St. Albans Trust Co. v. Farrar

The opinion of the court was delivered by Royce, J. Upon the pleadings and proofs we are satisfied that when the mortgage of November 3d, 1873, was given by James R. Watson and wife to the orator, to secure said Watson’s note of [545] that date made payable to the orator, the note so given was to be in payment of the pre-existing obligations that the orator had held against Watson, and which were secured by the mortgage of October 31, 1870. The facts, that the last-named mortgage was discharged of record, and that a new mortgage was taken to secure the $1800 note, and that the previous mortgages are shown to have been worth much more at that time than the amounts due to the orator and the defendant, are pertinent as showing what the understanding of the parties to the transaction was. It was not the substitution alone of new evidence of a previous, secured indebtedness, as was done in Dana v. Binney, 7 Vt. 493, and McDonald v. McDonald, 16 Vt. 630; but new security was taken; and what was done, was in its legal effect an abandonment or waiver of the previous security. There is no principle of equity law with which we are acquainted that would warrant the court in holding that the mortgage of October 31, 1870, can be upheld and made available as a security for the indebtedness secured by it, or for the $1800 note secured by the mortgage of 1873. It has been decided by the Supreme Court of Massachusetts in the case of Childs v. Stoddard, reported in The Reporter of April 6th, 1881, that, when A. took a new mortgage from B. which was erroneously ante-dated several years, and afterwards, to cure the defect, took a second mortgage on the same property from B. to secure the same debt, discharging the first mortgage on the record and surrendering the mortgage note, he could not enforce the second mortgage against C., who in good-faith had taken an intervening mortgage, which had beén duly recorded, although A. supposed his second mortgage would not be affected by the mortgage to C. There is another reason why the orator is not entitled to the relief prayed for. The premises, when the mortgage of 1873 was executed, are shown to have been an ample security for the debts of the orator and the defendant. The orator alleges that at the time of filing its bill (March 1st, 1880) they were an inadequate security for its debt alone. The defendant had the right to pay the orator’s mortgage, if necessary for her own security. [546] The record was constructive notice to her that the mortgage of 1870 was discharged, and the discharge of that mortgage left hers the first mortgage upon the property. Without any other notice shown to her than what was furnished by the record after the property has so depreciated in value, it would be inequitable to deprive her of her security by preferring the claim of the orator to hers. The decree of the Court of Chancery dismissing the bill is affirmed, and cause remanded.