Shannon v. Marselis

| New York Court of Chancery | Oct 15, 1831

The Chancellor.

There can be no difficulty or question as to the right of recovery on the part of the complainant, so far as the first mortgage is concerned. That mortgage covers the whole property, which is abundantly able to satisfy it. The question is, in what way shall it be satisfied, consistently with the equitable rights of third persons having subsequent vested interests.

Carrick, one of the defendants, owning the six acres and forty hundredths of an acre lot, contends that the first mortgage should be raised or satisfied out of the smaller lot, to the exclusion of the larger; and that the larger lot should only be resorted to in case of a deficiency. He sets out in his answer, that when he purchased of Griffin, and gave tire mortgage to him which is now in the hands of Ellison’s executors, he was totally ignorant of the incumbrance that was upon it, in the hands of Marselis; that he took a deed with covenants of warranty ; and that, if any of the proceeds of the six acres and forty hundredths of an acre lot should be wanting to satisfy the first mortgage, that it must be deducted from the amount of the mortgage given by him to Griffin, and which is now in the hands of Ellison’s executors, as assignees of Griffin ; and upon those principles proffers his readiness to pay what is equitably due on the first mortgage, after the smaller lot is first appropriated to its discharge.

Robert Morrell, another of the defendants, also contends, that the small lot should first be sold to pay the original mortgage, and that the larger lot should be resorted to only in case of a deficiency ; and in such case, that the part of the lot which he purchased of Griffin should not be sold, until the part which still remains in Carrick’s possession is disposed of.

The executors of Ellison agree with Carrick and Morrell, that the smaller lot must first be sold and appropriated, and in case of a deficiency that the six acres and forty hundredths of an acre lot be sold to pay the balance ; but, they deny the right of abatement set up by Carrick, and insist that the residue of the proceeds of the six acres and forty hundredths of an acre lot ought to be appropriated to the discharge of their mortgage, without any deduction.

. Oa the other hand, the complainant insists that the doctrine of contribution set up by the defendants is altogether too refined, and cannot apply to this case; that all the mortgages were recorded regularly, and if there is any loss it should be borne rateably.

These various conflicting interests and claims, it is the province and pleasure of this court to settle among all the parties, on just and equitable principles.

As to the first mortgage, it appears to me there can be no difficulty. Both lots are bound for the payment to the mortgagee or his assigns, and the ultimate payment cannot be defeated by any sale or conveyance that may be made of them by the mortgagors. Nevertheless, where new rights or interests have originated since the execution of the mortgage, although the mortgagee is no party to them, and they may tend to delay him in the prosecution of his remedy, yet the court will protect them ; and will direct the mortgagee to be paid out of such parts of the property, and in such way, as may be most equitable to all parties concerned.

Where a man gives a mortgage upon his property, and after having done so sells a part of it to a third person for a valuable consideration, justice demands that the residue of the mortgaged premises, in the hands of the mortgagor, should satisfy the mortgage debt; and the purchaser acquires a right even against the mortgagee, so far as to compel him to have recourse to such residue for the satisfaction of his debt, if it shall be sufficient for that purpose. If the mortgagor sell a second parcel, the second purchaser immediately acquires rights as against the mortgagor, and also as against the mortgagee, and rights also accrue immediately between the first and second purchasers, as to their liability to the mortgagee; all of which the court will notice and protect. If the property remaining unsold in the hands of the mortgagor is sufficient to pay the debt, both purchasers will be protected. If insufficient, the last purchaser contributes first, and if there be still a deficiency, then the first purchaser may be called on and is liable. Thus the last purchaser is always first liable. This is the settled rule of this court, and is founded on .plain principles of justice.

Apply the rule to this case, and it appears that the first mortgage must be paid out of the smaller lot, if it will pay it, and if not the larger one must pay the deficiency.

Harman Marselis and John Marselis were the owners of the mortgaged premises, and made the mortgage to Marselis, which is known by the name of the first mortgage. They were tenants in common. By separate conveyances, and at different times, they sold their interest in the larger lot, to Henry Griffin, so that on the 1st of August, 1823, he was the purchaser of that lot for a valuable consideration, having title from both. He then had a right to protection, and to throw the mortgage debt upon the residue of the mortgaged premises. Having this right, he sells a small part of the six acres and forty hundredths of an acre lot to Morrell, and a small part to Vanderbeck, and the residue to Carrick. The same right to protection vests in these purchasers ; for it is not personal, as was supposed at the bar, but attaches to the purchaser of the property, whoever he may be, and is connected with the property itself.

It was forcibly urged, that however this rule might apply to ordinary cases, it could have no application here; for that the mortgagors were tenants in common ; that they had a right to sell at different times, and by separate conveyances, which was the case here ; and that it would be unjust, where two tenants in common made a common mortgage, that one might sell out all his interest, and thereby throw the whole burden of the incum-brance upon his co-tenant. There is much justice in the argument, but in the view I take of this case, I am not called upon to decide how far such a state of things might call for a modification of the rule. I do not say that when, in 1822, Harman Marselis sold his moiety of the six acres and forty hundredths of an acre lot to Griffin, he thereby threw the mortgage on that part which still belonged to the other mortgagor, his co-tenant; but when, in 1823, John Marselis conveyed, in like manner, his moiety to Griffin, then he had a complete title from both. It was the same as though there had been but one mortgagor, and he had made the conveyance, or as though both the tenants in common had joined in a common deed ; and then it was as between the purchaser and the mortgagors, there accrued an equity in favor of the purchaser, that the mortgage money should be raised out of the residue of the mortgaged premises unsold.

There is some confusion or uncertainty as to the mode in which the title to the smaller lot has been transmitted. The bill states, that Harman Marselis conveyed to Griffin his interest in both lots, and it states also that John Marselis made to him a similar conveyance of all his interest. But both answers deny that John Marselis conveyed to Griffin the half of the small lot, and as there is no proof of it I take it for granted that the fact is not so. Then Griffin never had such a title for that smaller lot as would place it on the same footing with the other lot, and compel it to contribute rateably to the payment of the mortgage. He had a title for an undivided moiety from one of the tenants in common, the original mortgagors ; but as before hinted, it is doubtful whether that could operate to throw the whole burden on the other moiety in the hands of the co-tenant, and if it did not, the exemption attached only to the larger lot. Independently of that, it will be seen, that before any rights accrued to third persons in the smaller lot, it came into the possession of John Marselis, one of the original mortgagors, in whose favour no equity could attach as against those holding other parts of the mortgaged premises under the mortgagors. Whichever way, therefore, it is taken, it appears that the smaller lot is first liable, and that the first mortgage must be satisfied out of that, if it will pay it, and if it will not then the six acres and forty hundredths of an acre lot must be resorted to to make up the deficiency.

In such event, the two small parcels sold by Griffin to Morrell and Vanderbeck will be exempted from sale till that part which Griffin conveyed to Robert Garrick is disposed of, that being the last sold by Griffin, and of course, upon the principle already laid down, the first liable. In this mode the first mortgage will be paid.

If it should be necessary to resort to the larger lot, there is a question arising between Carrick and the executors of Ellison.. They are co-defendants. The mortgage held by the executors of Ellison is before the court, upon the pleadings. The executors contend, that the proceeds of the sale of the larger lot, after satisfying the first mortgage, shall be appropriated to pay their mortgage, given by Carrick to Griffin, and by Griffin assigned to Morrell, and by Morrell to Ellison in his life-time. Carrick, on the other hand, insists, that as he purchased from Griffin with covenants of warranty, if any part of tbfe property conveyed to him is taken to satisfy a prior mortgage, that so much shall be deducted out of the purchase money, or out of the mortgage given for the purchase money, which is the same thing.

This is a matter simply between co-defendants, and it was stated on the argument that this was not the proper time to adjust it; that the rights of these two parties, as between themselves, were not regularly in issue before , the court in this suit. 1 cannot concur in this opinion. It is the policy and duty of this court to settle and adjust all claims between the parties in one suit, if possible. In Chamley v. Dusaney and al., 2 Sch. and Lef. 718, Ld. Eldon, on appeal, said, it was objected to the decree before the court that it was between defendants, and that that was contrary to the practice of the court of equity, because there could be no cross-examination between co-defendants : but he held, that -where a case was made between defendants by evidence arising from pleadings and proofs between plaintiffs and defendants, a court of equity was not only entitled to make a decree between the defendants, but bound to do so. The defendant being chargeable, has a right to insist that he shall not be liable to be made a defendant in another trial for the same matter that may be then decided between him and his co-defendant, and the co-defendant may insist that he shall not be obliged to institute another suit for a matter that may be there adjusted between the defendants. See also Harris v. Ingleden, 3 P. Wms. 99. Here the matter is distinctly before the court upon the pleadings and proofs. The executors of Ellison claim the whole amount of the mortgage. Carrick insists that, in a certain event, there should be a deduction. He produces before the court the deed from Griffin to himself, with full covenants of seisin and warranty, and against this no counter-evidence is brought forward.

The question then arises, has Carrick any equity against the executors of Ellison, who is the assignee of Griffin? It must be conceded that they hold the bond and mortgage subject to the same equity that existed against it in the hands of the mortgages; that is all the equity of the obligor. The principle appears to be well settled : Coles v. Jones and al., 2 Ves. 692, 765; Hill v. Caillovel, 1 Ves. 122; Hinton v. Benson, 1 Plowd. 497; Mathews v. Walwyn, 4 Ves. 118. In 2 Johns. Rep. 612, Kent, sitting in the court of errors, said, speaking of the assignee of a bond and mortgage, that he took them subject to every defence that existed against them in the hands of the obligee : that the obligor could not be prejudiced by the assignment; and that the registry acts had nothing to do in the case. In the case of Murray v. Lylburn, 2 John. C. R. 441, the same judge, sitting in chancery, again recognizes and defends the principle, remarking, that “ the assignee can always go to the debtor and ascertain what claims he may have against the bond or other chose in action which he is about purchasing from the obligee.” And the master of the rolls, sir Jos. Jekyll, in the case cited from P. Wms. says, “ that it was incumbent on any one who took an assignment of a bond, to be informed by the obligor, concerning the quantum due upon such bond, which if he neglected to do, it was his own fault, and lie should not take advantage of his own laches.” See also Livingston v. Dean and al., 2 John. C. R. 479; Scott v. Shreave, 12 Wheat. 608; United States v. Sturgis and al., 1 Paine, 525.

The executors of Ellison, standing then in the place of Griffin, we are to consider whether if Griffin was attempting to enforce this mortgage against Carrick, Carrick would lie entitled to any relief in consequence of the outstanding incumbrance, and the covenant in his deed. It is very evident, that if the amount, of the mortgage money is raised from Canick’s property, and paid to satisfy the mortgage, that Carrick can immediately recover it back by action on the covenant. There can be no good reason assigned why there should be this circuity of action; but a very good one why there should not; which is, that the money might be lost to Carrick altogether, he having no security but the covenant. If Griffin was prosecuting at law on the bond, this court would certainly injoin him, and compel him to appropriate the money so as to discharge the incumbrance against which he had covenanted. In Johnson v. Gree, 3 John. C. R. 546, where the vendee gave a bond and mortgage to secure the purchase-money, and an action of ejectment wa^fefterwards brought against hin^uMMfeperson claiming ^^^Kant title, and the vendor brSPp^asuit on the bond the premises for sale under a power in the mortgag^^^^^wceedings on the bond and mortgage were «áíí-ecf to be §fa^;d until the action of ejectment was determined, and the fart Sir order of the court. Where there is a mere allegation upon an outstanding title or incumbrance, the court will not interfere^ but leave the party to his remedy on the covenant; but where there is an eviction, or even an ejectment brought, it will interpose. In this case the first mortgagee is prosecuting his claim; the second one is before the court and asks to be paid what is due, and also the third. All parties arc here, and justice can be done.

That Carrick is entitled to relief I can entertain no doubt. If any part of his property has to be sold to pay off the first mortgage, he is entitled to have the amount deducted from his mortgage to Griffin. In Jourvill v. Narish, 3 P. Wms. 306, it was held, that when a man purchases an estate and pays part, and gives bond for the residue, notice of an equitable incumbrance before payment, though after the giving of the bond, was sufficient to stop payment, and to entitle the obligor to relief in equity against the bond ; and this was declared to be the rule, though the purchaser had actual notice of the incumbrance before the purchase. The constructive notice furnished by the registry, cannot affect the equity between the vendor and the purchaser; and we have seen that as to it the executors of Ellison stand in no better situation than the mortgagee himself.

It is unnecessary to say any thing as to the third mortgage. It is a lien on the smaller lot onl}', and can only be paid in case the proceeds of that lot amount to more than sufficient to satisfy the first mortgage.

Let an account be taken of the amount due on each of the mortgages. Let the smaller lot be first sold and the proceeds applied to the first mortgage ; and the surplus, if any, to the third mortgage. If the first mortgage be not satisfied by the sale of the smaller lot, let that part of the six acres and forty hundredths of an acre lot in Carrick’s possession, be sold to satisfy the residue, and also to pay the balance that may be due on the second mortgage, after satisfy the said rej a deduction of so much as máy go to .. .

Garrick will ciples above st eem his the prig.-