Case ID: mass_21/html/0136-01.html
Source: Caselaw Access Project
Author: {"author": "Parker C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Calvin Crane versus David March.
    Where a negotiable note secured by a mortgage of the promisor’s land is negotiated without an assignment of the mortgage, the equity of redemption is liable to be attached and sold on execution in 3'suit by the indorsee against the promisor.
    Consequently, notwithstanding the separation of the note from the mortgage, the latter continues in force; and by the principles of a court of equity, the mortgagee becomes trustee for the holder of the note.
    This was a writ of entry, which came before the Court upon a case stated.
    On the 4th of April, 1816, Christopher Nason, being seised in fee of the demanded premises, mortgaged the same to Daniel Day, to secure the payment of five negotiable promissory notes made at the same time by Nason to Day, payable in five successive years. On the 10th of April, 1823, Nason, being still in possession of the premises, mortgaged them to the demandant to secure the payment of 500 dollars, which sum remains unpaid. Previously to the 19th of February, 1823, only three of the notes had been paid; the other two, of which one had been negotiated to Israel Billings and the other to Moses Grout, remained due and unpaid. On that day Billings put in suit the note which had been indorsed to him, and attached the right in equity of Nason to redeem the land; and on the 12th of August following, judgment and execution being obtained, the right in equity was sold on the execution, and a deed thereof given by the officer to Jacob March.
    
      Oct. 4th.
    The execution was afterwards returned fully satisfied.
    The defendant claimed the land under the title of Jacob March, and also by virtue of an assignment of the mortgage deed of Nason to Day, made under the following circumstances. On the 12th of October, 1824, Jacob March having deceased, and his interest, if he had acquired any in the land, having descended to his heirs, the tenant, as administrator of his estate, for the purpose of discharging a supposed incumbrance on the land, and perfecting the title in the heirs, paid the note which had been indorsed to Grout, and took the same into his possession, with a written acknowledgment thereon by the holder, that it had been paid by the defendant, as a voucher in the settlement of his administration accounts. On the 25th of March, 1825, the original mortgage deed from Nason to Day was assigned by Day, in whose possession it had always remained, to the heirs of Jacob March And it was agreed, that whatever title was vested in Jacob March and his heirs by virtue of the transactions which have been stated, was at the time of the commencement of tins action fully vested in the tenant.
    Judgment was to be rendered for the demandant or for the tenant, according as the Court should be of opinion, upon these facts, that the demandant was or was not entitled to recover seisin and possession of the demanded premises; unless they should be of opinion that he was entitled to redeem the premises, in which case it was agreed that this action might be considered as a bill in equity to redeem.
    
      J. Davis and Mien, for the demandant.
    As the mortgage was not assigned with the notes, neither Billings nor Grout had any estate in the land ; Warden v. Adams, 15 Mass. R. 233; Parsons v. Welles, 17 Mass. R. 419 ; and as Day parted with his interest in the debt, which was the principal thing, his interest in the land, which was but an incident, was also gone ; neither could he be trustee of the nolders ol the notes, there being no declaration of trust in writing, and no trust resulting by implication of law from the written evidence in the case ; St. 1783, c. 37, § 3 ; Northampton Bank v. Whiting, 12 Mass. R. 104; Jenney v. Alden, ibid. 375; Goodwin v. Hubbard, 15 Mass. R. 210, [Rand’s edit. 218, n. (a);] Storer v. Batson, 8 Mass. R. 431 :—it follows,.that when Billings made his attachment, and sale on execution, Nason had not a right in equity, but the legal estate, and the sale was therefore void.
    
      April term 1827
    If a mortgage is held to continue in force after the notes secured by it have passed into different hands, the mortgager may be put to great embarrassment in ascertaining to whom he must make a tender in discharge of the mortgage. He cannot pay the money to the mortgagee, because the notes will be still outstanding against him and because the mortgagee has no interest in the mortgage.
    The note indorsed to Billings was put in suit and the judgment satisfied, and so far as concerns that the mortgage was discharged ; Porter v. Perkins, 5 Mass. R. 237; Perkins v. Pitts, 11 Mass. R. 125; and then by the payment of the note in Grout’s hands the mortgage was discharged entirely. Vose v. Handy, 2 Greenl. 322.
    In Atkins v. Sawyer, 1 Pick. 351, it was determined, that the mortgagee cannot levy on the right in equity, in a suit upon the demand secured by the mortgage.
    
      Newton and Sibley, contra,
    
    to show that the mortgage continued in force till the debt was fully paid, and that even then, if the condition were broken, the legal estate did not revest in the mortgager without a reconveyance or a bill in equity, cited Cary v. Prentiss, 7 Mass. R. 63; St. 1783, c. 37, § 6; St. 1798, c. 77.
   Parker C. J.

delivered the opinion of the Court. By the statement of facts it appears, that when the demandant took his deed of mortgage he acquired only the equity of redemption of the mortgage to Day, and that subject to the lien which Billings had acquired by attachment. That attachment having ended in a judgment and sale of the equity on execution, the demandant’s right was reduced to a right to redeem that equity within a year; and if he redeemed that, he would have a right to redeem the original mortgage to Day, by paying the notes which remain due. But he did not redeem nor make any tender within a year; so that if that sale of the equity was good, he has lost all his right; if void, he then has a right to redeem by paying off the two notes, because the tenant or those whom he represents, has become entitled by assignment to that which was assigned by Day to Grout, And as the tenant stands now in the place of the mortgagee, by virtue of the assignment of the mortgage, he has a right to require payment of the whole debt originally secured by the mortgage ; and he would hold as trustee of Billings the amount of the note which had been assigned by Day to him, and then showing that J. March had paid Billings on the sale of the equity, he would have a right to retain to the amount so paid.

The question then is on the validity of the sale of the equity ; and it is said to be void according to the decision of this Court in Atkins v. Sawyer; because the holder of a note or bond secured by mortgage shall not be allowed to satisfy his debt by a sale of the equity, and thereby reduce the time of redemption from three years to one, contrary to the original intent of the parties. In that case it was the mortgagee himself who sued the note and caused the equity to be sold 5 in this, it is an assignee, who, for aught that appears, took the note for a valuable consideration, and it may be, without any knowledge that it was secured by mortgage. It is true, that when he attaches the equity, he may be presumed to know that the note assigned to him was secured by the mortgage, though the record would inform him only that a note of like tenor and date was so secured. And if he took the note upon the expectation that it would be paid according to the terms of it, there does not seem to be any reason why he should not avail himself of the right which any other creditor, save the mortgagee, would have, to procure satisfaction of his note from the equity of redemption. Is the negotiable quality of a promissory note destroyed or impaired by reason of its being secured by a mortgage of land ? Certainly not. It passes to the assignee with all its legal qualities. Shall the indorsee for valuable consideration be restricted in his rights to compel payment by attaching any of the property of the maker ? We do not perceive that to be the case. The difference between him and the mortgagee is, that the latter already holds the land by contract, in such manner as to give the mortgager certain legal rights as to the time and manner of defeating his estate, and therefore he ought not to be allowed to resort to process against the same land, which will necessarily abridge those rights. But no such contract, express or implied, is made with the indorsee, who is presumed to have taken the note in the manner such securities are usually transferred.

The difficulty also would be greater to the purchaser of an equity thus sold, than, as suggested in Atkins v. Scaoyer, would occur when the mortgagee himself was the judgment creditor at whose instance the equity was sold, for in that case he might see by the record the relation in which he, for whose use the equity was sold, stood to the mortgager; whereas if sold at the instance of the assignee of the note, he would learn nothing by the records, but that a similar note was secured by the mortgage. This is certainly a difficult question; but I am inclined to think the sale in equity in this case was valid in law, and that there is a reasonable distinction between this case and that of Atkins v. Sawyer.

It is true the mortgager may be subject to some of the Inconveniences suggested in that case ; but they are of his own creation, as they arise out of the form of the contract which he chose to make. In the form usually practised in regard to mortgages, until lately, these difficulties could not occur, for the collateral personal security was a bond, which not being assignable at law, the action upon it would be always in the name of the obligee, and the assignee in equity could avail himself of no means of enforcing payment from which the obligee would be restricted. So that mortgagers may protect themselves from having their time of redemption reduced, by giving bonds, or notes not negotiable, instead of negotiable notes, which have become so common a medium of business that their efficacy ought not to be restrained.

It may be objected, that it will be easy for mortgageés holding such securities, to effect the purpose which seems to have been intended in the case of Atkins v. Sawyer, by nominally assigning them to some friend who will attach the equity for their benefit; but all that the law can do, in regard to fraudulent practices, is, to avoid them when they are proved to exist. A possible, abuse is no reason against the soundness of a legal principle.

In determining that the sale of the equity on the execution of Billings was valid in law to pass the estate of the mortgager, subject to the mortgage existing before the attachment, it was necessarily determined that the mortgage to Day was then in force, notwithstanding the separation of the notes from the mortgage, for otherwise there would have been no equity to sell, the legal estate being in such case revested m the mortgager. But that could not be the case, for at the time of the mortgage to Crane, the condition of the first mortgage had been broken, and nothing but an equitable in terest remained in the mortgager. The subsequent transfer °f the notes could not work a change of the title; on the contrary, according to the principles of equity courts, the mort-

gagee remained the trustee of those to whom he had assigned the debt, and in chancery he would be compelled, either to sue the mortgage, or to foreclose for the benefit of the assignee, or to assign the mortgage to the holder of the debt. And if the power' of executing this equitable principle does not exist m the courts here, still the application of the principle cannot be denied, when the form of proof will admit of it.

Judgment for tenant for costs. 
      
       It has been decided in Maine, that if a judgment creditor extend his execution on land mortgaged for the same debt, and the debtor neglect to re deem for a year after the extent, the estate is absolute in the creditor, not withstanding the mortgage. Porter v. King, 1 Greenl. 297.
      And in Massachusetts a mortgagee may attach and levy on the mortgaged .and for a debt not secured by the mortgage. Cushing v. Hurd, post, 253.
     
      
       It has been decided in New Hampshire, that when a mortgage is given to secure the payment of a note payable to bearer, the interest of the mortgagee in the land will pass by the mere delivery of the note, as an incident to the debt. Southerin v. Mendum, 5 N. Hamp. R. 420. And the assignee of the note may maintain an action on the mortgage in his own name, without any other evidence of the transfer. Id. See also, Paine v. French, 4 Ohio R. 320; Clearwater v. Rose, 1 Blackford, 138; Runyan v. Mersereau, 11 Johns. R. 534; Hatch v. White, 2 Gallison, 155; Jackson v. Blodget, 5 Cowen 202; Green v. Hart, 1 Johns. R. 580; Craft v. Webster, 4 Rawle, 242; 4 Kent’s Comm. (3d ed.) 193, 194; Crosby v. Bronson, 2 Day, 425; Austin v. Burbank, 2 Day, 474; 3 Powell on Mortg. (Rand’s ed.) 908 a, n. (1). Under the law as settled in the cases above cited, the difficulty experienced by the Court, in securing an interest in the mortgage to the assignee of the debt in the case m the text, would have been avoided; but at the same time they must have held the sale of the equity in that case invalid, because under the above decisions it would have fallen fully within the principle of Atkins v. Sawyer.
      
      It is held in Maine, that the assignment of a mortgage must be by deed. Vose v. Handy, 2 Greenl. 322. So, it seems, in New Jersey. Den v. Dimon 5 Halsted, 156
     
      
       See next preceding note.
     
      
       See Goodwin v. Hubbard, 15 Mass. R. (Rand’s ed.) 318, n, (a)