Worth v. Hill

By the Court, PAINE, J. This was an action to foreclose a mortgage, and the appeal presents a contest merely between two subsequent incumbrancers of different tracts covered by this mortgage, as to which was entitled, in equity, to have the tract of the other sold first. Perhaps the following general statement of the situation of the parties, will be sufficient to a proper understanding of the question decided. The mortgage being foreclosed covered two different tracts in different towns. The defendant Buck, who is the appellant, held a mortgage next to this in point of time, covering one of the tracts contained in this mortgage, and other land not covered by this, in the same town. The defendant Mowry held a mortgage next to Buck's in point of time, but [562] upon tbe land in the other town covered by this mortgage, and also upon another tract Thus it will be seen that the mortgage of Howry was not upon any part of the land mortgaged to Buch, but their interests conflict by reason of the mortgage which is being foreclosed, which is prior to both, and covers a part of the land incumbered by each of these defendants. It further appeared that there was a mortgage prior to all these, covering the tract in the Bucle mortgage and the one in the Mowry mortgage which are not contained in the mortgage now being foreclosed, and that such prior mortgage had been foreclosed, and that part which was covered by Howry's mortgage adjudged to be sold before the part covered by Buck's. It was further proved that the other tract covered by Buck's mortgage was ample security for the amount of the debt secured by that mortgage. It was even shown to be of greater value than the entire amount of the Buck mortgage and the first mortgage before referred to, prior to all, for the satisfaction of which the other tract covered by Howry's mortgage had been adjudged to be first sold. Upon this state of facts, the court below decreed that the portion covered by Buck's mortgage should be sold in this foreclosure before that covered by Hoiury’s, and from that part of the decree Buck brought this appeal. His counsel relies upon the established equitable rule, that in foreclosure cases, where the land has been subsequently conveyed by the mortgagor, it shall be sold in the inverse order of alienation. The justice of this rule has been some times questioned, but we regard it as not only well settled, but correct upon principle, and have repeatedly enforced it. But at the same time we think it may be controlled by other established equitable principles, where the facts render them applicable, and such we think was the case here. It is a familiar principle, that where one creditor has security upon two funds, and another has security upon one of them only, the latter may compel the former to resort first to that fund which he cannot reach. And although this is not a direct proceeding to accomplish that object, yet it is substantially that, inasmuch as Howry sets up these facts to rebut the equity Buck would otherwise have as against him. Eor [563] tbe result, if tbe judgment bad been otherwise, would bave deprived Mowry of bis security entirely. Tbe one tract covered by bis .mortgage having already been adjudged to be sold first, for Buck's benefit, now if tbe other should be adjudged to be sold first, be would bave nothing left. Whereas it appears by tbe testimony, that upon tbe decree as rendered, Mowry is protected, and Buck left with ample security for bis debt. Suppose A mortgages a tract to B, then gives a second mortgage on apart of it to C, which mortgage also covers other tracts, and then gives a mortgage on another part to D ? On a foreclosure of B’s mortgage, tbe ordinary rule, based merely on tbe order of alienation, would be to sell B’s part first. But suppose D could show that tbe other tracts covered by C’s mortgage were an ample security for bis debt, would not that raise an equity sufficient to overcome tbe ordinary rule, and require, as between C and B, that C’s part should be first sold ? I think so; and that is substantially tbe relation which these defendants bold to .each other in tbe present case. I can see no reason why tbe principle requiring tbe creditor having two funds to resort first to tbe one which tbe other creditor cannot reach, is not applicable to such a case. It is true that ordinarily tbe adequacy of tbe first fund might be tested by an actual sale, and tbe creditor who was compelled first to resort to that, might still be in a position to resort to tbe other, to supply any deficiency; and here Buck may not be left in such a position. I think that is good reason why such a decree as tbe one made in this case, should be made only upon clear proof of tbe entire inadequacy of tbe remaining security. But I am not prepared to say that courts should not act upon such proof, or that a party so situated has any absolute right to bave tbe adequacy of bis remaining security tested in all cases by an actual sale. It is obvious that such a test could not be bad in a case like this, and consequently, if that rule were adopted, it would lead to the injustice of cutting off tbe last mortgagee entirely, though it might not be at all necessary for tbe protection of the second. Courts are constantly adjudicating upon tbe most important rights of parties upon tbe theory that human [564] testimony can establish facts with sufficient certainty to justify such adjudication, and I think the question of the ade-qnacy or inadequacy of a security should form no exception. I think the judgment should be affirmed, with costs, against the appellant, in favor of the plaintiffs and of Mowry. Judgment affirmed accordingly.