. K. Cohen, of Boston, for appellant.
Bates Nay & Abbott and Jos. Lebowich, all of Boston, for appellees.
The trial judge, whose finding is not disputed, having decided that the defendant Jacob Lebowich, by whom the foreclosure proceedings were instituted, was not a purchaser for value of the mortgage, but acted only as the agent of the defendant Max Lebowich, the question is whether under the frame of the bill, and upon the evidence reported, the plaintiff, who is the mortgagor, is entitled to equitable relief. It is true that on the face of the agreement in writing signed by the plaintiff he is not designated as a surety for the copartnership described as Flashman Bros., whose indebtedness to this defendant was thereby secured not only by a pledge of personal property of their own, but by the note and mortgage in question, with an assignment of a lease furnished by the plaintiff. The terms of this instrument show that he did not become obligated in any form as the defendant's debtor. It is, however, under seal, and although the plaintiff did not engage to pay the debt, the defendant contends that in the marshaling of securities he jointly bound himself with the debtors as a principal, and upon their default and at his election he can apply in liquidation the proceeds of the mortgage, the attempted foreclosure of which the bill seeks to enjoin, before resorting to the security given by the partnership. But if the contract itself can be thus construed, it has been abundantly settled that in equity the actual relations of the parties between themselves can be proved by extrinsic evidence, and whenever the relation of surety and principal is established, and the creditor has notice of the fact, he is as much bound by this knowledge, as if the suretyship had been disclosed by apt recitals in the contract with his debtor. Guild v. Butler, 127 Mass 386, 389; Goodwin v. Massachusetts Loan & Trust Co., 152 Mass. 189, 192, 25 N.E. 100.
It remains to apply this principle to the facts in the present case. The evidence warranted the findings, that with the defendant's knowledge the mortgage was given, and the lease assigned for the purpose of providing additional security which the debtors were unable to supply, and that they were furnished solely for their accommodation. It was a question of law under these findings, and not a question of fact as the defendant further urges, whether the plaintiff became a surety and his securities were held subject to the equities existing between himself and his principals. And the further conclusion of the judge that the plaintiff did not sustain this relation is to be treated as in the nature of a ruling of law which was erroneous. Campbell v. Cook, 193 Mass. 251, 256, 257, 79 N.E. 261. Upon the debtors' default the defendant possessed two funds for his protection and the satisfaction of the debt. No rights of strangers having intervened, the plaintiff upon tender and payment of the amount due would have been subrogated to the defendant's title, and could have enforced it for the purpose of self-protection. The plaintiff, however, who had the equitable rights of a surety as to the mortgaged property, can have his interests preserved not only by subrogation but by having the property pledged by himself and the partnership marshaled and applied in satisfaction of the debt of the principal in the order in which they are chargeable. It accordingly became the defendant's duty in the first instance to exhaust the security provided by the debtors to which the plaintiff could not resort, before compelling him to redeem from the mortgage or suffer the loss of the estate. American Bank v. Baker, 4 Metc. 164, 175; Guild v. Butler, 127 Mass. 386; Kelly v. Herrick, 131 Mass. 373; Worcester Savs. Bank v. Thayer, 136 Mass. 459, 462; Wilson v. Bryant, 134 Mass. 291, 297; King v. Nichols, 138 Mass. 18, 21; Kidd v. Hurley, 54 N. J. Eq. 177, 33 A. 1057; Cuyler v. Ensworth, 6 Paige (N. Y.) 32; Arnold v. Green, 116 N.Y. 566, 23 N.E. 1; Cooper v. Aldrich, 8 Ves. 382, 395; Hyman v. Dubois, L. R. 13 Eq. 158; Duncan v. North & South Wales Bank, 6 App. Cas. 1, 19; Pom. Eq. Jur. (3d Ed.) §§ 1414, 1417, 1419. The plaintiff under the prayer for general relief can enforce this equitable right and compel the defendant to marshal and apply the securities and during liquidation the mortgage sale may be enjoined. Franklin v. Greene, 2 Allen, 519; Hays v. Ward, 4 Johns, Ch. (N. Y.) 123, 8 Am. Dec. 554; Thompson v. Taylor, 72 N.Y. 32; Irick v. Black, 17 N. J. Eq. 189; Skinner v. Terhune, 45 N. J. Eq. 565, 19 A. 377; Woolredge v. Norris,...
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