Opinion of the Court.

than the sureties had agreed between themselves that he should bear, and he had not been compelled to pay a greate share.

The doctrine of the right of a creditor to the benefit of all securities given by the principal to the surety for the payment of the debt does not rest upon any liability of the principal to the creditor, or upon any peculiar relation of the surety towards the creditor; but upon the ground that the surety, being the creditor's debtor, and in fact occupying the relation of surety to another person, has received from that person an obligation or security for the payment of the debt, which a court of equity will therefore compel to be applied to that purpose at the suit of the creditor. Where the person ultimately held liable is himself a debtor to the creditor, the relief awarded has no reference to that fact, but is grounded wholly on the right of the creditor to avail himself of the right of the surety against the principal. If the person, who is admitted to be the creditor's debtor stands at the time of receiving the security, in the relation of surety to the person from whom he receives it, it is quite immaterial whether that person is or ever has been a debtor of the principal creditor, or whether the relation of suretyship or the indemnity to the surety existed, or was known to the creditor, when the debt was contracted. In short, if one person agrees with another to be primarily liable for a debt due from that other to a third person, so that as between the parties to the agreement the first is the principal and the second the surety, the creditor of such surety is entitled, in equity, to be substituted in his place for the purpose of compelling such principal to pay the debt.

It is in accordance with the doctrine, thus understood, that the Court of Chancery of New York, the Court of Chancery and the Court of Errors of New Jersey, and the Supreme Court of Michigan have held a mortgagee to be entitled to avail himself of an agreement in a deed of conveyance from the mortgagor by which the grantee promises to pay the mortgage. Halsey v. Reed, 9 Paige, 446, 452; King v. Whitely, 10 Paige, 465; Blyer v. Monholland, 2 Sandf. Ch. 478; Klapworth v. Dressler, 2 Beasley, 62; Hoy v. Bramhall, 4 C. E.

Opinion of the Court.

Green, 74, 563; Crowell v. Currier, 12 C. E. Green, 152; S. C. on appeal, nom. Crowell v. St. Barnabas Hospital, 12 C. E. Green, 650; Arnaud v. Grigg, 2 Stew. Eq. 482; Youngs v. Trustees of Public Schools, 4 Stew. Eq. 290; Crawford v. Edwards, 33 Michigan, 354, 360; Miller v. Thompson, 34 Michigan, 10; Higman v. Stewart, 38 Michigan, 513, 523; Hicks v. McGarry, 38 Michigan, 667; Booth v. Connecticut Ins. Co., 43 Michigan, 299. See also Pardee v. Treat, 82 N. Y. 385, 387; Coffin v. Adams, 131 Mass. 133, 137; Biddel v. Brizzolara, 64 California, 354; George v. Andrews, 60 Maryland, 26; Osborne v. Cabell, 77 Virginia, 462.

The grounds and limits of the doctrine, as applied to such a case, have been well stated by Mr. Justice Depue, delivering the unanimous judgment of the Court of Errors of New Jersey, in Crowell v. St. Barnabas Hospital, as follows:

"The right of a mortgagee to enforce payment of the mortgage debt, either in whole or in part, against the grantee of the mortgagor, does not rest upon any contract of the grantee with him, or with the mortgagor for his benefit."

"The purchaser of lands subject to mortgage, who assumes and agrees to pay the mortgage debt, becomes, as between himself and his vendor, the principal debtor, and the liability of the vendor, as between the parties, is that of surety. If the vendor pays the mortgage debt, he may sue the vendee at law for the moneys so paid.

"In equity, a creditor may have the benefit of all collateral obligations for the payment of the debt, which a person standing in the situation of a surety for others holds for his indemnity. It is in the application of this principle that decrees for deficiency in foreclosure suits have been made against subsequent purchasers, who have assumed the payment of the mortgage debt, and thereby become principal debtors as between themselves and their grantors."

"But the right of the mortgagee to this remedy does not result from any fixed or vested right in him, arising either from the acceptance by the subsequent purchaser of the conveyance of the mortgaged premises, or from the obligation of the grantee to pay the mortgage debt as between himself and

Opinion of the Court.

his grantor. Though the assumption of the mo.gage debt by the subsequent purchaser is absolute and unqualified in the deed of conveyance, it will be controlled by a collateral contract made between him and his grantor, which is not embodied in the deed. And it will not in any case be available to the mortgagee, unless the grantor was himself personally liable for the payment of the mortgage debt.

66

Recovery of the deficiency after sale of the mortgaged premises, against a subsequent purchaser, is adjudged in a court of equity to a mortgagee not in virtue of any original equity residing in him. He is allowed, by a mere rule of procedure, to go directly as a creditor against the person ultimately liable, in order to avoid circuity of action, and save the mortgagor, as the intermediate party, from being harassed for the payment of the debt, and then driven to seek relief over against the person who has indemnified him, and upon whom the liability will ultimately fall. The equity on which his relief depends is the right of the mortgagor against his vendee, to which he is permitted to succeed by substituting himself in the place of the mortgagor." 12 C. E. Green, 655, 656.

The decisions of this court, cited for the defendant, are not only quite consistent with this conclusion, but strongly tend to define the true position of a mortgagee, who has in no way acted on the faith of, or otherwise made himself a party to, the agreement of the mortgagor's grantee to pay the mortgage; holding, on the one hand, that such a mortgagee has no greater right than the mortgagor has against the grantee, and therefore cannot object to the striking out by a court of equity, or to the release by the mortgagor, of such an agreement when inserted in the deed by mistake; Elliott v. Sackett, 108 U. S. 132; Drury v. Hayden, 111 U. S. 223; and, on the other hand, that such an agreement does not, without the mortgagee's assent, put the grantee and the mortgagor in the relation of principal and surety towards the mortgagee, so that the latter, by giving time to the grantee, will discharge the mortgagor. Shepherd v. May, 115 U. S. 505, 511.

The present case is a strong one for the application of the general doctrine. The land has been sold under a prior mort

VOL. CXXXIII-40

Syllabus.

gage for a sum insufficient to pay that mortgage, leaving nothing to be applied towards the payment of the mortgage held by the plaintiff; and the plaintiff has exhausted her remedy against the mortgagor personally, by recovering judgment against him, execution upon which has been returned unsatisfied.

Although the mortgagor might properly have been made a party to this bill, yet as no objection was taken on that ground at the hearing, and the omission to make him a party cannot prejudice any interest of his, or any right of either party to this suit, it affords no ground for refusing relief. Mechanics' Bank v. Seton, 1 Pet. 299; Whiting v. Bank of United States, 13 Pet. 6; Miller v. Thompson, 34 Michigan, 10.

Decree reversed, and case remanded with directions to enter a decree for the plaintiff.

SHEPHERD v. PEPPER.

APPEAL FROM THE SUPREME COURT OF THE DISTRICT OF COLUMBIA.

No. 136. Argued November 26, 27, 1889. Decided March 3, 1890.

Where appeals by five defendants from a final decree were allowed in open court in October, 1885, and the amount of the supersedeas bond as to one of them was fixed at $100, but he never gave it, and the others perfected their appeal, and the record was filed in this court in October, 1886, and, when the case came on for hearing in November, 1889, he asked leave to file a proper bond, it was granted nunc pro tunc as of the day of hearing.

8. gave two deeds of trust of a lot of land in the District of Columbia to secure loans made by P. Afterwards he gave a deed of trust of the same lot to secure a loan made by C., that deed covering also a lot in the rear of the first lot, and fronting on a side street. At the time all the deeds were given, there was a dwelling-house on the premises, the main part of which was on the first lot, but some of which was on the rear lot. P., on an allegation that B., a trustee in each of the first two deeds, had refused to sell the property covered by them, filed a bill asking the appointment of a trustee in place of those appointed by the first two deeds. The suit resulted in a decree appointing a new trustee in place of B., " in the deed of trust," but not identifying which one. The new trustee and the remaining otd one then sold the land at auction to P.,

Statement of the Case.

under the first trust deed. S. then filed a bill to set aside the sale; and P. filed a cross bill to confirm it. The bill was dismissed. P. then filled, this bill against S. and C., and all necessary parties, to have a trustee appointed to sell the land covered by the three trust deeds, and the improvements on it, to have a receiver of the rents appointed, and to have the rents and the proceeds of sale applied first to pay P. A receiver was appointed, and a decree made for the sale of the entire property, as a whole, by trustees whom the decree appointed, and for the ascertainment by the trustees of the relative values of the land covered by the first two trust deeds and the improvements thereon, and of the rear piece of land and the improvements thereon, and for the payment to P. of the net proceeds of sale representing the value of the land and improvements covered by the first two trust deeds, less the expenses chargeable thereto, and of the residue to C., and, out of the rents, to P., what he had paid for taxes and insurance premims, and for a personal decree against S., in favor of P., for any deficiency in the proceeds of sale to pay the claims of P.; Held,

(1) It was the intention of both S. and P. that the first two deeds of trust should include the rear land as well as the front lot;

(2) The decree in the first suit by P. was so uncertain as to be practically void, and there was no effective appointment of a trustee and no effective sale to P.;

(3) P. was not estopped by that sale from having the property sold again;

(4) P. was not required, as a condition of the sale of the rear lot, to pay the whole of the debt due to C.; and the case was a proper one for selling the property as an entirety;

(5) It was, also, a proper one for the appointment of a receiver of the rents, and those rents in the hands of the receiver, after paying charges, ought to go to make up any deficiency in the proceeds of sale to satisfy the corpus of all the secured debts, and ought to be first applied to pay any balance due to P.;

(6) Under $ 808 of the Revised Statutes relating to the District of Columbia a decree in personam for a deficiency is a necessary incident of a foreclosure suit in equity;

(7) As the notes secured by the deeds of trust bore interest at the rate of nine per cent per annum, until paid, it was proper to allow that rate of interest on the principal until paid, and not to limit the rate to six per cent after decree, because the contracts were not merged in the decice;

(8) The rate of interest on the decree for deficiency is properly six per cent, under §§ 713 and 829 of said Revised Statutes.

(9) The statute of limitation rot having pleaded as to any part of the principal or interest, the defendant cannot avail himself of it.

IN EQUITY. Decree in favor of the complainant. respondents appealed. The case is stated in the opinion.

The