#### Taylor v. Cole.

Argued Nov. 11th, 1814.

1. Mortgages* — Sale of Premises with Permission of Mortgagee — Effect.—If a mortgagee, In consequence of aasurances that he shall receive his money from another quarter, permit the mortgagor to sell the premises, the pnrchaser will he protected; notwithstanding the fund, from which the mortgagee expected payment, proves delusory.

2. Same — Same—What Amounts to Permission.— Under what circumstances the mortgagee will he considered as Impliedly permitting the mortgagor to sell, and abandoning his claim under the mortgage, so far as respects the pnrchaser, and those claiming under him.

3. Same — Same—Same.—His falling to make any objection, when apprized of the intended sale, and not informing the purchaser that he has any claim; together with his refraining from enforcing the mortgage for a long time; especially if he hold hack nntil after the death of the mortgagor; and his permitting the mortgagor to sell some of the mortgaged articles; thereby indncing the purchaser of other articles to believe that the mortgage had been satisfied; are strong circumstances in such case.

See 1 Wash. p. 217 and 289; and 2 Wash. 115; also Bigger's administrator v. Alderson, 1 H. and M. 53: Cringan and Atcheson v. Nicholson's executors, ibid. 429; and Green v. Price, 1 Munf. 449.

A bill in chancery was exhibited by Jesse Cole, in James City County Court, ag-ainst the administrator and heirs of ^'Alexander Massenburg, to compel a foreclosure of a mortgage on a house and lot in the city of Williamsburg, and other property. A deed of bargain and sale for the same house and lot, of a date subsequent to that of the mortgage, having been executed by the said Massenburg, (with the knowledge of Cole,) to Robert Taylor, a bona fide purchaser, for a valuable consideration ; the latter also filed a bill against Jesse Cole, suggesting that the mortgage *150had been obtained without consideration, and for a fraudulent purpose, or, if not, had been fraudulently concealed by the said defendant when the sale was made by Massenburg to the plaintiff; and alleging, that a few months afterwards, when a certain James Young purchased the house and lot from the complainant, the defendant informed the said Young at what time he would haye a right to take possession thereof; (the same being in the use and occupation of a tenant;) that Cole was well acquainted with the sale made by the complainant to James Young, and never mentioned to Young that he had any claim upon the said lot and house, or against the said Massenburg, under any mortgage whatever. The plaintiff therefore prayed, that the deed to him be preferred to the mortgage. In his answer to this bill, Cole insisted that the mortgage, having been duly recorded, was to be preferred to any subsequent deed from Massenburg; that it was executed for a just debt, and still remained unsatisfied: but he stated, (among other allegations,) that “from the intimacy which subsisted between him and the said Massenburg, he did not think proper to distress him by foreclosing his mortgage ; but that when he was informed that the said Massenburg had sold, or was about to sell, the house and lot to the complainant, he (the respondent) went to Massenburg, and observed to him the impropriety of what he was about to do, or had done: Massenburg’s reply was, that he had in the hands of Mr. Greenhow, upwards of three hundred pounds, and supposed that the respondent would be better satisfied to receive his money, which he would most certainly pay in a short time ; concluding with hoping that the respondent would say nothing about his mortgage ; that, in consequence of this assurance *of the said Massenburg to make speedy payment, (which assurance he made both before and after the said Young took possession of the said house and lot, and continued to make even until a few days before his death,) the respondent did not think it necessary to mention his having a'mortgage of the said house and lot, either to the complainant or to the said Young.”

The County Court referred the accounts between Cole and Massenburg to commissioners, who reported that, according to the entries in the books of the former, the balance due him amounted to 3191. 12s. 2d. It appeared, however, from a deposition, that the latter, in his life-time, repeatedly expressed a desire to have a settlement of accounts with Cole, and declared his belief that, upon such a settlement, Cole would be found in his debt four or five hundred pounds. Sundry other depositions were taken, in relation to the consideration of the mortgage, and proving other circumstances which are mentioned in the following opinion of Judge Coalter.

On the 14th day of March, 1797, the suits between Cole and the administrator and heirs of Massenburg, and between Taylor and Cole, came on to be heard, when the County Court decreed, in the first suit, that the said administrator and h<^irs should redeem the mortgaged premises within four months from the date of the decree, or be forever barred and foreclosed from all equity of redemption ; and that the house, lot, and negro, should be sold by the sheriff for the benefit of the said Cole.

In the second suit, the decree was, that the bill be dismissed with costs. From this decree Taylor appealed to the late High Court of Chancery; and, to prevent the sale of the mortgaged premises, he also presented a bill, and obtained an injunction.

In the distribution of the business of the last mentioned court, these causes were transferred to the Superior Court of Chancery for the District of Williamsburg, where the decree for dismissing Taylor’s original bill was affirmed, and *his bill of injunction dismissed : — whereupon, he appealed to this court.

Wirt for the appellant.

Wickham for the appellee.

*

See monographic *note*on “Mortgages” appended to Forkner v. Stuart, 6 Gratt. 197.

JUDGE COAUTER.

In this case it appears that the appellant, shortly before the death of Alexander Massenburg, purchased from him, for the consideration of 1001., a certain real property in the city of Williams-burg, which he soon after sold to one James Young, who obtained possession thereof, with the knowledge of the appellee, in the lifetime of said Massenburg.

It also appears that, about ten years previous to this transaction, Massenburg had mortgaged the premises to the appellee, together with three slaves, some cows, and all his household and kitchen furniture, with a general clause embracing “all the moveable property in his possession,” to secure the payment, within a few months thereafter, of 4281. 16s. Od. said to be then due.

It farther appears, that, although the appellant had implied notice of this mortgage, it having been duly recorded, he was, in reality, ignorant thereof ; that the appellee knew of his ignorance, as also of the ignorance of his alienee Young, at the time of their said purchases, but was prevailed upon by the solicitations of Massenburg not to make known his claim, he promising to pay him out of a larger fund, which he said was at his command ; on which promise-he relied, but was deceived by the said Massenburg, who, in fact, had no such fund ; and he never made known, or asserted his claim, until after the death of the mortgagor.

It also appears that the appellee permitted the mortgagor, before the sale of the real property aforesaid, to sell at least one of the slaves, and the other personal property, which latter was a public sale, and at which sale it does not appear that he asserted his claim under his mortgage, - although *he took the bonds in his name ; but Massenburg afterwards asserted his right to those bonds, and gave an order to one •of his creditors to receive part of them in payment of his debt, which the appellee offered to assign, without, at that time, asserting any right to them by virtue of the mortgage, though he now says, in his answer, that they were taken in part discharge of the mortgage, but afterwards loaned to Massenburg.

Stripping this case then, for the present, of the matters, herein after stated, going to destroy the credit of the answer, and to shew that the transactions of the appellee were, in other respects, not fair, and that, probably, either nothing was in reality due to him, or *151that he had sufficient in his hands to pay himself ; and not deciding whether this parol agreement, not to assert his claim; (which is admitted in the answer,) amounted to a discharge of the mortgage, and a relinquishment of his claim under it, so as to enable Massenburg to sell; — stripping it, also, of the lapse of time which had occurred, and of those other public and notorious acts of abandonment and waiver of claim, as to the other property, all tending to produce a belief in the world, either that the mortgage was discharged, or abandoned ; — and considering it a naked case of a mortgagee, who, with knowledge of an actual fraud about to be committed on an innocent purchaser, is induced, by promises and persuasions of the perpetrator, not to make known, or assert his claim, until after the death of the mortgagor, so as to deprive the purchaser of an opportunity to secure himself, and of the aid of the mortgagor in unravelling a stale and dubious transaction, I would hesitate much before I would say that the conscience of such a bystander was not affected by such transaction. His case, as it at present appears to me, would differ widely from the case of one who only knew that another was about to purchase lands on which he had a mortgage recorded, and remained quiet. This latter might be justified in presuming that such purchaser had notice of, and would guard against the effects of the prior deed; and it might not be his duty to inquire whether he had actual *notice, or not. If such prior incumbrancer be present at the time of the purchase, and fails to assert his claim, the purchaser, with actual notice of the deed, might presume an abandonment on his part, and be thus induced to conclude the bargain ; but where there is no actual notice, the presence of the prior incumbrancer has no influence on the mind of the purchaser ; — so that, had Cole been present at this sale, that circumstance would have had no effect on the mind of the appellant, though it would have finally operated in his favour. Is the appellee’s conscience less affected then, when he knows the purchaser is deluded, and is induced, by persuasion and promises, to contribute, by his silence, to the consummation of the fraud, which he might have prevented, or arrested, than it would be had he been present at the sale, as he could in that case say, “the purchaser was ignorant of my claim, and therefore my presence and silence was no inducement to the contract ?” The shade of difference would seem too small to be noticed. His speaking out, when present, is for the selfish purpose of securing himself, not to guard his conscience by doing an act of justice towards the person about to be deceived.

But without intending absolutely to decide this point, yet if, in addition thereto, and to the other strong evidences of waiver and abandonment above mentioned, there are other mattors tending to impeach the justice and fairness of the appellee’s claim, in its origin, and of his transactions thereafter, I cannot, under all the circumstances, hesitate to vacate the mortgage, at least so far as it respects the appellant.

As to these matters, — the record affords strong grounds for a belief that this mortgage was, in its origin, intended to defraud creditors : the bill alleges, that there is, in reality, nothing due on it, and calls on the defendant to say whether the sum specified in the mortgage was bona fide due : the defendant in his answers says, that, in April 1784, Massenburg was indebted to him 2701. 10s. and that he had become his security for 1571. 10s.; and, to indemnify him for the latter, (which he admits Massenburg afterwards paid,) and secure the payment of the former, the mortgage was given; *that, so far from Massenburg’s having paid one shilling of the debt, he died upwards of 501. in his debt, independent of the 2701. 10s. for which the mortgage was given. Now it turns out, from the settlement and accounts taken by the commissioner, made up without evidence, from the books of the appellee, that, at the date of the mortgage, there stood charged on those books against Massenburg, only 841. 13s. 9d. When we add to this the declarations of Massenburg, that the mortgage was intended to cover the property against creditors, and the testimony of several witnesses who prove, that before, and about the time the mortgage was executed, Cole was in the habit of receiving into his store large parcels of goods from Massenburg, to sell on his account, no credit whatever for which is given ; that Cole kept the accounts and papers of Massenburg, who, till the day of his dfeath, was urgent to have a settlement, but never could get Cole to exhibit the books and papers, the credit of the answer, as to the extent and justice of the debt, at the date of the mortgage, must be done away ; for it is not pretended that Cole had other demands against Massenburg than those contained in his books. But, again, the appellee claims debits, according to those books, to the amount of 4031. 8s. 2d. giving credit only for 831. 10s. (which credits are without date,) leaving due to him 3191, 12s. 2d. thus making the balance on the dealings, since the mortgage, about 2681. instead of 501. as stated in his answer. But if these credits, which are without date, were for merchandize delivered before the mortgage, and many of which are for such articles as the witnesses say Massenburg was in the habit of delivering, then nothing was due at its date. In addition to all which, Waller proves that, in a conversation with the appellee, in relation to the impropriety of asserting this claim against the appellant, he stated that he hoped he would have enough i* his own hands to satisfy his demands against Massenburg, without resorting to the mortgage.

Upon the whole, I think the decree is erroneous, and must be reversed, and the mortgage declared void as it respects the appellant.

*JUDGE) ROANE).

I concur in the opinion just delivered ; on the ground that the appellee permitted Massenbu¡rg to sell the lot in question to the appellant. He not only gave this permission, but did it under an expectation of receiving his debt from another quarter; the prospect of which formed the consideration, or inducement, on which the permission was given. It was competent for him to give up his lien arising from the mortgage, and to look to another fund for payment; and it is of no conse*152quence that that fund has been found delusory and insufficient. Neither is it of any consequence that the appellant was not privy to, or conusant of the particular transaction by which the release was effected. As well might it be said that a subsequent purchaser or incumbrancer cannot receive the benefit resulting from an actual payment of the mortgage money, unless he had notice thereof, or was a party thereto. That case differs from the present only in degree: in principle they are the same. The one is that of an actual payment of the money: the other is equivalent to a paym.ent, in favour of the subsequent purchaser, by construction and operation of law. In all questions touching the payment or discharge of a mortgage, the mortgagor and mortgagee are the proper and sufficient parties; although the case may be made more strong in favour of the subsequent purchaser, by making him a party thereto also.

In permitting Massenburg to sell, the appellee consented to abandon the mortgage : otherwise he would take advantage of a fraud committed by himself, or at least perpetrated under his own permission and procurement: for Massenburg was not only permitted and encouraged by him to sell, but the appellant was also, in some degree, induced by him to purchase; for his (the appellee’s) acts, in permitting Massenburg to sell, as his own, property comprised in the mortgage, had a tendency to inspire the appellant, (in common with others,) with a belief that the mortgage had been satisfied. It would be monstrous, therefore, to permit the appellee now to disturb a contract, in which the one party had been encouraged to sell, and the other induced to purchase, *the subject in controversy, by acts of permission or connivance flowing from himself.

On these grounds, and without passing any opinion as to the justness of the debt which is purported by the mortgage to be due to the appellee, I am of opinion to reverse the decree, and declare the mortgage void as to the appellant and those claiming under him.

JUDGE) PLUMING.

Not being convinced that the decree of the Superior Court of Chancery, affirming those of the County Court of James City, is erroneous, but having doubts on the subject, I am of opinion that the same ought to be affirmed ; and, without fully discussing the various circumstances of the case, shall only remark, that the mortgage to the appellee having been recorded in due time, was sufficient notice to any subsequent purchaser, and to all the world ; and, more especially, as the mortgaged premises lay in the very town where the-same was recorded. It was urged, however, in the argument, that, in equity, a mortgage may be released verbally ; but, in my conception, no such release appears in the record : for, where the subject of a mortgage consists of a variety of articles, both real and personal, a mortgagee may certainly relinquish a part thereof, without releasing or forfeiting the whole.

But a majority of the court being of a different opinion, the following decree is to be entered.

The decree is reversed with costs; and this court proceeding to make such decree as the said Superior Court of Chancery ought to have pronounced, it is decreed and ordered that the deed of mortgage in the bill mentioned be vacated and annulled, so far as it respects the appellant, and all those claiming under him *; and*that the appellee do release, and convey to the appellant, by proper assurances in law, with special war - ranty, all his estate in the house and lot in the bill and proceedings mentioned.