Morrill v. Morrill

*78 The opinion of the court was delivered by Powers, J.

The ability to testify is the test of competency required of witnesses, called to attest the execution of deeds and other written instruments. If the person called would be an incompetent witness to prove the fact of execution, such person is not a proper attesting witness. And competency to testify must exist at the time of attestation. This has been the well settled rule ever since the decision of Holdfast v. Dowsing, 2 Strange, 1253. That was the case of a will executed in the presence of a witness, incompetent to testify by reason of interest. Ch. J. Lee, in delivering the resolution of the court, said, “ The true time for his competency is the time of attestation, otherwise a subsequent infamy, which the testator knows nothing of, would avoid his will.” This rule has since been generally adhered to. 1 Greenl. Ev. (12th ed.) s. 572; 2 Washb. Real Prop. As confirmatory of the rule, it is well settled that if a witness, competent at the time of attestation, becomes incompetent afterwards, the instrument is nevertheless well executed. Jones v. Mason, 2 Strange, 833; Bernett v. Taylor, 9 Ves. 381.

Our statute, s. 10, c. 49, Gen. Sts., declares that wills shall be probated, if the attesting witnesses were competent at the time of execution, although they afterwards become disqualified. The mortgage deed, therefore, executed February 19, 1875, by John F. Morrill to Joseph Bates, witnessed by Mrs. Bates, the wife of the mortgagee therein, was defectively executed, and its record was not constructive notice to subsequent purchasers or attaching creditors. Day v. Adams, 42 Vt. 510 .

The evidence shows that both parties called Mrs. Bates to witness the deed, and some members of the court think this sufficient to estop the parties from questioning its due execution. See Honeywood v. Peacock, 3 Camp. 196. We do not, however, undertake to decide this question. But this mortgage deed, although defectively executed, is a good equitable mortgage. It is proven beyond question, that Bates sought its execution, as security against his liability on Morrill’s guardianship bond, and that Morrill voluntarily executed it, solely to furnish such security. This intent being found, equity will effectuate it, and treat the deed as the *79 parties intended. A mere agreement to give a mortgage is treated in equity as a mortgage, and no want of form will defeat the instrument as an equitable mortgage. Jones on Mort., ss. 163, 167; Jones on R. R. ss. 73, 122; Miller v. R. & W. R. R. Co., 36 Vt. 452 . The true character of this mortgage may be shown, notwithstanding it purports to be given as security for a promissory note. It may be shown that it was given for indemnity only. Jones on Mort. s. 384.

The evidence shows that the manager of the Eastern Townships Bank examined the records in Derby to ascertain whether Morrill’s real estate was encumbered, and found this Bates mortgage. He then learned the fact that a mortgage in favor of Bates for some purpose had been given by Morrill. We incline to think that this search of the records was before the bank put its attachment upon the land, though, whether before or after, makes little difference in the case. The bank, having notice in fact of the deed, is affected with notice of all equities that Bates had under the deed. If the bank, in point of fact, had no notice of the deed until after it made its attachment, still, notice received at any time before levy of its execution, is sufficient to subordinate its rights to the superior equities of Bates. Hackett v. Callender, 32 Vt. 97 ; Hart v. F. & Mechanics' Bank, 33 Vt. 252 .

The effect of this notice to the bank is to limit its claim to the actual interest and title of its debtor. The bank is attempting to get security for an old debt; it has advanced no new consideration ; it did not even make the attachment, upon the theory that the Bates deed was defective and conveyed no title ; for it then had no notice that the deed was defective. The equity of an innocent purchaser, who had paid his money for the land, would prevail over the equity of' Bates. The purchaser from Morrill might get more as against Bates than his grantor had. The creditor of Morrill takes only the title of his debtor. Hackett v. Callender, supra; Hart v. Bank, supra; Mining Co. v. Bank, 44 Vt. 489 .

This mortgage being valid as between Morrill and Bates, can this oratrix, being the beneficiary under the bond, executed by Morrill and Bates, make it available as a security to her for *80 the amount due from her guardian ? The mortgage was executed to Bates as an indemnity only. , In some states a distinction seems to have been drawn between cases, where the security is given for indemnity only, and where it is given both for indemnity to the surety, and to secure the debt. Where it is given as security for the debt as well as indemnity, there would seem to be little doubt that the creditor, whether cognizant of the assignment and its purpose or not at the time of the assignment, could, when it came to his knowledge, avail himself of it as effectually, on maturity of his debt, as he could, had it been assigned to him directly.

But when the assignment is for indemnity only, some courts have held that the surety’s rights to apply the security as he pleased is inconsistent with the idea of a trust in favor of the creditor ; and that the creditor can only reach the security by way of subrogation after the surety has been damnified, actually or constructively. Rankin v. Wilsey, 17 Iowa, 463 ; Carpenter v. Bowen, 42 Miss. 28; Hopewell v. Bank, 10 Leigh, 206 .

The great weight of authority, however, is against the propositions, that the creditor’s right is rooted in the doctrine of subrogation. The assignment of security by the principal to his surety is an appropriation of funds for the ultimate discharge of the debt, for which he is holden. The surety has the right to apply the security directly to the payment of the debt. If the surety pays with his own funds, he keeps his principal’s debt on foot against him, and then applies the security to its payment. Thus in any event the funds of the principal are made to satisfy the principal’s debt£ and this accords with the purpose of the principal, when he gave the security. If the surety, after the assignment of the security, becomes insolvent, or by any act of the creditor, is discharged from liability, he holds the security in trust for the creditor. Cullom v. Br. Bank, 23 Ala. 797 ; Clark v. Ely, 2 Sand. Ch. 166 .

The clear deduction from the cases is, that, an assignment of securities by the principal to his surety for indemnity merely, raises an implied trust in favor of the creditor, which, on maturity of his debt, he may enforce, whether the surety has been damnified *81 or not, and irrespective of the question whether the surety or principal, either or both, are insolvent. New Bedford Inst. for Savings v. Bank, 9 Allen, 175 ; Kramer's Appeal, 37 Penn. St. 71; Rice's Appeal, 79 Penn. St. 168; Seibert v. True, 8 Kan. 52 ; Ohio Life Ins. Co. v. Ledyard, 8 Ala. 866 ; Moore v. Moberly, 7 B. Mon. 299 ; Curtis v. Tyler & Allen, 9 Paige, Ch. 432; Ten Eyck v. Holmes, 3 Sand. Ch. 428 ; Parris v. Hulett, 26 Vt. 308 ; 1 Story Eq. Juris. s. 499 (Redfield’s ed.); Brandt Suretyship, s. 283.

Here the principal and surety are both insolvent, and the liability of the surety has been fixed by judgment; but we regard these facts important, only as they seem to intensify the equity of the oratrix.

A question of practice is brought to our notice by this and some other recent cases, which calls for comment. The defendant bank, in its first answer filed in the cause, conceded the execution of the Bates mortgage, and interposed no defence against it, except that it was fraudulent against creditors. After the testimony had been partly taken, the defendant discovered the defect in the execution of this mortgage, and, thereupon, applied to the court for leave to amend its answer, by substituting certain words for words then in the answer; by interlining other words ; and by incorporating certain new matter. The amendment in this mode was authorized. This method of amending an answer is wholly unauthorized, even by the rules of loose practice. The answer is sworn evidence in the cause, and can be changed in its phraseology no more than a deposition could. Indeed, viewed in its character as evidence, it is a deposition. The true mode, and the only one, sanctioned by the books in cases of this kind, is to incorporate.any amendment which the court sanctions into a supplemental answer, to be vei’ified by oath. The amendment in this case is not sworn to ; the original answer is mutilated so that no conviction for perjury could be had if false swearing existed in that, as originally drawn. Moreover, the amendment itself went quite as far as the authorities would warrant. Mitf. & Tyl.’s Pleadings, c. 4; 1 Dan. Ch. Pr. 781 et seq.; Adams’ Eq. (6 ed.) 680 et seq .

*82 The result is, that the oratrix is entitled to have the Bates mortgage stand as a security to her, for the payment of the sum due her from the defendant Morrill, as her guardian, as fixed by the Probate Court; and a decree of foreclosure thereof against the defendants ; and so far as she receives payment from, or under such decree, the estate of Bates is to be discharged from liability under said bond. The pro forma decree of the Court of Chancery is reversed, and the cause is remanded with directions to enter a decree for the oratrix in accordance with the views herein expressed.