Colwell v. Warner

Carpenter, J. Before proceeding to discuss the principal question involved in this case, we will dispose of one or two questions of less importance. 1. It is insisted by the plaintiff in error that the Superior Court had no power to amend the decree passed by the court upon the defendant’s petition for a foreclosure. The plaintiff appeared to defend that petition, but finally submitted to a decree, agreeing upon a time within which he was to redeem. By mistake and accident the time was not inserted in the decree. The defendant in that petition failed to redeem within the time agreed upon. At the expiration of the time limited ijhe mortgagee took possession of the premises, made expensive improvements thereon, and continued in possession for three years or more. During that time the plaintiff occupied a portion of the premises as tenant of the mortgagee, and the mortgagee obligated himself, in writing, to sell the premises to a third paz'ty, but was z’estz’ained from doing so by the temporary injunction granted at the commencement of this petition. It further appears that, at the time the decree was granted, the premises were worth but little, if any, more than the amount of the incumbrances thereon, and that in the mean time they have advanced in value from fifty to one hundred per cent. Both parties were ignorant of the mistake until lozzg afterwards, and treated the decree as if complete and valid. The cozuectiozi of this mistake will place the parties where they supposed they were, and carry out their intentiozi, doing zzo harm or injustice to aziy one ; while on the. other hand a refusal to aznezzd the decree, especially if the mortgagor is permitted to redeem upon the terms proposed in his bill, will szzbject the mortgagee to loss and sezious izzconvezzience, azzd a cozu’esponding advantage enures to the mortgagor. Under -these circumstances, the course taken by the court below was manifestly equitable azzd jizst. 2. The plaintiff also complaizzs that he ought to have been permitted to show that the note to the defendazzt was without cozisideratiozi. [233] We think the' Superior Court did right in excluding this testimony. If the fact was so, the time for showing it was on the trial of the petition for a foreclosure. The court in that case having found that the note was justly due, it was not competent for the maker to impeach that finding, except upon a direct proceeding for that purpose, and with appropriate and pertinent allegations. ■ But this is not a petition to open or set aside the decree, but is a petition to redeem, assuming that the decree is invalid and inoperative. If however in any sense it may be considered as a petition to open a decree, the objection still remains, that there is no allegation in the petition of a want of consideration, but on the contrary the petition impliedly admits that the note was justly due, by offering to pay it together with the costs of the petition brought thereon. The evidence therefore was clearly inadmissible under the petition. It is insisted however that it was admissible in response to the averments in the cross-bill, on the ground that the cross-' bill is virtually a petition for a new decree, rather than for the correction of a mistake in an existing decree. We think this is a misapprehension. We look upon the cross-bill, as may be inferred from what has already been said, as a petition, in form and substance, for the correction of a mistake. If we are right in this, it seems to us that, under the practice of courts of chancery in this state, it was incumbent upon the plaintiff, if he would rely upon the want of consideration as a defense to the cross-bill, to set it up by way of answer. We think therefore we ought to consider the amended decree as valid, and give to it the same effect we should if it had been complete originally. And that brings us to the most interesting question in the case, which is this: 3. Has a mortgagor, whose equity of redemption has been foreclosed by a second mortgagee, a right to redeem the first mortgage ? This question must be understood, of course, in its application to the facts of the present case, where the second mortgagee, after foreclosure, redeems the prior mortgage, as he had a right to, paying the debt as his own, and now resists the claim of the mortgagor to redeem. A case [234] might arise in which the mortgagor might he compelled, independent of the security, to pay the first mortgage debt; or he might find it necessary for his own protection to take some action against the second mortgagee; but that is not this case, and the question as to his rights under such circumstances is not material to our present inquiry. A very brief consideration of the nature of a mortgage and the effect of a foreclosure will aid us materially in the solution of this question. In ordinary cases the mortgagor conveys to the mortgagee the title to real estate as security for a debt. There remains in the mortgagor the right to pay the debt, and thereby redeem the property mortgaged. The process of foreclosure cuts off this right, and vests the title absolutely in the mortgagee. The same thing is true of a second mortgage, which is but a mortgage of the equity of redemption. The whole equity is conveyed to the mortgagee, the same as the whole title is conveyed to the first mortgagee. The right remaining in the mortgagor is a right to redeem the equity of redemption. That right carries with it, as an incident to it, a right to redeem the first mortgage. Now when the second mortgagee forecloses the mortgagor, the whole equity of redemption vests in him, precisely as the whole estate vests in the first mortgagee after foreclosure, and he alone is entitled to redeem the first mortgage. The incidental right of redeeming the first mortgage goes with the thing to which it was an incident—the right to redeem the second mortgage. The second mortgage conveys all the mortgagor’s interest to the mortgagee. The foreclosure removes the condition, so to speak, and converts the conveyance into an absolute one, hut the thing conveyed remains the same. But if the first mortgagee forecloses the mortgagor without foreclosing the second mortgagee; the rule is different, as decided by this court in Goodman v. White, 26 Conn., 317. In such a case the incidental right alone is extinguished, leaving the principal thing, the right .to redeem the second mortgage still in existence and unaffected by the decree. As the right to redeem the first mortgage still remains in the [235] second mortgagee, and the mortgagor has a right to redeem the second mortgage, he may, by doing so, acquire a new right, or rather the right of the second mortgagee, to redeem the first. This rule seems to me to be a reasonable one, and one that can be easily understood and readily applied to any number of mortgages or transfers, and one that will be likely to do justice by all parties. If a case should arise in which it will do injustice, doubtless the circumstances of the case will justify a departure from the rule. While on the other hand, the doctrine contended for by the plaintiff will lead to this absurdity, that each holder of two successive mortgages upon the same property will have the right to redeem the other. Thus the plaintiff, after redeeming the Gorham mortgage, will have the right to redeem the second, and the holder of the second will have the right to redeem the Gorham mortgage. No doctrine leading to such consequences ought to receive the sanction of this court. We have no case'in this state, and we are referred to none elsewhere, covering the whole ground of this case. So far as our own decisions go, they seem to confirm the views herein expressed. In Swift v. Edson, 5 Conn., 531, it was held that a mortgagor who had conveyed to another his equity of redemption, having no longer an interest in the subject, ought not to be made a party to a bill of foreclosure by the first mortgagee. If the mortgage to Warner and its foreclosure were equivalent in effect to a sale of the equity of redemption, then the principle of that decision would seem to apply to this case, and settle the question that the plaintiff had no right to redeem the Gorham mortgage. In Broome v. Beers, 6 Conn., 198, the same rule was applied to subsequent incumbrancers whose equity of redemption had been foreclosed. For these reasons we are satisfied there was no error in the judgment of the Superior Court. In this opinion the other judges concurred.