Case Name: Zalmon Fitch vs. Harrison Mendenhall and others
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1848-12
Citations: 17 Ohio 578
Docket Number: 
Parties: Zalmon Fitch vs. Harrison Mendenhall and others.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 17
Pages: 578–590

Head Matter:
Zalmon Fitch vs. Harrison Mendenhall and others.
Where there is the lien of a judgment, not sustained by levy within the year after rendition of the judgment, but older than the lein of a mortgage, the mortgagee cannot protect himself against the prior judgment lien, by the purchase of a junior judgment levied within the year.
This is a Bill in Chancery reserved in Cuyahoga County.
The case made in these pleadings is in substance as follows:
The bill avers that on the 5th of May, 1838, Hutchinson, Bingham & Co., mortgaged to the Bank of Cleveland certain property in tho City of Cleveland, known as the “ Stone Mill ” property, to secure $19,500 00 secured by sundry notes. April 10th, 1839, no part of said debt being paid, said Bank, for the sole purpose of enabling said H., B. & Co., to raise money on the security of said premises to pay off said debt, and for no consideration whatever, but on the express condition that the same should not be used except on the actual receipt for the use of said Bank of at least $20,000 in cash, executed a release of said mortgage and delivered the same to said Bingham, at the same time, and as part of the same agreement, for the purpose of removing existing incumbrances upon said Mill property, and the “Warehouse” lot mentioned below, said Bank advanced to said H., B. & Co., the further sum of $10,000, with the express agreement that said H., B. & Co., should give her a mortgage upon both parcels of said land, subject only to the lien of such mortgage, as should be given to raise money as aforesaid, if any should be raised. The advance was used to remove incumbrances, and with the previous debt amounted to more than the value of both parcels of property. Bingham took said mortgage and the release thereof to New York, for the express purpose of raising money as aforesaid, and on the 23d of April, 1839, said H., B. & Co., executed and delivered to the Tenth Ward Bank, a mortgage on both said lots to secure ostensibly $35,000, which mortgage was delivered on the express agreement by said Tenth Ward Bank, that said Bingham should thereon receive for the use of Bank of Cleveland not less than $20,000. To obtain the same, and induce said Bingham to violate his express instructions, not to deliver the same until the actual receipt of said sum, said Tenth Ward Bank fraudulently and deceitfully promised to advance to him said sum of money in a few days thereafter; and thereupon, confiding in such promises, he delivered the same, but said Tenth Ward Bank refused to advance the money, and have ever since refused, and on the same 23d day of April, 1839, fraudulently caused said mortgage to be recorded. Said mortgage is charged to be wholly fraudulent and void, and in a suit commenced by the assignees fhereof, against said H., B. & Co. and said Banks, to enforce the same, and heard in this Court at the September term, A. D. 1845, the same was adjudged to be fraudulent and void, and the bill was dismissed, and threby the premises were discharged from all lien by reason thereof.
April 30, 1839, H. Mendenhall recovered judgment against said H., B. & Co., which was affirmed in this Court on appeal, August 7, 1839, for $4,982 20; March 12, 1840, $2,000 was paid thereon. Also, April 20, 1839, Petrie and Root recovered judgment against saidTI., B. & Co., for $1,991 39, on which was paid, March 25, 1842, $500. Said judgments are at law liens upon said lands, but in equity subject to the original mortgage to said Bank of Cleveland, and to the right of the parties to execute the parol agreement to mortgage said property to secure the $10,000 advance, &c. Said judgments were levied on said lands, Sept. 10th, 1845, and the same were duly offered for sale. April 10th, 1839, said H., B. & Co., in pursuance of the parol agreement aforosaid, signed and sealed in due form of law, and on the 15th of May, 1839, acknowledged and delivered to said Bank a mortgage deed of the aforesaid premises, to secure the sum of $33,220 00 exclusive of interest, (including said advance of $10,000, and said debt of $19,500,) of which no part had been paid. The Bank failed ^^2, and the special commissioners on the 2d of July, 1844, and transferred to the complainant said mortgage, and all their demands and securities against said H., B. & Co.
May 12, 1840, the Commercial Bank of Lake Erie recovered a judgment against said H., B. & Co., in Cuyahoga Common Pleas, for the sum of $4,828 04, which was levied on said premises, July 10th 1845, and was bona fide, and for value, sold and transferred to complainant, October 27, 1845. At the February term, 1845, in Summit county, one Hannah Hutchinson recovered a judgment against said A. S. Hutchinson for $6,859 00, which was levied on said premises February 26th, 1845, and on the 2d of September, 1845, was for value, and in good faith, sold to complainant. No part of said judgments has been paid. January 31, 1845, complainant filed his bill to sell said premises under the mortgage of April 10th, 1839, and at the September term of this Court, 1845, obtained a decree finding due him $43,209 60, and ordering, in default of its payment, the sale of the mortgaged premises, and that execution issue for the surplus after such sale, which decree was remanded to the Court of Common Pleas for execution. The bill charges that by reason of the fraud, &c., alleged, the first mortgage was not discharged, and its lien not removed in favor of said judgment creditors, and that the senior judgments not levied within one year, are to be postponed to the junior judgments first levied. The object of the bill is to set aside the release of the first mortgage, and to set up and establish said original .mortgage, and thus enforce its original lien upon the “ Stone Mill ” property; and to enforce the lien of the junior judments on the “ Warehouse ” property, abandoning the lien of the second mortgage thereon, and for general relief.
The supplemental bill filed May 31, 1848, sets up that the decree for the sale of said mortgaged premises was remanded to the Common Pleas, and an order of sale issued, and that on the 26th of July, 1846, said premises were duly sold to complainant on his bid for the “ Stone Mill ” property of $23,700, and for the “Warehouse” lot of $8,700, leaving a balance due on said decree of about $ 13,200 00; and afterwards, to wit, on the 23d day of July, A. D. 1846, an execution was for the colection of such balance, and the same was levied on the aforesaid premises, the lien whereof, it is insisted, is paramount to that of said senior judgments.
The answers substantially admit the material allegations of the bill except as to the transactions between the Bank of Cleveland, said H., B, & Co., and said Tenth Ward Bank, after the execution of the first mortgage. As to these matters, the answers aver that the release of said first mortgage was not in fact delivered to said Bingham, but that about April 1,1839, he visited New York city for the purpose of raising money from said Tenth Ward Bank, (same being then in process of organization,) for carrying on their business and repaying in part their loan to the Bank of Cleveland — that soon after, saidH., B. &, Co., supposing the arrangement in New York completed, applied to said Bank of Cleveland for aid, and said Bank, relying upon their representations, and upon information received from the agents of said Tenth Ward Bank, and upon report, discounted for them $10,000 to remove incumbrances, (which was so applied,) and on the '10th of April, executed the release, and the same was delivered absolutely, and not conditionally, and was forthwith recorded — that on the same day, H., B. & Co. executed to said Tenth Ward Bank separate mortgages upon said two parcels of property, and caused the same to be recorded, and procured from the Recorder a certificate that the premises were free from prior incumbrances, which with said mortgages, was forthwith forwarded to said Bingham in New York, all with the knowledge of said Bank of Cleveland. On receiving said mortgages, said Bingham found them unsatisfactory, and having learned that he could only obtain money from said Tenth Ward Bank by taking its stock, and then procuring a discount of said H., B. & Co’s notes to be secured by the stock, he returned to Cleveland to perfect the papers. On his return, he communicated this information to the Bank of Cleveland, and on the 23d of April, 1839, said H., B. & Co. executed to said Tenth Wm'd Bank, a new mortgage on both porcels of said property, secure the payment of $35,000, and caused the same to be recorded at that date. With this mortgage, said Bingham rerurned to New York, and May 3, 1839, closed his arrangement with said Tenth Ward Bank, delivered to her said mortgage, and received her certificates of stock to the amount of $35,000, and her written agreement to discount said H. B. &. Co’s, notes to the amount of $20,000, to run one year, on receiving as collateral security $25,000 of the stock certificates, $5,000 to be discounted when the Bank should commence discounting, and the same sum every fifteen days thereafter. Immediately thereafter, said Bingham returned to Cleveland, and informed said Bank of Cleveland what had been done, and thereupon, said H., B. & Co. assigned said stock certificates as collateral security to said Bank of Cleveland, whose officers did not then object that the condition of said delivery of said release had been violated, but accepted said stock as such security, and afterwards received and placed upon record the mortgage set up in the bill — that it was then expected that said Tenth Ward Bank would commence discounting about the 1st of July, 1839, and during that month said Bingham received from said Bank of Cleveland $12,500 in the certificates of said stock, and with it, and two notes of said H.,B. & Co. of $5,000 each, went to New York to procure $10,000 of the discount agreed upon. He found the Bank not ready to do business, and left both notes and stock with one Isaac Schuyler, to procure the discount when it could be done, and took for the same a receipt, which, on his return, he gave as collateral security to said Bank of Cleveland, together with an order on said Schuyler for said stock, which they, with a full knowledge of the facts, accepted, and which, together with the remaining $22,500 in stock certificates originally deposited with them, they still retain. The answers insist that said Bank of Cleveland and said complainant, have, by their acts, confirmed the action of said Bingham, and are thereby precluded from setting up said original mortgage against said senior judgments.
Hitchcock, Wilson S/ Wade and Reuben Wood, for Complainant.
Bolton Sf Kelley, Foot Sf Hoyt, Bishop Sf Backus, for Defendants.

Opinion:
Hitchcock, J.
The controversy in this case is between a mortgagee or the assignee of a mortgagee and judgment creditors, as to which has the prior lien upon the premises named in the pleadings. The defendants, Mendenhall, and Petrie & Root, recovered judgments against Hutchinson, Bingham & Co. on the 30th April, 1839, which were liens on these premises. At this time there was no other incumbrance than the mortgage to the Tenth Ward Bank. That mortgage having been declared fraudulent and void by a decree of this Court, these judgments operate as a lien preferable to the mortgage of the bank of Cleveland of the 15th of May, 1839. The complainant having, as the assignee of this last mortgage, procured a decree for the sale of the mortgaged premises, and having at the sale purchased them in, now seeks to avoid the prior liens of the judgment creditors in a variety of ways.
The first ground upon which he seeks to produce this effect •is, by setting up the mortgage to the bank of Cleveland, which was released the 10th of April, 1839, for the reason that the release was procured by fraud. It is not pretended, at least in argument, that there was any fraud on the part of Hutchinson, Bingham & Co. to whom the release was executed. The only fraud imputed is to the Tenth Ward Bank. This question must be settled by the evidence in the case.
The testimony is not voluminous, and relates principally to transactions which transpired in April and May, 1839, relative to the mortgage referred to in the bill. From this testimony it appears that Hutchinson, Bingham & Co., in 1838 were indebted to the bank of Cleveland in the sum of nineteen thousand dollars and more, to secure the payment of which, they ex ecuted a mortgage to the bank on what is called in the pleadings the " Stone Mill property." Hutchinson, Bingham & Co. had property in the city of Cleveland which is denominated in the bill, the " Ware Hoúse property." In the first part of April, 1839, there were outstanding judgments which were liens, upon this "Ware House property," and H., B. & Co. being anxious to relieve it from these incumbrances, and to carry on their business, applied to the bank of Cleveland for assistance. They supposed that they might procure money at the East upon the pledge of real estate, provided the same was unincumbered, and the Tenth Ward Bank was spoken of as an institution in operation or about to go into operation, from which such money might be obtained. The Bank of Cleveland was anxious to obtain payment of the debt from Hutchinson, Bingham & Co., and was willing to assist them, if by so doing they would eventually receive such payment and re ceive it at an earlier period than payment could be enforced by proceeding upon the mortgage. Eventually an arrangement was made, by which the Bank of Cleveland agreed to make an additional advancement of ten thousand dollars with which the incumbrances upon the "Ware House property" were to be removed ; also to release their mortgage upon the " Stone Mill property," Hutchinson, Bingham & Co. agreeing to pay to the bank of the money which they might obtain by a pledge of the same property, twenty thousand dollars, and to execute another mortgage upon the " Stone Mill property " and the "Ware House property" to secure the balance that would still remain due. This latter mortgage however to be subordinate to any lien PI., B. & Co. might create upon the property in effecting a loan at the East.
It is claimed by the complainant that there was an express agreement, that no mortgage should be made by H., B. & Co., unless upon the loan and receipt of at least twenty thousand dollars. Upon this point the testimony is not clear, but leaves it doubtful whether there was any such agreement, although it is manifest that the Bank of Cleveland would not have entered into the arrangement, but for the expectation of receiving that amount of money. In consequence of this arrangement, in the early part of April, 1839, the ten thousand dollars were ced, the incumbrances removed, and the mortgage of 1838 released. A new mortgage was executed upon both pieces of property by H., JB. & Co., and forwarded to Bingham, who was then in New York, attempting to negotiate a loan. He found, however, that this could not be effected with the Tenth Ward Bank, except by taking stock, and then pledging the stock to secure the payment of the loan, but there was some difficulty about the mo'rtgage and other papers which he had received, and he returned to Cleveland. When at Cleveland, he procured the necessary alterations in the mortgage and other papers, and as he thinks, informed the officers of the Bank of what he had done, and of the only mode by which he expected to procure money. After which he returned to New York, completed the arrangement with the Tenth Ward Bank, took thirty-five thousand dollars of its stock, and as collateral security for its payment, delivered the mortgage upon the " stone mill property," and the " ware house property," in Cleveland. Having done this, he proposed to borrow twenty-five or thirty thousand dollars upon a pledge of this stock. The Bank, however, refused the loan, and in fact was not in a situation to make it. This transpired the latter part of April, or early in May. The mortgage to the Tenth Ward Bank was recorded on the 23d of April, 1839, and on the 30th of the same month the judgments of the defendants were rendered. The Tenth Ward Bank eventually, and as part of the original agreement, agreed to loan H., B. & Co. twenty thousand dollars, upon the pledge of twenty-five thousand dollars of stock, five thousand to be advanced as soon as the Bank should commence discounting, and five thousand at the end of each fifteen days thereafter. . It was then expected that the Bank would commence discounting on the first of July next following. After making this last arrangement, Bingham returned to Cleveland, and informed the officers of the Bank of Cleveland of what he had done, and of his pros pects. The officers were disappointed and expressed dissatisbut eventually took a mortgage on the before mentioned in Cleveland, to secure the indebtedness of H., B. & Co., to the Bank, and also received the stock of the Tenth Ward Bank as further security. In July following, Bingham received $12,500 of this stock from the Bank of Cleveland and took it to Ne.w York, expecting to pledge the same for ten thousand dollars, part of the loan agreed upon. The Bank, however, had not yet got into operation, and he left the stock with Lane Schuyler, to hand the same over to the Bank, and to receive the money, when the Bank should commence discounting. Schuyler subsequently received upon a pledge of this stock, $6,500, in money, and $3,500 in stock; but no part of the money ever came to the possession of H., B. & Co., or of the Bank of Cleveland, Schuyler claiming the right to apply it upon claims which he had or pretended to have upon H., B. & Co.
By a decree of this Court, heretofore rendered, the mortgage to the Tenth Ward Bank has been declared to be fraudulent and void.
Upon examination of this testimony, I do not find that the Tenth Ward Bank had any communication with the Bank of Cleveland upon this subject, nor is there any pretence that it held forth any inducements to the latter to procure it to execute this release. In fact, the release itself was executed before any arrangement was made with the Tenth Ward Bank. In all the transactions relative to this business, the Bank of Cleveland contracted alone with H., B. & Co., and H., B. & Co., with the Tenth Ward Bank. The fraud of the Tenth Ward Bank, so far as there was any fraud, was upon H., B. & Co. The Bank of Cleveland undoubtedly suffered in consequence of this fraud; not however, from giving any credit to assurances made to it, by the Tenth Ward Bank, but from giving credit to the assurances and promises of H., B. & Co. The consideration for which the release was executed failed. Or rather, the expectations which induced the execution of the release were never realized, and probably at the time Bingham returned to Cleveland, in April, and informed the officers of the Bank that he could effect ,a loan in no other way than by the purchase of stock, they might by instituting proceedings, have compelled the of a new mortgage, or have avoided the release. Possibly this might have been done, upon his return in May with the stock of the Tenth Ward Bank.
This, however, was not attempted. On the contrary, the Bank of Cleveland took a new mortgage, and also as additional security, $35,000 of the stock of the Tenth Ward Bank. Thereby affirming, instead of disaffirming, what H., B. & Co. had done. And no attempt was- made to avoid the release. Neither did the complainant, who upon the sale of the assetts of the Bank of Cleveland, became the assignee of the debt due from H., B.' & Co., attempt to set up the mortgage of 1838, but filed his bill to foreclose the .mortgage of 15th May, 1839, procured a decree, and had the premises sold under that decree. Under these circumstances, after this apparent acquiescence, and after this delay, it seems to the Court that it is now too late to attempt to avoid the release and set up the mortgage of 1838.
The next ground upon which the complainant attempts to waive the prior lien of these judgment creditors, is that he is a purchaser of judgments which were junior, in point of time, to the judgments of the defendants, but upon which executions were issued, and levied upon said premises. The facts appear to be these. On the 12th of-May, 1840, the Commercial Bank of Lake Erie recovered a judgment against H. B. & Co., for the sum of $4,848 04. An execution was issued and levied upon the premises, July 10th, 1845. After the-levy was made, the complainant purchased in this judgment, as he says, bona fide, " and for value." The amount of this value is not stated. In like'jmanner, a judgment was recovered in Summit county in February, 1845, by Hannah Hutchinson, against AmosS. Hutch inson, one of the firm of H., B. & Co. Execution was issued and levied upon the premises, and on the second of September, 1845, this judgment was purchased in by the complainant. At the time these judgments were purchased in, the complainant had a bill depending to foreclose the mortgage of the 15th May, 1839. Here is an attempt to tack junior judgments to a mortgage, in order to overreach a judgment which has a prior lien to the mortgage.
As this principle of tacking has never been recognized, under our jurisprudence, I suppose that the complainant, as the assignee of these judgments, is placed in no better situation than would be the creditors themselves. Now the rights of creditors and mortgagees, under such circumstances, as in the present case, are settled by this Court in the case of Brazee et al v. Lancaster Bank, 14 Ohio Rep. 318, in which it was decided that " as between an older judgment, not sustained by levy within the year, an intervening mortgage, and a junior judgment, sustained by levy, the older judgment must be first satisfied." The same principle has been recognized and affirmed in subsequent cases.
The next and last cause for relief is, that the complainant, after having purchased in the premises, under his decree for the sale thereof, caused an execution to be levied on the premises, to satisfy the balance due upon the decree, after the first sale. The facts are, the defendant, at the September Term of this Court, 1845, obtained a decree finding due to him $43,209 60, and ordering, in default of payment, the sale of the mortgaged premises, and that execution issue for the surplus, if any, after such sale. The premises were sold, and purchased in by the complainant,!;at $30,009 60, leaving a balance due upon the mortgage of $13,009. To collect this balance, an execution was issued, at the suit of complainant, and levied on the same premises, which were already his, by previous purchase. This levy was made on the 23d of July, 1846, and by virtue of it, complainant claims that he occupies the situation of a junior judgment, sustained by levy within the year. There is some ingenuity, and certainly entire novelty, in this effort to defeat prior judgment liens. But there is one difficulty in the way. It was the duty of the complainant to have made these judg ment creditors parties to his bill for foreclosure; and not having done so, their rights are not affected by his decree, in ever shape he may place it. If they had been made lipón the sale of the premises, the Court would have directed, in the distribution of the avails, that their judgments should have been first satisfied. It was their right to have them first satisfied, and they are not to be deprived of that right, in consequence of the neglect of the complainant to give them notice, by making them parties to his bill for a foreclosure.
1till dismissed.