Raleigh National Bank v. Moore

Ashe, J., (after stating the facts). The questions presented by the record, are in regard to the priorities of the mortgages, executed at different times, and to different parties, by Y. Ballard and wife Frances. The facts found by his Honor, among others, were, that the first mortgage was to John E. Bledsoe, trustee, to secure six several notes, for the sum of $204.23 each, dated October 1st, 1877, and payable respectively on the 1st of October, 1878, 1879, 1880, 1881, 1882 and 1883, with interest at 8 per ■cent. Prior to October 1st, 1879, M. A. Bledsoe, for value, endorsed to J. J. Litchford the note secured by the deed of trust to John E. Bledsoe, which fell due on October 1st, 1880, and the same was endorsed for value by said Litchford, on the 6th of January, 1880, to the defendant Manteo Lodge. The second mortgage was executed to William Simpson, dated February 18th, 1879, to secure three several notes, bearing even date with the mortgage, payable respectively in one, two and three years. These notes and the mortgage, for a valuable consideration, were assigned by Simpson to Jno. C. Blake, and by him, for like consideration, to the plaintiff. *742 The third mortgage was executed to Van B.5 Moore, dated October 20th, 1879, to secure a note of even date, for the sum of $800, given to him by the said Ballard and wife, bearing interest from date at 8 per cent, per annum, payable semi-annually. This money was borrowed by V. Ballard and wife, at the instance of M. A. Bledsoe, for the express purpose of paying off and discharging certain notes secured -by the deed of trust to John E. Bledsoe, and, accordingly, was applied to the discharge of the notes severally due on the 1st of October, 1878, 1879, and 1881, and also in part-payment, to-wit: $100.86, on the note falling due on the 1st of October, 1882, which was duly credited thereon, and, contemporaneously with the execution of the last mortgage, the.agreement, of which V. Ballard and wife had no knowledge, was entered into between John E. and M. A. Bled-soe, on the one part, and Van B. Moore on the other, that the mortgage executed to Moore, should have priority over the deed of trust, and the debt secured therein should have preference to the debts secured in the trust, and the further stipulation, that they Avould not undertake to collect the debts secured in said deed of trust, by a sale of said land, until the sum secured in the mortgage should be paid. All of the notes, secured in the trust, were paid off with the money loaned to them by Moore, except that transferred to the Manteo Lodge, and that falling due October 1st, 1883, and that falling due October 1st, -1882, with the credit of $100.86, which still remained in the hands of M. A. Bledsoe. The defendant contended, that as Bledsoe proposed to Moore to loan Ballard and wife the money, wherewith to pay off and discharge the notes secured in the trust, and it was used by them for that purpose, that he should be subrogated to all the equity of Bledsoe, and thereby acquire a lien prior to that of the Simpson mortgage, and there was error in the judgment of the Court, because it was not rendered upon that principle. *743 But, in our opinion, the main question in the case, does not arise so much out of the conflicting equities involved in the case, as upon the construction and effect of the agreement entered into between the two Bledsoes and Moore. The transaction seems'to have been nothing more or less, that that M. A. Bledsoe, who had a large debt secured in the deed of trust, wanted his money, and he proposed to Moore, to loan to Ballard and wife the money to pay off and discharge the notes, or a part thereof, which he held against them, and as an inducement to Moore to make the loan, he agreed that the mortgage taken by Moore from Ballard and wife, to secure the $800 loaned, them, should “ be a first mortgage, and have priority of payment out of the proceeds of the sale of said land, whenever sold, over and before the debt secured in said deed of trust, and any part thereof, and further, that they, and neither of them, will undertake to collect the debt secured in said deed of trust, by a sale of said land, until the sum secured in the said mortgage, and every part thereof, shall be paid.” The money was not loaned to Bledsoe, but to Ballard and wife, and a mortgage taken from them to secure its payment. Moore looked to them alone for payment, and after receiving the money, they had a right to apply it or not, as-they might see proper, to to the discharge of Bledsoe’s notes. But they did so apply it, and it extinguished the debts secured, by the deed of trust pro tanto, and put that much of those debts out of the way of Moore’s mortgage, and left only the debt due the Manteo Lodge, to the payment of which there is no objection, and the two notes left in the hands of Bledsoe. The entire scope and meaning of the “agreement” was, that the notes secured in the trust, should not be in the way of, or oppose any obstacle to, the payment of the Moore debt, and when the three notes were discharged, they were put out of the the way, leaving only the two notes in the hands of Bledsoe, the one due October 1st, 1883, and the other due October 1st, 1882, with the credit indorsed; and as to these notes, his Honor held *744 that the mortgage note held by Moore, should be subrogated— and this we think was the only equity acquired by Moore, by the agreement-with Bledsoe, and was fully satisfied and met by the judgment-of the Court, in that respect. When Moore secured his mortgage, that in favor of Simpson and transferred, to the plaintiff, ’was registered. Its registration was notice to him. Then when he received his mortgage, he took it subject to that mortgage. But while he was willing to, take a mortgage, subject to a prior mortgage of only three hundred dollars, he was unwilling to take it, subject also to the lien of the deed, of trust for $1,225.38, and therefore it was, that he required the covenant from Bledsoe, that his mortgage should • have preference to the deed of trust, so that instead of there being $1,525.38-ahead of his mortgage, there should be only the $300 secured by the mortgage to Simpson. If Ballard and wife had.-paid- the whole debt due to M. A. Bledsoe, it would have extinguished the lien of the deed of trust, the effect of which would have been to let the Simpson mortgage into the position of priority, 1 Jones on Mortgages, §605; and the same principle must apply, when the first lien is satisfied in part, so as to let into priority the subsequent incumbrance pro tanto. The view we have taken of the case, sustains the judgment of the Court below, and is supported by authority. The case of Taylor v. Wing, 84 New York, is a case almost directly in point. In that case,- there were four mortgages, and, as in this case, the beneficiary in the first mortgage, executed an instrument under seal, referring to the first mortgage as' annexed,, in which he covenanted • and agreed that the fourth mortgage should have priority of lien, before and above the first mortgage, as fully and to the- same effect, as if -it had been previously executed. The action was brought by the plaintiff, who was the holder, to foreclose the two intermediate mortgages, and the Court says: “In an action to foreclose two mortgages, it appeared there was a prior mortgage upon the premises, the beneficiaries whereof, in *745 pursuance of an agreement, under which a fourth mortgage was executed and accepted, covenanted that said mortgage should have priority of lien over his first mortgage, as if it had been previously executed and recorded. The lien of the first mortgage was subsequently discharged. Held, that the covenant did not give the fourth mortgage a priority of lien over plaintiff’s two mortgages ; that the intent of the parties to the agreement under which the fourth mortgage was taken, was not to place that mortgage ahead of plaintiff’s mortgages, or to give to its owner an interest in the first mortgage, but simply that the liens prior to the fourth mortgage should only be the amount of the 'plaintiff’s mortgages, and that the agreement was fully satisfied by a discharge of the first mortgage.” The only difference between that case and this is, that there the first mortgage was entirely discharged ; here only in part, but by substituting the lien of Moore, to that of M. A. Bledsoe, to the extent of the two notes held by him, the agreement was as fully satisfied, as if all the debts secured in the deed of trust had been paid off and discharged by Ballard and wife. The judgment of the Court below was to that effect, and we think it was correctly decided. Upon a careful examination of his Honor’s conclusions of law, upon the facts found by him, we find no error. His judgment is affirmed in every particular, and the case is remanded to the Superior Court of Wake county, that it may be proceeded •with in conformity to this opinion. Ho error. Affirmed.