Gomez v. Lazarus, 16 N.C. 205, 1 Dev. Eq. 205 (1828)

June 1828 · Supreme Court of North Carolina

16 N.C. 205, 1 Dev. Eq. 205

Aaron L. Gomez, v. Aaron Lazarus & others.

From Cumberland.

A 1)111 was accepted for the accommodation of the drawer, and this fact was known to the endorser,, who when his endorsement was made, received from the drawer a bond and mortgage! conditioned to be void if he should be indemnified against that, and any subsequent endorsement. The drawer then conveyed the mortgaged premises, in trust, to secure ■ all his debts, with instructions in the deed, to his trustee to pay such debts first “ as may be endorsed by the said” endorser. After this conveyance, the bill being pro-, tested, was taken up by giving the holder, the note of the with the acceptor and endorser, as sureties, which was paid by the acceptor, who procured an assignment of all the securities in the hands of the endorser and the holder. It was held,

.First, that there being no contract, whereby the endorser and acceptor agreed to become co-sureties, the latter had no right to contribution from the former.

Second, that the endorser being liable only upon the default of the acceptor, the latter could not he subrogated to the rights which the holder had against the former.

Third, that the mortgage being made for the personal indemnity of the endorser only, and not for the security of the debt, the acceptor .had no right to pursue the fund, and that the endorser being indemnified by the acceptor’s payment the mortgage was functus officio.

Fourth, that a mortgage to secure subsequent endorsements rested merely in contract, and was available for those only, which were made while the property remained under the control of the mortgagor.

The pleadings and proofs In this cause were exceedingly voluminous ; it is believed that the following is a correct statement of the facts, which were either admitted or proved :

Jacob Levy, a resident of Fayetteville, in this State, in April, 1819, procured the Plaintiff, a Commission Merchant in New-York, with whom he was in habits of business, to accept his bill of exchange for g5000, payable to one Clark, whose endorsement, as well as the PlaintiiPs acceptance, was for the accommodation of Levy. There was no communication between the Plaintiff and Clark respecting their liabilities for Levy.— Clark knew that the Plaintiff’s acceptance was for Levy’s accommodation ; and Levy informed him, that he should consign to the Plaintiff produce to meet the bill. The bill was discounted at the Bank of Cape Fear, for the accommodation of Levy. When it was drawn, Levy executed a bond to Clark, in the penalty of $15,000, with a condition to be void in case Levy should indemnify him against loss, by means of any endorsements or surety-ships. To secure this bond, Levy, on the same day, executed a mortgage upon his property in the town, of Fay-etteville; which deed was not recorded until August, 1822.

In July, 1819, another bill was drawn, similar to the first, and in renewal of it, when Levy executed another bond to Clark, with a condition to be void in case Levy should indemnify him against all liabilities which Clark had then, or might thereafter incur, for his accommodation. To secure this bond, Levy executed, on the same day, a mortgage on his property in Wilmington, which mortgage never has been recorded.

In November, 1819, Levy being largely indebted to the Bank of Cape-Fear, the State Bank, and the Bank of the United States, by promissory notes, to which the Defendant Lazarus, Clark, and several others, were sureties, made a general assignment of his estate, including the property mortgaged to Clark by the two deeds of April and July of that year, to Lazarus and one McRae, for the indemnity of his endorsers & sureties,pari pass». Lazarus and McRae, at the time of the assignment, had notice of the two mortgages to Clark, k the last clause of the assignment was as follows : “ And whereas John Clark, Esq. hath a lien upon part of the property herein conveyed, for his endorsement made for the said Jacob Levy, it is further understood, agreed, covenanted and granted, and the Trustees aforementioned are hereby directed, in order to extinguish said claim, first fully to pay ami satisfy, out of the proceeds of the sale or sales aforesaid, so much of the debt of the said Jacob Levy, in the Banks aforesaid, as may be endorsed by the said John ClarkWu3‘

The acceptance by the Plaintiff of Levy’s draft in favor of Clark, was renewed by re-drawings, until February, 1820, when it was protested, and the holder, the Bank of Cups Fear, then received from Levy, the Plaintiff, and Clark, their joint & several promissory note, for $5,200, to secure the principal, and damages on it. Levy and Clark becoming insolvent, suit was brought upon this note against the Plaintiff, in New-York, where it was finally recovered of him, under a decree of the Court of Chancery, by which the holders were directed to assign to the Plaintiff all the interest which they had in the trust fund, created by the deed of November, 1819, to Lazarus and McRae, so far as it extended to the note of $5,200. An assignment was executed, according to this decree, by the Bank of Cape-Fear, in June, 1824 ; and in January, 1825, Clark also assigned to the Plaintiff all the right which he had to the two mortgages made to him by Levy, and also, all bis right under the assignment made to Lazarus and McRae, so far as the latter extended to indemnify him against his endorsement of the bill upon the Plaintiff, or his suretyship for the note of $5,200.

The Bank of the United States, the State Bank, and the Bank of Cape-Fear, together with Levy, Clark, Lazarus, McRae, and all the sureties of Levy interested in the assignment, were made Defendants.

The Plaintiff insisted that lie was, both by the rules of a Court of Equity, and also by the assignments of the Bank of Cape-Fear and of Clark, entitled to the benefit of the two morgages made to Clark ,* that it was the object aud intention of Levy, in his assignment of November, 1819, to preserve this right to the Plaintiff, as well as to Claris and that if if was not preserved and secured by the assignment, it was by reason of a mistake. The - bill prayed that any mistakes or omissions might be correcíed ; that the Plaintiff might be decreed to stand in the place of Clark and tiie Bank of Cape-Fear, in respect to their claim upon the trust fund, on account of the debt which he had paid, and for an account of that fund, and payment of the money he had paid as surety for jLevy.

The cause was argued at the last term, and hold by the Court under advisement until the present.

Gaston, for the Plaintiff.

— The mortgage by Levy to Clark was incorporated with, and made part of, the deed to Lazarus and McRae. Whatever right, therefore, Clark had under the mortgage, he lias under the deed. The mortgage protected him from the payment of this debt, and the deed must be held to do the same. To the argument that the joint note was given after the deed to Lazarus and McRae was delivered, and that the deed annulled the mortgage as to subsequent endorsements, it is admitted that the mortgage could not avail to protect a perfectly new endorsement. But here the endorsement was given to secure the old debt, that was in existence when the deed to Lazarus and McRae was executed, and this Court will look at the substance of the transaction, viz. the renewal of the debt, only making the form of security different.

The facts then present the ordinary case of a payment by a surety. Can it be denied that he has aright to all funds created for the payment of the debt, especially when the debt was incurred upon thecreditof that fund? Generally, anti Í may say universally, whenever property is pledged by a debtor to pay his own debt, any person who pays it may resort to that fund for indemnity. CSays v. Ward, 4 John. Chan. Rep. 123. — 1 Eq. Cas. M. 93. H. 5.J

From iltc case of Daniel v. McRae, (2 Hawks, 590,) it might well be contended, that the parties to the bill originally drawn, viz. Clark anti the Plaintiff, were co-sureties: but waiving that question, and admitting that both at law and in this Court, Clark, as a surety, was supplemental to the Plaintiff, and that the former had a right to full indemnity from the latter — then the case is, that between the Plaintiff and Clark, the Plaintiff is a principal debtor; and has not the surety a right to all the indemnities which existió the hands of the creditor?

That the Plaintiff is a surety, notwithstanding the form of his engagement, is admitted. Suppose, then, the holder had taken a mortgage for Ids indemnity — the case of Hays v. Ward proves that he is to hold this as a trustee for the Plaintiff: and can it be different when one who stands on middle ground — who is accountable to the holder, but has a remedy over upon the Plaintiff, should not hold all his securities for the benefit of him against whom he has a remedy? (Ex parte Hush forth, 10 Ves. 409.)

Hogg, for the Defendants.

— The parties to the deed of trust are Levy, Mediae and Lazarus. The deed is executed to countcrsecure Lazarus, Clark, and other securities of Levy, upon certain negotiated papers sot forth in the deed. John Clark had prior liens upon part of the property, not duly registered, and void at law — their validity in equity, depending on a question to be decided in a Court of Chancery, as to notice — Levy, to settle all controversy on tiie subject of Clark’s priority, inserted in the deed between himself and Lazarus, a covenant to the effect following:

“And whereas John Clark hath a lien upon part of the “properly herein conveyed for his endorsement, made “for J. Levy, it is further understood and covenanted, “ &c. and the trustees are hereby directed, in order to “extinguish said claim, first fully to pay and satisfy out «0f the proceeds of the sale, so much of the debt of said “Levy, as may be endorsed by said John Clark.”

Gomez is not entitled on the deed directly, and without substitution. The deed is not made for the benefit of any person except Clark, and the sureties mentioned. Clark’s priority is to be preserved, and his security extended to all the property instead of a part, and subject to that priority, the other sureties are to be secured by the residue of the property. Neither the Banks nor Gomez are objects of favour with Levy, nor named in his stipulation with Lazarus; not being named in the covenant, nor described, tiiey cannot take for themselves directly and without substitution. The meaning of the covenant is, to postpone the sureties named in the deed to Clark— Clark was the favoured surety, and the debts on which lie was bound, were favoured only so far as it was necessary to make him safe, and no farther. If Gomez had executed a note negotiable in Bank, for his own benefit, and Levy had signed it for his accommodation, and Clark had endorsed it for tiie accommodation of both, in terms set forth in the covenant, it would have been the debt of Levy, and endorsed by Clark. Yet neither the Bank nor Clark could have compelled the trustees, Lazaras and McUae, to pay that debt, until the property of Gomez was exhausted, because not until then, would it be necessary for Clark’s indemnity. But if Gomez could not pay it, it would be necessary to satisfy it, to protect Clark, and the trustees must pay it. It is the same thing whether the liability of Éromess precede that of Clark: because Gomez is the principal debtor, and Levy his surety and Clark the surety of both; in either case, Gomez comes before Clark, and Clark is never liable, till Gomez fails. The covenant gives Clark only the preference of the. other sureties mentioned, and subject to such liability, prefers them to all others. The debt is to be paid to the Bank out of the property, and by the trustees, when Clark is liable, and not before; Clark had two securities to look to, Gomex the acceptor, ami the trustees. He has suffered the acceptor to pay, and so he is safe. The acceptor makes application to the trustees, and insists they received the property in trust for his benefit, ami to indemnify him. They answer, lie is not named in the deed, and upon the whole deed, and upon the expressions in the covenant, that they were only to countcrsccure John Clark for his endorsement — when he had suffered for his endorsement. That subject to his security, they held the property in trust lor the other sureties, who were equally merliorions creditors with Gomex, (supposing him to be a surety) and had a special lien on the property, discharged from the demands of all persons except John Clark, and those who could be subrogated to Ids rights, and that Gomex was neither the surety of Clo/Jt, nor Ids ."«-surety, but liable before him at law and in equity, and therefore cannot be subrogated to him. If the construction be correct, that the debt of Gomex is to be paid at all events, then, if the property in the hands of the trustees be insufficient to pay all the endorsements of Clark mentioned in the deed, and those out of it, Gomex will be upon an equality with Clark, and will receive from the trustees as against Clark, such a part of the proceeds as will be in the ratio of his (Gomex’s) acceptance to the whole sum for which Clark is liable as endorser. This surely never could have been the intent of Levy or Clark; a construction leading to such a consequence, should not be made by the Court, except upon particular and insurmountable expressions, which would controul the general intent of the covenant, namely, Clark's indemnity. The particular expressions, and the general intent of the covenant, to indemnify Clark to the extent of his liability for his endorsement, and no further, stand together. The covenant having provided for Clark's indemnity, can be extended no farther, without prejudice to him, and the other persons, for whose benefit the deed was made, and will at their expense and loss, save Go- me%t does not appear to have been thought of, at tiie time the deed was executed. •

The covenant is worded, so as to direct the trustees to pay gff tiie debt of Levy, and protect Clark from the consequences of his endorsements ; and it is sought to be construed, where Clark is not liable to pay on his endorsement to protect Gome» on his acceptance, to the injury of the other sureties, who are to be postponed to Clark only, on a certain, not improbable state of tiie fund, to the injury of Clark himself.

Gome» can have no relief against tiie trustees (Laxa-rus and McRae) in tiie deed of trust of November, 1819, except through Clark. Tiie Plaintiff", if lie can have the benefit of Clark’s securities, must have them because he is the creditor of Clark as well as Levy, and has a right to resort to the property of Levy, conveyed to counter-secure Clark. But tiie Bank of Cape-Fear (and not Levy'} is the creditor,and the Bank has a right to go to Clark’s lien, whenever it has a right to resort to him personally. Tiie Plaintiff", therefore, if he has a right to resort to Clark’s lien, has it, either because he is the surety of Clark on the Bills of Exchange, or because he is his co-surety : if he be Clark’s surety, on payment of the debt, he has a right to look to Clark,and of course to his liens for the whole sum expended by him. But he is not tiie surety of Clark. He does not undertake that Clark will pay, and that if Clark does not, he will; it is just the reverse : Clark undertakes that Gome% will accept and pay, and if Gome» docs not, that he will. Gome», therefore does not undertake to accept and pay for Clark, but for Levy, and he is not tiie surety of Clark, but undertakes to advance money for Levy. Clark, at the instance of Levy, enters into a guarantee with tiie Bank of Cape-Fear, or whoever shall become tiie payee and holder of the bill, that Gome» shall comply with tiie engagements : Gome» is not, then, tiie surety of Clark on the bill. Is Gome» the co-surety of Clark on the bills ? Let it be supposed that Gome» and Clark are both volunteers, and thus far stand in'the samo relation to Levy. Do they on the negotiable instrument, stand upon an equality ? Are both bound for him, in the same contract, for the same act ? if there be no agreement between Gomez and Clark, to aid each, other, yet if there be an equality between them, in their responsibility for Levy — if their* contracts vtith the Bank enables it to resort indiscriminately to one or the other, at its pleasure, or to both, they are co-sureties, and equally bound. But they are not so bound ; for Clark was bound for Levy, while Gome% was free. Clark undertook with the Bank of Cape-Fear, that the mercantile security negotiated to them by Levy, should be accepted and paid according to its tenor, or if not, that he would pay it to them for Levy. If Gome% did not choose to accept, Clark could never look to him. The equality, therefore, did not exist at the discount, nor before acceptance. When the bill was purchased by the Bank, there was no mutual and reciprocal undertaking between Clark and Gome», for Levy; but Clark stood upon the paper the sole surety ot I^evy, and the Bank looked to him alone : — upon his name, and that of his principal, they advanced their money. How did Gome% write his undertaking on the paper ? He agreed, on the written request of Levy, to pay the sum of money mentioned iu the writing to the Bank ; and so performed according to the undertaking of Clark. Did he enter into the same agreement with Cla.k? — he did not : but undertook to pay the money unconditionally, by which the Bank acquired a new and additional security, to which, according to the principles of equity, (and indeed of law, in the case of an accept- or,) Clark had a right to resort, if he should pay the money to the Bank. If Gomez had taken a lien on Levy’s property, for his security, or if he had given the Bank one on his own, Clark would have had, in equity, a right to resort to either of these securities, on the ground that he and the Bank stood in the relation of principal and surety; and, therefore, he, as surety, was obliged to permit the Bank to have the use of any security he might have or acquire, and the Bank was obliged to assign to him any additional security they might get : the duty between them as principal and surety, being reciprocal, and each being obliged, according to a rule of equity, to afford the other any security, either personal or on property, collateral or direct, which might be acquired for the payment of the debt.

By our understanding of Gomel’s engagement, he voluntarily, at the request of Levy, put his name on the paper, and became bound to pay the Bank, in exoneration and discharge of Clark, both at law and in equity, and thus, by his written undertaking, came in the place of the principal debtor to the Bank and to Clark, who was not a co-surety with him, but supplemental o'tHly. This is indisputable at law, nor does the mere fact that lie was a volunteer, and accepted for the accommodation of Levy, alter the case in equity. Had there been a treaty between Gomez and Clark, or had they both signed the negotiable paper for the accommodation of Levy, without treaty, before it was offered for discount, and negotiated, there might have been some ground, as they were both sureties Sor Levy, to consider them co-sureties in Equity. But as they were bound for different acts,it is submitted that even upon this state of the proof, Clark must have been in equity a supplemental surety only, and not a co-surety of Gomez. Nothing else than evidence aliunde, that in fact they had agreed to be reciprocally responsible to each other, notwithstanding the form ofthe instrument chosen, could make them in equity or law co-sureties. In the present case, there is no such evidence. The bill was negotiated in Clark’s name, and the Bank afterwards procured the acceptance of Gomez, for their own benefit, and, by inference of law, for that of Clark, who ceased to be the primary surety to the Bank, and became secondary and supplemental only ; the acceptor being, as to him, the principal debtor. If the bill bad been protested for non-acceptance, and tlie Bank had sued Levy, and held him to bail, and fixed the bail with the payment of their judgment, and then collected the money of Clark, he would have had a right to resort to the bail, and the Bank must have assigned to him their judgment against the bail; because the bail comes in the place of Levy, the principal debtor.— So does the acceptor, Gomez,. (11 Vesey, junior, 22. — Parsons v. Fridock, (2 Vernon, 608.) The case of Tentrum v. Powell, (5th Taunton, 192) shews that the acceptor is principal as to all the parties, and that even if he accepts for accommodation, and not upon funds, that he will not be considered, as to the holder, a surety.

Such were the rights of the parties at the execution of the deed of trust. In this case it is not material to consider whether the trustees were affected with notice or not, for Clark is a cestui que trust in the deed of November, 1819, and lie is a party to this suit, and the Plaintiff avers, (as the truth is) that Clark is a party to the trust deed, and rests his claim to relief upon Clark’s right under it. Whatever rights, therefore, he is supposed to have under his mortgages of April and of July, 1819, he must be content to have them as they are qualified and restrained by the deed of November, 1819, to which he is a party. By the former deeds of mortgage, Clark was counter-secured as to all the endorsements then made, or to be made ; by the deed of trust, ho was declared -to have a lien upon the property therein conveyed, and the trustees were directed to indemnify him, by paying so much of Levy’s debt at the Banks (who are parties to the deed,) as was (then) endorsed by Clark. Now, whether the deeds of mortgage were void, as against the deed of trust, or good in equity against it, yet by this deed, by the very words inserted for Clark’s benefit, his power to enter into any new security is annulled, and the property mortgaged to him, by his consent, conveyed to others, subject to such endorsements of his as were then in Bank.

Now not waiving, but insisting that under the deeds of mortgage and trust, Clark was protected against endorsements only, and not against any other form of sure-tyship — yet if it be correct, according to the former part of this argument, thau upon the bills accepted by Gomen he was liable primarily, and Clark only secondarily, and in aid of him, in November, 1819, when the deed of trust was executed; then after that date, the trustees in the deed were bound only to protect Clark, according to his liabilities, as they then existed, and not otherwise. If he was secondarily liable, they wore bound to protect him, not by paying the debt, but by causing Gome» to pay it, or by paying it themselves. If they paid it, they could claim an assignment of the rights of the Bank, against Gomen. Clark, by no act of his after November, 1819, either in collusion with Gomen, or without it, could make the trust fund primarily liable, where it was before that time, liable only in the second degree.— Therefore his note of February, 1820, whereby he has become the qo-surety of Gomen, cannot have that effect, and if Gomen has paid off this note, whatever may be his rights against Clark personally, yet neither lie nor Clark can bind the trustees to anew, and different obligation from that imposed upon them by the deed of November, 1819. The rights of all parties are ascertained and fixed by that deed, and as respects Clark’s liability on that deed, it was secondary, and not primary, by endorsement, and not by making a note.— Clark has no claim for damages, he has sustained by entering into a new security, and into an engagement different from that by which he was bound in November, 1819, and from which only, the trustees by the deed of that date, were required to save him harmless. Clark’s claim certainly derives no additional force when urged by the Plaintiff, as there can be no reason assigned wherefore Clark should have changed his responsibility from indorser to that of co-surety, unless he thereby hoped and intended to give the Plaintiff’ an undue preference over the other sureties of Levy for his accommodation, and who by their diligence, had acquired a lien on Levy’s property subject only to the responsibility of Clark, and not of Gome». The deed must be construed as a countersecurity for Clark, for suretyships antecedent to the deed. For if he were at liberty to join Levy in new securities without limits, he could pledge the trust property to its value, and the trust deed would be nugatory as to La»arus and tin; other cestui que trusts named, and would enure exclusively for the benefit of Clark, which is manifestly against the intention of Levy.

HekbersoN, Judge.

— Levy atid Clark stand bound, in equal degree to the Bank, that Gomez should accept and pay the bill of the former. The discount, being solely for the benefit of Levy, as between him and Clark, he was the principal debtor. Gomez, by his acceptance, became a principal debtor as to Clark and tiie Bank; but his acceptance being for the accommodation of Levy, as between Levy and himself, he was only a surety. These facts were all known to Clark, at the time of his endorsement, with the further information, that Gomez accepted, or would accept, in confidence that Levy would consign property to him before the maturity of the bill, to meet the acceptance; and that he, Gomez, transacted business as a Commission Merchant in New-York, to whom Levy was in the habit of making large consignments.— By a bond and mortgage, a fund is provided for the indemnity of Clark, at the time of his endorsement. The whole of Levy’s property is afterwards bonaJide, and upon full consideration, conveyed to La»arus and McRae, with notice of the mortgage to Clark. The mortgage has not been registered. In the deed to Laaarus and McRae, there is this clause: “And whereas John Clark bath a lien on part of the property herein conveyed, for his endorsement made for the said Jocob Levy, it is further understood, agreed, covenanted and granted, and the said Trustees are hereby directed, in order to extinguish said claim, first fully to pay and satisfy, out of the proceeds of the sale or sales aforesaid, so much of the debt of the said Jacob with the Banks aforesaid, (meaning among others the Bank of Cape-Fear,) as may be endorsed by the said John Clark." After one or more re-drawings by Levy on Gome», endorsed by Clark, and after tiic execution of the deed from Levy to Lazarus and McRae, Levy, with Gome» and Clark as his sureties, gave a joint note to the Bank of Cape-Fear, the holder of the bill, or which is the same thing, a similar one drawn in renewal of it, including interest and damages. Levy and Clark being insolvent, Gome» lias paid the whole of this note. In the mortgage to Clark, the mortgaged property is declared to be liable to any future, or other endorsement, which Clark may make (or Levy, and for any endorsement which he may make for their renewals, according to the practice of Banks. Gome», by this bill, seeks the benefit of the fund created for Clark’s indemnity, and has obtained an assignment from him, and also one from the Bank of Cape-Fear, of all their interest in the trust premises, for and on account of the hill or note abovementioned.

There is no agreement made between Clark and Gomez to change the order of their liability, appearing upon the face of the transaction. Upon it, Gomez stands prior in obligation to Clark, for Clark’s liability was to arise only upon his default. Standing in this relation, he cannot call upon Clark to contribute as a co-surety. In order the better to understand tiie claim of Gomez to the fund provided for the indemnity of Clark, we will consider it as created by a stranger, and not by Levy, the principal debtor. Gomez could not reach it on the ground of equality between Clark and himself, for lie stands, as we have seen, prior in obligation to Clark. Neither can lie claim this fund upon being subrogated to the rights of the cr editor, the Bank of Cape-Fear, for the Bank, upon receiving payment from him, is bound to assign all its obligations and facilities for enforcing payment from those who stand prior and equal in obligation to him, not from those who stand posterior to him; and, I would say, not from those who stand in equal or prior degree, unless the fund came from the principal debtor. For I think, in that case, it is purely personal, and cannot be communicated. But as this fund came from Levy, the principal debtor, it is very justly thought to be more accessible to his sureties, and if it still remained the property of the principal debtor, this Court would lend its aid to reach it, and would remove all obstructions out of the way, and place it within the power of the suffering surety. I am almost prepared to say, that where the principal debtor creates a fund for the indemnity of a primary surety, one not a bare certificator, as he is called in the civil law, (such I think Clark to be) any surety who stands in equal or posterior degree, may pursue the fund in the bands of any person, who comes to it with notice. For the principal debtor is bound to provide equally for all his sureties; with him there is no prior or posterior; and when he communicates a benefit to one, his relationship makes it common to all standing in equal degree. Commune pcriculum, una salus.

The co surety who attempts, at the time, or after the obligation is created, privately to provide for himself, from the funds of the common principal, acts contrary to good faith, as he thereby diminishes the funds, on which they all rely for their common safety.— And besides, it would tend to weaken his exertions to the end in which all have an interest. But to extend this to a prior against a posterior surety, is connecting together those whose situations are different, and inferring similar rights from dissimilar obligations. It is restricting too much that right of seif-preference or self-security,which ail human Jaws permit, if wedo not infringe upon those of others; and it is not considered an in-fi'ingemcnt of them, to procure for ourselves a satisfaction or security for our debts, although we may leave our debtor without the means of satisfying his other creditors, whose debts may be as meritorious as our own. Subjecting this fund (I speak of it as provided for Clark’s indemnity, and not for the payment of the debt, which I shall notice presently,) to the claim of Gome would be saying, in effect, that the bare act of becoming surety creates a lien in behalf of the surety, upon the property of the principal debtor. It cannot be reached through the medium of Clark, for it was to be used by him, only in the reverse of the facts which have happened, to wit, the failure of Gomez to pay; whereby Clark’s guarantee to the Bank would be violated. Nor can it be reached through the medium of the Bank, for similar reasons. The Bank could not call on Clark, and consequently could not call for the fund provided for him, but in the like event, the failure of Gomez. The fund, therefore, remained the property of Levy, and subject to be transferred to any person, liable however, in the hands of an assignee, to indemnify Clark, or any person who had recourse against him, for any damage which they might sustain from the default of Gomea. I have viewed this case as it stood to the fund, when the trust deed was executed to Laxarus and McEae. After which Levy’s dominion over the property entirely ceased, and with it the efficacy of that part of the original mortgage to Clark, to secure him against future endorsements ; for it rested in agreement, and grew out of his dominion over his property. The loss,of dominion did not affect endorsements made afterwards, for prior debts. Considering this, therefore, as a fund set apart for the indemnity of Clark, Gomez can have no claim to it.

et apart not only for identifie Clark, hut that it is| specifically appropriated ament of this debt. If ¿0, most certainly he who debt has, in this Court, a right to be reimburs-Í >c fund. For the principal debtor substituted if, and lie who can claim remuneration from ¿ . -i, is it from the fund. They are as it were after much reflection, and some doubts upon tie s ct, I think that the fund was provided and set apart for the indemnity of Clark only, and not for the payment of the debt, otherwise than as a mean of saving Clark harmless from his endorsement, because from the recitals in the deed providing it, it appears that it is substituted for the unregistered mortgage and bond to Clark, which provided for his personal indemnity only, and not for the payment of the debt. And the words, “ extinguish such claim,” and “ fully to pay so much of the debt of said Jacob Levy with said Banks, as may be endorsed by the said Clark,” must be understood as directed in reference to that object, to-wit, the payment of that debt, should Clark be compelled to pay it, and not simply the payment of the debt, without regard to that object. This construction is much strengthened from the fact, that personal indemnity, and not the payment of the debts generally of Levy, was the object of the deed. From the operation of it, it is therefore fair to strike out (or rather not to include within it) such debts as the person intended to be secured, should not be compelled to pay. As to the ground, that it was intended to protect Come» as well as Clark, and that it was left out of the deed by inadvertence or mistake,the evidence does notsup-port the charge. It does not appear that the parties intended any thing but what they have done.

Hall, Judge

— If Gomez and Clark had agreed to become sureties for Levy, and with that view, Clark had endorsed, and Gomez had accepted the bill of exchange, when they afterwjpps give in© liSffB recovery was had agaijnst ,§ nen, in New-YoiJKE tlmiiT they should .be considered as sureties for the wbt, which that note was given to discharge, arid consequently that any indemnity which had been taken by Clark, tii.secur© him against loss, should extend to Gomez.

But if Gomen, without any agreement or understanding with Clark to become Levy’s surety, accepted the bill of exchange, he thereby became debtor to lie Bank, and Clark was only bound as endorser. It folrawcd that if Gomen had paid the debt, Clark was discharged, for he was only bound to pay, if Gomen did not.

Afterwards, when Clark and Gomen signed the note of Levy as sureties, Gomen was thereby released from his liability as acceptor, and stood as a co-surety with Clark, and as the latter had secured himself against loss, by the mortgage which Levy had made to him, Gomen had a right to be indemnified from the same security. This would be the case, if the rights of other persons did not interfere.

When Clark stood as endorser on the last bill of exchange, the deed of trust was executed to McRae and La-ñaras, for the same property which Levy had mortgaged to Clark; so that Clark could only expect to be indemnified for such endorsements, as he had made for Levy, but not for any liabilities, which he might incur after i that time. I have no idea that it was intended, nor do ; I think that the terms of the deed justify the belief, that ! the parties to it, intended to secure the payment of the [debtdue upon the bill of exchange, on which Clark was endorser, but only intended to secure Clark against his endorsement. If there had been a new bill of exchange drawn, perhaps the liability of the parties would not be altered. But when the note was given, tiiey were so far altered, that Clark became a principal to the Bank with Gomen, and the liability of Gomen as acceptor, was discharged. In this respect, Clark acted upon his own resjjonsih; ^ ant^ °f course cl)!ii!w mt expect to be re-numerate been co Levy’s mortgage tu nm, in case he had Pus- 'o discharge that note. His lien upon "( i* future endorsements, was terminated > McRae & Lamms; of course he could 'assignment of the mortgage to Gomen, con-rght which he himself did not possess.

it does not appear that Clark and GomeX me lit or understanding between them, stood s for Levy on the bills of exchange ; that mortgage from Levy to Clark secured the awy endorsements he had made, or liabilities incurred for Levy, before the date of the deed of trust to McRae and Lazarus, it became inoperative, after the creation of that trust, as to any endorsements, made by Clark after its date. This deed was executed with Clark’s knowledge; it was after its existence, that he executed the note with Gomen, as co-surety for Levy. For so doing, he eannotbe indemnified by the mortgage, and of course can communicate to Gomen no right arising from the same instrument. For these reasons, I think the bill should be dismissed.

Per Curiam.

— Let the bill be dismissed with costs.