Cullum v. Erwin

4 Ala. 452 | Ala. | 1842

ORMOND, J.

This bill was filed by Henry Hitchcock, to foreclose two mortgages, one of which was subject to a prior mortgage in favor of one Charles Cullum. The original and supplemental bills recite this fact, and state that the debt to secure which Cullum’s mortgage was executed, was payable in six instalments, evidenced by six promissory notes, the first of which had been paid to Cullum, and the remaining five transferred by him to different persons who are made parties. That in consequence of the destruction of the building by fire, the property secured by Cullum’s mortgage would not be sufficient to discharge all the notes, and that it would be necessary to ascertain the priorities between the assignees of Cullum, which the Court is prayed to do and direct a sale.

The Court decreed that the assignees of the notes from Cul-lum were entitled to the priority of payment in the order in which the notes fell due, and that being the principal question we will first address ourselves to the consideration of that matter.

It is perfectly well settled by the decisions of this and other Courts, that when a debt is secured by mortgage, the debt is the principaTajid the mortgage á mere accessory or incident, and that an assignment of tíre debt unless otherwise^expressed will bé, in equity, an assignment of the mortgage also. [Duval v. McLoskey, 1 Ala. Rep. 708; Emanuel & Gaines v. Hunt, 2 id. 190.] When, therefore, Cullum, the mortgagee transferred the second note falling due to Harding, if there was no express reservation of his interest in the mortgage, the assignment of the note was an assignment of the mortgage also, pro tanto, and if Cullum had retained the remaining notes and the mortgage property had proved insufficient for the payment of the entire debt, his assignee would have been entitled to priority of payment.

j Being entitled to priority of payment against Cullum, he has \ the same right against the assignee of Cullum, as the latter | could not convey a greater interest than he had himself. If ¡each of the notes had been successively transferred in the same' ¡manner, each successive assignee would succeed to all the pights of the assignor at the time of the assignment, and this re-|suit would follow whether the notes were transferred in the or-jder they fell due or not.

É These consequences would flow from the mere assignment |of the debt, which being the principal would, in equity, draw lafter it all its incidents, but there can be no doubt that one on 'assigning one of several notes secured by a mortgage, could, by a stipulation to that effect, reserve the mortgage as a security for the remainder of the debt; or on transferring several notes thus secured, he might determine which should have priority, if the property mortgaged was insufficient to pay all.

The case of Bloodgood v. McVay, [9 Porter, 547,] appears to go beyond the decision here made, and to determine that the assignee of the notes which first fell due, would have the prior right of payment. The Court places its judgment on the terms of the deed, which authorized a sale of the trust property on default of payment of either of the notes as they fell due. But in that case the assignment of the first was made prior to the assignment of Iho last note, and upon that which was the real equity of the case the Court also rely, saying, that Bolling, .(the cestui que trust,) could not transfer to the second assignee a greater interest than he had himself.

The same decision was made in Gwathmey v. Ragland, [1 Rand. 466,] under a precisely similar state of facts.

The same principle also governs the case of Van Rensalear v. Stafford, [1 Hop. C. 569,] where it was held that one having two mortgages of equal date on the same land, and having assigned both, that by the first assignment he gave his as-signee a preference over himself, if the property was not sufficient to pay both debts, and that the second assignee could be in no better condition than he was.

. An analagous principle was also settled in the case Clowes v. Dickinson, [5 J. C. R. 235,] where it was held, that there was .no contribution between purchasers in succession at different times,of different parts of the estate of a judgment debtor.

The only authority brought to our notice adverse to the view .here taken, is the case of Donly v. Hays, [17 S. & R. 400,] in which the majority of the Court held that where a mortgage was given to secure a debt due by eight different'instalments, for the payment of which eight bonds were executed, five of which a mortgagee assigned to different persons at different times, and retained three himself, and the fund arising from the sale of the mortgaged premises having proved insufficient to pay the entire debt, that the respective assignees and the mortgagee were entitled to a pro tanto dividend.

We cannot yield our assent to this decision, and think that the dissenting opinion of Mr. Justice Gibson is the law of the case. It will also be observed that the principle upon which the majority of the Court rest their decision, compelled them to hold that priority of assignment, not only gave no preference as between the assignees, but also that the assignee acquired no preference as against the assignor. The vice of the opinion is, that the Court appear to consider the debt and the mortgage executed to secure its payment as having no necessary connection, when the well settled doctrine is, that the mortgage is merely an accessory or incident, and the debt the principal.

In the case at bar, it appears that after the transfer of the note to Harding, the four remaining notes were assigned to Fontaine & Freeman, by whom the two first falling due were assigned to the Bank of Mobile, and the two last to the Planters’ and Merchants’ Bank.

Fontaine & Freeman, by the assignment to them of the residue of the debt by Cullum, became invested with all the rights of the latter, and according to the principles here laid down, might have given both their assignees equal rights in the mortgage, or they might have given to either a preference.”

The counsel for the plaintiffs in error insist, that no decree can be made on this bill settling the rights of the defendants as between each other, and that to enable the Court so to decree a cross bill was necessary. If wrong in that view, he then insists the proof did not authorize the decree which was made.

In England, upon the foreclosure of a mortgage the property is not sold, but the decree is that the equity of redemption be barred. If the bill is filed by a second mortgagee, the decree is that the second mortgagee shall redeem the first mortgage, and that the mortgagor redeem him or stand foreclosed. [Fell v. Brown, 2 B. C. 276.] In this country, where the decree is for the sale of the mortgaged premises, there can be no doubt that the second mortgagee may discharge the prior in-cumbrance by paying what is due, when that can be correctly ascertained, and have a decree for the sale of the property, for his own debt as well as the redemption money paid by him; or it may be that in a proper case he might have a decree to sell subject to the first mortgage. Such seems to have been the opinion of the Chancellor, in the case of the Western Insurance Company v. The Eagle Fire Insurance Company, [1 Paige, 284.] But the former, as it might require the advance of a large sum of money, might be exceedingly inconvenient, not to say unjust, to the second mortgagee, and in many cases be impracticable, as the amount due could not be ascertained without an account between the mortgagor and first mortgagee, which they might refuse voluntarily to enter into. For the same reason the latter course might be unjust and oppressive to the mortgagor, as no one could purchase understandingly until the amount due on the first mortgage was ascertained.

We think, however, that where no obstacle exists to stating an account between the mortgagor and first mortgagee, as is the case here, that the subsequent mortgagee may file his bill to foreclose, and have an account taken of the amount due on both mortgages, making all who have an interest parties, and obtain a decree for the sale of the property. If a conflict of interest should exist among the defendants, as to the disposition of the fund arising under the first mortgage, it would not be proper that the subsequent mortgagee should be delayed, pending a litigation between them in which he had no interest. If the defendants, prior to the decree for the sale of the property, had not taken the necessary steps to enable the Court to adjust the priorities between them, or to settle what portion of the fund each was to receive, the money dire on the first mortgage might be placed subject to the control of the Court upon a cross bill to be filed, or petition, as it might direct,

A cross bill is necessary against co-defendants where they have opposite claims, which the Court cannot determine upon in the bill already filed, and where the determination of such clashing interests is still necessary to a complete decree upon the subject matter of the suit. [Coop. Eq. 84; Story’s Eq. P. 316.]

The complainant in this case, by his supplemental bill, has stated the conflict of interest between the different assignees of the notes, to secure the payment of which the first mortgage was made, but he does not place himself in an adverse position to the defendants, nor has he any interest whatever in the controversy between them in regard to the fund which will be the product of the sale under the first mortgage. Nor can we see how, consistently with the rules of Chancery pleading, one defendant can set up an interest adverse to another, without himself becoming an actor. It is the general rule that a defennant cannot pray any thing in his answer but to be dismissed the Court; if he has any relief to pray, or discovery to seek, he must do so by a bill of his own. In this case the bill concedes that all the assignees of Cullum are entitled to the fund which will arise from the sale under the first mortgage, and thus far the Court may decree in favor of the defendants upon the bill. But if one or more of the defendants claim the entire fund, or a priority over the others, the matter must be put in issue, which can only be by a bill filed for that purpose; or if the controversy should arise after a decree in the principal cause, by petition to the Court in the nature of a cross bill, for the proper distribution of the fund, under the decree.

If it were conceded that the distribution of this fund could be made upon this bill, the necessary facts were not before the Court, to enable it to decide upon the conflicting interests of the defendants. It does appear from the testimony in the cause, that the defendant, Harding, has the prior right in the fund. By the testimony of the defendant, Charles Cullum, the first mortgagee, taken before the Master, it appears that the note held by the defendant, Harding, was negotiated to him on the 28th November, 1836, and that the remaining four notes were transferred to Fontaine & Freeman, on the 11th May, 1838. But it does not appear whether these notes were transferred by them to the two banks at the same or at different periods of time, or whether any special preference was given to one over the other, further than would result from priority of assignment, and without a knowledge of these facts no decree could be made settling the priorities between them, if the fund is insufficient to pay all.

The view here taken of the cause, renders it unnecessary to consider the other assignments of error, but it may be proper to remark that the objection that a decree for the sale of the mortgaged premises could not be made against the consent of the Planters’ and Merchants’ Bank, on the ground that the last note held by the Bank was not due, has ceased to operate by the maturity of the note pending the litigation.

It follows from this opinion, that as the defendants have not litigated their rights to the fund which will arise from the sale, under the first mortgage, that the Chancellor erred in attempting to adjust their respective priorities upon this bill, but as the complainant should not be delayed for that cause, the Court should have directed a sale of the property, and decreed that the fund which should be the product of the mortgage to Cullum, be placed under its control, that the defendants might litigate their respective claims to it.

The decree of the Court must therefore be reversed, so far as it affirms the Master’s report, giving the defendants, Harding, the Bank of Mobile, and the Planters’ and Merchants’ Bank, assignees of Charles Cullum, precedence and priority of right in the fund to be raised by the sale of the mortgaged premises, according as the notes severally fell due. And this Court proceeding to modify said decree, doth hereby order, adjudge and decree, that the monies arising from the sale of the premises conveyed by the Mobile Steam Cotton Press and Building Company to Charles Cullum, if not. sufficient to pay and satisfy the amount ascertained to be due, by the report of the Register, to the defendants, Harding, the Bank of Mobile, and the Planters’ and Merchants’ Bank, be brought into Court, at the next term, to be subject to the further order of that Court,

The writ of error in this case is prosecuted by Charles Cul-lum in behalf of all the defendants, against Isaac H. Erwin, administrator of Henry Hitchcock, but under the rule of this Court, errors have been assigned only by Charles Cullum and the Planters’ and Merchants’ Bank. Erwin has no interest whatever in this controversy, which is between the defendants, who were assignees of the notes executed by the Mobile Steam. Cotton Press and Building Bompany, to Charles Cullum — it would, therefore, be obviously improper that he should be taxed with costs. The object of (his writ of error is to ascertain the priorities of the defendants, Harding, the Bank of Mobile, and the Planters’ and Merchants Bank, to the fund arising from the sale under the mortgage executed to Charles Cullum, and as they were equally to blame in not putting the case in a condition, to enable the Chancellor to make a decree settling their relative rights,the costs of this Court must be borne equally by all, each paying one third part thereof.

Let the cause be remanded for further proceedings.