6 Nev. 304 | Nev. | 1871
This is an action for the enforcement of the rights secured by a mortgage. The complaint alleges that on the nineteenth day of April, 1867, the defendant Howard made and delivered to the plaintiff his promissory note of that date, and at the same time, to secure its payment,- executed a mortgage conveying to the plaintiff certain real estate described; that said mortgage was duly recorded ; that defendant Armstrong and others claim an interest in the premises, subsequent to the mortgage lien, etc. IioAvard and Armstrong answered, setting up that one half of said mortgaged premises, at the time of the execution of the mortgage, belonged to Armstrong, the title being vested in Howard in trust for Armstrong ; that plaintiff had notice of said trust, etc. A judgment. was rendered, directing a sale of the premises for the payment of said note, and subordinating the claim of Armstrong to the lien of the mortgage. From this judgment and an order overruling a motion for a neAY trial, this appeal is taken.
The record discloses the folioAving facts: In the year 1860, Howard acquired title to the premises; on the twentieth of August,
Upon these facts the counsel for appellant contends in an able and elaborate argument, that the equity of Armstrong, as cestui que trust, was good as against Howard, and equally good against all persons except Iona fide purchasers for value; that the plaintiff cannot be considered such a purchaser, because to have a defense against prior equities, one must be a, purchaser in the technical sense of the common law, and must have acquired the legal title; that a mortgagee is not a purchaser at common law, and a fortiori not in this State where, it is contended, a mortgage does not pass the legal title; that this mortgage, even if a quasi conveyance, was not taken in good faith within the meaning of either the equitable or statutory rule concerning Iona fide purchasers, to the extent
It is clear that the plaintiff is a bona fide mortgagee, so far as the question of notice is concerned. By putting the conveyance to Howard on record, Armstrong is estopped from relying on his continuance in possession as notice of the trust; and under such circumstances the plaintiff was not bound to go beyond the declarations of Howard and Armstrong as publicly recorded, and inquire into the actual relations subsisting between them. This is the rule
Whether a mortgagee, who takes a mortgage as security for a preexisting debt is such a purchaser within the statute, (27 Eliz.) has been doubted, and seems to be left an open question by the text writers. (Greenleaf's Cruise, Title 32, Deed, Ch. 28, Sec. 39 [note] ; 2 Leading Cases in Equity, 103, et seqS) The analogous question, whether a promissory note indorsed over as collateral security for a preexisting debt, before maturity and without notice, can be held discharged of the equities between the original parties, has given rise in the American Courts to great conflict of judicial decision, and has elicited opinions exhaustive of the argument. In the early New York cases, and those which have followed them, the reasoning is, that where the note is received for an antecedent debt, either as nominal payment or as a security for payment, without giving any new consideration, the receiver is not a holder for value; that the principle of protecting the bona fide holder of negotiable paper who has paid value for it, or who has relinquished some available security or valuable right on the credit thereof, is derived from the doctrines of the Courts of equity in other cases, where a purchaser has obtained the legal title without notice of the equitable right of a third person to the property ; -that it has been uniformly held by the Courts of equity, in such cases, that the purchaser who has obtained the legal title as a mere security for or
To this it is answered: That the holder foregoes the pursuit of his own debt and thus puts himself, for the time, in a different, and in law, a worse situation; that the transaction possesses the two cardinal ingredients of a valuable consideration, viz: a detriment to the promisee, and an advantage to the promissor; that the holder is not left in the same condition he was before, (if the note prove unproductive) having for the time forborne, and in such matters time is of the essence of the transaction; that the creditor gives time, (more or less) but of necessity some time ; that it is scarcely supposable that one so taking security will not conduct differently on account of the security; nor would the debtor part with the security, unless he expected more or less indulgence on account of giving it; that the assumption that time is not in fact given, because it is not expressly agreed to be given, and that, therefore,' the indorsee is not placed in a worse position, by letting in the latent equities than he would have occupied had he not received the note, is at variance with general experience, and disregards the only motives inducing the transaction — that forbearance is implied from the nature of the transaction; that the creditor is lulled into quiet, and the familiar principle applies, that, as between two innocent parties, he must suffer who has done an act by which he has placed it in the power of a third person to defraud the other party; that the rule is so settled in England (Poirier v. Morris, 2 El. & Bl. 89) ; that, as to the equities of the case, it is more equitable, that the party who set the note afloat with all the marks of credit and currency upon its face, should suffer, than the one who has so taken it bona fide for a debt due; and that the English courts of equity, where transfers of land are concerned, have recognized
There is a direct issue between Chancellor Walworth, 6 Hill supra, and some of the judges delivering the opposing opinions above cited, as to what was English law on the point in dispute as to indorsements of paper; but the case of Poirier v. Morris leaves no doubt that the latter judges are correct in their statement. There is an equally pronounced contradiction between the statement of Chancellor Walworth in 6 Hill, and that of Chief Justice Williams in Brush v. Scribner, as to the English equity doctrine incases of sales, etc., of land; and here also the English authorities seem to sustain the statement of Judge Williams, that in English equity, no distinction exists between a mortgage of lands to secure a preexisting debt, and a mortgage or deed of lands in consideration of a present advance made on the faith of the apparent legal title of the vendor or mortgagor holding such title as trustee.
If the question discussed in the above cited cases were of the first impression, the reasoning of those following Swift v. Tyson would be, undoubtedly, the more convincing and persuasive; theirs “ the plainer and better doctrine.” Kent, 3 Com., and if, as seems the fact, Stalker v. McDonald was decided on a misapprehension of the rules of both English law and equity, the doctrine of Swift v. Tyson is sustained by precedent as well as upon principle. The decided and increasing preponderance of authority in this country
In Mississippi, the Court say, in a case involving a sale of land by a trustee: “ It is settled that satisfaction of a preexisting debt makes a hona fide purchaser not affected by previous equities: this is the rule as regards negotiable securities, and no reason is per
In Wood v. Robinson, 22 N. Y. 567, cited by appellant, it seems to be admitted that in case of property mortgaged to secure a precedent debt, if time is given, the mortgagee will become a bona fide purchaser for value, which expression in the statute is said to be derived from Courts of equity; and 1 Paige, 125, is relied on to show that a mortgagee for an old debt is not such a purchaser ; but the cases cited in 1 Paige fail to sustain the proposition. We fipd, then, no warrant in the authorities for the contention of counsel, that “ in cases of property as distinguished from commercial paper, the doctrine never was extended beyond the rule applied to cases of commercial paper in the earlier New York cases.”
On the point of the disagreement between Chancellor Walworth and Justice Williams as to the true equity rule, the distinction recognised in the English Courts seems to be that stated in some of the recent American cases; that is, between a creditor obtaining a lien or elegit by operation of law in invitum, or the assignees of a bankrupt, on the one hand; and a creditor obtaining a lien, as by' mortgage, resting in agreement or consent, and contracting for the title to a specific thing, on the other hand — the mortgagee taking what he contracts for : while a judgment or attaching creditor, or •assignee in bankruptcy, coming in by the law, is only placed by the law in the shoes of the debtor.- (Field, &c. v. Stearns, 42 Vermont, 112: Kelly v. Mills, 41 Mississippi, 273, m which last case the subject is very thoroughly investigated.)
The case of Plumb v. Fluitt, 2 Anstruther, 432, cited by Justice Williams, seems to be directly in point, and to have been always recognized as authority. That was a bill in chancery by , one having an equitable mortgage by deposit of the title deeds, against a person who had taken a subsequent legal mortgage conveying the same premises as ..security for an antecedent debt. The bill was filed for a sale, and to restrain the defendant from proceeding at law to recover possession of the estate. The plaintiff contended that the defendant was not a purchaser in good faith, because he took his mortgage 'without getting the title deeds, and so was affected -with constructive notice. It was held that, .the legal estate
Now it is settled that, so far as this question of prevailing against a mortgage taken to secure a preexisting debt is concerned, an equitable mortgagee is viewed as a cestui que trust, and occupies the same ground as any other equitable claimant — as Armstrong does here. Vide Whitworth v. Gaugain, 3 Hare, 425, where the question was between an equitable mortgagee and subsequent judgment creditors in possession by elegit. It was decided in favor of the mortgagee, on the ground that his was a trust binding the estate except against bona fide purchasers; that it was immaterial whether the debts of the subsequent incumbrancers were contracted “ on the view of the land ” or not; but that the true distinction was between a party contracting for a specific thing, and a party taking a judgment giving him nolhing more than a right to that which belongs
So/the distinction between an old debt and a fresh advance is said to be one existing in fact, but not recognized in law. (Fisher on Mortgage, 463.) To the same purport — at least where time is given — is the language of Lord Eldon, in Ex parte Knott, 11 Vesey, 615. He says : “ The assignees, have contended that there is a difference between dealing originally for a mortgage, and a debt originally by simple contract, and afterwards continued upon the immediate credit of the land under a new contract; the creditor waiving his right of insisting upon his debt at present, provided his debtor will give a security upon the land.” After distinguishing Brace v. Duchess of Marlborough as applying to a lien by operation of law, he proceeds : “ But that is not the case of a creditor originally by simple contract, who thinks proper to say he will remain such no longer, but will have either payment or a pledge ffor his money ; that is, for a continuance of the loan, he will have an interest in the land, and that only. The contract is changed.
In Bayley v. Greenleaf, 7 Wheaton, 54, Chief Justice Marshall, taking the distinction between parties claiming by operation of law, and creditors contracting for a specific lien to secure their debts, decided that a vendor’s lien could not prevail against a creditor,' to secure whose debts the vendee had conveyed the premises to a trustee. He said: “ The lien of the vendor, if in the nature of a trust, is a secret trust; and although to be preferred to any other subsequent equal equity unconnected with a legal advantage, or equitable advantage, which gives a superior claim to the legal estate, will be postponed to a subsequent equal equity connected with such advantages. The vendor should reduce his lien to a mortgage so as to give notice to the world. If he does not, he is in some degree accessory to the fraud committed on the public by an act which exhibits the vendee as the complete owner of an estate on which he claims a secret lien.”
■ This case was commented on and disapproved by Chief Justice Gibson, in Twelves v. Williams, 3 Wharton, 485, but for no reasons which impugn- its correctness as applied to the ease before us. Judge Gibson says: “ I know of no case, in which the abstract existence of debts was held to be a valuable consideration for a transfer of property to trustees for distributive payment, except Bayley v. Greenleaf. But where the creditors are party to the
In a case where goods fraudulently obtained were mortgaged by the vendee to secure a preexisting debt, no time being given, the mortgagee was held to be a bona fide purchaser for value, and the conclusion said to be supported by justice and policy and analogous principles. (Gibson v. Moore, 7 B. Monroe, 95.) In Potts v. Blackwell, 4 Jones Eq. [N. C.] 68, the Court say: “ A deed in trust executed bona fide for the security of actual creditors, whether for debts old or new, must be regarded as a conveyance for value, under the statute, 27 Eliz.: and a mortgage has always been considered as standing on the same footing as a deed in trust.” In Birdseye v. Ray, 4 Hill. 163, the Supreme Court of New York, composed of Judges Nelson, Bronson, and Cowen, held that a
In the case before us there is, however, no necessity for resorting to any presumption of forbearance, or for implying it from the nature of the transaction. The note was made payable twelve months after date, thereby suspending the plaintiff’s right of action on the debt until the maturity of the note. (Pratt v. Ceman, 37 N. Y. 442.) If we can rely on the analogy of the rule concerning commercial paper, all the cases, those of New York included, concur that if the party receiving the note parts with anything valuable he is not subject to equities, and that forbearance under a binding
Then, is the plaintiff clothed with the legal estate within the rule protecting bona fide purchasers in equity ? It will not be denied that in an English Court of Chancery he would be so considered. (Colyer v. Finch, 5 House of Lords Cases, 905.) The English equity doctrine is thus stated by Spence (2 Eq. Jur. 648 ; 1 Ib. 599-604) : “ Whether the mortgagor be in possession or not, he is considered until foreclosure, excepting where the interests of the mortgagee may be affected, as substantially — as according to the Roman law he urns actually — the owner of the estate. The estate of the mortgagee is considered for almost all purposes as personal estate ; the equity of redemption as an estate in the land.” That is, Courts of Equity — looking at the substance and disregarding the form — consider that the title passes only so far as is necessary to effectuate the real purpose of the parties, and to give •to the mortgagee the full benefit and protection of the security; the mortgage passes the legal title to the extent that it is necessary such title should pass in order to enable the mortgagee to realize the full fruition of 'the contract, the object of which is to bind the land absolutely to the payment of the debt; consequently the mortgagee could bring ejectment, for the reason given that “in order to render his pledge available and give him the intended benefit of his «ecurity, he was necessarily indulged with this, the only instrument by which he could obtain possession of the land mortgaged.” This right has been taken away by our statute, and for that purpose or to afford that remedy the legal title no longer passes in this State. But in other respects the rule is unchanged, and in the language of one of the cases, “ The mortgage is a potential conveyance of the legal estate; and whenever the mortgagee sees fit to make that election, the mortgage becomes in his hands a conveyance of the legal estate for all purposes necessary to the protection of his interest, and to enable him to avail himself
To consider the plaintiff the owner in fee for the purposes of this case, is to carry out what Shaw, C. J., in Ewen v. Hobbs, says are the two great objects of a mortgage : First, in the form of a conveyance in fee is given to the mortgagee an effectual security. Second, there is left to the mortgagor, and to purchasers, creditors, and all others claiming direct through him, the full and entire control, disposition and ownership of the estate, subject only to the paramount purpose, that of securing the mortgagee. It cannot be objected that the plaintiff is himself asking relief in equity, because “ for the purpose of the question whether a Court of Equity will interfere against a purchaser for a valuable consideration without notice, a foreclosure is not relief at all.” (Colyer v. Finch, 2 Leading Caseá in Equity, 59, 14.) Armstrong occupies the position of the plaintiff in Plumb v. Fluitt, seeking, equitable relief, viz : the enforcement of his trust against a bona fide purchaser.
That the plaintiff is a purchaser within the meaning of and protected by the recording acts and Statute 27 Eliz., is well settled. (James v. Morey, 2 Cowen, 290; Pierce v. Faunce, 47 Maine, 514; Porter v. Green, 4 Iowa, 571; Martin v. Jackson, 27 Penn. 504; Gere v. Cushing, 5 Bush, [Ky.] 304; Snyder v. Hett, 2 Dana, 204; Ledyard v. Butler, 9 Paige, 136; Chapman v. Emery, Cowper, 280.)
The judgment and order appealed from should be affirmed, and it is so ordered.
Without indorsing the proposition that a mortgagee for an antecedent debt occupies the position of a bona fide purchaser for value,