Case Name: Wilson and Herr Appellants, vs. Richard Hayward, Appellee
Court: Florida Supreme Court
Jurisdiction: Florida
Decision Date: 1855-01
Citations: 6 Fla. 171
Docket Number: 
Parties: Wilson and Herr Appellants, vs. Richard Hayward, Appellee.
Judges: 
Reporter: Florida Reports
Volume: 6
Pages: 171–214

Head Matter:
Wilson and Herr Appellants, vs. Richard Hayward, Appellee.
1. In case of a mortgage to secure notes payable at different periods the note which first falls due has the prior right to be satisfied out of the mortgaged property, unless there is some peculiar equity attached to the notes of subsequent date, and so as to the other notes.
2. In case of sale by a prior incumbrancer, the subsequent incumbrancer can only complain by showing fraud in the sale, or that the property was more than sufficient to pay both debts, and that something remains for his benefit
Appeal from a decree of the Circuit Court for Leon County, sitting in Chancery.
Richard Hayward filed his bill in the Court below against the appellants and D. C. Wilson, administrator of the estate of J. H. Lunn, deceased, alleging that J. H. Lunn in his life time, and in June, 1840, executed to one Robert K. West, five several promissory notes, each for the sum of one thousand dollars payable respectively on the fourth day of June, in the years 1841,’42,’43,’44 and’45, and to secure the payment thereof executed and delivered to said West a certain deed of mortgage covering a certain lot and premises in the city of Tallahassee; that on or about the sixth day of March, 1841,the said R.K. West assigned and delivered to him, Hayward, the one of said notes payable inJune; 1845. and at the same time assigned and delivered to him the said mortgage. That J. H. Lunn died in 1841, and in October of that year, D. C. Wilson was appointed administrator of his estate.
. He further alleges that Jos. C. Wilson and John H. Herr composing the firm of Wilson & Herr, having become the holders of three of the notes aforesaid given by said Lunn and secured by said mortgage, instituted after said notes became due, their suit by petition on the law side of the Superior Court for Leon County under the act to authorize the foreclosure of mortgages in the Courts of common law, and obtained a decree of foreclosure under which the mortgaged premises were sold and purchased by the said Wilson and Herr. That the said judgment and decree in the alleged suit for foreclosure were not and is not binding on him, because he was not made a party thereto, had no notice of its institution, nor any opportunity to defend the same and to assert his rignts in the premises. That said decree was obtained by Wilson and Herr by collusion with D. 0. Wilson or in their names for his use and benefit; that D.C. Wilson employedthe counsel to institute the proceedings against himself for foreclosure, waived the filing of the petition in the Clerk’s office four months before the first day of the term, waived the service of notice of intention to institute suit four months before the first day of the term at which decree was rendered and acknowledged it had been so given, when in fact it had not been given, waived the filing of the original deed of mortgage with the petition and the exhibition thereof to the Judge,required by the Statute to be so filed and exhibited, and substituted a copy thereof from the record of deeds of Leon County without accounting for the absence of the original, and he also waived the affidavit of petitioner or their agent or attorney as to the sum claimed to be due, which is required by the statute.— That the said D. C. Wilson not only wholly failed to make defence to said petition, but wrongfully and collusively allowed, suffered and permitted said judgment and decree to be entered up and passed immediately upon the filing of said petition.
Hayward further alleges in his bill, that the three notes held by Wilson and Herr, were received by them as collateral security, to secure the payment of a debt due to them by Robert K. West, and which debt was afterwards fully paid by West.
The bill concludes with a prayer for a foreclosure of said mortgage, and that the decree of foreclosure in favor of Wilson and Herr be vacated and set aside.
The note held by Hayward, and the mortgage afore said, were made exhibits and filed with the bill. On the mortgage is endorsed the following assignment:
“ Whereas, Richard Hayward, has made himself responsible to Patterson and Hughes, for five thousand two hundred and fifty dollars, by endorsing his name on my paper, now in order to indemnify the said Hayward, and save him harmless, I do hereby transfer the within mortgage to him and for his use, until said debt and interest is satisfied.'— Witness my hand this sixth day of March, 1841.
Test: John Wilson. R. K. WEST.
It was proved that Hayward had paid the debt to Patterson and Hughes, for which he was security for West.
David C. Wilson, administrator of Lunn, in his answer says, that on the first day of June, 1841 R. K. West being indebted to Wilson and Herr, in the sum of two thousand seven hundred and twenty-three 49-100 dollars, for which amount R. K. West had accepted their draft, dated 16 Sept., 1840, and being anxious to secure the same, and upon such security being given to obtain further credit, transferred to said Wilson and Herr three notes signed by J. H. Lunn for the amounts stated. That he being the correspondent and agent of Wilson and Herr and the manager and superintendent of their interest received from West the said notes as collateral for the payment of said amount of indnbtedness; that when said notes were offered he, defendant, was pf opiniop tliat said West produced and offered five notes pf the same amount, executed by J. H. Lunn, all of which, as he supposes, were secured by the mortgage which West also held and produced at the same time; that the impression is strongly fixed on his mind that he saw the note held by Hayward, (if it is one of the five mentioned in the mortgage aforesaid) in the possession of West posterior tp the sixth day of March, 1841. He therefore denies that the note was transferred te Hayward at the time stated and requires proof thereof, &c. He further says that at the time he received the notes from West to secure Wilson and Herr, he carefully examined the mortgage and there was then no assignment thereon.
He admits that as agent of Wilson and Herr, and having in his possession the evidence of the debtfromWest, he employed Counsel for them and in their names to institute the proceedings to foreclose the mortgage mentioned in the bill of Complaint, but asserts that there was no propriety, necessity or justice in resisting a claim of which he had full knowledge, and from which there was no escape, and that he Avished to save the expense which all attempts to delay or defeat the claim would have produced. That at the sale of the mortgaged premises he caused the same to be purchased for Wilson and Herr and in their names, and that they are now the owners thereof.
Wilson and Herr allege in their answer that they became possessed of the three notes of J. H, Lunn by act of their agent, D. C. Wilson, who received them as collateral and to secure the payment of a draft of said Wilson and Herr,' bearing date 16th of September, 1840, for two thousand seven hundred and twenty-three 49-100 dollars, drawn on R. K. West and accepted by him, that being the amount in which he stood indebted to them for goods furnished him previous to that time. They further allege that no payments were made by said West or any other person for him and on his account on said debt, and the whole amount thereof evidenced by said acceptance was due at that time of the foreclosure of said Mortgage. They admit that D. H. Wilson, as their agent, had their interests in charge and that he placed their claim in the hands of Counsel for the purpose of instituting proceedings. West afterwards became indebted to Wilson and Herr in the further sum of $2336.26 for which they drew their draft which was accepted.
The draft drawn by Wilson and Herr on West, to secure which, the Lunn notes were assigned, was filed and is as follows:
Baltimore, 16th September, 1840.
Dollars, 2723 49-100.
Six months after date pay to the order of Mr. D, C. Wilson, Twenty-seven hundred and twenty-three 49-100 dollars for value received.
Your ob’t serv’ts,
WILSON & HERR.
To Mr. R. K. West.
Tallahassee, Florida.
(Endorsed.) R. K. WEST.
The following is a condensed statement of the accounts filed by Wilson and Herr with their answer:
R. K. West, To Wilson & Herr,
1840.
Sept. 16 To Sundries,'...................... $2723.49
By amt. df’t fav. D. C. Wilson, dated
16 Sept, 1840.................... 2723.49
1841.
March 19, To acceptance due this day unpaid, $2723.49
i; 1 une 25. To Sundries, .......... 2336.26
1842. OR.
June 24. By nett p’ds cotton per Kennebeck to Boston,..................... $243.47
$4816.28
To acceptance due 16 March, 1841,"$2723.49.
“ “ “ 25 Dec., 1841, 2326.26-
$5059.75.
Less p’ds cotton per Kennebeck, 243.47.
$4816.28.
R. K. West. To Wilson & Herr.
1839.
Nov. 13. To Sundries,....-.................$1276.86
1840.
April 10. To Sundries,..................... 683.83
Aug. 27. 5p. c. Exchange on amount of our bill of 13 November, 1839, paid at Florida,.......... 67.20
$2027.89
1840. CR.
Aug. 27.
By amt. p’d to D. C. Wilson & Co., and deposited by them in Union Bank of Fla., as per certificate, $1366.46
1841.
Jan’y 30.
By Union Bank Post Notes,.....• 661.43
$2027.89
The petition in the suit instituted by Wilson and Herr, on the common law side of the Superior Court of Leon County to foreclose the mortgage aforesaid, appears in evidence in this case, on which is the following endorsement :
“Due and legal^notice of the within, acknowledged by me this 22 August, 1843, all exceptions being waived as to the time required by the statute.”
DAVID C. WILSON,
Adm’r of J. H. Lunn, Dec’d,
A decree was entered in said petition suit, at the ensuing fall term of Leon Superior Court, for a forclosure and sale, no person appearing to object thereto.
The following draft was filed as evidence in this cause by D. G. Wilson, together with the notes mentioned in the endorsement thereon:
Tallahassee, January 6, 1842,
Sir:—Please pay to the order A. K. Allison, Esq., one thousand dollars and place the same to the acc’t of your ob’t s’rt,
EWD. M. WEST.
To D. C. Wilson, Tallahassee. [endorsed.]
Pay to the order of Mr. R. K- West—A. K. Allison.
Rec’d and paid this draft by way of discount and settlement with R. K. West, taking up four notes, viz :
One to D. C. and J, C. Wilsqu, and
Interest,.................... , $120.5,1
One toD. C. Wilson & Co.,-...... 380.22
“ “ D. 0. Wilson,............ 212.82
“ “ ............ 160.32
$873.87
The balance credited on account of
R. K. West,.................. 126.13
$1000.00
The following receipts are also in the record as evidence in this case,
Tallahassee, June 10, 1840.
Mr. L. A. Thompson :
Please pay to Messrs. Wilson & Co., the proceeds of my claims against Thos. M. Bush, in your hands for collection, and oblige yours, &c.,
R. K. WEST.
[Endorsed.]
Rec’d from Thompson and Hagner the sum of nine hundred and fifty-two 72-100 dollars on account of proceeds of Bush’s note, specified within.
DAVID. C. WILSON.
Aug. 7, 1840.
Rec’d from Thompson and Hagner, the sum of seven hundred dollars, being balance of funds specified in within order,
DAVID C. WILSON.
August 10,1840.
Rec’d Tallahassee, Oct. 23d, 1841, of Mr. R. K. West5 one thousand dollars, viz: nine hundred and three dollars, Life In. and Trust Co. money, and ninety-seven dollars Union ; this is to be credited on a draft of twenty-seven hundred dollars and upwards, belonging to Messrs. Wilson and Herr of Balt. Should there be any difficulty in getting off or making use of the Life In. and Trust Co. money, Mr. West is then to take it back, or pay in its place Union money or its equivalarit.
DAVID C. WILSON.
John Daffin, a witness for complainant, testified that in the spring of 1842, thinks it was in March of that year, be» ing then engaged in business with R. K. West, he at the request of West, handed him one thousand dollars to be paid to D. C. Wilson, an account of a bill of goods which D. 0. Wilson had purchased at the North for West. This sum was for Wilson and Herr, and was to be paid to D. C. Wilson as their agent. West returned shortly after receiving the money, and stated that he had paid it to Wilson. Saw no receipt for it, but is of impression that Wilson told him afterwards, that West had paid him one thousand dollars. The money handed by witness to West, was to be applied to the payment of the account of Wilson and Herr, dated June 25, 1841.
John Wilson, an other witness examined on behalf of eomplainat, testified that the assignment of the mortgage to Hayward, was not executed in his presence, but was acknowledged by West, who requested him to witness said acknowledgment, which he did by signing his name at the bottom of said assignment. Does not recollect the date» but his impression was that it was sometime in the year 1841.
Robert K. West, another witness for complainant, testified that the assignment of the mortgage to Hayward, was executed by witness, who was mortgagee, named in said mortgage, and that said assignment was executed on the day it bears date, viz, sixth of March, 1841, and at the same time he transferred to complainant one of the notes secured therein. He further testified, that in January, 1842’ E. M. West sold some cotton to Wilson, and drew a draft on him, Wilson, for one thousand dollars, in favor of A. K. Allison, who endorsed it to witness. This draft witness declares was used or given by him to Wilson, to pay the Lunn notes, and was not used in a settlement with D. 0. Wilson, of his own private claims against witness.' He further states, that on the same day a few minutes after the cotton transaction, he called on D. 0. Wilson, and demanded the notes already referred to. Wilson refused to give them up, saying that there was a balance of over three hundred dollars yet due, and when that was paid, he would give up the notes. He further testifies that he did not at any time exhibit the original mortgage to Wilson, it was at the time of the assignment of the Lunn notes to him in the possession of Richard Hayward, and had been since the previous March.
In answer to the cross interrogatories, West declares that the assignment to Hayward, was made because Hayward was security for him on a note to Patterson and Hughes, for $5250.00, and he wished to save Hayward harmless.— He further states at the time he made the assignment to Hayward, he had but one note, Wilson had such of the others as were unpaid, hence the reason of his assigning that particular note to Hayward. At the time of the transfer to Hayward, he says he had no other notes of Lunn, they had been transferred to Wilson. He further declares in answer to the thirteenth cross interrogatory, that he paid the debt evidenced by the acceptance of the draft dated 16 September, 1840, to D. C. Wilson. He states that he cannot produce receipts for the different payments made thereon by him, as his store was broken open in 1849, and his pocket-book containing such receipts was stolen there-form. On being asked whether the account filed by Wilson and Herr, commencing Nov. 13, 1839, did not exhibit .correctly the proper charges and credits, and whether the payments credited were not the only payments made by him, he states that he does not know whether the charges are correct or not. The credits he knows are not correct. The payments therein credited were not the only-payments made by him on account of his indebtedness to Wilson & Herr. His receipts for other payments were lost with his pocket book, which was stolen as before declared.
E. M. West another witness examined for complainant, says, that he has seen receipts of David C. Wilson, to and in possession of R. K« West, within twelve months anterior to the taking of his deposition—has no recollection of their amount—they were receipts for so much money without specifying on what account. Does not know where they are. That in 1842 he drew an order on D. 0. Wilson in favor of A. K. Allison for #1000 with the understanding that Allison was to transfer said order back to said Wilson for and on account of R. K. West. Knows of no payments made byR. K. West or any one else on the draft accepted by R. K. West, either to D. 0. Wilson or to Wilson & Herr. The draft or order drawn by him bn Wilson was to be applied to the general account of R. K. West, with said Wilson, or such was his impression, as he knew of no particular bills or accounts between them. So far as he was concerned, R. K. West was at liberty to apply the said order as he saw fit.
David 0. Wilson was examined as a witness on behalf of Wilson & Herr, who testified that he acted as agent for Wilson & Herr in their business transactions with R. K. West. He further states that the accounts filed by Wilson & Herr are correct, and that the drafts therein mentioned and also filed by them of date 16th September, 1840, and 25th June, 1841, were never paid or satisfied. He further testified that R. K. West, was indebted to him previous to March, 1841, for which on that day he gave his several notes, promising to pay the same out of the proceeds of his cotton crop then growing, if he, witness, would continue to furnish him, West, which he did, to the amount of #157.34-100. In the fall of 1841, R. K. West, delivered at the Railroad Depot, 39 bales of cotton in the name of his son, and had it stored in the name of witness. E. M-. West called on witness and demanded an order for the cotton, which was refused, until the notes of West to him, Wilson, individually and the account for supplies were paid. The said E. M. West declared the said cotton was not subject to the debts of R. K. West. Witness after-wards agreed to purchase the cotton, retaining one thousand dollars of the purchase money to be applied to the said notes and account of R. K. West to him] individually.— This was done by the draft in favor of Allison, endorsed to R. K. West, and by the latter turned over to witness, and applied as stated. He states that the notes of West to him individually, were subject to the order of West, but he never called for them. Ho further declared that the notes' of Lunn, were taken to secure the draft dated 16 September, 1840, which draft never was paid by R. K. West, or any other person. He received in the latter part •of 1841, the exact time not recollected, from R. K. West or John Daffin, one thousand dollars on account of the two drafts of Wilson and Herr, and from the positive declaration of John Daffin, he is satisfied this payment was made on account of the draft of 25 June, 1841. Has no recpllec4ion of any other payments.
The complainant át the proper time objected to the competency of David C. Wilson as a witness for Wilson and Herr, because he was a party to the record, and because of his interest to defeat the complainant in the remedy sought by this proceeding.
The Court below, decreed the sale of the premises under the decree of foreclosure in favor of Wilson and Herr, to be set aside, vacated the said decree, and directed the parties to be paid according to their respective interests, out of the proceeds of the mortgage premises when sold, in pro rata shares; and to ascertain the amount of their respective interests, a reference was made to a master.
From this decree Wilson and Herr appealed.
D. P. Hogue for Appellant.
1. The appellant had a right to forclose the mortgage as they did, either at law or in Equity. The statute gives the right when the debt is due, both to the mortgagee and assignee.
The appellants were assignees of the three notes received by the mortgagee, which'fell due before the note held by the appellee ; and it is unnecessary to cite authority to mainfain the position, that the assignment of the notes carries with it the security of the mortgage.
2. Where there are several notes secured by the same mortgage, the right of the assignee of one note to forclose when the note falls due, necessarily results from this doctrine : He is not bound to wait until all the notes fall due, but may proceed when his mortgage debt is due, and he is entitled to the whole mortgage subject, if it takes it all to pay his demand. (1 Bibb 150, 1 Randolph 466, 10 Smeede & Mar., 631, 6 Howard, 320.)
3. In Alabama it has been held that the first assignee of one of several notes is entitled to priority of satisfaction out of the mortgage property. (See 4 Ala., 452; 9 Ala., 648.)
4. In this case the appellants were not only the assignees of the notes which first fell due, but they were, as the evidence shows, actually prior assignees; for it is not proved on the part of the appellee, that he held the mortgage deed by assignment anterior to the date of the transfer of the notes held by appellant.
5. The assignment of the mortgage without the debt is considered to be without meaning or use. In this case, the' assignment of the mortgage is clearly defective, not being under seal. (5 Halst., 156.)
6. The appellee, if entitled to any thing, is only entitled to a pro rata share of the proceeds of the sale under the' first foreclosure, and this he can only have upon a bill filed against the purchasers, who are the appellants—Wilson and Herr. He cannot have a decree of foreclosure against D. C. Wilson, the administrator of Lunn. (2 Flor-da, 27.)
7. As to the substantial compliance of the administra-' tor with the requirements of the statute, I think there can be no doubt; the notice given fully meeting the views of this Court in the case of Laverty vs. Filyaw. (2 Fla.)— The claim of the appellee was not presented within the time prescribed by law. (Thom. Dig., 206)
8. The appellee has slept upon his rights, if he had any, and is not now entitled to the favor of a Court of Equity.
9. The decree of the Court below is erroneous, because it makes no allowance for improvements of great value upon the premises.
10. The first decree of foreclosure, and the sale under it, having been made by a Court of competent jurisdiction, upon a subject properly before it, ought not to be vacated and set aside, unless it was obtained by fraud or collusion, and of this the record furnishes no proof.
M. D. Papy, for Appellee.
The judgement of foreclosure in favor of Wilson and Herr, is a nullity as to Hayward and is not binding on ■him, because,
1. He was not made a party to the proceedings, although he was not only interested as the holder of one of the notes, secured by the mortgage, but was the legal holder of the mortgage itself by assignment, and
2. Because the said judgement of foreclosure was not warranted or authorized by the statute under which the were had.
“The party claiming a judgement of foreclosure at law, shall be the owner of all the' notes, the mortgage was given to secure, and without it is not entitled to judgement.” (Wilson, Adm’r of Lunn vs. Hayward, 2 Fla. R., 27.)
There can be no foreclosure until the parties entitled to the whole of the mortgaged premises are before the Court. (1 Eng. Chy. R., 215, 217, 1 Bro. Chy., 368.)
Wilson and Herr as assignees of some of the notes secured by the mortgage, had no such interest in the mortgage itself as authorized a foreclosure at law, for the assignment of the notes did not carry the mortgage at law. In Equity the assignment of the debt carries with it the mortgage through the medium and circuity of a trust by implica tion. (1 Story’s Eq., 353, Roberts on Frauds, 272, 4 Pick., 131.)
Such was the view of the Legislature, for the statute of this State in reference to mortgages authorises, the assignee of a mortgage to take the steps and pursue the same remedies as the original mortgagee, and it declares that all petitions for the foreclosure of mortgages under and in pursuance of its provisions, together with the original mortgage, shall be filed in the clerks office at least four months, when the foreclosure is to be of real property, and two months if of personal, before the term of Court at which judgement of foreclosure can be demanded.— (Thomp. Dig., 376, 377.)
To entitle a petitioner to pursue the remedy provided by this statute, he must be the legal holder of the mortgage, for if he is not such legal holder, he not only cannot according to general principles, pursue any legal' remedy, but he cannot file the original mortgage as required by the statute. As assignees, of the notes simply, the remedy of Wilson and Herr to foreclose the mortgage was in Equity, for it is only in that Court that the proper parties could be made, and that Court only has the power to declare through the medium of a trust, that the assignees of a note secured by a mortgage, is entitled to the benefit of the security. If it be true that Wilson and Herr had no interest in the mortgage at law, it having been assigned to Hayward, how could they have obtained a foreclosure at law, except by collusion with or the default of D. C. Wilson, admi’r of Lunn. And can it be held to be law, that Hayward who was not made a party to the proceedings, who held the original mortgage by assignment*. is to be concluded by the judgement rendered in favor of Wilson and Herr.
2. Haywa] d having received the assignment of the mortgage, and one of the notes prior to the time, when the other notes were assigned to Wilson and Herr, as we contend, is entitled to priority. (4 Alabama, 452, 9 Ala., 645.) The written evidence of the assignment is better than any of the declarations of the witnesses.
3. At all events Hayward is entitled to a sale of the mortgage premises, and to a pro rata share of the proceeds, and if not such pro rata share, then to the surplus that should remain after paying Wilson and Herr what is due on the draft, (if any thing remains due,) to secure which the Lunn notes were assigded.
4. The evidence of D. C. Wilson should be rejected, because he is a party to the suit, and because he is interested to defeat the complainant.

Opinion:
BALTZELL, C. J.,
delivered the opinion of the Court.
This case was before us at the January term, 1848, on an application of the defendant, Hayward, to foreclose undér the common law proceeding of this State, a mortgage executed by James Lunn. The proceeding was against the! administrator of Lunn, who resisted the application on the ground that other parties holding notes of prior date, had already foreclosed and had sale of the mortgaged proerty.
The Court considering that if the party had rights, they! could be more appropriately asserted in equity than in a Court of law, and especially that the purchasers under the sale already had, should be made parties so that a second «ale should be avoided if possible, and the conflicting rights and interests of the different parties properly adjusted, sent the case back with that view. It is now before us, with new parties and the facts presented are as follows:
Robert K. West was the owner of a mortgage on part of lot 167, in Tallahassee, executed to him by James Lunn, on the 4th day of June, 1840, to secure payment of five promissory notes, for one thousand dollars each, payable the 4th days of June, 1841-42-43-44 and '45.
The first note seems to have been paid, the second, third and fourth, falling due in 1842-43 and '44, were assigned and transferred by West on the first day of June, 1841, to Wilson and Herr. On the22d of August, 1843, two of these notes having become due, these parties filed their petition of foreclosure, and in January, 1844, procured a decree or judgement of the Superior Court for Leon County, under which the property was sold to pay said debt by the marshal.
The complainant, Hayward, claims to be the assignee of the last note, and of the mortgage by transfer bearing date the 6th of March, 1841. His bill alleges that 'the decree of Wilson and Herr, was obtained by collusion and that he is entitled to prior payment by virtue of his previous assignment, as well of the note as of the mortgage.
The enquiry becomes an important one in the very outset, whether Hayward in fact has the prior assignment.— In his bill he proposes to the defendants the question directly and expressly, whether West did not on or about the 6th of March, 1841, indorse and deliver the said note of Lunn, for one thousand dollars, and whether he did not at the same time assign the mortgage. In reply to this, D. C. Wilson says: " when the notes received' by him for Wilson, and Herr, were offered, he is of opinion that said West produced and offered five notes of the same amount executed by the same person, all of which, as this defendant supposes, were secured by the mortgage which said West held and produced at the same time. That if the note which complainant holds is one of the five notes mentioned in said mortgage, it could not have been assigned and transferred to him on the 6th of March, 1841, if he is correct in the impression strongly fixed on his mind, that he saw said notes in the actual possession of said West, at a date posterior to the said 6 th of March. He therefore denies and calls ' for proof of the time of the alleged transfer to complainant.
Robert K. West is questioned for complainant on this point, and says in his direct examination, the assignment of the note and mortgage were made at the day they bear date, 6th of March, 184L
In his cross examination however, being asked how many notes he had in possession at the time of this assignment to Hayward, he says he had but one, Wilson had the other two, hence the reason of my assigning that particular one to Hayward. Again, being asked at the time of the transfer to Hayward how many of said notes of Lunn he had assigned, he replies, "that at the time of the transfer to Hayward he had assigned none but the two and those to D. G. Wilson, making in all three notes." Again asked if he had other notes of Lunn in his possession falling due anterior to this transferred to Hayward, why he did not transfer them also, his reply is, " I had no other notes of Lunn at the time, they had been transferred to D. C. Wilson." His account of the transfer to Hayward is as fol lows: " I made this assignment because Hayward was security for me on a note to Patterson and Hughes for $5,250, and I wished to save him harmless. When I found the crush was coming upon me I went to him and told him of it and said to him here take this, satisfy yourself and gave him the mortgage and the note of Lunn attached to it."— Independent of the repeated declarations by him that he had assigned the prior notes to Wilson and Herr, this last statement strikes us as corroborating it with great force. Why if he was so anxious to secure Hayward in so large a sum and had four notes secured by mortgage, does he give only one for $1000 and that, the last due of five and payable at the distant period of four years 1
We are of opinion then that Hayward took his note and the assignment of the mortgage after the other notes were assigned to Wilson and Herr. Plaving ascertained that the notes obtained by the latter fell due first and were assigned and transferred first, the question arises as to the law of the case. As a general rule the assignment of a note secured by mortgage is in equity an assignment of the mortgage unless there is some special provision by the parties to the contrary. Where several notes have been assigned as in the present case lies the difficultju
The first case on the subject was decided by the Court of Appeals of Virginia, and is the leading case. A deed of trust was executed by William and Francis Sutten to trustees to secure payment of three notes to Barrett. The first note was paid, the second transferred to Ragland without any assignment to him of the deed of trust, the third endorsed to the Gwathmeys who took an assignment of the deed of trust for their security. The Trustees having ad vertised the land for sale to pay Ragland's claim, the Gwathmeys filed a bill against Ragland and the Trustees to enjoin them from selling the property. An injunction was granted which was dissolved and the case taken to the Court of Appeals. The Court say that the deed of Trust being intended by the parties to it as additional security for the payment of the notes to Barrett or his assigns in the order in which they fell due, it followed the notes into the hands of the several holders thereof and that it was not competent to Barrett by an assignment of the deed to the Appellants, without the assent of the Appellee, to whom the second notes had been assigned to deprive him of his priority of right to demand a sale of the property, if necessary to the payment of the note assigned in the order of payment expressly directed by the deed. The deed being assigned to the Appellants, gave them full notice of the order in which the notes were to be paid to Barrett or his assigns, and at least, put them on the enquiry whether the first and second notes had been paid at the time they took the assignment of the third note and of the deed of trust. By not making that enquiry, if they relied on the trust fund as security for the payment of the note assigned to them, they may have lost their money ; however that may be as against the Appellee, the Court is of opinion that he has no claim to be preferred. Gwathmeys vs. Ragland, 1 Rand. 466.
The Supreme Court of Indiana say; "the meaning and construction given to a mortgage payable at different times by several promissory notes, must depend upon the law of the remedy upon such notes or mortgage for these contracts as well as others are made under and with an eye to the laws governing their enforcement. In this State a mortgage may be foreclosed, when there are instalments, on default of payment of the first instalment. The holder of the first note may, if he chose, when that becomes due, enforce the full payment of it out of the mortgaged premises, and the holder of the second note may in like manner obtain priority over the third, and so on. State Bank vs. Tweeds, 8 Black, 447. This is also the rule in New Hampshire, 10 N. H.
In Alabama a different rule prevails; there the prior' assignment seems to give preference of payment in case of dificiency of the mortgage fund. (Cullum vs. Erwin, 4 Alabama, 458.)
In that case the Court admits that in 5 Porter and also 9 Porter, 527, McVoy vs. Bloodgood, the same Court had decided that the assignee of the notes which first fell due, would have the prior right. They say that the same decision with the one established by them was made in Gwathmey vs. Ragland, under precisely a similar state of facts.
They also refer to Van Rensaleer vs. Hopkins, decided by the Supreme Court of New York. In reference to this case as well as the one just alluded to, we think that intelligentCourt was mistaken. Van Deusen, says the, Oourthad two mortgages, the first he assigned to Van Rensaleer for $ 1180;thoughmade to him it was intended for the use of Van Rensaleer, and to. secure him the unpaid balance of the land which he had sold Van Deusen. Van Deusen there-" fore in effect received and held the mortgage for $1180.. in trust for Van Rensaleer, and his intention was that this' mortgage should become the first incumbrance by a prior registry áse.
The assignment to Van Rensaleer was thus not merely an arbitrary preference by Van Deusen of the original mortgage to the mortgage retained, but it was a just discharge of duty, a fulfillment'of the confidence which Van Rensaleer had reposed in Van Deusen, and a substantial compliance with the antecedent rights of the parties. 1 Hopkins.
It is very true that the prior assignment is alluded to, but it will be perceived that the case is principally decided upon the peculiar equities of the case as existing between the parties. Equally unfortunate is the reference of the Court to and reliance upon the case of Gwathmey vs. Ragland. We have seen already that this case is not authority for payment to the party having the first assignment or transfer of the note, in preference to the one whose note fell due first.
In Mississippi a different rule still is held, as their Courts devide the proceedsof the sale of the mortgage property amongst all the notes agreeing with none of the authoritiesto which we have alluded. Here again the Virginia case is regarded as not being in conflict with the rule established by them. The leading case is that in 6 Howard, 320,' and with due respect to the very high intelligence and ability of that tribunal, the equity of the case and the rights of the parties depend on the peculiar facts and circumstances of the case, rather than the maintainance of any rule or principle of law obtained from the authorities cited.
Whilst we are free to declare our own opinion in favor of the Virginia rule as best agreeing with analogy,' as most certain and definite, leaving less to uncertainty and confusion, whilst we admit that there are equities to change its application, as in the New York and Mississippi cases, and in the ease of a mortgagee claiming after the assignment of part of the mortgage debt, yet it is unnecessary in the present case to assert the superiorly either of the rule of the Ya. or Ala. Courts. It is sufficient that the adoption of either is fatal to the case. The complainants Wilson and Herr have the first assignment of J;he notes; their notes were first due by the terms of the mortgage. They obtained a decree of foreclosure in January, 1844, and the property was sold on the fourth of March, 1844, upwards of a year previous to the time Hayward's note became due. If Hayward has an equity, it must be because the property is worth more than the claim of Wilson and Herr, or there has been irregularity or fraud in the sale to invalidate it.
There is no allegation in the bill as to the value of the property, no assertion that it is more than sufficient to pay the three first notes. The Complainants' bill is predicated on his prior right and equity. The amount bid at the sale is no where stated, tho' Wilson says in his deposition, " the. property brought but a small proportion of the draft ($2,-' 729). There is then no propriety in ordering another sale; this would be a vain and fruitless thing.
Is there an irregularity in not makin g Hayward a party to the judgment of foreclosure. As a general rule all incumbrancers should be parties. Prior incumbrancer's rights are paramount, and they would seem to be necessary if not indispensable parties 7 Paige 444, 2nd Alaba. 415,2 Ed. Chy. 127.
A subsequent incumbrancer is not an indispensable par ty Cullum vs. Batie, 2nd. Ala. 415, Walker vs. Bank Mob. 6 Ala. 452;
A second incumbrancer is only affected and can only complain when there is a surplus after paying prior liens. His right to the surplus cannot with propriety arise until it shall be ascertained that there is a surplus, and this cannot be shewn before the mortgaged premises have been sold and the debt of the prior incumbrancer with all costs fully discharged. 2 Alabama 422.
The English practice is to allow the subsequent mort-' gagee to redeem by paying up the prior mortgage. Coote 522.
It remains to notice another allegation of the bill, that the judgment of Wilson and Herr was obtained by fraud; the defendants employed Counsel to institute suit against himself—waived the filing of the petition four months before the first day of the term ; waived the filing of the mortgage and substitued a copy thereof, and wrongfully allowed judgment to be entered up immediately. The answer of the parties denies collusion, and we find not a particle of proof to support it. The facts stated even if true, by no means Constitute fraud. The defendant alleges that he had no defence to the suit and desired to avoid delay and expense; what objection then was there to a direct confession of judgment without previous preliminary proceedings?
In the case of Finley vs. Bank U. S., the bill was filed fit the November term, stating the consent of the mortgagor to an immediate sale of the mortgaged property although the day of payment had not arrived, and on the same day an answer was filed consenting to a decree for the sale. A decree was immediately entered by consent ,of parties fit* recting the Marshal to sell the property, and yet no one complained of this as irregularity, much less fraudulent, although the decree was assailed by a prior mortgagee. 11 Wh. 304.
Independent of this, it is not allowable to attack a judg ment collaterally by asserting irregularities that might form the subject of reversal in an appellate Court. A judgment concludes the subject on which it acts, and those things are regarded as proved and done which ought to have been proved to entitle the party to judgment. Grignon's lessee vs. Alston, &c., 2 Howd. S. C. R. 343, 3 Peters 204, 5, 10 Peters 473.
On the whole case we see no ground for disturbing the sale or for ordering another sale. The decree of the Circuit Court will therefore be reversed and set aside, and the case remanded with instructions to dismiss the bill with costs.
The following petition for a re-hearing was afterwards filed: