Hadley v. Chapin

11 Paige Ch. 245 | New York Court of Chancery | 1844

The Chancellor.

The first objection to the complainant’s right to a decree, which was made by the appellants in the court below, was that the mortgage produced, in evidence was variant from that stated in the bill. This variance consisted in stating in the bill, that the mortgagors covenanted in, and by such mortgage, to pay the money secured thereby. The objection, however, was merely technical; as they did in fact give their bond for the payment of the mortgage debt, at the same time the mortgage was executed. Although there is no express covenant in the mortgage itself to pay the debt, and the revised statutes have abolished the implied covenant arising from the condition of the mortgage, the defendants’ answer shows they could not have been misled by this misstatement in the bill. Besides, the bill itself refers to the record of the mortgage, and the book and page in which it is contained; and the answer admits that statement of the bill to be correct, in reference to the mortgage which was actually given by the mortgagors, and which was produced by the complainant upon the hearing. I am inclined to think, therefore, that this erroneous statement in the bill as to the supposed covenant contained in the mortgage, should be disregarded. In the recent case of The Ontario Bank v. Schermerhorn, (10 Paige's Rep. 109,) this court disregarded a variance between the date of a mortgage as stated in the bill, and the true date thereof, as the same appeared upon the hearing ; where it appeared from the defendant’s answer that he was not misled by the variance, but was fully apprised as to the mortgage which the bill was filed to foreclose, and had set up his defence in reference to such mortgage.

Neither is the objection well taken, that the demand of payment, thirty days previous to the commencement of the suit, was not sufficiently proved, A mere admission by .the mortgagors, that such a demand had been made, would not probably have been legal evidence of the fact, as against the other defendants, who had, by their answer, put the fact of such demand in issue. The proof in this case, however, goes much further than, a mere admission of a past fact by a third person. The written admission, produced in evidence, purports to have been given by the persons upon whom the demand was made, on the day of such demand. And the solicitor in the cause swears that this admission was signed, by the mortgagors, more than thirty days before the commencement of the suit. . This he could only have known, from having seen the written admission signed by the mortgagors, in their own hand-writing; which he proves, more than thirty days previous to his filing of the bill. The admission itself, therefore, is equivalent to an actual demand of payment at the time such admission was signed by the mortgagors. Besides, the interest upon the mortgage, if the mortgage had not been paid, was due and payable annually, and without any demand. This, of course, was sufficient to authorize the filing of the bill.

Although the defendant Johnson was the holder of the mortgage, and was the owner of the equity of redemption in the part of the mortgaged premises gonveyed by him to McCarty, at the time the conveyances to McCarty were made, the fact that he held the mortgage merely in the character of trustee, appeared upon the face of the mortgage, and of the order of the court substituting him as trustee in the place of the original mortgagees who were dead. This, in equity at least, would prevent a merger which would have the effect to deprive the cestuis que trust of the benefit of the mortgage, without an actual payment to the trustee. Although Johnson himself, both at law and in equity, would be estopped by his covenants of warranty, from enforcing the payment of the mortgage for his own benefit, nothing short of the actual receipt of the money, by him, could deprive the cestuis que trust of their right to have the mortgage enforced against the land, for their benefit. The question then arises whether, upon the evidence in this case, the court is authorized to declare that the mortgage was actually paid to Johnson, while he was trustee ; which question I will now proceed to consider.

Upon this question the court must lay entirely out of view what Johnson may have sworn to before the master, as it is clearly not evidence as against these defendants. The testimony of Mrs. Alleman and of McCarty was properly received in this cause to prove the fact of payment-; as neither of them was interested in the event of the suit, in favor of the parties calling them as witnessed. Mrs. Alleman was the widow of a grantee of a part of the mortgaged premises, which was conveyed to her husband previous to the appointment of Johnson as trustee. She was therefore probably entitled to dower in that part of the mortgaged premises. And if she had put in an answer, insisting upon the payment of the mortgage, as a defence to the suit, she would have had a common interest with these appellants in "the matters to which she was examined. But by suffering the bill to be taken as confessed against her, she admits the mortgage to be a valid and subsisting incumbrance upon any interest she may have, in the part of the mortgaged premises which was conveyed to her husband, in September, 1832. All the defendants, except these four appellants, having suffered the bill to be taken as confessed against them, they thereby admitted the amount due upon the mortgage as charged in the bill, for all the purposes of this suit; and proof of payment of the mortgage will only go to discharge the lands of the four defendants who have answered and set up that defence. The witness, Mrs. Alleman, therefore, instead of being interested in favor of establishing the defence of those defendants, had a direct interest the other way. For if their lands are charged with the mortgage, they must be first sold to satisfy the debt and costs, upon the principle of charging the lands in the inverse order of'their alienation; the deed to her husband having been given several years before either of the deeds to McCarty, under which the appellants claim their respective portions of the mortgaged premises. Neither has McCarty any interest in the event of this suit in favor of the defendants who have answered, they having released him from his covenants of warranty; although he would have had an interest in the question to which he was examined, if he had not previously parted with his interest in other portions of the mortgaged premises. Even in that case, however, the objection would have gone to his credibility only, but not to his competency.

To show the mortgage paid, it is not necessary for the defendants to prove that Johnson actually endorsed moneys upon the bond and mortgage, or that he had paid the amount of such bond and mortgage to the cestuis que trust, or to the new trustee. For, if he received money, while he was the holder of that bond and mortgage as trustee, which it was his duty to apply thereon, the law will make the application; unless such money has been misapplied -by him, with the concurrence or consent of these defendants, or nf McCarty under whom they claim their several portions of the mortgaged premises.

It appears by the testimony of G. J. Alleman that at the time of the purchase of the part of the premises which was conveyed in moieties to J. Alleman and A. Lucas, in September, 1833, it was agreed that the grantors should pay off all the incumbran-ces, and that the grantees should retain a part of the purchase money, for which they then gave their bonds and mortgages, until such incumbrances were paid off; and that if the grantors did not pay off the incumbrances, Alleman and Lucas might discharge them out of the moneys thus retained. Under that agreement, it became the duty of Johnson to apply that amount to the satisfaction of the incumbrance in question, if he received it from them while he held such incumbrance as trustee. What became of the Lucas mortgage does not appear; nor is there any evidence to show whether it was paid before or after Johnson became the trustee. The Alleman mortgage appears, however, to have been assigned to him, by Chapin and Gage, previous to his appointment as trustee. And by an endorsement on that mortgage, it appears that interest had been paid thereon up to the 20th of March, 1834, together with $175 of the principal. And as the last payment of the principal did not become due until after Johnson was appointed trustee, and as satisfaction was acknowledged by Johnson in September, 1835, about ten months after his appointment as trustee, I think it may fairly be inferred, that he received the residue of that mortgage, while he was the holder of the- bond and mortgage in question; and the money thus received by him ought to have been endorsed thereon, as a payment thereof pro tanto. But that would only go to discharge the incumbrance in part, and would still leave about half of the incumbrance unsatisfied; unless a similar sum was received upon the mortgage of Lucas.

The testimony of McCarty, however, as to the subsequent transactions with him, satisfies me,beyond all reasonable doubt, that the bond and mortgage in question, ought to be considered as fully paid to Johnson and satisfied, while- he held the same as. trustee. At the time of the several conveyances, to McCarty, Johnson was the holder of this mortgage as trustee, and was also the owner of the equity of redemption in. that part of the mortgaged, premises which, as between him and Alleman and Lucas, was primarily liable for the payment of the mortgage debt. A conveyance of the. premises with warranty, therefore, and the actual receipt of the purchase money to the extent of this-mortgage; would operate as a payment and extinguishment of the mortgage, in equity as well as at law; unless the purchase money thus received was misapplied by the trustee with the knowledge and consent of McCarty. For, it was the duty of the trustee, in that case, to retain out of the purchase money paid, for the entire fee, the amount of the mortgage which he held as trustee; and only so much thereof as was the proceeds of the equity of redemption, .could be applied to his' own use, without rendering him guilty of a breach of trust. And the law will not presume an intended breach of trust, on the one hand, or an intention to defraud the purchaser, on the other, by leay-ing the mortgage unsatisfied. The receipt of the money, by the trustee, under such circumstances, operated as an actual payment of the mortgage. And if the trustee misapplied the money afterwards, it was a misapplication of money which he held as trustee; and such misapplication would not, either at law or in equity, revive the mortgage, as against the purchaser or those claiming under him. The legal effect of the transaction, in this case, would be the same, if the trustee took securities for the purchase money on such sale, and afterwards received the money on such securities, to the extent of the mortgage, during the time he was trustee. The testimony of McCarty, in connection with that of Birdsall, clearly establishes this state of facts. McCarty proves that an amount far exceeding what was due on this mortgagé, was paid by him to Johnson, on account of the purchase money, while the latter was the holder of that mortgage as trustee. The mortgage must be considered as paid, so far as the interests of the appellants are concerned, who claim through Johnson’s covenants of warranty. ■

The decree of the vice chancellor must therefore be reversed, with costs, so far as concerns the appellants, and the several parcels of the mortgaged premises to which they have derived title under conveyances from McCarty, as stated in their answer. And the bill, as to them, must be dismissed with costs.