
    Bell v. Weir et al.
    
    
      (Supreme Court, General Term, Second Department.
    
    February 12, 1890.)
    Pledge—Rights of Pledgee—Receivers.
    Payment of a bond and mortgage to one to whom they have been assigned as collateral security for other bonds of the assignor held by the assignee, operates, pro tanto, as a satisfaction of the latter obligations, where they are due before the payment, as against a receiver of the assignor appointed after the assignment.
    Appeal from special term, Westchester county.
    Action by James C. Bell against Daniel J. Weir and others, to foreclose certain mortgages. A. Walker Otis, who had been appointed receiver of the property of the defendant Weir, answered the complaint, and claimed a bond and mortgage given by Catharine E. Tally and H. A. Carr to defendant Weir, which had been previously assigned to plaintiff by Weir as collateral security for the bonds and mortgage's held by plaintiff. Plaintiff received payment of the assigned bond and mortgage. From an interlocutory judgment of foreclosure and sale, allowing the proceeds of the assigned bond and mortgage to be applied in reduction of those held by plaintiff, the receiver appeals.
    Argued before Barnard, P. J., and Dykman and Pratt, JJ.
    
      James W. McElhinney, for appellant. John W. Alexander, for respondent Bell. William T. Matthies, for respondent Walker.
   Pratt, J.

The sole question in this case is whether the payment of the bond and mortgage of Tally and Carr have operated as a satisfaction, pro tanto, of the bonds and mortgages of the defendant Weir, held by the plaintiff, which had become due before' such payment was made, and we are of opinion that it did. The assignment of the bond and mortgage of Tally and Carr having been made as collateral security for the payment' for the other bonds and mortgages held by the plaintiff, the assignor, Weir, no doubt retained an equitable interest therein, notwithstanding the assignment vested the legal title thereto in the plaintiff. Such equitable interest passed to the receiver, Otis, by virtue of the proceedings supplementary to execution set forth in the case. The relation between Weir and Beceiver Otis, respectively, and the plaintiff, was that of pledgeor and pledgee, and gave to the former the right to redeem the bond and mortgage of Tally and Carr, by paying the debt for the payment of which these securities had been pledged, and to any surplus that might remain after payment of such debt. But, as that debt greatly exceeded the amount of such securities, no right to a surplus has yet arisen. It is also a principle of equity that one who has several funds to satisfy his demands will be compelled, on the demand of another who has a subordinate lien upon some, but not all, of the same funds, to exhaust the fund upon which he has an exclusive lien, before resorting to the others. But this principle is subject to the qualification that compliance with such demand will not subject the holder of the paramount lien to delay or inconvenience in the collection of his debt, as to risk of loss to himself, or of injustice to other persons. Pom. Eq. Jur. § 1414, and cases cited. We are of opinion that this pri nciple mentioned is not applicable to this case, for several reasons: (1) The general rule is well settled that when a creditor receives payment in due course of an obligation held by him as collateral security for the payment of a debt due him, the law at once applies such payment in satisfaction wholly or in part of the principal debt, (Waring v. Loder, 53 N. Y. 584,) and the fact that no formal application of such payment was made by the creditor is immaterial. (2) Such payment extinguished the collateral obligation, and the lien thereon, of the defendant Otis. The plaintiff cannot be made the custodian of the money paid or a trustee for the junior creditor against his will, nor in any way, without subjecting him to risk of loss and liability which he never assumed, and which it would be inequitable to cast .upon him. (3). It would be grossly unjust to the debtor Weir to subject him to the loss of interest which the withholding of an application upon his debt of the sum paid on account of the collateral security would involve. We have looked into the cases cited on behalf of the defendant Otis, but have found in them nothing in conflict with‘ the foregoing rules; nor do we perceive any certain benefit which would accrue to him from an adoption by the court of the principle on this subject for "which his counsel has contended. The plaintiff certainly can apply, and is bound to apply, the sum received from Tally and Carr upon any deficiency that may arise upon a sale of the mortgaged premises in suit, and he is not required for his own protection to bid upon such a sale a sum which will make such deficiency less than the sum received from Tally and Carr. For aught that appears, it must depend upon the defendant Otis, or those whose interests he represents, whether a more favorable result shall be achieved by means of such sale. The only practicable remedy available for him, therefore, is to cause the mortgaged premises in suit to be sold for the full value thereof, and to claim any surplus that shall arise upon such sale. The judgment should be affirmed, with costs. All concur.  