2 Johns. Ch. 125 | New York Court of Chancery | 1816
These causes were brought to a
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When the cross bill was filed, there was then pending the judgment and execution at law on the second bond, on which there was a credit of 310 dollars levied by the sale of the equity of redemption; and there was also pending *the suit at law on the third bond, and an ejectment suit at law by Akin, the purchaser, and the original bill in this Court, and which was then at issue. The questions arising out of this state of things, are full of embarrassment and difficulty.
If a judgment creditor, other than the mortgagee, sells the equity of redemption, the mortgagor reaps the benefit of that equity, by having it applied towards the payment of his other debts, and the mortgage debt remains, without any confusion, as a distinct and separate encumbrance; and if the mortgagee, in such a case, should elect to proceed against the original debtor at law, instead of seeking to foreclose his mortgage, and should endeavor to collect his money out of other property of the mortgagor, this Court must either stay such a proceeding, or compel him, upon payment, to assign over his debt and security to his debtor, so as to enable the debtor to indemnify himself out of the mortgaged premises. The one course or the other would be indispensable to prevent the purchaser of the equity from obtaining and holding the whole interest in the land, when he purchased, and paid only the value of, the equity of redemption. If the mortgagee himself, as in the present case, sells the equity of redemption by execution at law, to satisfy the very debt for which the mortgage was taken, and he then proceeds at law against the mortgagor’s person, or other property, for the residue of the debt unsatisfied by the sale of the equity, or if the whole debt was satisfied by the sale of the equity, the same consequence must follow. He must, at all events, on being paid, assign over to the mortgagor the bonds and mortgage, to enable him to compel the purchaser of the equity to refund him the debt out of the land charged. If, however, the mortgagee, as in this case, has put it out of his power to assign, by placing the whole debt and security in-the hands of the purchaser, a new and greater difficulty arises.
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*To allow the purchaser to go on and compel the mortgagor to pay the mortgage debt to him, and then to compel him to assign over the mortgage to the mortgagor, so as to enable him to recover the money back again, would be an idle and absurd proceeding. There seems to be no other alternative, but to consider the debt as extinguished in the hands of the purchaser. He purchased only the equity of redemption, and, of course, subject to the mortgage debt,
I do not feel myself at liberty to go so far as to say, that the plaintiff in the cross bill is entitled to the 310 dollars, for this would be rendering the whole suit and sale at law, by the mortgagee, a mere farce. The sense of the thing (if indeed there be any good sense in allowing the mortgagee himself to proceed and sell the equity, by execution at law, without proceeding on his pledge) is, that the purchaser, Akin, bought the land for 310 dollars, subject to all the residue of the debt secured by the mortgage, beyond what was extinguished by that purchase money. Even this point is attended with great perplexity. Unless the purchaser bids more than the whole amount of the debt charged on the land, he, in fact, gives nothing for the equity. He obtains the entire interest in the land, merely for the amount of the encumbrance. Thus the debt, as in this case, may be 1,200 dollars. He bids 310 dollars for the equity of redemption, and by discharging the residue of the debt, or 890 dollars, he acquires an unshaken title. If the equity of redemption be of any value, then the mortgagor is, by that operation, devested of that equity, without any consideration. So, if the mortgagee himself purchase in the equity at the sheriff’s sale, he never bids beyond the amount of his debt, and if he can hold the land against the mortgagor, by uniting in this way the legal and equitable titles, he will have acquired it for the price of his debt, and no more. The equity of redemption is absolutely sacrificed.
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*The true and only remedy for all this mischief is, to prevent such sales; and I think I shall be inclined, if the case should arise hereafter, to prohibit the mortgagee from proceeding at law to sell the equity of redemption. He ought, m every case, to be put to his election to proceed directly on the mortgage, or else to seek other property, (if the rights of other creditors do not interpose,) or the person of the debtor, to obtain satisfaction for his debt. I see no other way to prevent a sacrifice of the interest of the mortgagor; and it is manifestly equitable, that the mortgagee be compelled to deal with his security, so as not to work injustice,
To compel the payment over to Annin of the 310 dollars, would be increasing, by so much, the price of the land to Akin; and perhaps would be charging him with a greater price than he intended, or would have been willing to give for the land, or, perhaps, than it was worth. As the case stands, I cannot interfere further than I have suggested. I am accordingly of opinion, that the original bill be dismissed with costs, to be paid by the plaintiff. The plaintiff went on at his own peril, after September, 1810, when the amount
Decree accordingly.