Howard v. Clark

| Vt. | Jul 21, 1899

Watson, J.

The orator’s mortgage covers only the “Barnum Farm;” and the mortgage to the defendant Henry O. Clark covers land described in the deed as “all lands owned by said Jed P. Clark between Lamoille river and the highway running from the residence of C. D. Ladd to the foot of the hill at Milton Lower Falls, so called.” The master has found that the description in the mortgage to Henry O. was much more extensive than the limits of the “Barnum Farm,” but included it, and was so understood by the parties. This finding is conclusive, and the mortgage must be construed and considered accordingly.

The important question for consideration is the effect of the conveyance of the equity of redemption in the “Barnum Farm” by the mortgagor to the orator, under the facts and circumstances disclosed by the master’s report. Was the effect to merge the legal and equitable estates ? and if it was, is the orator entitled to relief in.equity?

As a general rule the conveyance of the equity of redemption to a mortgagee will not constitute a merger of the legal and equitable estates, when from all the circumstances it is apparent that the best interests of the mortgagee require the two estates to be kept separate, unless it is found that such was the intention of the mortgagee. The intention of the mortgagee governs, and when his intention to merge the two estates is established, it controls. Belknap v. Denison, 61 Vt. 520" court="Vt." date_filed="1889-02-15" href="https://app.midpage.ai/document/belknap-v-dennison-6583245?utm_source=webapp" opinion_id="6583245">61 Vt. 520; Carpenter v. Gleason, 58 Vt. 244" court="Vt." date_filed="1885-10-15" href="https://app.midpage.ai/document/carpenter-v-gleason-6582711?utm_source=webapp" opinion_id="6582711">58 Vt. 244; Walker, Smith & Co., v. Baxter, 26 Vt. 710" court="Vt." date_filed="1854-09-15" href="https://app.midpage.ai/document/walker-smith--co-v-baxter-6575362?utm_source=webapp" opinion_id="6575362">26 Vt. 710.

The master has found that it was intended by the orator and mortgagor to pay and discharge the orator’s debt by the deed of the equity of redemption, and it is contended by the defendant, Henry 0., that this, in effect, is a finding of an intention by the orator to merge the two estates, and that making the mortgage of Henry O. the first encumbrance upon the property is but the legal effect or result of the orator’s intentional act, from which a court of equity can grant no relief without annulling the very contract intentionally and understandingly entered into by the parties. Proctor v. Thrall, 22 Vt. 262" court="Vt." date_filed="1850-01-15" href="https://app.midpage.ai/document/proctor-v-thrall-6574291?utm_source=webapp" opinion_id="6574291">22 Vt. 262. But this finding is to be considered in connection with the further findings that the orator had no knowledge of the mortgage to Henry 0., and that the mortgagor then led the orator to believe, and he did believe, that the premises were free from encumbrance, except the mortgage to the bondsmen, and that he would not have abandoned his foreclosure proceedings and concluded the arrangement then made, had he believed otherwise. The record of Henry O.’s mortgage was not constructive notice to the orator, and no duty rested upon him to examine the records for subsequent encumbrances—Johnson v. Valido Marble Co., 64 Vt. 337" court="Vt." date_filed="1892-01-15" href="https://app.midpage.ai/document/johnson-v-valido-marble-co-6583805?utm_source=webapp" opinion_id="6583805">64 Vt. 337—and therefore he was not guilty of negligence in failing so to do. The mortgagor had full knowledge of the mortgage to Henry 0., and that it covered the “Barnum Farm;” he had no equity of value in the farm, and he was personally holden to the orator for the payment of the debt secured by his mortgage; he was also personally holden to Henry O. for the payment of the debt secured by mortgage to him, which he knew amounted to several times the value of the farm; and he knew that to give the orator a deed of the equity of redemption, in payment and discharge of' his debt, and thereby make Henry O.’s mortgage a first encumbrance upon the farm, was to pay and discharge the debt without any consideration of value moving to the orator therefor, and that he would thereby be relieved from personal liability thereon. Under those circumstances, for the mortgagor to lead the orator to believe the premises free from encumbrance, except the mortgage to the bondsmen, to induce him to accept the deed of the equity of redemption in payment and discharge of his debt, was to obtain possession of the orator’s notes as paid and discharged, by fraudulent means, and with this fraud thus established, the fact found as to the intention of the orator is rendered without force, and a court of equity will relieve the orator from the unconscionable position in which this fraud has placed him, by re-instating him in his rights under his notes and mortgage as they existed before the taking of the deed. 2 Jones on Mort., §§ 966, 967.

And because of the fraud practiced upon the orator when he took the deed, he was laboring under such a misapprehension of the material facts relative to the subject matter which entered into the transaction, as also to entitle him to relief in equity on the ground of mistake. 2 Jones on Mort., § 969.

But equality is equity, and in granting relief to the orator, the defendant Jed P. must, so far as possible, be restored to his rights as mortgagor with the privilege of redeeming the premises by paying the orator the sum found due in equity upon his mortgage with costs of suit, within such time as may be fixed by the court of chancery for that purpose.

Notwithstanding the fact that the mortgage to Henry O. contained a covenant of warranty that the premises were free from all encumbrance, he not only had constructive notice of the orator’s mortgage, but he had knowledge in fact that the orator’s debt was past due and unpaid and that the mortgage securing the same was in life and undischarged. His mortgage when made, as to the “Barnum Farm,” was only upon the equity of redemption, and such it is with the orator re-instated in his rights under his mortgage. His position is in no wise changed, and he cannot object to the orator’s being restored to his rights as senior mortgagee, when he himself suffers no injustice thereby. 1 Jones on Mort., § 967.

The equitable adjustment of the rights of the defendant Teachout may involve the consideration of matters not now before the court, and, as to him, this case should be so disposed of as not to prejudice his rights in the premises.

Decree reversed and cause remanded with mandate that the orator's notes and mortgage be and are in full force, and the mortgage re-instated as senior encumbrance upon the uBarnum Farm," so called; that the quitclaim deed of the equity of redemption from the defendant, fed P. Clark, to the orator, be and is null and void; that the bill be dismissed with costs and without prejudice as to the defendant Edgar D. Teachout; that the orator's mortgage be foreclosed as against the defendants fed P. Clark and Henry O. Clark, with the right m the said Jed P. and Henry O. to redeem the premises therefrom within a time to be fixed by the court of chancery; and that the orator recover his costs of the said Jed P. Clark and Henry O. Clark.