Wilson & Herr v. Hayward

BALTZELL, C. J., delivered the opinion of the Court. This case was before us at the January term, 1848, on an application of the defendant, Hayward, to foreclose undér the common law proceeding of this State, a mortgage executed by James Lunn. The proceeding was against the! administrator of Lunn, who resisted the application on the ground that other parties holding notes of prior date, had already foreclosed and had sale of the mortgaged proerty. The Court considering that if the party had rights, they! could be more appropriately asserted in equity than in a Court of law, and especially that the purchasers under the sale already had, should be made parties so that a second «ale should be avoided if possible, and the conflicting rights — 189 — and interests of the different parties properly adjusted, sent the case back with that view. It is now before us, with new parties and the facts presented are as follows: Robert K. West was the owner of a mortgage on part of lot 167, in Tallahassee, executed to him by James Lunn, on the 4th day of June, 1840, to secure payment of five promissory notes, for one thousand dollars each, payable the 4th days of June, 1841-42-43-44 and ’45. The first note seems to have been paid, the second, third and fourth, falling due in 1842-43 and ’44, were assigned and transferred by West on the first day of June, 1841, to Wilson and Herr. On the22d of August, 1843, two of these notes having become due, these parties filed their petition of foreclosure, and in January, 1844, procured a decree or judgement of the Superior Court for Leon County, under which the property was sold to pay said debt by the marshal. The complainant, Hayward, claims to be the assignee of the last note, and of the mortgage by transfer bearing date the 6th of March, 1841. His bill alleges that 'the decree of Wilson and Herr, was obtained by collusion and that he is entitled to prior payment by virtue of his previous assignment, as well of the note as of the mortgage. The enquiry becomes an important one in the very outset, whether Hayward in fact has the prior assignment.— In his bill he proposes to the defendants the question directly and expressly, whether West did not on or about the 6th of March, 1841, indorse and deliver the said note of Lunn, for one thousand dollars, and whether he did not at the same time assign the mortgage. In reply to this, D. C. Wilson says: “ when the notes received' by him for — 190 — Wilson, and Herr, were offered, he is of opinion that said West produced and offered five notes of the same amount executed by the same person, all of which, as this defendant supposes, were secured by the mortgage which said West held and produced at the same time. That if the note which complainant holds is one of the five notes mentioned in said mortgage, it could not have been assigned and transferred to him on the 6th of March, 1841, if he is correct in the impression strongly fixed on his mind, that he saw said notes in the actual possession of said West, at a date posterior to the said 6 th of March. He therefore denies and calls ' for proof of the time of the alleged transfer to complainant. Robert K. West is questioned for complainant on this point, and says in his direct examination, the assignment of the note and mortgage were made at the day they bear date, 6th of March, 184L In his cross examination however, being asked how many notes he had in possession at the time of this assignment to Hayward, he says he had but one, Wilson had the other two, hence the reason of my assigning that particular one to Hayward. Again, being asked at the time of the transfer to Hayward how many of said notes of Lunn he had assigned, he replies, “that at the time of the transfer to Hayward he had assigned none but the two and those to D. G. Wilson, making in all three notes.” Again asked if he had other notes of Lunn in his possession falling due anterior to this transferred to Hayward, why he did not transfer them also, his reply is, “ I had no other notes of Lunn at the time, they had been transferred to D. C. Wilson.” His account of the transfer to Hayward is as fol — 191 — lows: “ I made this assignment because Hayward was security for me on a note to Patterson and Hughes for $5,250, and I wished to save him harmless. When I found the crush was coming upon me I went to him and told him of it and said to him here take this, satisfy yourself and gave him the mortgage and the note of Lunn attached to it.”— Independent of the repeated declarations by him that he had assigned the prior notes to Wilson and Herr, this last statement strikes us as corroborating it with great force. Why if he was so anxious to secure Hayward in so large a sum and had four notes secured by mortgage, does he give only one for $1000 and that, the last due of five and payable at the distant period of four years 1 We are of opinion then that Hayward took his note and the assignment of the mortgage after the other notes were assigned to Wilson and Herr. Plaving ascertained that the notes obtained by the latter fell due first and were assigned and transferred first, the question arises as to the law of the case. As a general rule the assignment of a note secured by mortgage is in equity an assignment of the mortgage unless there is some special provision by the parties to the contrary. Where several notes have been assigned as in the present case lies the difficultju The first case on the subject was decided by the Court of Appeals of Virginia, and is the leading case. A deed of trust was executed by William and Francis Sutten to trustees to secure payment of three notes to Barrett. The first note was paid, the second transferred to Ragland without any assignment to him of the deed of trust, the third endorsed to the Gwathmeys who took an assignment of the deed of trust for their security. The Trustees having ad — 192 — vertised the land for sale to pay Ragland’s claim, the Gwathmeys filed a bill against Ragland and the Trustees to enjoin them from selling the property. An injunction was granted which was dissolved and the case taken to the Court of Appeals. The Court say that the deed of Trust being intended by the parties to it as additional security for the payment of the notes to Barrett or his assigns in the order in which they fell due, it followed the notes into the hands of the several holders thereof and that it was not competent to Barrett by an assignment of the deed to the Appellants, without the assent of the Appellee, to whom the second notes had been assigned to deprive him of his priority of right to demand a sale of the property, if necessary to the payment of the note assigned in the order of payment expressly directed by the deed. The deed being assigned to the Appellants, gave them full notice of the order in which the notes were to be paid to Barrett or his assigns, and at least, put them on the enquiry whether the first and second notes had been paid at the time they took the assignment of the third note and of the deed of trust. By not making that enquiry, if they relied on the trust fund as security for the payment of the note assigned to them, they may have lost their money ; however that may be as against the Appellee, the Court is of opinion that he has no claim to be preferred. Gwathmeys vs. Ragland, 1 Rand. 466. The Supreme Court of Indiana say; “the meaning and construction given to a mortgage payable at different times by several promissory notes, must depend upon the law of the remedy upon such notes or mortgage for these contracts as well as others are made under and with an — 193 — eye to the laws governing their enforcement. In this State a mortgage may be foreclosed, when there are instalments, on default of payment of the first instalment. The holder of the first note may, if he chose, when that becomes due, enforce the full payment of it out of the mortgaged premises, and the holder of the second note may in like manner obtain priority over the third, and so on. State Bank vs. Tweeds, 8 Black, 447. This is also the rule in New Hampshire, 10 N. H. In Alabama a different rule prevails; there the prior' assignment seems to give preference of payment in case of dificiency of the mortgage fund. (Cullum vs. Erwin, 4 Alabama, 458.) In that case the Court admits that in 5 Porter and also 9 Porter, 527, McVoy vs. Bloodgood, the same Court had decided that the assignee of the notes which first fell due, would have the prior right. They say that the same decision with the one established by them was made in Gwathmey vs. Ragland, under precisely a similar state of facts. They also refer to Van Rensaleer vs. Hopkins, decided by the Supreme Court of New York. In reference to this case as well as the one just alluded to, we think that intelligentCourt was mistaken. Van Deusen, says the, Oourthad two mortgages, the first he assigned to Van Rensaleer for $ 1180;thoughmade to him it was intended for the use of Van Rensaleer, and to. secure him the unpaid balance of the land which he had sold Van Deusen. Van Deusen there-" fore in effect received and held the mortgage for $1180.. in trust for Van Rensaleer, and his intention was that this' mortgage should become the first incumbrance by a prior registry áse. — 194 — The assignment to Van Rensaleer was thus not merely an arbitrary preference by Van Deusen of the original mortgage to the mortgage retained, but it was a just discharge of duty, a fulfillment'of the confidence which Van Rensaleer had reposed in Van Deusen, and a substantial compliance with the antecedent rights of the parties. 1 Hopkins. It is very true that the prior assignment is alluded to, but it will be perceived that the case is principally decided upon the peculiar equities of the case as existing between the parties. Equally unfortunate is the reference of the Court to and reliance upon the case of Gwathmey vs. Ragland. We have seen already that this case is not authority for payment to the party having the first assignment or transfer of the note, in preference to the one whose note fell due first. In Mississippi a different rule still is held, as their Courts devide the proceedsof the sale of the mortgage property amongst all the notes agreeing with none of the authoritiesto which we have alluded. Here again the Virginia case is regarded as not being in conflict with the rule established by them. The leading case is that in 6 Howard, 320,' and with due respect to the very high intelligence and ability of that tribunal, the equity of the case and the rights of the parties depend on the peculiar facts and circumstances of the case, rather than the maintainance of any rule or principle of law obtained from the authorities cited. Whilst we are free to declare our own opinion in favor of the Virginia rule as best agreeing with analogy,' as most certain and definite, leaving less to uncertainty and — 195 — confusion, whilst we admit that there are equities to change its application, as in the New York and Mississippi cases, and in the ease of a mortgagee claiming after the assignment of part of the mortgage debt, yet it is unnecessary in the present case to assert the superiorly either of the rule of the Ya. or Ala. Courts. It is sufficient that the adoption of either is fatal to the case. The complainants Wilson and Herr have the first assignment of J;he notes; their notes were first due by the terms of the mortgage. They obtained a decree of foreclosure in January, 1844, and the property was sold on the fourth of March, 1844, upwards of a year previous to the time Hayward’s note became due. If Hayward has an equity, it must be because the property is worth more than the claim of Wilson and Herr, or there has been irregularity or fraud in the sale to invalidate it. There is no allegation in the bill as to the value of the property, no assertion that it is more than sufficient to pay the three first notes. The Complainants’ bill is predicated on his prior right and equity. The amount bid at the sale is no where stated, tho’ Wilson says in his deposition, “ the. property brought but a small proportion of the draft ($2,-' 729). There is then no propriety in ordering another sale; this would be a vain and fruitless thing. Is there an irregularity in not makin g Hayward a party to the judgment of foreclosure. As a general rule all incumbrancers should be parties. Prior incumbrancer’s rights are paramount, and they would seem to be necessary if not indispensable parties 7 Paige 444, 2nd Alaba. 415,2 Ed. Chy. 127. A subsequent incumbrancer is not an indispensable par — 196 — ty Cullum vs. Batie, 2nd. Ala. 415, Walker vs. Bank Mob. 6 Ala. 452; A second incumbrancer is only affected and can only complain when there is a surplus after paying prior liens. His right to the surplus cannot with propriety arise until it shall be ascertained that there is a surplus, and this cannot be shewn before the mortgaged premises have been sold and the debt of the prior incumbrancer with all costs fully discharged. 2 Alabama 422. The English practice is to allow the subsequent mort-' gagee to redeem by paying up the prior mortgage. Coote 522. It remains to notice another allegation of the bill, that the judgment of Wilson and Herr was obtained by fraud; the defendants employed Counsel to institute suit against himself—waived the filing of the petition four months before the first day of the term ; waived the filing of the mortgage and substitued a copy thereof, and wrongfully allowed judgment to be entered up immediately. The answer of the parties denies collusion, and we find not a particle of proof to support it. The facts stated even if true, by no means Constitute fraud. The defendant alleges that he had no defence to the suit and desired to avoid delay and expense; what objection then was there to a direct confession of judgment without previous preliminary proceedings? In the case of Finley vs. Bank U. S., the bill was filed fit the November term, stating the consent of the mortgagor to an immediate sale of the mortgaged property although the day of payment had not arrived, and on the same day an answer was filed consenting to a decree for the sale. A decree was immediately entered by consent ,of parties fit* — 197 — recting the Marshal to sell the property, and yet no one complained of this as irregularity, much less fraudulent, although the decree was assailed by a prior mortgagee. 11 Wh. 304. Independent of this, it is not allowable to attack a judg ment collaterally by asserting irregularities that might form the subject of reversal in an appellate Court. A judgment concludes the subject on which it acts, and those things are regarded as proved and done which ought to have been proved to entitle the party to judgment. Grignon’s lessee vs. Alston, &c., 2 Howd. S. C. R. 343, 3 Peters 204, 5, 10 Peters 473. On the whole case we see no ground for disturbing the sale or for ordering another sale. The decree of the Circuit Court will therefore be reversed and set aside, and the case remanded with instructions to dismiss the bill with costs. The following petition for a re-hearing was afterwards filed: