Stone v. Welling

| Mich. | Oct 23, 1866

Cooley J.

The position of this case is as follows: Stone filed his bill to foreclose a mortgage given by George Hart, making James Welling a party defendant as subsequent purchaser. Both the defendants were non-residents, and their default was taken for want of appearance, after publication of an order for that purpose. Decree was taken in the usual form, a sale made under it, and the premises bid in by complainant.

Three years after this sale the defendant Welling presented his petition to the court for leave to defend, setting forth that he had just become aware of the proceedings. He also moved the court to set aside the proceedings, for irregularity. The court made an order based on his petition, setting aside and vacating the decree, and giving Welling leave to defend, but directing that the sale which had been made should not be affected until the final hearing and decision of the cause.

Welling then filed his answer, by which he claimed title to the mortgaged lands, by a deed from Hart, bearing date after the mortgage, but recorded first, and which he alleges was given for the consideration of five hundred dollars. Issue being taken upon this answer, evidence was put in by Welling to support it, from which it appears that the real consideration for the deed was an agreement by the firm of Welling & Root to give up to' Hart, within twelve months from its date, judgments and notes against Hart and one Williams, both, or either of them, to the amount of four hundred and fifty dollars, including in that amount their indebtedness to Welling & Root. There was also a conditional agreement to procure and give up to Hart another note, of near a hundred dollars, held by one Hobert. Welling & Root at this time held a judgment against Hart & Williams, amounting to about $336, but whether there was any further indebtedness to them was not distinctly shown. Nothing appears to have been done towards performing this agreement with Hart after it was given.

The court below held that this deed and evidence did not' entitle Welling to the rights of a bona fide purchaser, as against the prior mortgage to complainant, and thereupon, by its final order, vacated the order opening the decree, leaving the sale to stand unaffected. Welling appeals tó this court, and assigns several causes for a reversal of the proceedings.

A preliminary objection is taken by complainant, that no evidence is properly returned with the record, inasmuch as the proofs were submitted at the hearing, and no case embodying them has been made and settled. This objection is based upon the assumption that the case is to be considered as having been heard on evidence taken in open court; but this is a misapprehension of the practice. An order for taking proofs in the usual form was entered, and the evidence which was put in at the hearing was documentary in its character, and was put in at that time by stipulation.

Under such circumstances no settlement of a case is required, but the depositions or documents, which appear from the record to have been presented and filed in the court below, stand on the same footing as depositions taken before a Commissioner, and require no authentication by the Judge. We have no doubt the evidence is all properly before us, and we have only to consider the validity of the reasons assigned for a reversal.

First. It is claimed that the order for the appearance of the defendants as non-residents was not in compliance with the statute, and consequently all the subsequent proceedings were void. This objection, if otherwise valid, was obviated by the appearance and answer of Welling in the case, and does not, therefore, require examination. An objection that the complainant should have been personally examined as to the payments due upon his mortgage, before the first decree was rendered, stands upon the same footing, as it cannot be claimed to be essential, when the defendant is personally served or appears in the case.

Second. It is insisted that Welling, having placed his deed first upon the record, had a right to rely upon it as establishing a prima facie right in himself as against the mortgage, and that complainant, if he claimed the better right, would take upon himself the burden of showing that Welling was not a iona fide purchaser. "We do not perceive that the question of the order of proof is of any importance in the case, as it now stands. The evidence showing the real consideration for Welling’s deed is in the case, and is not disputed. It is, therefore, quite immaterial which party introduced it. It must be considered and weighed on the final hearing, and the question arising upon it is, not who .was bound to put it in, or who did so, but whether when in it supports the deed as against complainant.

Third. Welling claims that the agreement which was given for the deed was amply sufficient to support it, and to entitle him to the rights of a ionafide purchaser under the recording laws. It was satisfactory, it is said, to Hart; and as to the indebtedness held by Welling and Root against him, it would have the effect of a present discharge. That it was satisfactory to Hart can be of no consequence on this question, since, to constitute Welling a' iona fide purchaser, he must have parted with something of value, and not merely given a contract which he could avoid, if his title under the deed proved defective.— Thomas v. Stone, Walker’s Ch. 117; Dixonv. Hill, 5 Mich. 404; Warner v. Whittaker, 6 Id. 133 ; Blanchard v. Tyler, 12 Id. 339. Nor do we think the agreement had the effect to discharge any indebtedness. It was executory in its character, covering not only the claims of Welling & Root, but also other claims to be procured by them, and upon which it cannot be claimed that the agreement itself would have any effect whatever.

An agreement by a creditor with his debtor to discharge his demand may doubtless be treated as an absolute discharge, on the principle of equitable estoppel, when the consideration is sufficient, and the rights of third persons do not intervene. — Robinson v. Godfrey, 2 Mich. 408; Morgan v. Butterfield, 3 Id. 615.

But the question in this case is, whether there was an actual payment of value for the land by Welling before notice of complainant’s mortgage; and to make the agreement amount to such a payment it must at least have been one which Hart, at the time, could have enforced as a discharge against Welling & Root. The evidence shows that the agreement was wanting in the consideration agreed upon, since the land covered by the deed had previously been incumbered by the mortgage to complainant. There was no impediment, therefore, to Welling & Root proceeding in the collection of their demands against Hart & Williams, if the facts had all been made known to them. The circumstance that their deed was recorded before the mortgage can not relate back, so as to furnish a valuable consideration for the deed as against complainant, if one was wanting at the time. The original transaction must have been valid at the time, as a bona fide purchase, or the prior record of the deed would be of no avail under the recording laws. To say that Welling made his agreement effectual, and became a bonafide purchaser, by getting his deed on record first, when the force of the record depended on his being a bona fide purchaser, is simply reasoning in a circle.

Fourth. Rut although Welling was not entitled to priority of right as against complainant’s mortgage, we think the court erred in not giving him leave to redeem. When the court in the exercise of its discretionary power vacated the decree to let in his defense, we do not see how he was afterwards to be deprived of the benefit of such defense as he should be able to establish. The proviso in the order opening the decree, that the sale should stand until the final hearing, we can only understand as designed to leave the sale unaffected, until it should appear that some matter of defense required it to be vacated; since, otherwise, letting Welling into defend was an idle ceremony. The equity to have the sale set aside where a right of redemption is shown, is as complete as if it had appeared that Welling’s rights superseded those of complainant altogether.' An order allowing a defense by answer would certainly imply a full defense, where no restrictions are imposed by its terms, 'The suggestion made by complainant’s counsel, that the court by its order designed simply to give Weiling the same rights, and no more, which he would have obtained by filing his bill — namely, the right to an account of the proceeds of the sale, should he appear to have priority — does not seem to us consistent with the order made, which, as we have said, imposes no restrictions upon a full defense. It may be that the court ought to have declined to interfere on the petition, and left Welling to his statutory remedy; but as a defense was allowed, we have only to see how far it was made effectual. And, as we have said, it was made effectual to the extent of showing a right to redeem; since the validity of the deed from Hart to Welling, as between the parties to it, cannot be questioned in this proceeding.

All the steps taken in this case, subsequent to the sale, have proceeded on the assumption that Welling was the party in interest on one side, and the complainant on the other; but it was stated on the argument in this Court that complainant long since parted with his interest. As the record discloses nothing of this, we can not regard it in our decision; but no decree we could make either ought to effect the rights of persons not made parties, or could be made to do so. The order ■opening the decree, and all subsequent proceedings, will be .available as against any right of the complainant, or any one who has since acquired rights under him; and Welling can redeem from any such party; but if other parties are interested they are entitled to be heard, before their rights can be affected; and the order allowing redemption must be so limited as to confine it to such interest in the land as the complainant owned, at the date of the order opening the decree.

The final order of the court below must be reversed, and decree entered in this Court allowing defendant Welling to redeem on this principle, on paying to complainant, or his solicitor, in case complainant has not conveyed the land, or has conveyed since the decree was opened, the amount of the original decree, with interest thereon, and the complainant’s costs of this Court, within four months from this day, after deducting therefrom his costs of this Court to be taxed. And on failure to make such payment within the time mentioned, his right of redemption is to stand foreclosed. But in. case said complainant had conveyed said land before said decree was opened, then the said defendant to be at liberty to assert his rights against the purchaser or purchasers, as to him may seem meet, and the rights of all such persons, and of said defendant against them, shall remain unaffected by this decree.

Christiancy and Campbell J J. concurred. Martin Ch. J. I find no reason for changing the decree of the Circuit Judge.