Court Opinion

ID: 5550670
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:34:54.12755+00
Date Added: 2024-06-11T08:35:05.189052
License: Public Domain

The Assistant Vice-Chancellor.
It is objected preliminarily to the complainant’s bill, that the' mortgage in question was given as collateral security, for a mortgage of §4000 on property in New Jersey, and that it was premature to commence this suit, until he had pursued and exhausted his remedy in that state. It is expressed in the mortgage itself that it is given as collateral security. Still I do not think that the objection is well taken.
The complainant held a mortgage against Cornell upon property in New Jersey. Cornell sold a part of the property to John P. Haff, and desired the complainant tb take a mortgage from Haff on that part, for the whole of his debt, and release the residue, Haff thereby paying the consideration as between him and Cornell. The complainant assented to this, provided $1000 were paid to him in cash. Haff was unable to raise the $1000, and in order to secure its payment, he gave the mortgage which is the subject of this' suit. At the same time, he executed a mortgage on the *101New Jersey property which he bought of Cornell, for the whole sum payable to the complainant, including the $1000, and the latter released to Cornell the unsold portion of the New Jersey property. In effect, the latter mortgage was collateral for the payment of the $1000.
Independent of that, the mortgage in suit was payable in one year, while that in New Jersey was payable in four years. And it is alleged in the bill that the New Jersey property was not worth over $2500. There is proof that it was worth but $3000 in 1842, and on the foreclosure of the same which was pending when this bill was filed, it sold for only $1100. The entire inadequacy of that property to pay any part of the $1000 was fully established.
Under these circumstances this is not a case in which a party having a lien on two funds, will be compelled to exhaust his remedy on one of them in order to relieve a creditor who has a lien upon the other.
Assuming that the $1000 mortgage was purely collateral, the complainant sets out by showing that the principal pledge will not suffice to pay any part of it. In such a case there is no rule of equity which precludes him from pursuing his collateral remedy as soon as it is due.
Another point made by Mrs. Haff is that the complainant’s , mortgage never was a lien, because it was given during the pendency of the partition suit and was not recorded till after the decree of sale.
The recording of the mortgage was not necessary to make it a lien. As to the Us pendens, it might result in making the mortgage fruitless, but it did not prevent its becoming a lien for the time being. This will be more fully discussed hereafter.
Next as to the objection that the mortgage was intended to give a claim upon the proceeds of Haff’s share in the premises, and not upon the land itself; it is sufficient to say that the mortgage declares otherwise, and the only testimony relied upon to prove it is by parol, and thus incompetent. Moreover the fact that when the mortgage was given, it was uncertain whether there would be a sale or an actual partition, shows that a lien upon the land itself was intended by the parties. This view of *102the subject disposes also of the point that the mortgage was taken as a personal security only.
To proceed to the merits of the case; which are to be considered first, in reference to the complainant’s rights as between him and John P. Haff, and second, as between him and Mrs. Haff.
First. The effect of the mortgage as between the complainant and John P. Haff'. There is no doubt but that it became a lien upon his undivided interest in the premises which were the subject of the partition suit. But it is contended that by the decree and sale this lien was wholly divested.
I agree with the defendant’s counsel, that the complainant took his mortgage subject to all the consequences of the proceedings in the partition suit. But what were those consequences ? Simply, that John P. Haff instead of owning an undivided interest in the premises, became the owner of two lots in severalty, subject to certain payments to his co-tenants in common, which are now represented by the mortgages to Speck and the clerk of the court. If the decree had been for an actual partition, it is not to be denied that the mortgage would have been a valid lien upon the share which was allotted to John P. Haff in severalty. But it is said the decree was for a sale, a sale has taken place, and Haff is now a purchaser under the decree, not an owner of a common interest. This is all true, but this court looking at the substance of things, cannot but see that as to Haff the change is one of mere form, not affecting his real interest in the premises. If the sale had wrought a change in the title by which Haff came in as purchaser, we should be informed of the payment and distribution of the purchase money to those having interests and liens. Yet it is conceded that the complainant who had such a lien has received nothing. It is answered by the defendants, that this is his fault, he should have claimed the proceeds from the master who made the sale.
To this, it might be replied that the master would not have been bound to take any notice of his claim, as it was not provided for by the decree. At all events, John P. Haff, who as the purchaser with notice of the complainant’s lien, was bound to see it paid off and discharged out of the fund, or at least that its due proportion of the proceeds of the sale were paid to him; instead *103of discharging that duty, virtually retained in his own pocket the money which he should have paid to the complainant.
As a purchaser with full notice of the complainant’s lien, and bound personally as well as by such notice to see that it received its share of the purchase money, John P. Haff took his conveyance from the master subject to the effect of that lien. And as a tenant in common, using the forms of a decree and sale in partition, to turn his undivided share into an interest in severalty, the lien upon his common interest would in equity attach to his allotment in severalty. The defendant’s positions on this subject are good law, but are not applicable to the circumstances of the case. If a stranger had bought one or all of the lots at the sale, without notice of the mortgage, and paid his purchase money to the master, the lien of the mortgage would unquestionably have been cut off. But as to John P. Haff, I feel equally clear in holding, that it continued a lien upon the lots which he obtained in severalty, not exceeding the extent of his interest in the proceeds of the whole lands held in common, and sold under the decree.
Second. The effect of the complainant’s mortgage after the master’s sale, as between Mrs, Haff and himself.
Mrs. Haff is not a bona fide mortgagee for a valuable consideration. Her mortgage was given for a precedent debt due to her from her son. The debt was in fact due from her to Cooper and she would have been compelled to pay it whether she ever obtained security from her son or not. It was her debt, although he was liable to refund it to her. When she took the mortgage therefore, she parted with no money, security or value. If the mortgage proved to be good, she would save her debt,' if it were bad, she stood in the same situation that she did before.
In this respect the complainant has the superior equity, for on obtaining his mortgage he parted with his lien on the New Jersey property which Cornell retained, and he never can regain his standing as an incumbrancer there. It is urged that the complainant ought to have obtained the sum which was payable to John P. Haff under the decree. With more propriety it might be said that Mrs. Haff ought to have obtained the same money, because as a party in the partition she had notice that there was such a *104sum payable to him and the time when it was payable; whereas the complainant knew nothing of the distribution.
It is true that by force of the partition, the master’s deed, and the mortgage to Mrs. Haff, she acquired the legal title; but the consideration being a precedent debt and not any value paid, she acquired the title subject to the same equities with which it was charged while owned by John P. Haff. She therefore cannot set up the legal title against the prior and superior equity of the complainant.
A still stronger case is made against Mrs. Haff on the ground of notice. It is alleged that she had actual, as well as constructive notice of the complainant’s lien when she took her mortgage.
As to actual notice, it is proved that on the occasion of completing the master’s sale on the partition and distributing -the proceeds, most of the parties in that suit met at the office of Mr. Elting, who was the solicitor of several of the defendants in the suit. Mrs. Haff and John P. Haff were there. The complainant’s mortgage and its amount were mentioned and discussed in the presence of Mrs. Huff. She did not participate in the discussion so far as it appears ; but considering that John is her son, that she was at that time obtaining security from him on this property, and that the complainant’s mortgage on it was canvassed in her presence and hearing; it is difficult to resist the conclusion that she then learned, if she did not before know, of the existence of that mortgage.
Then as to the constructive notice. When the mortgage to the complainant was prepared, Mr. Elting was the solicitor and counsel of John P. and Mrs. Haff in the partition suit, and in fact was her general solicitor and counsel. All the papers which were executed by and between the complainant, Cornell and John P. Haff, were prepared by Mr. Elting or in his office, and he advised with the parties on the subject. He is the subscribing witness to the bond and mortgage in question.
When the mortgage to Mrs. Haff was executed, it was also' prepared by or under his direction, and he acted as her counsel in the settlement of her accounts as administrator of her husband, and obtaining that mortgage from John P. Haff. Nothing *105can be more full and direct than the notice which Mr. Biting had of the complainant’s bond and mortgage. And as the counsel and solicitor for Mrs. Haff this was notice to her. (See Griffith v. Griffith, 9 Paige’s R. 315 ; and 1 Hoff Ch. R. 153 ; Champlin v. Laytin, 6 Paige’s R. 189, 203; Tunstall v. Trapps, 3 Simons, 305; also a very strong case, decided first by the Master of the Rolls, and then by Lord Brougham; Kennedy v. Green, 3 M. & K. 699.)
On both grounds, that Mrs. Haff was not a bona fide mortgagee for a present consideration paid or given, and that she had notice of the complainant’s mortgage, I must hold that her lien is subject to the latter.
The complainant is entitled to a decree for the sale of the premises. And his mortgage and the costs of suit, are to be paid, next after Speck’s and Walworth’s respectively.
As the mortgage to Walworth was due, and his rights correctly stated in the bill, there was no necessity for his putting in an answer; and the objection being taken, he must bear his own costs of the answer.