84 Me. 308 | Me. | 1892
This case was heard on bill and answer. In 1871, B. F. Knowles purchased of V. A. Sprague the mill property at Southard’s Mills in Corinna, for fourteen hundred dollars, and gave him a mortgage to secure the purchase money. As a part of the transaction, however, Stephen Steward, the plaintiff’s intestate, advanced one half of the purchase money and received therefor two notes for three hundred and fifty dollars each, payable in one and two years respectively, signed by Knowles, as principal, and Sprague, as surety. The condition of the mortgage was, therefore, to pay a note of seven hundred dollars, payable directly to Sprague in three years from its date, and also to pay the two notes above named held by Steward for three hundred and fifty dollars each, signed by Knowles, as principal, and Sprague, as surety. Knowles occupied the premises for several years after his purchase; and prior to 1882 he paid the interest on the Sprague note and a portion of the principal, and also a part of the interest on the Steward notes. But, March 23, 1882, Sprague took possession of the property in order to foreclose the mortgage for condition broken, and a foreclosure was perfected March 23, 1885. In the meantime, March 1, 1883, in consideration of six hundred dollars Sprague assigned and transferred to the defendant Welch, the mortgage in question and the note for seven hundred dollars held by him and secured by the mortgage. The two notes for three hundred and fifty dollars each, signed by Sprague as surety, still remained unpaid and outstanding in the hands of Steward, and Sprague did not assume to transfer to the defendant any rights secured to Steward by the mortgage. On the contrary, he informed the defendant of the relations sustained by Steward to the mortgage and the property described; and although in ¡addition to the assignment of the mortgage and his own note he gave the defendant a deed of warranty of the same premises, •the mortgage in question was expressly excepted from the ■operation of the covenants. In 1887, Stephen Steward brought ¡suit against Sprague as surety on one of the notes for three "hundred and fifty dollars. The statute of limitations was invoked :in defense, but, by way of compromise, Steward was allowed to
The defendant, Welch, claims in answer that the premises are now held by him in fee simple, free from all claims under the mortgage, and no longer charged with a trust in favor of auy person. But this result would be manifestly inequitable and the position is, therefore, untenable.
On the other hand, the plaintiff contends that the mortgage was given to Sprague primarily as one of indemnity, and although it included a debt due and payable to the surety himself, the mortgagee must be regarded in the light of a trustee for the principal creditor with respect to an indemnity, and as between himself and a principal creditor, the latter is entitled to be first paid out of the proceeds of the mortgage. But due regard to the elementary principle, that equality is equity, will require a material modification of the plaintiff’s contention.
It is familiar law that, as between mortgagor and mortgagee, the title is vested in the mortgagee immediately upon the delivery of the mortgage, and the mortgagee is regarded as having all the right of a grantee in fee subject to the defeasance. Gilman v. Wills, 66 Maine, 275; R. S., ch. 90, § 2. But the equitable theory of mortgages so far prevails in this State, that the mortgage is regarded primarily as a security; the debt is the principal fact and the mortgage is collateral thereto; and the beneficial interest which it confers on the mortgagee may, therefore, be equitably transferred by an assignment of the debt without a conveyance of the land itself. 3 Pom. Eq. § § 1181, 1182. By sec. 12, chap. 90, E. S., "land mortgaged to secure payment of debts, . . . and the debts so secured are on the death of the mortgagee, or person claiming under him, assets in the hands of his executors or administrators.” In Jordan v. Cheney, 74 Maine, 361, it is declared to be the settled law of
In Eastman v. Foster, 8 Met. 19, it was held that a mortgage given by the principal maker of a promissory note to his surety, conditioned that the principal will pay the note and save the surety harmless, creates a trust and an equitable lien for the holder of the note ; and even after the sureties’ liability to the holder of the note is barred by the statute of limitations, he holds the property subject to such trust and lien ; and after he has obtained an absolute title to the property by foreclosure, the same trust still attaches to it. See also 1 Jones on Mortgages, § 387, and authorities cited.
The principles involved in these cases must be held decisive of the case at bar. The equitable interest of Stephen Steward was essentially the same as it would have been if the two notes of three hundred and fifty dollars each payable to him had originally been made payable to the order of Sprague, had been thus described in the mortgage, and for a valuable consideration had been indorsed by him to Steward before maturity. The equitable lien binds the property after an assignment of it to one who has notice of the trust. Rice v. Dewey, 13 Gray, 47. The defendant was not only chargeable with the notice afforded by the plain terms of the mortgage, but he was further explicitly informed by Sprague of the relations sustained by Stew'ard to the mortgage; and the debt given to him by Sprague was expressly made subject to the rights of Steward. It is, therefore, obvious that the defendant is in no better condition in equity than the assignor or grantor under whom he claims; and the equities now subsisting between the plaintiff and the defendant are precisely the same as were those between Steward and Sprague. To sustain and enforce these equities, the defendant must be regarded as holding the property described in the mortgage in trust for the plaintiff in the proportion which the amount due on the notes payable to Stephen Steward sustains to the whole amount due on the mortgage, and the plaintiff is equitably entitled to that part of the property which is in proportion
The case must be submitted to a master with instructions to ascertain and report the sums due upon the several notes secured by the mortgage and the amount of the rents and profits, and also the disbursements. Upon the acceptance of his report a decree is to be rendered in accordance with this opinion.
Decree accordingly.