[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 577 The principle is well established, that where one grants land to another, with the covenants contained in the deed from Philo D. Mickles to the plaintiff, he is bound to make the title perfect, so far as it may be in his power to do so.
If, therefore, the vendor subsequently acquires any interest in the land, such acquisition enures to the benefit of the grantee, not simply by way of estoppel against the grantor or his privies, but, if necessary, as a positive confirmation of his title. The vendor is presumed to have made his subsequent purchase for the purpose of discharging a duty which he owes to the vendee, to perfect his title; and the law applies it accordingly. The presumption cannot be controverted.
It was contended by the counsel for the defendants, however, that the rule was inapplicable to the assignment of a mortgage to a vendor with warranty, inasmuch as that instrument does not convey a title to real estate, but is simply a security for the payment of a debt, or the discharge of some personal obligation. But it is, nevertheless, a lien upon the land, and the vendor is as much bound to relieve it from an incumbrance as from any positive defect in the title.
The same principle would, therefore, by its own efficacy, transfer the mortgage to the vendee, or operate as an extinguishment of the lien, so far as it might be for his benefit, but no further. The mortgage debt, of course, would not pass; but the debt and the security are not absolutely inseparable. If the debt is paid, the mortgage is gone; but the security may be released, and the debt remain.
If the mortgagor retains the equity of redemption, then it would be necessary that the assignor should *Page 578 retain his interest in the mortgage in order to foreclose it, and thus obtain the title of the mortgagor; and that the vendee of the real estate from the assignor could not do, because the law would not transfer the debt to him with the virtual transfer of the mortgage.
Then the right to the mortgage would not pass, nor would that instrument be extinguished, because in neither case would the title be fortified. But it is otherwise when, as in this case, the equity of redemption has passed from the mortgagor to the vendee. Then, if the mortgage should be foreclosed, or retained as an incumbrance, it would prejudice the guaranteed title. The assignee would unquestionably be precluded from doing either.
But it is said that the assignee might foreclose and purchase the mortgaged premises, and then his acquired title would enure to the benefit of his vendee. The law does not require such circuity, but prefers a direct result, where that can be obtained. The decision of the points necessarily involved in the case of Wilson v. Troup (2 Cow., 195), is not at variance with these principles.
There the mortgagee gave deeds, with warranty, of a portion of the mortgaged lands, the equity of redemption in the whole being still in the mortgagor.
It was decided by the Court for the Correction of Errors, that the power of sale was a unit, and could not be divided; that it was necessary that the mortgage should remain the property of the mortgagee, in order that he might foreclose it upon the portions of the premises which he had not attempted to convey for his own benefit, and upon the residue, and purchase that to relieve it from the equity of redemption for the benefit of his vendees, as the title which he would thus acquire would protect their estate.
In that case, the mortgagor was the owner of the land, and could be divested of his title only by a foreclosure. In this case, as the vendor was the actual owner when he conveyed the land to the plaintiff, a foreclosure was unnecessary, and would, indeed, have operated to the injury of the vendee.
Mr. Van Buren, in his argument *Page 579 in favor of the retention of the right to the mortgage, notwithstanding the grant of a portion of the mortgaged premises, puts it on the ground that a foreclosure would protect the grantees, and avoid any objection from all quarters.
He admits the rule to be, that "whenever a subsequent exercise of a power by the donee will defeat his previous grant, then it shall be holden inoperative, or to have been taken away by the first act." "Thus," he says, further, "the construction of these powers depends upon the object to be promoted. The principle is thesafety of the grantee." These admissions, by one so eminent in the legal profession, being, as they were, against the claims of his clients in that case, are very high authority.
Judge SUTHERLAND, in giving his opinion in that case, said: "I have already shown that the purchase by Col. Troup (the mortgagee, who had made the conveyances with warranty, and had subsequently foreclosed the mortgage and become the purchaser) enured to the benefit of the grantees of the mortgagee, so far as it was hostile to those grants.
So far as they had any interest in the mortgaged premises, they may be considered as assignees of the mortgagee, and the purchase by him was for their benefit and account." As they were interested in a part only of the mortgaged premises, they could only have been deemed assignees pro tanto, whereas, if they had purchased the whole, they would, from a parity of reason, have been assignees of the entire security.
That would be a case where it would be necessary to retain the mortgage separate from the title to the land, in order to foreclose the equity of redemption. Where, however, that was unnecessary, the lien might well be considered as merged in the higher title, and thereby in effect extinguished. If it was extinguished, it could never be revived in favor of a subsequent assignee or purchaser.
If, however, there was in this case only an estoppel, the subsequent assignee took it, subject to all the existing equities between his immediate assignor and the owner of the *Page 580 equity of redemption. It matters not whether such owner was the mortgagor or one who had succeeded to his rights, by one or through several conveyances.
In the case of Davies v. Austen (1 Ves., Jr., 247), Lord Chancellor THURLOW said, that "a purchaser of a chose in action must always abide by the case of the person from whom he buys; that I take to be a universalrule." So in Coles v. Jones (2 Ver., 692), Lord HARCOURT said, that although the assignee comes in upon a full and valuable consideration, yet he must take the land, subject to the same equity, as it was in the obligee's hands.
It is very clear, that where a mortgage is assigned without the privity of the mortgagor, the assignee takes it, subject to the equities between the mortgagor and mortgagee. It was so decided by Lord LOUGHBOROUGH, in Matthews v. Wallwyn (4 Ves., Jr., 118). An exception has been made, in some modern cases, of what is denominated a latent equity.
It is not clearly defined what a latent equity may be, and until it shall be, what constitutes an exception to a general and well established rule, should be admitted with great caution. In the case of an assignment of a mortgage, the assignee always takes it subject to the equities between the mortgagor and the assignor. That is considered as a patent equity, because the assignor can always satisfy himself by inquiry of the mortgagor.
But it may be otherwise as to the equity between the assignor and some third person; that is, if such equity is unknown to the assignee, and there is not enough to put a man of ordinary prudence on inquiry. But it seems to me that the owner, under a title immediately or mediately from the mortgagor, is to a great extent substituted for him, and succeeds to his rights. The mortgage is a lien upon his property, and he is interested, and often the person the most interested, as to the extent of the incumbrance.
He is the person of whom inquiry should be made; and if an intended assignee omits to make inquiry of him, it is no reason why he should suffer. He is generally known; but how is he to ascertain that an assignment is *Page 581 proposed, or to whom? and how can he give notice to an unknown person of the existence or extent of his equities? In the case of a secret owner, who should be out of possession, it might be different. But there are few such now, as deeds are generally promptly recorded.
They were so in this case; and, what is still more important, the assignee knew that the plaintiff was the owner of the land, or had been so recently as to call for inquiry when the assignment was executed, as he then held a mortgage from the plaintiff on the same premises. If he had made any inquiry of the plaintiff, or examined the record as to his title, he would have ascertained the true state of the affair, and could have acted accordingly.
Surely the plaintiff ought not to be held responsible for the omission. If he had known of the intended purchase, and remained silent as to his rights, that might have presented another question. There can be no doubt but that the defendants Wheaton, Robinson and Dillaye, made their purchases, and the Bank took its mortgage, in good faith; but that cannot help them if the mortgage, under which they claim title or lien, was inoperative in the hands of the defendant Townsend.
Surely it cannot be necessary that one, in order to avail himself of an equitable estoppel to sustain his title to his property, should give notice of it to the whole world, in order to prevent some stranger from depriving him of it by becoming an innocent purchaser. The judgment must be affirmed.
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