Starr v. Ellis

| New York Court of Chancery | Oct 18, 1822

The Chancellor.

The merits of this case tarn upon the question, whether the Jordan mortgage, which the defendant, S. E., bought in, and afterwards assigned to the defendant, C. E., can be set up against the plaintiff’s right- and title to lot No. 18.

The object of the bill is to have that mortgage delivered up and cancelled, as being merged, upon the union of the legal and equitable titles in the defendant, S. Ellis, when he purchased in Jordan's mortgage, and as being since kept on foot, and assigned and set up, in fraud¡of the plaintiff’s title.

1. I see no manner of reason, why the Jordan mortgage should not be held to have merged, when it came in union with the equity of redemption held by S. E.; nor do I perceive any interest that S. E. then had to continue it in his own hands as a subsisting encumbrance. Unless some beneficial interest be shown, to require it to be kept up, or the intention to keep up the charge be immediately and duly declared, the conclusion is, that it was purchased in, or rather paid off and satisfied, in order to exonerate his estate. A Court of equity will never permit it to be kept on foot for the purpose of injuring a subsequent bona fide purchaser, under the very party who had thus consolidated in himself the legal and the equitable title. This was the doctrine in the case of Gardner v. Astor ; (3 Johns. Ch. Rep. 53.) and- if that doctrine was not then misunderStood, we are entitled to act upon it in the present case,

equity will cumbrance °alive> or conEi" der it extinguished, i¡,st*ce> . and tii0 just intent ofthepaxtymay best serve the purposes of

A Court of equity will keep an encumbrance alive, or • • „ consider it extinguished, as will best serve the purposes of justice, and the actual and just intention of the party, must, at all events, be an innocent purpose, and injurious to no one. In the case of Lord Compton v. Oxenden, (2 Vesey, jr. 261.). it was admitted to be the general rule, that equity considers the union of the real and equitable estates as a merger, or not as a merger, according to the intention and best interest of the party. The general rule is, that the union of the estates will create a merger, unless there be some beneficial purpose, or some declared intent to prevent Forbes v. Moffatt, (18 Vesey, 384.) which was referred to in Gardner v. Astor, a mortgage was held not , to be merged by union with the tee. 1 here was no actual intention established by act of the party, and it was presumed against the merger, in that case, from the greater advantage in favour of the personal representative. “ It is very clear,” said the Master of the Rolls, “ that a person, becoming entitled to an estate, subject to a charge for his own benefit, may, if he chooses, at once take the estate, and keep up the charge. A Court of equity will sometimes hold a charge extinguished, where it would subsist at law; and, sometimes preserve it, where, at law, it would be merged. The question is upon the intention, actual or presumed, of the person in whom the interests are united. In most instances, it is, with reference to the party himself, of no sort of use to have a charge on his own estate; and, where this is the case, it will be held to sink, unless something shall have been done by him to keep it on foot. If it be perfectly indifferent to the party, whether the charge should or should not subsist, it sinks.”

The union of redemption estate^produces a merger of the mortgage, unless it hekept onfoot for some beneficial purpose.

Upon the cases, and upon principle, ,1 think I am bound .to hold, that Jordan’s mortgage sunk, and was extinguished on being got in by the defendant, S. E., who was then owner of the equity of redemption in lot No. 18. He did no act, at the time, showing a declared intention to keep it alive ; and why should he ? There was no interest of his to require it. In ordinary cases, w'hen the estate has no connexion with other interests, what motive can a man have, who owns the equity of redemption, and purchases in a subsisting mortgage, to keep this mortgage alive in his own hands, against his own estate ? His title was perfect to lot No. 18. There was no claim against it. It could not be of any use, but a mischievous one, as against subsequent purchasers or encumbrances, and for such a purpose, the merger is not to be prevented, nor the charge upheld by the aid of this Court.

But, 2. The facts warrant the charge of a fraudulent combination between the two defendants, to set up the Jordan mortgage, to the prejudice of the plaintiff’s title to lot No. 18, which he purchased of the defendant, S. E. The credit of the answer of S. E. is very much shaken by the proofs against the truth of some of its averments; and I am entirely satisfied, that the Jordan mortgage has been fraudulently assigned, and set on foot, to injure the plaintiff’s title. It was, undoubtedly, the understanding of the plaintiff and the defendant, S. E., at the time of the plaintiff’s purchase, that the Jordan mortgage was not a subsisting encumbrance, and was considered as cancelled, and the assignment to the son, if even before the purchase, was colourable merely. The marks of fraud are upon every part of this transaction.

I shall, therefore, decree, that the defendants cause Jordan's mortgage to be delivered up to be cancelled, and be enjoined, in the mean time, from disposing of it, or making any use of it, in law or equity, in prejudice of the plaintiff’s title; and that when the said mortgage shall be delivered to the plaintiff's solicitor, or be deposited with the Register of this Court, to be cancelled, that then the injunction, heretofore issued, be dissolved ; and that the defendants pay to the plaintiff his costs of this suit.

Decree accordingly.