Whittacre v. Fuller

By the Court Atwater, J. These are actions by different mortgagees to foreclose separate mortgages given by Fuller at different times, and embracing in the main tbe same property. In each case tbe mortgagor, and all incumbran-cers of record, other than plaintiffs, are made defendants. In tbe action in which Hayes is Plaintiff, and which was first commenced, Whittacre and Starbuck interpose their equities and claim by way of answer, and in that afterwards commenced by Whittacre and Starbuck, Hayes sets up her equities in the same manner. The equities and claims of the Defendant, Emmett, who claims as the successor in interest of the mortgagor, and also as purchaser under a judgment against Fuller, are also interposed by answer in each action. The whole merits of the controversy are therefore before the Court in either case. The two cases were referred to a special referee to take the testimony and report the facts, and the report in both cases was the same, and the cases were tried in the Opurt below, and argued in this Court upon the same state of facts and same record. Both cases may, therefore, properly be considered together, as a decision upon the issues raised in one, must necessarily determine those of the other. As the papers in the case of Whittacre and Starbuck vs. Ful — 512 — ler were mostly used by the Court in considering the case, where the word Plaintiffs occurs, it will be understood as referring to them. The facts presented by these cases, as report-fed by the referee, Harvey Officer, Esq., are substantially as follows, viz. : That on the twenty-fifth day of May, 1854, Alpheus Gr. Puller made and executed his promissory note to the Plaintiffs for the sum of three thousand dollars, due in twelve months from date with interest at the rate of two-and-a-half per cent, per month, payable semi-annually. That on the same day, to secure said note, Fuller and wife executed and delivered to the Plaintiffs (Whittacre and Starbuck,) a mortgage upon lots nine and ten, in block fifty-one, in Rice & Irvine’s addition to the town of Saint Paul, which mortgage was duly recorded. That said conveyance was conditioned for the payment by said Fuller to the parties of the second part named in said mortgage, of the sum of three thousand dollars, with the interest thereon, according to the conditions of his promissory note, bearing even date with said mortgage. That on the 13th day of February, 1856, in consideration of the extension of time on said note for one yeax*, the said Fuller agreed to keep the interest then due, for one year, at thi’ee per cent, per month, interest payable quarterly, and to pay interest on the piincjpal quarterly, instead of semi-annually, and if not paid when due, to pay five per cent, per month till paid, which agreement was endorsed in writing on the back of the note, expressing the consideration, and signed by the Defendant, Fuller. That there was paid upon said note, in part payment thereof, the sum of $967.50-100, May 25th, 1855, and the sum of $225, August 28th, 1855. That the payment of May 25th, 1855, was the first payment on the note, and that $900 thereof was interest on the principal, and the $67 was interest on the first semi-annual instalment due on the note, and that the payment of $225, on the 28th day of August, 1855, was paid as interest, and calculated at the rate of two-and-a-half per cent, per month. There was also a payment on the 13th of May, 1856, of $264, paid as interest as follows : On the 13th of February, 1856, there was a balance due of $433, upon — 513 — which Puller agreed to pay three per cent, per month, and the $264 payment was made up by calculating interest at 2| per cent, per month on the $3,000, and three per cent, per month on the $433 balance. There was also a payment on the 13th of August, 1856, of $264, which payment was made up in the same manner as the payment of May 13th, 1856, and still another payment of $264 on the 5th day of November, 1856, made up in the same way upon similar calculations of interest, and this payment was included in, and made a part of the principal sum mentioned in the promissory note for $1,694.88, hereafter described. That on the 16th of November, 1857, Whitacre and Star-buck paid the sum of $64.40-100, which had been assessed upon the premises as taxes. That on the 5th day of November, 1856, the said Alpheus G. Puller and wife executed and delivered to Plaintiffs, a mortgage on the same premises, to secure his note to them of that date for the sum of $1,694.88, which mortgage was recorded July 28th, 1857. That on the 24th day of October, 1855, the said Fuller made a promissory note in favor of Harriet S. Hayes for the sum. of $1,300, with interest after maturity at five per cent, per month, due one year after date, and on the same day executed a mortgage, to secure said note, on the wept part of said lots nine and ten, and certain other property, which mortgage was recorded November third, 1855. That fifty dollars was paid on said note at the maturity thereof. That on the 6th day of April, 1857, 'William L. Banning and Wm. Bucknell, by the firm name of Wm. L. Banning & Co., recovered a judgment against Alpheus G. Puller (with others,) for the sum of $3,156,85, which judgment was founded upon an indebtedness which had accrued to them prior to the 28th day of July, 1856, and was, on the date thereof, duly docketed in the county of Ramsey. That on the 19th day of September, 1857, the premises mortgaged were sold on execution issued on said judgment, and purchased by Banning & Co., and the Sheriff’s certificate delivered to Banning & Co., and also filed with the Register of Deeds. — 514 — That the said certificate was afterwards duly assigned by Banning & Co., to Lafayette Emmett, and a Sheriff’s deed for tbe premises, at the expiration of the time of redemption, duly executed to the said Emmett. That on the 30th day of April, 1858, Alpheus G. Fuller sold the premises to Joseph E. Gay, and on the 15th day of July, 1858, the said Gay sold and transferred the pu-emises to Lafayette Emmett, who entered into possession of the same October 1, 1858, and has ever since continued in possession. That there was nothing in the mortgage first above described, or in the record thereof, to show that it drew any greater rate of interest than seven per cent, per annum. And the same finding in regard to the mortgage secondly above described. That Banning & Co., at the time of their purchase on the judgment, had no other notice of the said mortgages, nor of the rates of interest in the notes secured by the same than that conveyed by the record. That the agreement endorsed upon the back of the note, was made without the knowledge or -consent of, and without any notice to any of the parties to this action, except the Plaintiffs, and Defendant Puller, and no record was made of the same. That the sum of $261, paid on the 5th day of November, 1856, was included in and formed part of the consideration of the said second note for $1,694.88, and that said note was given for arrears of interest, claimed to be due up to November 5th, 1856, and that no part of said note has been paid. That the delay in recording the mortgage securing said note was unreasonable, and that said Defendants, Hayes and Banning, and their successors in interest, had no notice of the existence of said mortgage, until the same was recorded, and that the same is a lien upon the same premises covered by the mortgage to Whitacre and Star-buck. The decree entered upon this report adjudged that there was due the Plaintiffs, from Fuller, the sum of $7,010.34, and that the mortgage for $1,699.88 is not a lien on' the premises therein described or any part thereof, as against the lien or — 515 — interest of either of the Defendants, Hayes or Emmett, but postponed to their claims. That the mortgage first described is a lien on the premises described in the complaint, as against the Defendants, Hayes and Emmett, for the amount remaining due thereon, after computing interest on $3,000, at the rate of two-and-a-half per cent, per month, from its date to the maturity thereof, and after maturity at the rate of seven per cent, per annum, deducting from the principal and interest so made the payments by Defendant, Puller, mentioned in the . referee’s report, at the several' times when the same were made, the amount now appearing to be due upon such computation, being $2,844.80. That the Plaintiffs have a lien against all the Defendants for $64.40, amount of taxes paid by them, and interest on same. The decree then provided for a sale of the premises, and that all parties be barred and foreclosed from all equity of redemption, &c. All parties appear to have been dissatisfied with this decree, and appeal to this Court to have the same reformed, and their rights adjusted according to the equities of the case. The mortgage of $3,000 by Puller to Plaintiffs, of May 25th, 1854, is the first incumbrance upon the premises which the papers disclose, and of course takes precedence of the others to the amount specified in the record. As between the original parties to this mortgage, it is a lien upon the premises to the amount due upon the note which it secures, according to the legal amount of interest secured by said note. But subsequent incumbrancers are bound by nothing more than the record discloses, (unless express notice be proved,) and as the record makes no mention of the rate of interest specified in the note, as to the second mortgagee, the same must be computed at the'rate of seven per cent, per annum. Frost v. Beekman, 1 John Ch., c. 300; Shawbhut v. Parrott & Thompson, ante p. 323. So far at least as Mrs. Hayes is concerned she has the right to insist that the lien of the mortgage shall be no greater than the record discloses, as she appears to be a bona fide purchaser for a valuable consideration, and we are not to presume she would have risked her money upon the property, — 516 — encumbered to a greater amount than tbat of which notice was given by the record. Her mortgage bears date the 24th of October, 1855, and was recorded November 3d, 1855, from which date, as to subsequent incumbrancers, her rights commence. The Court below, therefore, erred in holding that the first mortgage was a lien as against Mrs. Hayes for more than $3,000, and interest at seven per cent., after deducting payments. This amount is to be ascertained by computing the interest on the principal up to the time when a payment was ' made, adding the same to the principal, and deducting the payment from the amount, the balance forming a new principal, on which interest is to be computed in the same manner. The sum of these payments, as alleged and admitted by the pleadings in both actions, is $1,984.50 ; and although the referee finds, as a fact, that the payment of $264, Nov. 5, 1856, was carried into, and formed a part of the consideration of the new note and mortgage, yet I do not see how we can distinguish between that and the other payments. This arrangement for the payment of this sum is binding between the parties, and subsequent purchasers or incumbrancers are certainly in as good a position. That the giving a new note, with larger interest and increased security, was considered as a payment, is affirmed, and still insisted on by Whittacre and Starbuck, by their claim to recover on the new note. If permitted to do this, then it should be endorsed as a payment on the old. The next transaction between the parties to the original mortgage, which is assailed by subsequent incumbrancers, is the extension of time on the $3,000 note. It is claimed by Mrs. Hayes and L. Emmett, that this extension of time discharged the mortgage. We do not think this position tenable. Seo. 31, p. 301 Comp. Stat. provides how a mortgage shall be discharged, which Statute was in force at the time of the transaction referred to. There is no claim that the mortgage was discharged in the manner provided by Statute, nor by the execution of any instrument of as solemn and binding a character as the mortgage itself. There having been no legal discharge of the mortgage, if any is claimed it must be based upon superior equity cf the subsequent incumbrancers over — 517 — the original or first mortgagees, or some injury to their rights and interests in the property, sustained by reason of the act complained of. But the Defendants wholly fail to show that their rights have been injuriously affected by the extension. As between the parties, the arrangement was unobjectionable, was made in good faith, and evidently without any intent to discharge the mortgage, or prejudice the rights of subsequent incumbrancers. Mrs. Hayes doubtless has the right to insist that her lien on the premises shall not be impaired by any arrangement between the parties to the first mortgage, made subsequent to the execution of hers, without her privity or consent. As to her, the agreement was simply void, and her mortgage may be enforced, as though no extension had been made. But in equity she can claim no more. There is no such relation existing between consecutive incumbrancers, as to avoid a mortgage from such agreement, and it would manifestly be subversive of the principles of justice and equity to give it such effect. It is laid down in 1 Hilliard on Mort., p. 307, that a mortgage being given as security for a debt, and not merely for any particular evidence of debt, the general rule is, that nothing but actual payment of the debt, or an express release will operate as a discharge of the mortgage. The lien lasts as long as the debt. And in The Bank of Utica vs. Finch, et als., 3 John, Ch. R., 293, it is held that where the mortgage is given to secure a particular debt, with a condition to be void upon the payment of that debt, the mortgagee does not lose his security by the mere extension of the time of payment. 8 Pick., 522; 9 Mass., 247; 31 Maine, 247. The amount of - $64.40, paid by Plaintiffs as taxes, is undisputed, and is a prior lien in favor of the Plaintiffs upon the premises for that amount and interest. The next incumbrance in order of date, is the second mortgage of Puller to the Plaintiffs for $1,694.88, date of November 5th, 1856. The consideration of this mortgage, as found by the referee, was for arrears of interest on the $3,000 mortgage, and it was recorded July 28th, 1857. In what manner, or at what rate the interest was computed to produce this — 518 — amount does not appear, but if the payments made by Fuller were made as interest, as found by the referee, at tbe rates as stated by bim, there would only have remained due, as interest, at the date of the mortgage, the sum of $409.41. It is only to this extent, therefore, that we find any consideration for this second mortgage, and this consideration appears to have been an amount found due on the principal of $3,000, February 13, 1856, calculating interest on the same at two- and-a-half per cent, per month. The amount, in fact, then found due by the referee was $433, probably by computing the interest quarterly, although by the terms of the note previous to that date, interest was payable semi-annually. The next incumbrance on the premises, is the judgment of Banning & Co., recovered and docketed April 6th, 1857, from which date it became a lien on the lands described in the complaint. This was previous to the record of the second mortgage from Fuller to the Plaintiffs, that having been recorded July 28th, 1857. The facts reported show no consideration for that mortgage, except for something over the sum of four hundred dollars, as above stated, and that consideration consists of interest not legally chargeable. In other words, the Plaintiffs could not have collected that amount of interest in an action against Fuller, if he had interposed a de-fence, nor is the obligation on his part rendered more binding by giving his note for the amount, unless it be shown that such note was given and received in payment of the debt. No such evidence appears in the case. The assignee of the judgment is entitled to object that this debt shall not operate as a lien upon the premises, prior to that of the judgment. There is also another reason why this mortgage should not be held as a prior lien to the judgment on these premises. Previous to the Statute of 1858, a bona fide purchaser for a valuable consideration, previous to the docketing of a judgment, was'preferred to the lien of the judgment, even though his deed or mortgage was not recorded. But as against all other unrecorded conveyances, the lien of the judgment attaches from the time of docketing thereof. In Stuart vs. Kissam, 2 Barb. 493, it was held that a party taking a conveyance of real estate in payment of a precedent debt, was — 519 — not entitled to protection as a tona fide purchaser within the principle of the recording acts, for the reason that he gave no present consideration for the conveyance. To the same effect is Dickerton vs. Tillinghast, 4 Paige Ch. Rep. 215, and 20 John. 637. The reason why a tona fide purchaser for a valuable consideration, whose deed or mortgage was unrecorded, was preferred to the judgment creditor, was on the' ground that his claim was one of superior equity, he having parted with a valuable consideration on the faith of the specific property. But in the case at bar the mortgagee shows no equity superior to that of the judgment creditor, as he parted with nothing on the faith of the property, and took the mortgage only as security for a precedent debt, and it does not appear that he relinquished any personal claim for such debt upon the debtor himself. Aside from the fact that the consideration of this mortgage was that of a precedent debt, not collectable by law, the circumstances disclosed by the case with reference to it do not exhibit the equities of the Plaintiffs in a peculiarly favorable light. The consideration named in the mortgage exceeds by more than four times the amount due at the date thereof, even computing the interest on the principal at two and a half and on the interest at three per cent, per month quarterly, and the mortgage was not recorded until nearly nine months after its execution and delivery, while the referee has found as a fact that the delay in recording this second mortgage from the date thereof until the 28th day of July, 1857, was unreasonable, and that Banning & Co. and their successors in interest, had no notice thereof until the same was recorded. "We do not think therefore on any principle that the lien of this second mortgage should be preferred to that of the judgment of Banning & Co. and there was no error in the ruling of the Court below on this point. We think the Defendant Emmett occupies the same position as Mrs. Hayes with reference to the application of the payments made by Fuller on this mortgage. That is, he appears from the record to be a tona fide purchaser for a valuable consideration, holding not only under the title by Sheriff’s deed on the Banning judgment, but also by deed from Fuller’s grantee. Were his title limited to that acquired — 520 — under the judgment only, he would possess superior equities to the judgment creditor, as in Jackson vs. Dubois, 4 John. 221, it was held that the vendee of the Sheriff would be preferred to a prior unregistered mortgage. To the same effect is 4 Cow. 499. The referee has found that the payments made by Fuller were made as interest, but the amount far exceeds the interest due upon the note as disclosed by the record. As subsequent incumbrancers are presumed to have acquired their interests with reference to the existing liens on the premises of which they had notice, they are entitled to have payments applied so as to reduce those liens, as they appear of record. Parties by a private arrangement between themselves cannot prejudice the rights of subsequent incumbrancers, although as between themselves the arrangement may be binding. The decree which was entered upon the report of the referee barred and-foreclosed the Defendants, and all persons claiming under them, from all equity of redemption. This part of the decree is erroneous, as under the act of March 10, 1860, the Defendants are entitled to three years after the sale within which to redeem the premises. Bassett vs. Stone, 4 Min. 298; Heyward vs. Judd, 4 Min. 483. As between the Defendants Hayes and Emmett, the latter is entitled to insist that Mrs. Hayes shall make the amount due her out of property, so far as the- same is sufficient for that purpose, not covered by Plaintiff’s mortgage; or, if she redeems from Plaintiffs without foreclosing her mortgage, the Defendant Emmett is entitled to be subrogated to her rights in her mortgage upon satisfying the amount due by the terms thereof. 1 Hilliard on Mort. 308; 1 Story’s Eq. Jur., sec. 633. As a matter of equity the parties in interest have a right to insist that the property shall not be consumed by unnecessary costs and expenses. One sale is sufficient for all purposes, and the proceeds thereof should be applied to extinguish the liens to the extent and in the order herein above determined. We shall therefore refer this case to the Clerk of this Court (unless the parties to the, actions stipulate in writing to refer to some other person within ten days after notice of filing hereof,) to ascertain and report the amount due the mortgagees — 521 — respectively, and tbe amount of tbe liens, npon tbe principles bere laid down, and shall so order that tbe property be sold in tbe action first commenced, that tbe proceeds of tbe sale of tbe property mentioned in tbe first mortgage be applied first to pay tbe costs of sncb sale, and tbe snit commenced to foreclose tbe same, and tbe payment of tbe first mortgage lien of Whittacre and Starbucb, and tbe remainder, if any, together with tbe proceeds of tbe lands not mentioned in tbe first mortgage, or so much thereof as may be necessary, be' applied in discharge of tbe second or Hayes’ mortgage, and costs of suit, tbe overplus, if any, to be paid to said Emmett, as tbe party next in interest — tbe mortgagees being respectively entitled to judgment against tbe mortgagor for any amounts remaining due upon their notes, after applying tbe proceeds of such sale in tbe manner before stated, computing interest at tbe rate agreed upon or specified in tbe note until maturity, and tbe legal rate thereafter, tbe payments to be deducted at tbe dates they were respectively made, as reported by tbe referee. Note. — The Chief Justice having boen a party in tho action took no part in the decision.