Belding v. Manly

The opinion of the court was delivered by Ham., J. The view which the court have taken of the case renders it unnecessary to determine, what were the respective interests of Belding, the plaintiff, and the defendant Cochran, in the Farwell mortgage, by virtue of the transfer by Farwell to the plaintiff of one of the notes, and of the subsequent assignment of the two other notes, together with the mortgage, to Cochran. By the tender by the plaintiff to Cochran, of the amount of his two notes, the plaintiff seems to admit, that Cochran was entitled to the prior benefit of the mortgage, for the collection of his notes; and we dispose of the case upon that assumption. Taking it for granted, then, (which however I deny,) that Cochran, as between him and Belding, acquired the full benefit of the whole mortgage for the collection of his two notes, the question arises, whether Belding, as against the mortgagor, still retains any lien upon the land, and if any, what lien ? In regard to the effect of the division of the mortgage notes between the different parties, upon the rights of the mortgagor, little need be said. In Langdon et al. v. Keith, 9 Vt. 299, the mortgagee had sold a part of the notes, and with them had assigned the whole mortgage, retaining in his hands one of the notes ; and it was held, that though, as between the mortgagee and the assignee, the assignee had acquired the whole interest in the mortgage, yet, as against the mortgagor, the mortgagee had a lien upon the land for the security of the note retained by him. It is difficult to conceive, how it could be otherwise. The security was as binding on the mortgagor, as the note was. It was given to ensure the absolute payment of all the notes specified in it; and while any of them remained unpaid, he could not object to its being enforced. It would [555] be strange, indeed, if his liability could be discharged, or impaired, by any contract between the several holders of the notes, in regard to the security, to which he was not a party, and with which he had no connection. So long as any of the notes remained unpaid, so long the mortgage must remain good against him. In this case, Manly, the mortgagor, was absolutely holden for the payment of all the notes, and the mortgage security covered the whole debt. He could not be discharged from liability on the first note by any transactions between Farwell and Belding, in regard to the liability of Farwell, as endorser of the note. Whether Farwell was originally liable to Belding as indorser, or whether, being holden, he became released by the laches of Belding in not giving due notice of the non-payment of the note, was quite immaterial to Manly, the mortgagor; and so would be any agreement between Farwell and Belding, as to which should have the prior benefit of the mortgage. Manly was, in any event, liable for the payment of the note, and the security, as to him, would stand good for its payment. Those claiming under Manly, the mortgagor, purchasing only his right to redeem, could not stand in any better situation than he did; and the plaintiff in this case, whatever might have been his rights as against the owner of the other two notes, is clearly entitled to a decree of foreclosure against the mortgagor and those claiming under him. This disposes of all the parties defendants, except Cochran, who claims as assignee of the two remaining notes and also of the mortgage. It is manifest, that Cochran could have no greater interest in the mortgage, than to enable him to enforce the collection of his two notes. Whenever those two notes should be paid to him, his interest in the mortgage would cease, and the plaintiff, as against the mortgagor, would be entitled to the benefit of it for the collection of his note. The plaintiff, before the bringing of his bill, offered to Cochran the amount of his notes, and demanded of him the benefit of the mortgage for the collection of his note. This offer, being all that Cochran could possibly claim under the mortgage, ought to have been accepted by him. The decree of the court of chancery will therefore be reversed and the substance of our directions to that court will be, to give the [556] plaintiff the benefit of the Farwell mortgage, against all the defendants, for the collection of all the notes, upon his payment to Cochran of the amount of his two notes. I-should certainly have been better satisfied with a decree, made upon somewhat different principles. I entertain no doubt, that Belding, when the two notes and mortgage came into the hands of Cochran, was, equally with him, entitled to the benefit of the mortgage security. But whatever interest Cochran may have acquired in the mortgage by virtue of the assignment to him, I think he has no interest in it now. 'The very day he purchased the two notes and mortgage be gave up the notes to Marcus M. Manly, who holds under the mortgagor, and included the amount of them, with another debt of his against Manly, in a new note, secured by mortgage on the same and other premises. This new mortgage was taken subject to the mortgage to James Curtis, an incumbrance created subsequent to that of the Farwell mortgage. It was as much out of the power of Cochran, when the money was tendered to him by Belding, to give Belding the benefit of his mortgage notes and the original security, as if the amount of the notes had been paid to him by the mortgagor in money, His notes had been merged in a new security, and postponed to a second incumbrance on the land. Nothing but the extraordinary power of a court of chancery could restore Cochran’s debt to its original security, and replace it in priority to the Curtis mortgage. Cochran had in fact received payment of his notes, and his lien under the Farwell mortgage was gone. Cochran had also, at the time he gave up his notes, agreed to discharge the Farwell mortgage, and he did afterwards undertake to discharge it, under seal. This discharge was not given through any misapprehension of facts. He knew the plaintiff’s note was in existence and unpaid, and to deprive the plaintiff of the benefit of his security he undertook' to discharge the whole mortgage, — the plaintiff’s lien as well as his own. I think it is too late for him to say, that his mortgage notes are unpaid, — too late for him to claim any benefit whatever under the mortgage. The state of the case, then, as I view it, is this. The plaintiff’s lien, as against the mortgagor and those claiming under him, remains; but Cochran’s lien is gone, The security stands, as to [557] Cochran, precisely as if he had never had any interest in it, and as to all the defendants as if the mortgage had been originally given only to secure the plaintiff’s note. Cochran, by virtue of his new mortgage, has, in common with the other defendants, a mere right to redeem. I would therefore have preferred a simple decree of foreclosure, against all the defendants, in favor of the plaintiff, for the amount of his note. I however assent to the direction now to be given, for the sake of making a final disposition of the case at this term, and because I suppose the decree we order to be made will have substantially the same effect upon the parties, that the decree which I have suggested would have had. The decree of the court of chancery is to be reversed, and the case remanded to that court, with directions, that, upon the payment to the clerk, by some short day to be fixed by the chancellor, by the orator, for the benefit of the defendant Cochran, of the amount of the principal and interest of the two notes specified in the Farwell mortgage, which came into Cochran’s hands by assignment, a decree be made for the foreclosure of the Farwell mortgage, in favor of the orator, against all the defendants, for the principal and interest of all the three notes; that the time of redemption be fixed by the court of chancery; and that the orator be allowed his costs in this court and also in the court of chancery.