Waring v. Smyth

The Chancellor. I do not find it stated in the bill, in this cause, whether the mortgaged premises belonged to Charles Smyth, at the date of the mortgage; or whether they belonged to his wife, so that his interest therein terminated at his death. Nor is it stated that either of the defendants who have demurred, claim to have a title or interest in the premises under him. It may not, therefore, be necessary to inquire whether there is any thing in the bill, from which it can be legally inferred that Charles Smyth ratified and assented to the alteration of the — 132 — bond and mortgage. There is no pretence that it was ever ratified by his wife. Indeed, there was no way in which she could ratify the alteration, except by a re-acknowledgment of the mortgage. As to her, therefore, the alteration was a gross fraud, whether she owned the mortgaged premises in her own right, or had only an inchoate right of dower therein. And if her husband had himself consented to the making of the alteration, it still would have been a fraud upon the insurance company, to pass off the altered mortgage to them, as collateral security for their loan, as the true and genuine mortgage of Mrs. Smyth. I think, also, the vice chancellor is right in supposing that there is nothing in this bill from which it can be inferred that Smyth himself assented to this alteration; either before or after it was made. Indeed, the statement in the bill that Smyth declined to re-acknowledge the mortgage, because there was a misunderstanding between him and the mortgagee, shows that the latter could not have supposed that Smyth intended to ratify the alteration at that time, even so far as concerned himself. And he knew, or at least the law presumes he must have known, that Smyth could not ratify the alteration in the mortgage so far as related to the interest of his wife. Nor would Smyth’s previous promise, to give a mortgage payable on demand, with semi-annual interest, be binding upon her, even if it had been in writing, so as to be obligatory upon Smyth himself under the statute of frauds. The case, -therefore, which is presented by the bill, is simply this: The holder of a bond and mortgage, without authority from either of the mortgagors, and without the knowledge of one of them, alters the condition of such bond and mortgage, in two very essential particulars, to their disadvantage; and after the one who is informed of the fact had declined to ratify the alteration, by a re-acknowledgment, the mortgagee passes off the bond and mortgage as valid and genuine securities, to secure the repayment of a loan of money to himself. And the question now to be considered is this: can the assignees of the person who has been guilty of this fraud, or any other person claiming title to the bond and mortgage under him, or them, — 133 — as the assignee thereof, enforce the collection of the mortgage, in a court of equity, against the mortgaged premises, in the hands of the mortgagors, or in tj^e hands of persons claiming title under such mortgagors, or either of them 1 It was formerly held, that the alteration of a bond, or other sealed instrument, in a material part, even by a stranger, without the consent of the party whose rights were affected by such alteration, avoided the deed. (Pigott's case, 11 Coke's Rep. 27.) The modern and more sensible rule, however, is, that such an alteration, if made by a party claiming to recover on such bond or instrument, or by any person under whom he claims, renders the deed void; but that an alteration by a stranger, without the privity or consent of the party interested, will not render the deed void, where the contents of the same, as it originally existed, can be ascertained. (Rees v. Overbaugh, 6 Cowen's Rep. 746; Mathis v. Mathis, 3 Dev. & Bat. Rep. 60; Henfree v. Bromley, 6 East, 309.) I apprehend, however, that the burthen of proof in such cases, is cast upon the party seeking to recover upon the deed, to show that the alteration was not made by him, or by those under whom he claims, nor with his or then privity or consent. A distinction is made between deeds which operate to convey the title to property, and those which merely give a right of action. For, where the legal title to real estate passes to the grantee by the execution and delivery of a deed, a fraudulent alteration of the deed, by such grantee, will not have the effect to revest the title in the grantor, in cases where the statute of frauds requires a written conveyance to transfer the title. (Doe, ex dem. Berkley, v. Archbishop of York, 6 East's Rep. 86. Mitler v. Mainwaring, Cro. Car. 397. Maginnis v. McCulloch, Gilb. Eq. Rep. 235. Morgan v. Elam, 4 Yerg. Rep. 375. Doe, ex dem. Beauland, v. Hirst, 3 Stark. Rep. 60. Lewis v. Payn, 8 Cowen’s Rep. 71.) In this class of cases it is held, that the title to the estate, which was vested in the grantee by a genuine and valid conveyance, remains in the grantee, although lie destroys or makes void the deed itself, by a forgery, or by a voluntary cancelment of the conveyance which created that title. — 134 — But the deed' itself is avoided thereby; so that the grantee cannot recover upon the covenants therein, nor sustain any suitf founded upon the deed as an existing and valid instrument. In England it is still held, that a mortgage hi fee transfers-the legal title to the land, as a conditional estate; so that if the condition of the mortgage is not strictly complied with, by the payment of the money at the day, a reconveyance is necessary to vest the title of the land in the owner of the equity of redemption, although the debt is subsequently paid. It was upon this principle, I presume, that Lord Hardwick’s' remark in Harrison v. Owen, (1 Atk. 519,) was based. He there says that if a mortgagee cancels a mortgage, it is as much a release as cancelling a bond; but it will not convey or revest the estate in the mortgagor, for that must be done by some deed. The note of that case by Atkyns is very meagre; but it is stated more at length by West, from Lord Hardwick’s note book, under its proper title of Harris v. Owen and others, (West’s Ch. Rep. 527.) It there appears that the case came before the lord chancellor, on an appeal from a decretal order of the master of the rolls, directing an issue, to try the question whether the bonds and mortgages, given to the testator of the complain ants, were cancelled by him. The bill was filed by the executors of the mortgagee, to obtain satisfaction of the bonds and mortgages; which were found cancelled at his death, although it was not pretended by the defendants that they were ever paid. The complainants insisted that they were entitled to a decree of foreclosure, although the mortgage deeds might have been cancelled by the mortgagee himself, and that the awarding of the issue was improper. But his lordship affirmed the decision of the master of the rolls; thereby deciding that the representatives of a mortgagee who had voluntarily cancelled or destroyed his mortgage, could not come into the court of chancery to foreclose to the equity of redemption of the mortgagor, or to have satisfaction of the mortgage debt; although the legal title of the mortgagee, to the mortgaged premises, was not divested by such cancelling. Upon the principle of that decision, I am satisfied the bill in — 135 — the present case could not be sustained, even England; where the mortgagee at law is considered as the legal owner of the mortgaged premises, even after the debt is paid or discharged. For if a voluntary destruction of the bond and mortgage, by cancelling, would discharge the debt, so as to deprive the mortgagee of the right to file a bill of foreclosure, in equity, where the mortgage, as well as the bond, is treated as a mere chose in action, or security for the debt, their voluntary destruction by a fraudulent alteration, without the consent of the mortgagors, must have the same effect. The case is much stronger against the complainant in this state, where the mortgagor is, for most purposes, considered the legal as well as the equitable owner of the mortgaged premises, previous to foreclosure; and where a discharge of the debt leaves the legal title to the premises in the mortgagor, or those who have derived title thereto under him, as if no mortgage had ever been given. Before the adoption of the revised statutes, it was settled by the courts of this state, that the mortgagor was to be considered as the real owner of the fee, of the lands mortgaged, except for the mere purposes of protecting the mortgagor as the holder of a security thereon for the payment of his debt. (See Runyan v. Merscreau, 11 John. Rep. 534.) And the revised statutes have restricted the legal rights of the mortgagee still farther; by depriving him of the power to bring a suit to recover the possession of the mortgaged premises, before a foreclosure. The only right he now has in the land itself, is to take possession thereof, with the assent of the mortgagor, after the debt has become due and payable, and to retain such possession until the debt is paid. The mortgage then is here nothing but a chose in action; or a mere lien or security upon the mortgaged premises, as an incident to the debt itself. And where the mortgagee has released or discharged his debt, by an improper and voluntary alteration or destruction of the bond and mortgage by which it is secured, he ought not to be permitted to sustain a suit, in any court, for the recovery of his debt, the basis of which suit must be the securities thus voluntarily destroyed or made void. — 136 — N. F. Waring, the mortgagee, who was guilty of the improper acts of altering this bond and mortgage, and of then passing them off to the insurance company, as good and available securities, certainly would not himself have had the right to come into this court to foreclose the mortgage. And his assignees sit in the seat of their assignor, and are not entitled to any relief, against these defendants, which the assignor himself could not have claimed. The decretal order of the vice chancellor, which is appealed from, is therefore right, and it must be affirmed with costs.