Aiken v. Milwaukee & St. Paul Railway Co.

Lyon, J. When the trust deed, through which the appellant malees its title to the premises in controversy, was executed and registered, no assignment of the mortgage executed by Dunn and wife to the La Crosse & Milwaukee Railroad Company had been recorded in the office of the register of deeds, and it does not appear that the trustees named in such deed had any actual notice that such mortgage had been assigned. Upon these facts, it is maintained that the appellant took its title to the mortgaged premises divested of the lien and incumbrance of the mortgage; and the registry laws and the doctrine of merger are invoked by the learned counsel for the appellant to sustain the position. For the purposes of this case, it will be assumed that the execution and registry of the trust deed, and the subsequent proceedings thereon, vested the same title in the appellant that would have vested in it (had it then been in existence) by an absolute conveyance to it from the La Crosse & Milwaukee Railroad Company of the mortgaged premises, executed and registered at the same time, and containing the same covenants as to title, as the trust deed. [477] The La Crosse Company, the mortgagee, assigned the plaintiff’s mortgage for value long before it took a conveyance of the land in controversy from Dunn, Tenney and Haskell. Hence the two estates, the fee and the mortgage interest, never met in the same grantee, and for that reason, if for no other, the mortgage interest did not merge in the fee. This will more fully appear when we come to consider, as we presently shall, the doctrine of merger. Were the proposition a correct one, that, had the two estates met in the same grantee, the mortgage interest would necessarily have merged in the fee, it might follow that the trustees named in the trust deed could have safely relied upon the record in the register’s office, and could have dealt with the La Crosse company as the owner of the mortgage interest, as well as of the equity of redemption, that is, as the owner of the whole estate. In this view of the case the question becomes material, whether, had the two estates so met, the mortgage interest would necessarily have merged in the fee; and this leads us to consider a little more fully the doctrine of merger. Blackstone says that, “ whenever a greater estate and a less coincide and meet in one and the same person, without any intermediate estate, the less is immediately annihilated; or, in the law phrase, it is said to be merged, that is, sunk or drowned in the greater.” Com., Book II, p. 177. Commenting upon this rule, in James v. Morey, 2 Cow., 246, SUTHERLAND, J., says: “The rule in equity is the same as at law, with this modification, that at law it is invariable and inflexible. In equity it is controlled by the express or implied intention of the party in whom the interests or estates unite” (p. 300). The learned judge cites several cases to support such distinction. Among "these are Compton v. Oxenden, 2 Ves. Jr., 261, and Forbes v. Moffatt, 18 Ves., 384. In the latter case the Master of the Rolls, Sir William Grant, states the rule as follows: “It is very clear that a person, becoming entitled to an estate subject to a charge for his own benefit, may, if he chooses, at once [478] take the estate and keep up the charge. Upon this subjpct a court of equity is not guided by the rules of law. It will sometimes hold a charge extinguished where it would subsist at law; and sometimes preserve it where at law it would be merged. The question is upon'the intention, actual or presumed,, of the person in whom the interests ■are united ” (p. 890). Prof. Washburn, in his treatise on the Law of Eeal Property, lays down a similar rule, as do many of the cases cited in the briefs of counsel. The rule was also recognized by this court in the late case of Morgan v. Hammett, 34 Wis., 512. It must, be held, therefore, that, had the La Crosse company owned the mortgage interest when it executed the trust deed, still that interest would not necessarily have merged in the fee.- ' Such being the law, it seems very clear that it was the duty of the trustees, if they desired that the trust. deed should bé unaffected by the- plaintiff’s mortgage, to go beyond .the record in the register’s office (for such record was notice to them of the mortgage), and to ascertain from other sources whether there had been a merger in fact. They should have required their grantor (if it could) to produce the mortgage and the note which it was given to secure, and deliver them up, or, at least, to produce the securities and discharge the mortgage of record. The inability of the grantor to do so would be sufficient to charge the trustees with notice that the securities had been assigned, and the failure to call upon the grantor to do so is sufficient to charge them with laches. Briefly stated, the case seems to be this: When the trust deed was executed, under which the appellant makes its title to the land in controversy, the plaintiff’s mortgage was of record in the proper office, and the trustees had, at least, constructive notice of its existence. There was nothing of record: to show that the debt which it was given to secure had been paid, and nothing which could affect the mortgage, except the registry of the conveyance to the mortgagee of the equity of redemption. The record did not show whether such convey479 anee operated as a merger of the mortgage interest in the land, or otherwise. Further investigation was necessary to determine that fact; and the means of determining it were at hand. The trustees failed to push their inquiries beyond the registry. They failed to ascertain (as they easily might have done) whether the two estates were, in fact, united in their grantor, and, if so, whether the latter elected to preserve the mortgage interest. Using no diligence in that behalf, they took their conveyance at their peril of the fact. It turns out that there has been no merger; that the mortgage interest is still subsisting, and, because of priority of execution and registry, such interest is paramount to that of the appellant in the mortgaged premises. These views are fully sustained, by the cases cited on behalf of the plaintiff, particularly by the case of Purdy v. Huntington, 42 N. Y., 334, and the cases there cited. II. It is further, argued by the learned counsel for the appellant, that the ■ court erred in rejecting the testimony offered to show the order in which the mortgaged premises were conveyed by the mortgagor, and in failing .to direct in the judgment that the same be sold in the inverse order of alienation. The established equitable rule, one which has been applied by this court in numerous cases, is, that where the mortgaged premises have been conveyed in parcels at different times, by the mortgagor, on judgment of foreclosure, the parcels shall be sold in the inverse order of alienation. But, to authorize the court to determine at the trial the rights and priorities of the owners of the equity of redemption, all parties interested should have due notice that those rights will then be determined. What will be sufficient notice is not here determined. The record in this case fails to show that any such notice was given; and manifestly the defendants, other than the appellant, are none of them chargeable with constructive notice that their equities in the mortgaged premises, as between them and the appellant, were to be litigated and determined on the trial. [480] We think, therefore, that the court did not err in refusing at the trial to hear the testimony and determine the priority of right in the equity of redemption. But we think also that on the application of any defendant interested therein, made upon proper notice before the sale, and possibly, in some very special cases, after sale and before confirmation thereof, and within a reasonable time after judgment, the court should, by reference 0| otherwise, determine the respective rights of all parties in the mortgaged premises, and direct the sheriff to sell the same in the proper order ; and the court may, if necessary, stay such sale for a reasonable time to enable it to do so. Indeed, we think this the better practice; for, usually, the plaintiff has no interest whatever in the matter, and, as a general rule, he ought to be allowed to establish his case at the trial (if he can), without being embarrassed and delayed by a contest between the defendants in which he has no concern. Besides, if the priorities of the defendants be litigated in a proceeding subsequent to judgment, the court can better protect the plaintiff from the costs of a litigation in which he has no interest. If these views are correct, it follows .that, in a proper case, it rests in the sound discretion of the court to hear and determine on the trial the respective rights of the defendants in the equity of redemption, and to direct in the foreclosure judgment the order in which the mortgaged premises shall be sold, or to postpone such hearing and determination until after judgment, under the conditions and restrictions above indicated. Here the court chose the latter course; and, even had the proper notices been given, we could scarcely say that there was an abuse of discretion. Moreover, an omission in a judgment, which can be supplied by a convenient proceeding after judgment, in the court which rendered it, ought not to work a reversal; and this for the reason that no one is necessarily injured by such omission. III. The answer of the appellant alleges in a very general [481] way that the La Crosse & Milwaukee Railroad Company (through which it claims) took and condemned the lands in controversy, under the power of eminent domain conferred upon that company by its charter; but it contains no specific averment that the company proceeded under its charter to obtain an appraisement of the lands so taken. The record is entirely destitute of proof that any such appraisement was ever made. In the absence of such proof, the judgment properly provided for a sale of so much of the mortgaged premises as should be necessary to pay the mortgage debt, making no exception in favor of the appellant. Kennedy v. The Mil. & St. P. R'y Co., 22 Wis., 581. But it is claimed that the judgment, so far as it affects the lands of the appellant, violates sec. 21, ch. 119, Laws of 1872. It is said that the court should have appointed commissioners to appraise the value of such lands, and stayed all proceedings against the appellant until the coming in of their report. The statute clearly contemplates that the appraisal under it shall be made before judgment. But it does not require that it shall be made at all events in each case. It only authorizes it to be done; and it is at the option of the railway company to avail itself of the benefit of the statute or not. So, in this case, if the appellant desired an appraisal, it should have applied to the court before judgment, on proper notice to all parties interested, for the appointment of commissioners. The record fails to show that any such application was made; and this is a perfect answer to the objection and argument founded on the statute. By the Court. — The judgment of the circuit court is affirmed.