Wilson v. Allen

By the Court,

The denial of “any knowledge or information sufficient to form a belief” was a good denial,under the statute,and has been so held by this court. (Civil Code, sec. 713; Robbins v. Baker, 2 Or., 52; Sherman v. Osborn, 8 Or., 66.) But the issue thus joined was immaterial. If the respondent was a surety only on the first note secured by the mortgage executed by the principal debtor to Smith, Brassfi’eld & Co., that fact would not of itself entitle him to control the application of the proceeds of sale of the property covered by the mortgage. It is true that considerable diversity and, perhaps, some conflict exist among the authorities upon this point. But those which hold that a surety in the situation of the respondent has no such right, are not only more direct adjudications upon the precise question involved here than the others, which seem to countenance the opposite view, but the doctrine they announce appears _ consonant with sound legal principles. (Belcher v. Hartford Bank, 15 Conn., 381; Stamford Bank v. Benedict, id., 437; Wilcox v. Fairhaven Bank, 7 Allen, 270; Mathews v. Switzler, 46 Mo., 301.)

The appellants in this case held all three of the notes, as well as the mortgage. There is no such question here as is usually presented where there is litigation over the application of payment between creditors holding distinct debts *157secured -by tbe same mortgage. Between them the rule as to the application of the proceeds of sale of the mortgaged property, contended for by the respondent, applies. But it is not based upon the debtor’s contract, under which the mortgage security has been furnished. His engagement is that the security shall be made to pay all the debts in full, and he gives his creditors the power over it for that purpose. He cannot, in ordinary cases like the present, at least, compel an application of the proceeds- of such security according to the rule which obtains between distinct creditors. After the execution of the notes and mortgage in this case, Smith, Brassfield & Co. could have assigned the first note only to the appellants with a distinct stipulation in the contract of assignment that the proceeds of the mortgage security should first be applied in payment of the second and third notes, and to the exclusion of the first in the event of the insufficiency of such proceeds to satisfy all three of the notes; and such stipulation would have been valid. (Dixon v. Clayville, 44 Md., 573.) There is no conflict among the authorities on this point. And if the debtor cannot insist on the observance of the rule against such an arrangement made exclusively between his creditors, how can his security? If a creditor, holding all the debts thus secured, can, by means of an assignment, confer a right upon his assignee to apply the proceeds of the mortgage security in contravention of the rule, without the debtor’s assent, why should he be held bound by it if he prefers to retain all the debts and obtain payment of them himself? If he can give the power to make the application in a different manner by assignment of one of the debts secured, -he certainly may make such application himself. In such a case, the debtor’s surety would plainly stand in his shoes and not in the creditor’s. And as the debtor could *158not complain, the surety could not. This conclusion virtually disposes of the whole case. For if the appellants had the right which they exercised, of applying the proceeds of the sale of the mortgaged property to the payment of any of the debts held by them and secured by mortgage, as they might see proper, as we hold they had, in view of the facts appearing in the record of this case, then respondent has only paid what he could have been compelled to pay, and cannot recover it back.

Decree reversed, with directions to dismiss the bill.