Cook v. Mancius, 5 Johns. Ch. 89

5 Johns. Ch. 89 | New York Court of Chancery | 1821

The Chancellor.

The plaintiff Cook obtained ajudgmerit at law against the defendant Hisscher, on the 9th of Ju/y, 18 j7. There was, at that time, aud had been for some time previously, a suit pending in this Court, by Henry Ostrom, to foreclose a mortgage given by Gerrit G. Van Zandt. The defendant Vesscher, who was a purchaser under Van Zandt, and owned the equity of redemption, was a party to the bill of foreclosure. A decree for the sale of the mortgaged premises was obtained on the 25th of ■May, 1818, and a sale made by the master on the 21st of July, 1818, and the defendant Mancius became the purchaser for 2,000 dollars, which was 920 dollars beyond the balance of debt, interest and costs due, at that time, to Ostrom. The plaintiffs now seek to recover that surplus from Mancius the purchaser, or else to redeem the mortgaged premises, or for some other general relief, under the special circumstances disclosed in the case.

The plaintiff was a junior incumbrancer, and .became such pending the mortgage suit, but it was long prior to the decree, and it would seem upon principles of equity, that he was entitled to have his judgment satisfied out of the residuary interest of the defendant V., in the land, after the mortgage debt and costs were paid. He had an equitable lien upon that equity of redemption, or upon the surplus moneys arising upon the sale. By the terms of the decree in Ostrom’s suit, (and which terms were procured as will be hereafter explained,) the residue of the moneys, if any, were directed to be paid over to the defendant V., in whom the equity of redemption resided; and they were paid over, by his order, to the defendant M., so as entirely to exclude the claim of the present plaintiff. If the plaintiff had been a judgment creditor at the commencement of the suit to foreclose the mortgage, the mortgagee would have been bound to have made him a party, or else the decree and sale would not have taken away his right to redeem, even as against Mancius the purchaser. This prineiple was discussed and sufficiently explained in the case of Haines v. Beach, (3 Johns. Ch. Rep. 459.) and in the authorities there referred to. But the present plaintiff became an incumbrancer pendente lite, and therefore according to the doctrine, in the case of The Bishop of Winchester v. Paine, (11 Vesey. 194.) it was not necessary that he should have been made a party, and he has no right to redeem. This may, perhaps, be true as a general proposition, but the special circumstances of this case ought to take it out of the general rule. Here the plaintiff became a judgnent creditor prior to the decree, and the purchaser had notice of his judgment and of his claim upon the surplus moneys prior to the sale, and there is reason to infer y some understanding and arrangement, between the two defendants, intentionally and studiously to divert the surplus moneys from the plaintiff to themselves. If the facts will warrant this conclusion, the prior notice of the plaintiff’s claim upon the surplus moneys may operate upon the purchaser equally as if the plaintiff’s incumbrance existed prior to the commencement of the suit upon the mortgage. Equity attaches great importance to notice of another’s claims or pretensions, and generally charges a party, whether he be a purchaser or otherwise, who acts regardless of such notice, with all the duties that such claims impose. Though the mortgagee is not bound to take notice of incumbrancers who became such, pendente lite, yet such an incumbrancer acquires a lien upon the residuary interest of the debtor, which this Court does regard, in a variety of cases; and I presume that upon due application by such a creditor, the Court would not suffer the surplus moneys, after the prior incumbrance was satisfied, to pass into the hands of the debtor. Here the mortgage suit had been pending since January, 1813, and can it be possible that all subsequent incumbrancers, however slow may be the progress of the mortgage suit, are to be utterly disregarded ? If the mortgjagor can take or appropriate to himself the surplus money, or the cash value of the equity of redemption, and the purchaser can also buy with notice of the subsequent incumbrance and of the claim of the creditor to the surplus, and yet hold the land discharged of any right of redemption, the lien of the subsequent creditor is utterly defeated, and becomes of no value. That right is entitled to some efficient protection, and the subsequent judgment or mortgage creditor must have a right, either to come in and be made a party, so as to secure his claim upon the surplus, or if he can charge the purchaser with previous notice of his judgment, and of his claim under it upon the equity of redemption, he must be entitled to redeem equally as if he had been an incumbrancer at the commencement of the suit.

An incumb Tancer pendente lite, need not be made a party; and be is siot entitled to redeem, unless under special circumstances; as where the plaintiff became a judgment creditor after the commencement of the suit to foreclose the mortgage, and prior to the decree of foreclosure and sale, and the purchaser had notice of the judgment, and of the ¿ten of the plaintiff on the surplus moneys» Whether a naked trustee, who is plaintiff, can he made a witness, though liable for costs ?

Before we look more particularly into the facts in this case, there are one or two preliminary points to be disposed of.

It has been made a question, whether the plaintiff Cook, , . „ 1 was a competent witness in the cause, inasmuch as he may be responsible for costs, though a naked trustee. But as r ’ his testimony does not appear to be essential to the determination of the case, I have assumed, for the purpose of this discussion, that the objection to the competency of his testimony was well founded, and have not regarded it.

Another objection is made to the want of parties. The plaintiff C., the legal owner of the judgment avers, that he holds it only as trustee for James Kane, who is a party to the bill We have, then, the trustee and cestuy que trus parties to the bill. But it was vaguely intimated in the answer, put in upwards of a year after the bill was filed, that Oliver Kane had some interest in the judgment, and it was proved by one of the witnesses, Thomas Bridgen, that the plaintiff K. informed him that his interest in the judgment had been assigned to O. K. When this information was given, or the assignment made, does not appear. He was examined as a witness, in June, 1820, and he says, that O. K. informed him of the same fact, “ some time ago.” The bill was filed in 1818, and we may as well intend that this assignment was made after, as before the filing of the bill; and if the defendants meant to rely upon so formal and technical an objection, it was incumbent upon them to have shown clearly the existence of the fact at the commencement of the suit. A change of interest from the cesluy que trust to another, pendente lite, can hardly be admitted as sufficient to support the objection, at the hearing, of a want of parties, when we have before us the party in whom the legal title resides, and the cestuy que trust existing at the filing of the bill. The Court is not bound to take notice of any interest acquired by purchase in the subject matter of a suit pending the suit.

Where a trustee and his ce$tuy que trust are plaintiffs, and pending the suit the cestuy que trust as signs his interest to another, it is no objec tion atthe hearing, that such assignee is not a party. The Court does not take notice of the purchase of the subject matter, penden* te Hie.

The facts connected with the sale, form the equity of this case. Mr. Henry, the Solicitor for Ostrom, the plaintiff in the mortgage suit, says that he drew the decree of sale, and inserted therein the usual clause, “ that the residue (if any) of the moneys be brought into Court, to abide the order of the Court,” and that those words were, afterwards, obliterated from the draft, and the words “ paid to the defendant Fisscher” substituted, at the instance and upon the application of the defendant V. That alteration has probably produced the present suit. The solicitor acted without the knowledge of any judgment creditor existing entitled to the surplus, and without any suspicion of the design of the defendant V., who knew of the judgment, and who concealed that knowledge from the solicitor. Mr. Henry says he believed that V. would be entitled to the surplus moneys. The concealment from the solicitor, when he was requested to alter the decree, of the fact of there being an unsatisfied judgment creditor, whose lien attached upon the equity of redemption, is the circumstance of which J complain. It may be laid down as a clear rule of ethics, that it is wrong to procure an act to be done, which would not have been done, if a material and pertinent fact known to one party and not to the other, had been disclosed.

The decree was entered in May, 1818, as of course, and there is no evidence that the judgment creditor had any knowledge of the pendency of the suit upon the mortgage, until within a few days of the sale. In June, 1818, an arrangement was made between the defendant V, the owner of the equity of redemption, and the defendant M., the subsequent purchaser at the master’s sale, to secure those surplus moneys for their joint benefit. It would appear from the answer, that the defendant V. was indebted to the defendant M. on simple contract to the amount of 212 dollars and 15 cents; and the latter applied to the former for information respecting the mortgage suit, and the land to be sold under the mortgage, and understood from him that by the decree, the defendant V. would be entitled to the surplus moneys; and for his greater satisfaction, the defendant M. called at the solicitor’s office to look at the decree. The subsequent agreement between the two defendants, made on the 20th of June, ISIS, was, that the defendant M. should accept of an order from the defendant V. upon the master, for the surplus moneys, whatever they might be, in full of the above simple contract demand. On the day of sale, the defendant M. attended as a bidder, and on that day, hut previous to the sale, the order was drawn. He says, that his motive in attending the sale, was to purchase, in order to secure his demand, according to the above arrangement. The defendant accordingly discovered an anxiety to have the sale go on,, and urged it on, though the plaintiff’s counsel was present and pressing a postponement. The latter offered his check, or that of another person, for the mortgage debt and costs, to the agent who attended on behalf of the solicitor for Ostrom, the mortgagee. The plaintiff C. offered, moreover, to procure the money, if the check was objectionable, but he was referred to another immediate agent of Oslrom, who was present, and does not recollect that any such offer was made to him. The sale was made, and the conveyance to M, the purchaser, executed, and the whole transaction consummated with a rapidity that is rather alarming. Immediately upon the sale, the order of the defendant V., in favour of the defendant M., was accepted by the master as equivalent to a payment of the surplus moneys, and the defendant M., on the same day discharged the defendant V. from his demand, and retained to himself the surplus value of the bid, after satisfying his simple contract debt; the residue of that surplus so retained, as a gratuity from the defendant K, amounted to 704 dollars and 85 cents. The answer says, that the surplus moneys were legally and fairly disposed of by the acceptance of the order.

The plaintiff C., who had made unavailing efforts to stay the sale, or to discharge the mortgage debt, and preserve the lien of his judgment, took other steps to prevent the surplus moneys from passing under the control of the defendant V. Here, also, his vigilance failed him. The attorney for the plaintiff C., and in his name, gave written notice to the master immediately upon the sale, that he was the holder of an unsatisfied judgment as trustee of the plaintiff K., and that he was entitled to the surplus moneys on the sale of that day. It seems extremely probable from circumstances, that this notice came immediately to the knowlege of 3Í., the purchaser. He had a conversation with the attorney of the plaintiff C. prior to the sale, relative to the plaintiff’s, judgment; and just before the sale the defendant M. had a conversation with the plaintiff C., relative to the amount necessary to be hid, in order to make the requisite surplus to satisfy the judgment. The purchaser M. was thus duly apprized, when he purchased, not only of the existence of the judgment, but of the actual and avowed claim of the plain-jiff C. to the surplus. The master as well as the purchaser disregarded this notice; but I do not mean to implicate him in any censure, for he followed the words of the decree, as they had been inserted, at the instance of the defendant V., directing the surplus to be paid to the defendant V. He accepted the order of that defendant, as a payment to him of the surplus moneys, amounting to 920 dollars, and on the succeeding day he made his report of the sale, and of the disposition of the purchase money. It was not until the third day that the plantiff C. was able to apply to this Court, and obtain an order upon the master, to bring the surplus moneys into Court. That order, unfortunately for the plaintiff, was obtained a day too late.

The defendant M., by this arrangement with the defendant V., and by his purchase, with knowledge of all the equity of the plaintiffs’ case, and with explicit and monitory notice, not only obtains payment of his simple contract debt, out of land bound by a judgment, and in preference to that judgment, but he makes an absolute profit of 704 dollars and 85 cents; nor is this all. On the 15th of August, 1818, (being only twenty-five days after the sale, but subsequent to the commencement of this suit,) he contracts to sell the land for 4,000 dollars, and a deed was afterwards executed in pursuance of that contract, and the consideration secured.

It appears to me, that the plaintiff’s lien upon the equity of redemption ought not to be defeated by the transactions which took place, and that he has pressing claims upon the Court for its assistance. There can be but one question in the case, and that is, as to the most suitable and effectual relief to be afforded to the plaintiff. The prayer is for general, as well as for particular relief; and any relief may be granted suitable to the case, and consistent with the allegations and proofs. I consider that the plaintiff is entitled to redeem, as against such a purchaser, acting with such previous arrangement with the owner of the equity of redemplion, and under such notice, equally as if his judgment had existed prior to the suit upon the mortgage. To limit the remedy to the amount of the surplus, in the bands of the purchaser, would be depriving the judgment creditor of his lien upon the equity of redemption, and substituting for it inferior personal security. And, in -tjie next place, the surplus moneys may fall short of the amount of the judgment, though the real value of the equity of redemption might go far beyond that amount. Upon the principle which I apply to the case, and which is, that the judgment creditor under the special circumstances, has a right to redeem, notwithstanding the sale, he is entitled to his lien unimpaired, and is not to be turned over to any personal security whatsoever ; nor is he, in this case, to take the sale by the master, as a test of the value of his security. He is entitled to redeem the prior incumbrance, by refunding the amount of it to the defendant M., together with the costs of that suit, and by having the land disposed of to satisfy both the incumbrances.

A person who has obtained a judgment a* gainst a mortgagor, pending the suit by the mortgagee for foreclosure,and prior to the decree, was allowed to' redeem,as against the purchaser at the master’s sale,{ictmgwith 3iqtice ofthe lien of the judgment creditor, and under the circumstances of the case.

I shall, accordingly, decree a reference, to ascertain the amount due to the plaintiffs, and that the defendants pay the amount thereof, together with the costs of this suit, within thirty days after notice of this decree; or in default thereof, and upon the plaintiff’s bringing into court, for the use ofthe defendant M., the 1,080 dollars, (the amount of the mortgage debt and costs,) togetberwith interest thereon, from the 26th day of July, 1818, (the time ofthe purchase,) and upon bringing into Court, to be cancelled, the sheriff’s deed upon the sale of the mortgaged premises tb the plaintiff C., on the 24th of July, 1818, that then, and in such case, the premises be sold by a master, on the usual notice, to satisfy the mortgage debt and costs and interest, and the amount to be reported due to the plaintiffs upon the judgment, and the 10 dollars paid on the purchase under the sheriff’s sale, and the costs of this suit.

Decree accordingly.