Case ID: minn_11/html/0166-01.html
Source: Caselaw Access Project
Author: {"author": "McMillan, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Andrew Misener v. John S. Gould and William R. Gould, partners under the firm name of Gould & Brother, Samuel T. Van Brunt, et al.
    r A mortgage was executed by M. and V to G. and Bro.; by subsequent acts of the mortgagees and V., the mortgage is discharged in equity as to M., the other mortgagor; G. and Bro. afterwards foreclosed the mortgage by advertisement, against both mortgagors, and became the purchasers at the sale, and after the commencement of this action and filing of the notice of lis pendens, convey the premises to D., as the agent of V., one of the original mortgagors.
    
      Held: That M. may maintain an action to set aside the mortgage, sale, etc., although he did not appear or give notice of any equities at the sale; and that as to the premises owned by H., the defendants, D. and T., took no title by the conveyance from G. and Bro.
    This action was brought in the District Court for Rice county, and was .tried by the court without a jury. In the decision of the court below, the facts are found substantially as follows: Prior to and on the 4th Sept., 1858, the plaintiff, Misener, and the defendant, Van Brunt, were engaged in business as co-partners, under the firm name of Van Brunt & Misener, and owned and occupied lot 1, block 45, in Faribault, on which was a store, as tenants in common. The firm was indebted to defendants, Gould & Bro., in about the sum-of $1400 00, to one Parish $1000 00, and to Wadsworth & Wells, $400 00. Gould & Bro. held a note of the firm, and a mortgage on said lot 1, as security for tbeir debt. Tbe assets of tbe firm, consisting of book accounts and stock of goods, were about $3500 00. On tbe 1th Sept., 1858, tbe firm was dissolved, and Misener sold and assigned bis undivided balf of tbe personal assets, to one David Misener, at tbe request of Tan Brunt, and Tan Brunt agreed to pay the debts of the firm. Tan Brunt gave to Misener (plaintiff) bis note, and a mortgage upon bis undivided balf of said lot 1 as security for tbe payment of tbe debt to Gould & Bro., and caused a mortgage to be given by one Sarah Nash on lots 9 and 10 in block 58, to secure payment of tffe Parish debt. These mortgages were executed about tbe time of tbe dissolution of tbe firm. In July or August, 1859, Gould & Bro., who were fully informed of tbe agreement between Tan Brunt and Misener, in respect to tbe payment of tbe firm debts, agreed with T an Brunt, that if plaintiff (Misener) would discharge bis mortgage on lots 9 and 10, and Tan Brunt would give them a mortgage on said lots as additional security for tbe debt of Tan Brunt and Misener, and also a bill of sale of tbe stock of goods, they would pay tbe Parish debt, and when Tan Brunt should pay them tbe sum advanced to pay such debt, they would bold tbe goods as additional security for tbe debt of Tan Brunt and Misener. This agreement was communicated to tbe plaintiff, (Misener,) and be discharged bis mortgage on lots 9 and 10, and a mortgage thereon was given to Gould & Bro., and tbe stock of goods, worth $2500, was assigned to them. Tan Brunt afterwards paid Gould & Bro. tbe Parish debt, and tbe stock of goods was restored and released to Tan Brunt, without tbe knowledge or consent of plaintiff (Misener.) Tbe goods were worth more than tbe amount of tbe Parish debt and tbe debt to Gould & Bro. and more than tbe plaintiff’s half of lot 1, block 15. On tbe 30th May, 1860, Gould & Bro. foreclosed tbeir mortgage on lot 1, block 15, (given to secure tbe debt of Tan Brunt and Misener,) and bid off tbe premises for tbe amount of tbeir debt. Tbe notice of foreclosure and sale also contained the mortgage on lots 9 and 10. Plaintiff attended the sale, and requested the sheriff and the attorney for Gould & Bro., to sell lots 9 and 10 first, which was refused, and they were not sold at all, and the mortgage thereon was afterwards released and discharged without the knowledge or consent of plaintiff. Defendant, Yan Brunt, remained in possession of the premises after the foreclosure and sale, and allowed the time for redemption to expire, and paid no part of the debt of Yan Brunt and Misener to Gould & Bro.; and in the spring of 1863 commenced negotiations for the re-purchase of the premises from Gould & Bro., and made some payment on account thereof. This action was commenced on May 20, 1863, and notice of the pendency thereof was duly filed. In Oct., 1863, Yan Brunt hired from the defendant, Draper, money to complete the purchase, and Gould & Bro. conveyed the premises to Draper, who gave a bond to Yan Brunt for the conveyance of the saxne to him, on being paid the money so loaned.
    Upon these facts the court below found as matters of law: That after the assumption by Yan Brunt of the firm debt of Yan Brunt & Misener, the plaintiff, Misener, becaxne the surety, and Yan Brunt the principal, and as such surety became entitled to be subrogated to the rights of any creditor of the firm, in and to any securities taken from the defendant, Yan Brunt, as security for the firm indebtedness, upon the paymexrt of such debt by the plaintiff, or out of his property. The discharge of, or relinquishment of, axiy such security by the creditor, knowing of the arrangement between the plaintiff and defendant Yan Brunt, releases the plaintiff or his property, to the extent of the value of the security relinquished. The defendant, Yan Brunt, having agreed to, and being bound to pay off the indebtedness charged upon said lot 1, block 15, and having failed to perform his agreement, and allowed the mortgage thereon to be foreclosed, and the period of redemption to expire, cannot take advantage of his own wrong, and acquire a title under the foreclosure, to the prejudice of the plaintiff; his purchase must be treated as a redemption. The defendant, Draper, having acquired the title after the commencement of the action, and the filing of the notice of the pendency thereof, and as agent of Yan Brunt, acquired no greater rights than those of defendants, Gould & Bro. and Yan Brunt. The mortgage, as a lien upon the plaintiff’s undivided one-half of lot 1, block 45, is satisfied and discharged, and the foreclosure and sale of such undivided half should be set aside, and the deed to Draper is void. * * *
    Judgment was entered in accordance with such decision, from which defendants appeal to this court.
    Berry & Perkins, and 0. L. Lowell, for appellants.
    The time for the plaintiff to have asserted his equities, was during the pendency of the foreclosure of the Gould mortgage, within the rule laid down in Bidwell v. Whitney, 4 Minn. 76; and Johnson v. Williams, Ib. 260.
    Cole & Case, for respondent.
    It appears from the record, and is conceded by the defendants, that the plaintiff was a surety for the defendant Yan Brunt; that the defendants Goulds, were cognizant of this and knowingly discharged securities sufficient in amount to have satisfied the indebtedness, and upon these facts the defendants admit, that the plaintiff and his property were released, but insist that the claim should have been interposed by suit, to enjoin the sale prior to the foreclosure under which the plaintiff’s property was sold to satisfy the defendant Yah Brunt’s indebtedness to the defendants Goulds, relying solely upon the cases of Bidwell v. Whitney, and Johnson v. Williams, 4 Minn., 76-260. The want of analogy between these cases, and the case at bar, is so glaring tbat it is difficult to perceive tbe object of the counsel in citing them.
    Tbe first was an action for money bad and received to recover tbe surplus in excess'of seven per cent., for which a mortgagee bad bid off upon foreclosure by advertisement, under a mortgage,- authorizing tbe collection of interest at 5 per cent, per month, and tbe form of tbe action is stated by tbe court, as one of tbe principal reasons for refusing relief.
    Tbe other was an action to set aside a foreclosure, because tbe mortgagee bad sold tbe entire land mortgaged, disregarding tbe equitable rights of tbe plaintiff to have a portion of tbe land, primarily liable, first sold.
    Even in this case, tbe true rule is correctly stated in Clowes vs. Dickenson, 9 Cowen 402. Tbe neglect to interpose tbe objection before tbe sale, does not deprive tbe party of bis rights; but if by delay, tbe property has passed into tbe bands of a bona fide purchaser, and in such case only tbe sale will not be set aside, but tbe mortgagee will be compelled to account for its value.
    But tbe broad distinction exists in tbe case at bar, tbat the creditor, bolding ample sécurity for tbe payment of tbe principal debt, has voluntarily destroyed it in disregard of tbe rights of tbe surety.
    Whether this discharge was before or after tbe foreclosure of tbe mortgage, is immaterial. In tbe case of tbe last mortgage, it is shown to have been afterwards, and tbe plaintiff not having then been injiu'ed, bad no motive to enjoin tbe sale, as be bad tbe undoubted right to allow tbe sale to proceed, and bis property to be taken for tbe debt, relying upon bis right to subrogation.
    If it be said tbat be should have filed bis bill to have compelled the creditor first to exhaust the security, up>on the principle tbat when one of two creditors has a lien upon two funds, and tbe other only one, tbe former will be compelled to resort primarily to tbe fund in which tbe other has no interest. We reply that this is not that case, but if it were, the rule in practice generally is to compel the creditor to place his securities at the disposition of the other claimant, after they have served the purpose of satisfying his own debt, without restraining him in their use in the first instance. 2 Eq. Lea. Cases, 275-6.
    If the discharge was before the foreclosure, and the security discharged was equal in amount and value to the principal debt, it released the plaintiff, and cancelled the mortgage on his property; Johnson v. Williams, 4 Minn. 268; and his neglect to assert his rights at the foreclosure, could not waive them and impart to the mortgage renewed vitality, especially as at the commencement of the action and prior to the filing of the lis pendens no rights of third parties had intervened. Clowes v. Dickenson, cited ante.
    
    
      
      Mr. Justice Berry, being of counsel in this case, took no part in its hearing or determination.
    
   By the Court

McMillan, J.

-It is admitted by the appellants, that upon the facts found by the Court, the plaintiff stood in the relation of surety for Yan Brunt, as to the'indebtedness of the firm of Misener & Yan Brunt, and that the defendants, Goulds, had full notice of that fact, and by their own action in delivering to Yan Brunt, property of the firm, which they held in trust to pay the debts, the plaintiff was discharged from all liability as such surety, and his property released from the mortgage given to secure the Goulds’ debt. But it is urged that the time for the plaintiff to have asserted his equities, was during the pendency of the foreclosure of the Gould mortgage, and not having done so, it is now too late. The defendants in support of their position, rely upon the cases of Bidwell v. Whitney, 4 Minn., 76, and Johnson v. Williams, Ib., 260. Bidwell v. Whitney was an action at law, to recover the surplus bid by a mortgagee on a foreclosure by advertisement, over and above the amount actually due upon the obligation, but within the amount stipulated to be paid in case of non-payment after maturity. The Court in that case held, that the mortgagor could have enjoined the sale, in equity, until the amount actually due could be ascertained, and had the mortgage cancelled as to the balance claimed to be due in the notice of sale, or could have had other appropriate equitable relief, depending upon the condition of the parties, and the securities; but that the action at law would not he. * Johnson v. WillÁams was an action to set aside a sale by advertisement under a mortgage, where subsequent to the mortgage, the mortgagor conveyed to the plaintiff and one Eastman, separate parcels of the. mortgaged premises, the deeds to which were recorded prior to the publication of the notice of sale. The jilaintiff alleged that the balance of the mortgaged premises remaining in the mortgagor, with either of the parcels sold to Eastman, were sufficient to pay the debt, and if sold in the order they were primarily liable, it would not be necessary to sell the plaintiff’s portion of the property. The whole tract was sold together. No demand was made for plaintiff on the day of sale, that the land should be sold in any -particular manner, or that he claimed any equities; the plaintiff excusing the want of appearance at the day of sale, on the ground that he was an officer in the United States navy and had been for the year previous on duty on a foreign cruise, and that until within a few days he had no notice of the proceedings of foreclosure. Neither of these cases is in point in'this instance. It will be observed, that in both of these cases there were valid mortgages, and that the foreclosure proceedings were under valid existing powers, and within the letter of the instrument, and were therefore regular. But in this case the mortgage is can-celled and the power extinguished, and as between these fa/rties at least, the foreclosure is without authority, and the proceedings are not irregular, but void. In speaking of a foreclosure by advertisement, Cowen, J., says: “There must be a power. Payment extinguishes it, and the case becomes the same as if none had ever been inserted in the mortgage. By payment, the whole mortgage is extinct, as much so as if released or paid and cancelled of record.” Cameron v. Irwin, 5 Hill, 276, and authorities cited. Jackson v. Dominick, 14 Johns., 441. So far as these parties are concerned, Yan Brunt and Goulds, being the actors in the proceedings which effected the cancellation of the mortgage, and the actors chargeable with notice, it is immaterial whether the cancellation of the mortgage was effected by paylnent or by the acts of the parties. “It had ceased to exist, and in legal contemplation was extinguished as effectually as if it had been paid or released by the party under hand and seal.” Deyo v. Van Valkenburgh et als., 5 Hill, 244. In Bennett et al. v. Healy, 6 Minn., 240, Justice Flandrau says: “ It is true in the case of Bidwell v. Whitney, we treat the foreclosure, by way of illustration, upon the same terms as a suit at law or in equity, and so far as the mortgagee keeps within the terms of his power, such illustration and position are strictly correct. But where the mortgagee acts entirely outside the power conferred upon him, his acts can bar no one, and no waiver can accrue.” The decision in the case, in the light of the facts reported, would seem to be analagous in principle with the case at bar.

It is unnecessary in this view of the case, to consider either of the other points raised by the defendants. The sale being void as to Misener, Goulds took no title to his portion of the premises, and Yan Brunt having notice, could take no greater title than Goulds had. The defendant Draper, having purchased after the commencement of the action, and after the filing and recording of the notice of the pendency thereof, and purchasing also on behalf, and as the agent of, the defendant, Yan Brunt, acquired no title to the property as against the plaintiff.