Watson v. Bane

Eccleston, J., delivered the opinion of this court. The two Clagetts sold to Bane a considerable landed property in Allegany county, but a deed was not given for the same. Part of the purchase money was paid, but it does not appear in the record how much remained unpaid. On the 15th of May 1851, after the sale, Watson obtained a judgment against Bane in the circuit court for Allegany county. The day after this judgment a mortgage was executed by Bane and the two Clagetts, to secure to Winters a debt of $2000, due by Bane to Winters, which mortgage included but a part of the land purchased by Bane from the Clagetts. After slating the debt as due by Bane to Winters upon a single bill, the mortgage then recites: “And which said single bill the said Harvey Bane is anxious to secure on certain lands bought by him of the said David Clagett and Samuel B. Clagett, and to which the said Harvey Bane has only an equitable title. And whereas the said John Winters requires the execution of this mortgage, both by the said David Clagett and Samuel B. Clagett, who have the legal title, and by the said Harvey Bane, who has the equitable title: Now this indenture witnesseth, that the said David — 124 — Clagett and Samuel B. Clagett, and Harvey Bane, with a view to secure and make safe to the said John Winters, his heirs and assigns, the said sum of $2000 due upon the said single bill,” &c. This claim not being paid when due, the present bill was filed, praying that the mortgaged premises might be sold for ■the payment of the debt. Watson came in by petition, asking permission to become a party defendant, and, by consent of the solicitor for the complainant, the court passed an order in conformity with the prayer of the petition. The answer of Watson was then filed, in which it is alleged that large sums, on account of the purchase money, had been paid by Bane to the Clagetts, amounting in the whole to the sum of $5159.44. That inasmuch as the Clagetts united in the mortgage, their vendor’s lien upon the mortgaged premises was released, not only in favor of Winters, but also as against all incumbrances prior to the mortgage. That his (Watson’s) judgment was a prior lien to the mortgage, and that Winters could not have a decree for the sale of the mortgaged lands without redeeming the judgment; or, at least, that the decree should provide for the payment thereof, prior to the payment of the mortgage, out of the proceeds of sale. The solicitor of Winters agreed to receive this answer without oath, and to admit the truth of the facts therein set forth; the agreement stating the object to be, to raise the question of priority between Watson and Winters. It appears an amended bill had been filed, but it is not in the record. In the answer of the Clagetts to the original bill, they admit the matters charged, and say they have no objection to a decree being passed as prayed. But in answering the amended bill they say they cannot admit any of the facts mentioned in it, and claim a lien for purchase money upon the land included in the mortgage, after payment of the mortgage debt and the complainant’s costs. And they pray that in any decree which may be passed, the court will reserve to them all rights which they may have as vendors. — 125 — The court passed a decree, directing the mortgaged premises to be sold, and the manner in which the proceeds should be applied. By the terms of the decree it is rendered necessary to ascertain the amount of purchase money due from Bane to the Clagetts; and, as part of that amount, the mortgage debt is first to be paid, together with interests and costs. Then, next in order, the proceeds of sale are to be applied to the payment of any balance of purchase money due the Clagetts. After which the residue of the money, (if any,) arising from the sale, is to go towards satisfying the judgment creditor. And from this decree the appeal is taken by Watson, the judgment creditor. In the examination of this case the first subject of inquiry is, whether, by uniting in the mortgage, the Clagetts assigned a portion of their vendor’s lien to Winters; or whether that instrument operated asa waiver of the lien, pro tanto 9 If the deed is to be considered an assignment, it is only so by implication or construction, for it contains no express contract or agreement to assign. In Schnebly & Lewis, vs. Ragan, 7 G. & J., 120, Lewis sold to Hall a parcel of land, taking his negotiable promissory notes for a part of the purchase money, without collateral or any other security. The land had been purchased from Stull and wife, by Lewis, without his receiving a conveyance. Subsequently, at his request, Stull and wife conveyed the land to Hall, who conveyed it to a trustee for the payment of certain of his creditors, among whom was the government of the United States. The promissory notes, so taken, were afterwards assigned by Lewis to Schnebly, by a special endorsement, and without recourse to the assignor. The bill was filed by Lewis and Schnebly, seeking to charge the land with the vendor’s lien. The defendants held and claimed the land by virtue of sales made under proceedings on the part of the United States. The Court of Appeals held, that inasmuch as the notes were assigned to Schnebly by Lewis, expressly stipulating that he was not to be responsible for the payment of them, — 126 — the transfer, upon such terms, operated as an extinguishment of the vendor’s lien, “because, so far as he was concerned, it amounted to a payment and satisfaction of his claim.” In the examination of the subject, however, the court refer to a number of cases in which the vendor’s lien, his right to assign it, and the mode of doing so, are treated of. One of the cases alluded to, is in 1 Ohio Rep., 318. There the lien is held to be an equity between the vendor and vendee, which exists, whether a note be given or not; and that this is an equity for the vendor’s own safety, but it cannot be transferred to another. In reference to this case the language of our court is: “We are not, however, prepared to go to the full extent of this decision, if the court meant to say that the assignee could not obtain the benefit of this lien by express contract.” And immediately after this remark they add: “In 1 Paige Ch. Rep., 502, the chancellor seems to hold a different doctrine, and intimates his opinion to be, that although the lien does not pass by implication or construction, still that it may pass by express agreement.” On page 126 of 7 G. & J., a quotation is made from the opinion of the chancellor in 1 Paige, the concluding sentence of which is: “But I am not aware of any case where the assignee of the note, or other security, has been permitted to sustain a claim on an implied agreement to assign the lien.” Although in Schnebly fy Lewis, vs. Ragan, the court do not actually decide the question, yet in the views expressed by them they have intimated, as strongly as they could, without so deciding, their opinion to be, that a vendor can assign his lien by an express agreement, but the lien will not pass by implication or construction. Which view we think correct in principle, and is sustained by authority. This being so, the lien of the Clagetts did not pass to Winters, but the mortgage was a waiver of it upon the mortgaged premises, to the amount of the mortgage claim. And such we think was the intention of the parties, as manifested by the transaction. The deed was to secure a debt due by Bane to Winters, and to gratify these parties the Clagetts — 127 — united in it, without receiving any equivalent or consideration for doing so, as far as can be seen from any thing in the record. But whilst the conveyance operated as such waiver, it did not cither satisfy or extinguish any portion of the claim of the vendors upon Bane, because they executed the mortgage with him and for his convenience. After that the vendor’s entire claim for unpaid purchase money was a lien upon the lands purchased by Bane, not included in the mortgage, and not conveyed by the Clagetts to other persons at Bane’s request. Although Winters cannot stand in the place of the Clagetts, and claim the vendor’s lien, but is simply a mortgagee one day junior to Watson’s judgment, yet as this judgment is a general lien, and therefore binds, not only the lands embraced in the mortgage, but also the other lands of Bane, Winters may say to him, your claim is a lien upon the lands, both inside and outside of the mortgage, whilst mine is confined to those inside, and a court of equity, for my protection, may first require you to look to the outside lands. Thus the vendors and the judgment creditor will be throw» upon the lands not subject to the mortgage. Ancf if they are’ sufficient to pay both, all parties may receive their' claims,without injury to either. But if the outside íand will not pay the Clagetts and Watson, then, to the extent of the mortgage, or so much thereof as may be necessary for the purpos'e of paying the judgment, the claim of the vendors must he abated. This loss they will be subjected to, because, by the mortgage, they waived their lien to the extent of the mortgage debt, for the benefit of Winters, without the assent of Watson, and of course, to his prejudice, if, notwithstanding the mortgage, they can claim the whole of their lien out of the residue of the lands in preference to the judgment. When the mortgage was given all the lands were subject to the lien of the vendors and that of the judgment creditor, the former having the preference. But that preference they lost, to the amount of the mortgage, by- uniting in that instrument. If the mortgaged lands should- sell for more than-enough to128 satisfy the mortgage, the balance of the proceeds may be added to the lands not mortgaged, and out of the fund so constituted the Clagetts and Watson are to be paid, if sufficient. But if not, then the claim of the former, after deducting the amount of the mortgage, is first to be paid, next the judgment, and then the balance due to the Clagetts as far as the funds will go. Should it turn out that in this order of payment the judgment, or any portion of it, remains unsettled, that deficiency must be supplied from the proceeds of sale arising from the mortgaged lands. The case of Aldrich vs. Cooper, 8 Ves., 382, is authority for throwing the Clagetts and Watson, first, upon the lands not embraced in the mortgage, for the benefit of the mortgagee. At. page 395, Lord Eldon says: “Suppose another case; two estates mortgaged to A and one of them-mortgaged to B. He has no claim under the deed upon the other estate. It may be so constructed that he could- not a'ffect that estate after the death of the mortgagor. But it is the ordinary case to say, a person having two funds shall not,-by his election, disappoint the party having only one fund;- and equity, to satisfy both, will throw him who has two funds upon that which can be affected by him only, to- the intent that the only fund- to- which the other has access may remain clear to him.” This principle is to be found also in Cheesebrough vs. Millard, 1 Johns. Ch. Rep., 412; in Averall vs. Wade, Lloyd & Goold, 252, in 10 Cond. Eng. Ch. Rep., 498; and in 9 Gill, 194, 195. Watson has no execution on his judgment levied- upon the mortgaged premises,- but he comes into a court of equity seeking to deprive the mortgagee of the benefit of his specific lien under and by virtue of the general lien of the judgment, when it would seem from Watson’s own answer in the cause there are other lands-bound by the judgment. For he says, “This respondent further states, that the said Harvey Bane had purchased from the said- Clagetts the mortgaged premises, together with other lands' lying in Allegany county, upon-which the said Bane, prior to the execution of the said mortgage and prior to the judgment hereinafter mentioned in favor of this respondent, had paid-to the said-Clagetts large sums of money.” Under — 129 — the circumstances, this is a very proper case for a court of equity to require, that it shall first be ascertained whether there are lands sufficient to satisfy the Clagetts and Watson before the mortgagee shall have his claim reduced or abated for the benefit of tiie judgment creditor. We refer to Gibson, et al., vs. McCormick, 10 G. & J. 110 to 112; Watts vs. Symes, 16 Sim. Rep., 640, and the authorities there cited; Clower vs. Rawlings, et al., 9 Smedes & Mar., 122; and Stevens vs. Cooper, 1 Johns. Ch. Rep., 430; not, however, as cases strictly analogous to the present, but because the principles involved in them have relation to assigning, waiving, of extinguishing liens, and the effect of such acts. The record does not show whether, upon the principles slated as applicable to the case before us, the lands are sufficient to pay the lien of the vendors and the judgment, without any abatement of the mortgagee’s claim, and therefore it will bo proper to send the case back for such further proceedings as may be necessary to obtain the requisite information for adjusting the rights of the respective parties, according to the views expressed in this opinion. If, in the future progress of the cause, looking to the lauds not embraced in the mortgage for the purpose of satisfying the judgment, circumstances shall be disclosed presenting difficulties or any serious impediments in that mode of settling the claim, the court may, if they think the equity of the case justifies it, direct the judgment to be paid out of the proceeds of the mortgaged premises, and order the judgment to be assigned to the mortgagee. Or, they may order the assignment to be made if the mortgagee thinks proper to pay the claim out of his own funds. In Cheesebrough vs. Millard, Chancellor Kent admits the equitable principle, that where there is a lien on two different parcels of land and another junior lien on one of those parcels only, and the party holding the elder claim elects to have his whole demand out of the land bound by the lien of the junior creditor, the latter may either have the prior creditor thrown upon the other fund or have the prior lien assigned to him, and receive all the aid it — 130 — can afford him. He says, “This is a rule founded in natural justice, and I believe it is recognised in every cultivated system of jurisprudence. In the English law it is an ordinary case, that if a party has two funds, he shall not, by his election, disappoint another who has one fund only, but the latter shall stand in the place of the former, or compel the former to resort to that fund which can be affected by him only.” In support of which, reference is made to a number of cases. See also Stevens vs. Cooper. Under the act of 1832, ch. 302, without reversing or affirming the decision below, a decree will be signed remanding the cause for the purpose of having the principles announced in this opinion carried into effect. Cause remanded.