Morris v. Pate

| Mo. | Jan 15, 1861

Napton, Judge,

delivered the opinion of the court.

The plaintiff, together with six others, held a note on the defendant Pate for $2,500, and a mortgage of eighty acres of land, near Kansas city, to secure its payment. At the time this note and mortgage were executed by Pate, he had not yet obtained any title to the land, except that which a bond for a title from his vendor implied, and he was still indebted for a portion of the purchase money, amounting to $640. A few days after the execution of the note and mortgage to the seven persons above referred to, of whom one was the plaintiff, Pate received from his vendor a deed and at the same time executed to him a mortgage to secure the $640 still due on the purchase. This note and mortgage the vendor transferred to the plaintiff, Morris, for $320, and the present suit was brought to foreclose this mortgage and recover the $640, for which it was security. The six co-obligees in the $2,500 note and co-mortgagees with the plaintiff were admitted as parties defendants to the suit, and insisted that the purchase by plaintiff of the $640 note and mortgage should enure to their benefit as well as that of the plaintiff, and the court below so adjudged.

There can be no question that the mortgage to secure the $640, due on the purchase to the vendor, is a prior lien to the mortgage to secure the $2,500, since, at the time of the last mentioned mortgage, the mortgagor could only convey the title which he had, and that was only a right to a conveyance upon payment of the purchase money. The vendor, having made a conveyance and received a mortgage at the same time, is not to be considered as having lost his lien by its merger in the mortgage.

The question is, whether the co-mortgagees of Morris, the plaintiff, are entitled to share the benefit of his speculation ; in other words, whether, if one of seven co-mortgagees buys in a prior mortgage, such purchase would, in equity, be held for the benefit of the other six.

In a court of equity, a mortgage is considered a mere security for a debt. The mere fact, therefore, that one of several joint mortgagees buys up a prior mortgage does not of itself necessarily constitute any breach of obligation, moral or legal, towards his co-obligees, since it does not necessarily impair' the value of the common security. The land may be amply sufficient to secure both debts, and the only object of the mortgage is security. But where the value of the land is insufficient to pay off both debts, the prior mortgage of course impoirs the value of the second; and although the purchase of the prior mortgage by one of the co-mortgagees in the subsequent mortgage does not really change the value of the second mortgage as a security, and the first lien has to be discharged whether it be retained by its original owner or passes into the hands of one of the co-mortgagees, yet the latter occupy towards each other a relation which a stranger does not, and therefore one of them is not allowed to speculate in the fund which is their common security, behind the back of his companions. Chancellor Kent says, in Van Horn v. Fonda, that “ community of interest produces a community of duty, and there is no real difference, on the ground of policy or justice, whether one co-tenant buys up an outstanding encumbrance, or an adverse title, to disseize and expel his co-tenant.”

In this case the plaintiff purchased the prior encumbrance at about half its value. The judgment of the court was that the proceeds of the sale under the foreclosure should be applied, first, to the payment of the $320 paid by plaintiff for the prior lien of $640, and then to the extinguishment of the debt secured by the second mortgage. The decree should have gone further and directed the surplus, if any, to be paid to the plaintiff until the prior claim bought by him was extinguished. The judgment, therefore, is reversed and a judgment will be entered here in conformity to this opinion.

Judge Ewing concurs. Judge Scott absent.