Lamoille County Savings Bank & Trust Co. v. Belden

Watson, J. It is contended by the appellant that the note given by C. F. Eddy to P. D. Pike & Son, (hereinafter called the Pike note,) and by them negotiated to the plaintiff bank is not secured by the mortgage in question, it not being a note given by the mortgagors or either of them to the bank, but a note given to third persons and by the latter negotiated to the bank, basing such contention on the ground that a construction by which the mortgage stood as security for a note thus acquired by the bank, is against public policy. But we do not think it is a question involving public policy. There is no legal reason why a person doing business with, or discounting promissory notes at, a bank, may not, in giving it a mortgage as security for present and also for future indebtedness of the mortgagor, make the general terms of the clause covering the latter sufficiently broad to include a promissory note given by the mortgagor to a third person, which subsequently, on indorsement by such third person, is discounted and owned by the bank in its usual course of business. In this respect, the question in the instant case is therefore not to be determined on public policy, but on the intention of the parties as gathered from the mortgage itself under rules applicable to the construction of such written instruments. By its terms, the mortgage was security to the bank for the payment of the noté particularly described in the condition, and also for the payment of all "further sums” that the mortgagors [540] or either of them owed the bank at the time of the execution of the mortgage, or might thereafter “become owing it in any way.” No question is made but that the plaintiff is a bank of discount and deposit. The term “further sums” refers to sums of indebtedness in addition to that represented by the note described; and the phrase “in any way,” construed as it should be with reference to the subject-matter to which it relates and the character of the mortgagee (West London R. Co. v. London and, North-Western R. Co., 11 C. B. 254, 356), shows that the word “owing” is not to be taken as restricted in sense, but rather as universal and indefinite, extending to all sums that might become owing from the mortgagors or either of them to the bank, .whether by direct dealings between them, or by way of bills, notes, and other evidences of debt given by the former to the order of third persons and, on indorsement by the payees, discounted by the bank in its usual course of business. We think this construction is in accordance with the intention of the parties, and that the condition of the mortgage covers the debt evidenced by the Pike note negotiated to the bank and owned by it. See Soule v. Albee, 31 Vt. 142; Gleason v. Kinney, 65 Vt. 560, 27 Atl. 208; Keyes v. Bump, 59 Vt. 391, 9 Atl. 598; Bank of Paterson v. Byard, 26 N. J. Eq. 255; Collins v. Gregg, 109 Iowa 506, 80 N. W. 562. And in the absence of any finding of conspiracy, as claimed by the appellant, the mortgage must be given its full operation in this respect, notwithstanding C. F. Eddy gave the Pike note not understanding or intending that it should be so secured. The intended scope of the mortgage controls. On October 6, 1913, the land covered by the plaintiff’s mortgage, and other land called the Smalley place, were mortgaged by O. F. Eddy to the appellant, subject to two prior mortgages named, one of which is the plaintiff’s mortgage in suit; and on November 18, 1913, all the lands so mortgaged to the appellant were sold to him by O. F. Eddy, the conveyance thereof being by warranty deed of that date executed by the latter and his wife. In and by that deed, the premises are warranted free from every incumbrance, “Except $3,000 mortgage held by Capital Trust Co., $3,000 held by” Lamoille County Savings Bank & Trust Co., “and $500 held by Union Savings Bank & Trust Co., all which mortgages said grantee assumes and agrees to pay.” It will be seen that in the part of the exception particularly men [541] tioning the plaintiff bank, there is an ellipsis between the dollar-mark and figures “$3,000,” and the word “held.” In technical phrase, the word “mortgage” is to be there understood. A like ellipsis occurs in the part particularly mentioning the Union Savings Bank & Trust Company, immediately following the dollar-mark and figures “$500,” — the word “mortgage” is to be understood there also. Hence in construing the instrument, we treat the word “mortgage” as being thus grammatically understood to complete the sense, the significance of which more particularly appears in connection with our discussion of the appellant’s case under the cross-bill. If the appellant, at the time of taking the warranty deed mentioned, did not have actual knowledge of the full conditions of the plaintiff’s mortgage, he had constructive notice thereof; and if he was interested to know what constituted the mortgage debts and their aggregate amount, he was in law bound to inquire of the plaintiff. Making no such inquiry, he is chargeable with notice of all the facts that could have been obtained by the exercise of reasonable diligence in prosecuting inquiry in that direction. Seymour v. Darrow, 31 Vt. 122; Passumpsic Savings Bank v. First National Bank, 53 Vt. 82; Passumpsic Savings Bank v. Buck, 71 Vt. 190, 44 Atl. 93. In addition to this it is found that on or about the next day after the appellant purchased the equity of redemption and before any actual money had been paid out by him'on account of the purchase, though after he had given his note for part of the consideration, payable to Mrs. Eddy, he was informed by one of the directors of the plaintiff bank that the debt covered by the mortgage in question was more than three thousand dollars, that the Pike note had been indorsed to the bank, and he thought there was two thousand dollars (two notes) in addition secured by the mortgage; that on the same day Eddy, the appellant, and the same director of the bank together took advice of counsel upon the legal question whether the last three notes were covered by the mortgage, and were advised by him that he could not see why they were not. This clearly shows that as against the plaintiff’s mortgage the appellant can stand no better than the mortgagors; for to entitle him to any protection against the mortgage, not had by them, he as purchaser must be not only bona, fide, and without notice, and for a valuable consideration, but he must have paid the purchase money. Story’s Eq. Jur. §1502; Abell v. Howe, [542] 43 Vt. 403; Reynolds v. Haskins, 68 Vt. 426, 35 Atl. 349. Nor does the fact that at the time of receiving such information he had given his note to Mrs. Eddy for part of the consideration, make any difference with the application of this principle, for a court of equity would stop payment of the money due on the note. Tourville v. Naish, 3 P. Wms. 306. Recurring to the warranty deed under which the appellant holds the equity of redemption, wherein as construed it is stated that a “$3,000 mortgage” on the premises is held by the plaintiff, manifestly the sum “$3,000” is given by way of description to identify the mortgage, (that being the face of the note particularly described therein,) and not as stating any limitation in the amount of debts secured by it; and the provision immediately following in the deed, “all which mortgages said grantee assumes and agrees to pay,” is an assumption of the payment of the plaintiff’s entire mortgage debt, not merely a part of it. The agreement contained in the deed in this respect is plain and free from ambiguity, and the legal operation thereof can not be varied or affected by the finding on parol testimony showing the consideration given for the deed. In Simanovich v. Wood, 145 Mass. 180, 13 N. E. 391, an action for breach of covenant against an admitted incumbrance of an unpaid betterment assessment, the defendant offered to prove by parol testimony that at the time the deed was given, and as a part of the consideration, the plaintiff promised to pay the assessment. The court said: “This evidence was rightly rejected. It directly varied and contradicted the written contract of the defendant. The covenant is against all incumbrances. The evidence offered was for the purpose of showing an oral agreement that the incumbrance created by the assessment was not within the covenant. "While for some purposes it is competent to show what the real consideration of a deed is, a party cannot, under the guise of showing what the consideration is, prove an oral agreement, either antecedent to or contemporaneous with the deed, which will cut down or vary the stipulations of his written covenant. This would violate the well settled rule of law, which will not permit a written contract to be varied or controlled by such testimony.” To the same effect are the cases: Beach v. Packard, 10 Vt. 96, 33 Am. Dec. 185; Taylor v. Gilman, 25 Vt. 411; Butler v. Gale, 27 Vt. 739. The value of the property conveyed is not found. Nor is a finding in this behalf essential to [543] the binding 'effect of the grantee’s assumptive agreement; the acceptance of the deed was a sufficient consideration for such agreement. Jones Mort. (4th ed.) §752; Bay v. Williams, 112 Ill. 91. By such acceptance the grantee became personally liable for the fulfilment of the agreement to his grantor, and the benefit thereof inures to the mortgagee who may enforce it in equity directly against the grantee. Jones Mort. Id.; Green v. McDonald, 75 Vt. 93, 53 Atl. 332. The appellant’s position that on payment of the mortgage notes, he is entitled to have the two notes on which Macutchan and Love joy are accommodation signers, and the Pike note, turned over to him uncancelled, is untenable. Saying nothing about the right of the plaintiff to reject any offer of payment made upon such condition, the appellant, by force of his assumption of the mortgage, is primarily liable as principal for the mortgage debt as a whole, and a payment by him operates in law as an extinguishment of all the notes constituting it. Converse v. Cook, 8 Vt. 164; Willson v. Burton, 52 Vt. 394; Deavitt v. Ring, 74 Vt. 431, 52 Atl. 1045. Without regard to other obstacles standing in the way in this respect, it is sufficient for the disposition of this branch of the case to say that payment by the appellant of his primary liability can afford no ground upon which to predicate the doctrine of subrogation. Bank v. Cushing, 53 Vt. 321; Underwood v. Metropolitan National Bank, 144 U. S. 669, 36 L. ed. 586. The decree rendered below, however, is defective: (1) the cross-bill should have been dismissed; and (2) it.was essential to the decree that it fix a time of redemption. Notwithstanding Rule 38 of the court of chancery says the time of redemption shall, unless otherwise ordered, be one year, to run from the date of the decree, it is necessary as an incident to the remedy that the decree shall allow a time therefor. Smith v. Bailey, 10 Vt. 163; Davenport v. Davenport, 80 Vt. 400, 68 Atl. 49. On remand of the case, the decree should be altered to correct these defects. Decree affirmed and cause remanded with directions that the decree he so altered as to include the further element mentioned under division (1) of the last paragraph in the opinion. Let a time of redemption he fixed.