The sale under the decree, in the foreclosure suit, brought by Hoyt upon the first mortgage, was wholly inoperative as to the rights of the assignees of the bond and mortgage executed by Shelton and Smith, which assignees were not parties to that suit. The only right therefore, which A. C. .Stevens acquired under that sale, as against such assignees, was the right to the prior lien upon the premises to the extent of the money due and unpaid upon Hoyt’s mortgage; in the same manner as if Hoyt had assigned that mortgage to him without foreclosure. But as against Shelton and Smith, who were defendants in that suif,*he acquired the equity of redemption which remained in them previous to the master’s sale. And it may be important to ascertain what the equity of redemption thus acquired wasfor the purpose of determining the question, whether the second mortgage ought in equity to be paid out of the surplus proceeds' of a sale of the mortgaged- premises, after satisfying the Hoyt mortgage, or by Shelton and Smith.
So far as the rights of A. C. Stevens are concerned, no question whatever arises as to constructive notice of the assignment of
So in this case; A. C. Stevens, when he purchased at the master’s sale, knew there-was an outstanding mortgage upon the equity of redemption, and that the purchaser at such sale would only acquire an interest in the premises to the extent of the amount then
What, then, is the effect of the guaranty contained in the assignment of the bond and mortgage to Evans? That guaranty was that Evans, or his assignees, should be able to collect the several instalments upon that bond and mortgage which were then unpaid, from time to time as they became due, together with the interest thereon ; either from the proceeds of the mortgaged premises or from the mortgagors or their other property. It could not, therefore, have been the intention of the parties, in case the mortgagedju-emises were insufficient to pay the -whole of this debt, in addition to the previous incumbrance thereon, that the assignee should be at liberty immediately to resort to the guarantor, after exhausting his remedy against the land, subject to the prior lien. Nor can the guaranty be considered as a covenant that the land itself should actually produce sufficient to pay the second mortgage; so as to enable the assignee to take the benefit -of the prior mortgage, which the assignor acquired under the mastér’s sale, to satisfy the amount due upon such junior mortgage, instead of resorting to the personal liability of Shelton and Smith for the deficiency. The only alteration, therefore, which would have been proper in the decree above suggested, on account of this guaranty, if A. C. Stevens had not executed the subsequent mortgages, would have been a further direction, that upon the return of an execution against Shelton and Smith unsatisfied, A.. C. Stevens, as such guarantor, should pay to the complainants so much of the deficiency as remained uncollected from
The purchase at the master’s sale by A; C. Stevens, therefore, did not merge the first mortgage, in the equity of redemption which he also acquired by the same purchase. For the intermediate mortgage which was not foreclosed, and the interest of the purchaser to keep the first mortgage and the equity of redemption separate and distinct, so as to compel the complainants to resort to the personal liability of Shelton and Smith, in thefirst place, for any deficiency there might be after paying the first mortgage, would prevent the merger. (Crow v. Tinsley, 6 Dana's R. 402.)
Upon examining the provisions of the revised statutes, I think there is very little doubt that the vice chancellor is right as to the effect of the recording of the assignments of the mortgage to Kingman, as constructive notice to Kissam, and to the banking association, as mortgagees of the premises after the sale by the master. Previous to the revised statutes it had been decided, by the court for the correction of errors, in the case of James v. Morey, (2 Cow. Rep. 246,) that actual notice of the assignment of a mortgage was necessary to invalidate payments subsequently made to the assignor, by the mortgagor or his representatives. But it was also decided, in that case, that the recording acts did not apply to the assignment of a mortgage; and that no notice of the assignment, either actual or constructive, was necessary to protect the assignee of the mortgage against a subsequent assignee, or against other persons claiming under the assignor. In other words, that as between the assignee of a mortgage and subsequent assignees or purchasers from the assignor thereof, the rights of the parties depended upon the rule of law as it existed previous to the recording acts. That rule was that the first grantee, or assignee, of an interest in real estate, was entitled to a preference, whether the subsequent assignee, or purchaser, had or had not notice of the prior assignment or grant. The revised statutes, however, extended the beneficial provisions of the recording acts to the case of the assignment of a mortgage; by declaring that the term purchaser, as used in the chapter of the revised statutes relative to the proof and recording
What notice, then, would the mortgagees of A. C. Stevens have had of the legal and equitable rights of the complainants, if they had searched the records at the time of taking their respective mortgages, in 1838; for the purpose of ascertaining what title he obtained under the master’s deed? They would have found that Hoyt’s mortgagors had conveyed to Shelton and Smith, who had afterwards mortgaged the premises to Kingman, who was one of the parties to the foreclosure suit. And if the assignment from him to A. C. Stevens had not been upon record, they would have been authorized to presume that Kingman was still the owner of the mortgage given to him by Shelton and Smith; and that his interest in the premises as such mortgagee had been foreclosed by a decree to which he was a party. Although A. C. Stevens, the purchaser, who had actual notice of the several assignments by which Evans became the owner of that mortgage before the commencement of the foreclosure suit, would not have been protected against the lien of that mortgage in the case supposed, yet his subsequent mortgagees, who had advanced their money and scrip upon the faith of the security upon the land, and without any notice, either actual or constructive, of the rights of the complainants, would have been
The order appealed from was clearly erroneous, in directing that the proceedings in this suit should be suspended until the complainants should have exhausted their remedy at law upon the bond of Shelton and Smith. And although the appellants were not entitled to have the bill dismissed, they are entitled to have the proper decree made, without further delay, to ascertain the rights of the several parties, in order that the mortgaged premises may be sold and the proceeds thereof applied accordingly. The complainants’ bill is properly framed for that purpose; as this is a bill for a foreclosure and sale of the equity of redemption in the mortgaged premises, to satisfy the several incumbrances thereon according to their respective priorities, and is not a mere bill to redeem. In England, the court does not decree a sale of mortgaged premises, but merely allows the second incumbrancer to,file a bill to redeem from the first incumbrance, and that the junior incumbrancers may redeem both of the prior ones, or be foreclosed. And the complainant there, is in all cases, required to offer to redeem the first incumbrance. But here, where the puisne creditor has the right to a sale of the estate to satisfy his debt, after applying so much of the proceeds of the sale as may be necessary to pay the debt and costs of the prior incumbrancer, he is not required to offer to pay the first
The order appealed from must therefore be reversed. And a decretal order must be entered referring it to one of the masters of this court to compute and ascertain the amount due to the complainants upon their bond and mortgage; stating the amount due and payable, and the amount to become due hereafter, with interest thereon to the date of his report. The master must also compute the amount due to the defendant A. C. Stevens as the purchaser of the interest of Hoyt in the mortgage executed by Kingman and Welty to him; and in ascertaining that amount he must credit A. C. Stevens with the amount remaining unpaid at the time of the decree of foreclosure in the suit of Hoyt, and the subsequent interest, and must charge him with the rents and profits of the mortgaged premises from the time he took possession thereof under the master’s deed, after deducting taxes, assessments, and repairs. (7 Dana’s Rep. 70. Lloyd & Goold’s Rep. Temp. Sugden, 246. 2 Sum. Rep. 143.) The decree must also direct the master to ascertain and compute the amount due and to become due, for principal and interest, on the mortgage given by A. C. Stevens to Kissam, and also upon the one given to Sherman Stevens as president of the Merchants’ Exchange Bank of Buffalo; and to ascertain who is the holder or owner of those mortgages. The decree must then direct that upon the coming in and confirmation of the master’s report, the mortgaged premises be sold, by a master, in the usual form. And out of the net proceeds of the sale the master must pay the amount reported due to the defendant A. C. Stevens, as follows : first, to the holder of the mortgage given to Kissam, so much as may be reported due upon that mortgage, if the sum reported due to A. C. Stevens as the purchaser, of the interest of Hoyt, is sufficient for that purpose; secondly, to the holder of the mortgage to Sherman Stevens as president, the amount reported due thereon, if the amount due to A. C. Stevens is sufficient for that