Cox v. Wheeler

7 Paige Ch. 248 | New York Court of Chancery | 1838

The Chancellor.

Upon the facts in this case, I cannot see that there is any foundation, either in law or equity for the claim set up by the appellant to offset the last instalment due on the bond and mortgage, against the surplus monies raised by the statute foreclosure for the previous instalments. On the contrary, if, as alleged in the answer, the value of the premises was as much or more than the amount of the last instalment in addition to the $800 bid at the sale, the respondent would have a perfect right in equity to restrain the appellant from proceeding at law on his bond to collect the amount of the last instalment. The mortgagee had the right to sell the premises discharged of the lien of the future instalment, and to retain the amount of such instalment out of the purchase money if there was any surplus beyond the amount which had then become due and the costs of the statute foreclosure. And if he chose to sell subject to the incumbrance of the instalment which was not then due, in legal intendment the premises would bring so much less on the sale ; and the purchaser would take the premises subject, in equity, to the payment of the incumbrance thereon. In such a case the mortgaged premises become, in equity, the primary fund for the payment of the amount of the incumbrance. And if the mortgagee becomes himself the purchaser, the incumbrance becomes merged in his legal estate in the equity of redemption ; and the debt is, in equity, extinguished. The equities of the parties on such a sale are similar to those which arose in the case of Tice v. Annin, (2 John. Ch. Rep. 125,) where the mortgagee having recovered a judgment at law upon the bond given with the mortgage, proceeded to sell the equity of redemption upon execution on such judgment; in which case it was held by Cnaneellor Kent that the purchaser took the premises subject to the payment of the balance due upon the mortgage. In other words, the sale being made subject to the incumbrance, the land itself became thereby, in equity, the primary fund for the payment of that incumbrance; and if the premises were sold to a stranger, the mortgagor, upon being compelled to pay the incumbrance by suit upon the bond, would be entitled to be substituted in the place of the holder of the incumbrance as to the remedy against the land as the primary fund. In such cases it is perfectly immaterial whether the mortgaged premises or the personal bond of the mortgagor was originally the primary security for the payment of the debt; provided the party who is personally liable for the payment of the mortgage is the owner of the equity of redemption at the time the premises arc sold subject to the incumbrance, or if he has sold his interest in the equity of redemption to another who is either legally or equitably bound to pay such incumbrance.

In the present case the equitable rights of the parties would have been the same, even if the appellant had held two separate and distinct bonds and mortgages of the respondent which were liens upon the same premises. And he could not, in that case, have sold on one of the mortgages by a statute foreclosure, subject to the incumbrance of the other mortgage, without making the mortgaged premises in the hands of the purchaser the primary fund, in equity, for the satisfaction of that incumbrance.

The decree appealed from is therefore not erroneous; and it must be affirmed with costs.