King v. McVickar

3 Sand. Ch. 192

• Court: New York Court of Chancery
• Decided: February 4, 1846
• Status: Published

Opinion

The Assistant Vice-Chancellor.

At the time the transaction in controversy was brought to a close with the American Life Insurance and Trust Company in June 1841, their mortgages executed by Dr. McVickar, were .indisputably valid liens upon fourteen lots of ground, eight of which had been conveyed by McVickar to W. B. Lawrence on the 15th of May preceding, and six were still owned by McVickar himself.

So far as the Trust Company is shown to have had any notice, the whole sum requisite to discharge their mortgages was a charge upon all the lands mortgaged, and that company might have released any of the lots, without being subjected to loss in consequence of any equities of Isaac Lawrence, or any existing between Dr. McVickar and W. B. Lawrence.

Prime, Ward & King became interested in the subject matter, on their advancing the $25,000, on the purchase of the Trust Company’s certificates. So far as they were ■ chargeable with notice,'on succeeding to those mortgages in the manner which they allege in their bill, the mortgages were the first lien on those fourteen lots, and valid for the $50,048 93, which was payable for the Trust Company certificates. They received $25,048 93, of W. B. Lawrence, and advanced the residue, as they ipsist, on the security of the mortgages upon the lots still owned by Mc-Vickar.

The first issue made by the original suit, is on the fact of their having thus made the advance.

On this point, the testimony is direct and positive, that they delivered the certificates to W. B. Lawrence, upon his agreeing to take an assignment of the mortgages from the Trust Company, and to hold them as a security, so far as it respected Dr. Mc-Vickar’s lots, for the payment to them of the $25,000.

The circumstances relied on by the counsel for Isaac Lawrence’s administrator, as casting doubt upon this agreement, are nearly all explained by the fact that the affair occupied two days in its adjustment, and some of the papers were dated on the 18th of June and some on the 19th, although in legal consideration to be deemed as cotemporary writings.

The next question presented in the original suit, is as to the right of the complainants to make such an agreement, or to set up the mortgages when assigned, against the lands of McVickar only.

As to this, there is no technical difficulty in the way. W. B. Lawrence was not the mortgagor in either of the mortgages. And as to the lots owned by McVickar, an assignment to W. B. Lawrence would not operate as a merger. As to his own lots, it might so operate, pro tanto., unless there was an intention to the contrary; but that could not affect the lots still vested in the mortgagor, where the intention was express, to keep the mortgages outstanding.

The objections to the complainants’ right are, that the debt was in equity a joint debt of McVickar and W. B. Lawrence ; that the lands mortgaged had been divided, and the greater part of the debt apportioned upon those conveyed to W. B. Lawrence, who was bound to pay such apportionment; and that McVickar had furnished to W. B. Lawrence, all, or nearly the whole of the amount which in respect of the lots retained by him, he was liable to pay towards the purchase of the certificates which were to discharge the mortgage. Also that Isaac Lawrence had a junior mortgage on McVickar’s lands, and his rights are impaired by the proceeding which the complainants seek to enforce. The objections assume that the complainants were chargeable with direct or constructive notice of all these matters.

1. As to the character of the mortgage debt to the Trust Company. It was at law, the sole debt of McVickar. There was no joint personal liability of W. B. Lawrence, and in one of the mortgages he was the mortgagee. So far as notice to the Trust Company is concerned, there is no proof that they ever knew of W. B. Lawrence’s interest in the property, either before or after the conveyance to him on the 15th of May, 1841. The complainants are therefore not subjected to any notice through their assignors.

As to the complainants themselves, I think it sufficiently appears that they were aware of the fact that W. B. Lawrence had claimed an interest in the mortgaged premises before the division in May, 1841, but this interest did not make him a joint debtor, even in equity. His equitable right or interest in the lands, (if he really had any right beyond an honorary one,) was subject to the mortgage debt, but he was not personably liable..

In May 1841, the division and apportionment was made, embracing lots not subject to these mortgages, and other mortgages on such lots. Mr. King knew that there had been a division of the lands' between McVickar and W. B. Lawrence, but he knew nothing of the particulars, or of the apportionment. It is evident that he had been informed of the execution by McVickar of a conveyance of some of these lots to W. B. Lawrence, but it does not appear that he had seen the 'deed, or heard of its contents. The deed was not recorded till the 19th of June; and if it had been recorded a month before, the record would not have been notice to the prior mortgagee.

This presents the whole subject of notice to the complainants, as it is disclosed by the proofs. Now what were the legal and equitable presumptions, which Mr. King was authorized or required to entertain, from all that he had thus learned ? The mortgages which he was about to obtain, were executed on fourteen lots. The title at that time was in one man, the actual interest in two. These men had divided the lots between them, and the one having the legal title, had conveyed to the other the lots assigned to the latter. Mr. King had never heard what shares each had in th,e lots originally; nor what proportion of them had been assigned to the one or the other in the division; nor how they had arranged the liens in respect of such lots, if they had arranged them at all. It appears to me that the just and only inference which he could deduce from- the facts known to him was, that the.parties had an equal interest originally, and that on their division they had made an equal distribution of the lots and of the mortgage debt. I am not sure that he was bound to draw any inference from such information, which was to affect his dealing with the securities.

But it may be said he was put upon inquiry by these facts ; it was incumbent upon him to ascertain McVickar’s rights. As representing the first lien, (when he became assignee,) I think he was not called upon to pursue these inquiries. He could stand upon the recorded mortgages, unaffected by events subsequent to their being recorded, unless such events were distinctly presented to his consideration. It was the duty of parties who had acquired subsequent rights in the property, or whose existing rights had become changed; to notify the same to the mortgagees, if they were liable to be affected by the action of the latter.

In this case, the complainants succeeded to all the rights of the Trust Company, and are not liable by reason of constructive notice of the apportionment made on the division of the lands. .

There is no evidence that either the Trust Company or the complainants had any information of the alleged payments by Dr, McVickar to W. B. Lawrence, towards the former’s portion of the cost of the Trust Company certificates.

As to the junior mortgage of Isaac Lawrence, I find no proof that the complainants or their assignors knew of its existence. It was argued, that the complainants ought to have denied notice in their answer to the cross bill. I think not, because the cross bill did not allege notice. It is not like the case of a defendant resisting a prior or better title, on the ground of a bona fide purchase without nqtice. Here the parties answering the cross bill, were meeting an equity which was set up against their elder and prior legal right.

Then it is said that the record of Isaac Lawrence’s mortgage was notice to the complainants. This would be true if they were purchasers of the property mortgaged to Isaac Lawrence. But in fact they are purchasers of a title prior to his, and they were not required to search the records posterior to the date of that title. The recording of a deed or mortgage, is not notice of its existence to a prior mortgagee. (Stuyvesant v. Hone, 1 Sand. Ch. R. 419.)

The result is, that when the complainants stipulated for the assignment in question, they had a right to assume that the $50,048 93, payable to the Trust Company, was a charge devolving equally upon McYickar and W. B. Lawrence, and that the lots of each were to bear an equal proportion of the burthen. On delivering the certificates, they received from W. B. Lawrence, a trifle more than half of that sum," and probably knew that he raised it upon a mortgage of five of his lots which were under the Trust Company mortgages. They were therefore warranted in assuming that Br. McYickar and his lots, were to pay the remaining $25,000; and it was both competent and proper for them to take an assignment of the mortgages, and hold it as security against his lots for the repayment of that sum.

The subsequent cancellation of the mortgages, did not impair the complainants’ rights as against the parties now before the court. Dr. McYickar participated in the act, and neither Isaac Lawrence or his administrator, have derived any new rights, or parted with any securities in consequence of the cancellation. It was wholly unauthorized as to the complainants, a violation of their rights, and as to them is void. On' the case made by the original bill, the complainants are, in my judgment, entitled to the relief which is therein prayed.

The equity which the administrator of Isaac Lawrence sets up in the cross bill, aside from his defence to the original suit, may be thus stated. Admitting that Prime, Ward & King, were entitled to advance their $25,000, upon an assignment of the Trust Company mortgages, and to hold them against Dr. McVickar’s lands ; yet in point of fact, as between him and W, B. Lawrence, Dr. McYickar was not obligated to pay that $25,000. Mr. W. B. Lawrence ought to pay a considerable part of it, if not the whole. Isaac Lawrence, as a junior mortgagee of Mc-Yickar’s lots, had an equity to compel W. B. Lawrence to discharge his portion of the $25,000, in order to relieve those lots of McYickar’s, and thus to benefit Isaac Lawrence’s security. That Wj B. Lawrence could not by his own act, in discharging the Trust Company mortgages, so far as they were a lien on his land, without paying his just proportion of the $25,000, defeat this equity of Isaac Lawrence. That Prime, Ward & King, having obtained from W. B. Lawrence, a mortgage for the further security of this $25,000, the administrator of Isaac Lawrence, is entitled to the benefit of that mortgage, so far as to exonerate McYickar’s lots from W. B. Lawrence’s just proportion of the $25,000. And it is alleged, that the lands thus mortgaged to Prime, Ward & King, are still liable to be subjected to this equity, unaffected by any subsequent bona fide conveyance or incumbrance.

In answer to this claim made by the cross bill, it is insisted, first, that the case thus stated, furnishes no ground for marshal-ling the assets, and compelling Prime, Ward & King, to resort in the first instance to th'e mortgage given by W. B. Lawrence ; and Ex parte Kendall, (17 Ves. 520,) and Dorr v. Shaw, (4 J. C. R. 17,) are relied upon as authorities.

In both of those cases, the attempt was by a junior lien creditor of B., to compel a senior lien creditor of A. and B., to exhaust A.’s property first, without showing any equitable right in B. to have the latter debt charged on A. alone. Lord Eldon said, and Chancellor Kent adopted his language, that there must be a right in the creditors of B., founded on some equity of B., giving him as a surety or otherwise, a right to compel A. 'to pay the joint debt; that it must appear to be just and equitable that A. ought to pay in the first instance, or else there is no equity to compel the creditors to go against A., who have a resort to both funds.

In my view, these authorities sustain the principle of the cross bill, On the case stated, when McYickar conveyed the lots to W. B. Lawrence in May, 1841, by force of the apportionment of the liens, the lots of the latter as between himself and McYickar, became liable to discharge $45,939 90, of these mortgages to the Trust Company. As to this sum, he was the principal debtor in equity, and McYickar was his surety in respect of the lots of McVickar still liable to the mortgages, as well as by force of his personal liability on the bonds accompanying the mortgages. Therefore, when the mortgages were discharged, McVickar had as against the lots of W. B. Lawrence, the precise equity which Lord Eldon and Chancellor Kent described, as entitling one of the joint debtors to require the other to discharge the obligation. This was an equity which was bound by the lien of Isaac Lawrence’s mortgage, and his representative may avail himself of it. (Kellogg v. Wood, 4 Paige, 578.) McVickar’s assent to the discharge of the mortgages cannot affect this lien, both because he had no right to impair it, and because his assent appears to have been given under the expectation that his lots, as well as those of W. B. Lawrence, were to be actually discharged.

According to the cross bill, W. B. Lawrence has not satisfied the amount for which McVickar’s lots were incumbered in his behalf; hence the equity which I have described, continued to the extent of his deficiency, as between him and McVickar, and the. junior mortgagee of McVickar, is thus placed in the relation of surety for W. B. Lawrence in respect of the junior mortgage on these lots of McVickar’s.

In reply to the claim of the administrator of Isaac Lawrence to have the $25,000 mortgage to Mr. King marshalled, it is shown, that in August, 1842, W. B. Lawrence executed a further mortgage to Mr. King, on the lands conveyed by the mortgage of November 1,1841, to secure any indebtedness of W. B. Lawrence to Mr. King, individually and as trustee, which was not otherwise secured; and it is then shown, that Mr. King as trustee, has such a claim against W. B. Lawrence, to more than $10,000, for which Isaac Lawrence was liable as guarantor.

I think this second mortgage does not impair the right of the administrator to relieve McVickar’s lands through the first mortgage to Mr. King. Mr. King is not a mortgagee who has advanced money upon the faith of the second mortgage. He obtained it for a precedent debt, and has not parted with any security or property, in consequence of its execution. His equity is therefore no better than that of McVickar and his mortgagee, and theirs being prior in time, must prevail. The guaranty of Isaac Lawrence does not affect the question, as the case is presented here. Before giving it effect, (if such a circuitous equity could be permitted,) it would be necessary to understand the state of the accounts and other securities existing between Isaac and W. B. Lawrence, between Isaac Lawrence and McVickar, and possibly those between the Lawrence’s and Mr. King himself.

No question of parties is raised in respect of these mortgages, and as the last mortgage was in Mr. K.’s name, without any addition as trustee, there is no occasion for further parties, or of designating him as trustee in order td proceed with the cause.

The cross bill states a conveyance by W. B. Lawrence to Mr. King, as trustee for Mrs. W. B. Lawrence, of various lots which were subject to the Trust Company mortgages, and seeks to have the benefit of those mortgages against such lots also, by way of substitution, to make good W. B. Lawrence’s deficiency in paying the same. As to two of those lots, (327, and 329 Ninth street,) there is the further ground, that the mortgages thereon held by the New York Insurance Company, cover in addition .to their debt, a portion of the Trust Company debt, which was discharged by the certificates in June, 1841, and as to such portion, McVickar and his mortgagee have a right to the benefit of those mortgages, in respect of W. B. -Lawrence’s deficiency. These questions affect the rights of the children in esse, of Mrs. W. B. Lawrence, as the persons presumptively entitled to the remainder of the trust estate, and they, as well as the trustee as such, should be parties to the suit, before the court can properly dispose of them.

It was objected to the cross suit, that it sought to introduce, and have a decree upon new subjects of litigation, wholly unconnected with the original suit; and Galatian v. Erwin, (Hopk. R. 48, & 8 Cow. 361,) was cited. In that case the decree sought in the cross suit, was based upon the entire overthrow of the original suit, besides relating to lands not affected by the original bill. The relief sought in this cross bill, proceeds upon the footing that the claim in the original suit is proper, but that the relief therein ought to be decreed against others of the defendants, and other property than that sought to be primarily charged. I have no doubt but that it is a proper case for a cross bill.1

I have now gone over the points of law raised by the cross bill, and will next consider the only disputed fact which I deem material to the proper disposition of the cause at this time, which is whether W. B. Lawrence has paid his proportion of the Trust Company mortgages.

In this inquiry, I set out with the apportionment made between him and McVickar in May, 1841, and I must say unhesitatingly, that there is no mode of stating the transaction, upon that basis, by which I can make out that he has paid the share of those mortgages, which he assumed upon his lots in the apportionment. Whether the Trust Company debt embraced in the mortgages assigned to the New York Insurance Company, be included or omitted; and whether the calculation be made on the full amount of the Trust Company debt, or upon the sum which was required to pay for the certificates with which it was discharged ; the'result is in this respect, the same.

Tn this conclusion I leave out of view, the sums which Dr. Mc-Vickar says he paid towards those certificates, and take all that Mr. Lawrence gives as paid by himself. I do this irrespective of the propriety of McVickar’s claims; it being unnecessary at this time, to decide their validity.

The question arises between Mr. King and the administrator, and the answer of W. B. Lawrence is not to be weighed in disposing of it.

In my view therefore, the cross bill is sustained in its principle, and the administrator of Isaac Lawrence is entitled to a part of the relief for which he prays.

As to a portion of his case, further parties are requisite, and the cross bill must stand over, to enable him to bring them before the court. Inasmuch as the case may be varied by the issues which may arise between him and the new parties, I will not at this time enter into the details of the payments made by Mc-Vickar and W. B. Lawrence respectively, towards the purchase of the Trust Company certificates. I trust, when that question comes up for decision, it will be better elucidated by the testimony, than it seems to be by the papers before me.

To recur to the original suit. The complainants have a clear right to enforce the amount'due to them against the lots of Dr. McYickar. Although hy Mr King’s vigilance, a subsidiary security has been obtained, to which the cross bill shows a qualified right, on the complainants’ debt being paid, it would be in3 equitable and unjust, longer to delay their remedy against the primary fund, in order to settle the controversy between these other parties, in which they have no interest.' This consideration is strengthened by the fact, that the further delay occurs in consequence of the omission of parties in the cross • bill. I fee) warranted therefore, under the circumstances, in adopting the civil law rule of subrogation, instead of requiring the complainants in the first instance to resort to the ancillary securities for their debt.

The complainants in the original suit, may have a decree reinstating the Trust 'Company mortgages against the lots of Mc-Yickar, and for a sale thereof to pay the amount remaining due to them on the $35,000, and their costs of that suit. The same decree will declare that Isaac Lawrence’s administrator is entitled to the benefit of the mortgage to Mr. King, dated November 1, 1841, (after the payment of such amount to the' complainants,) to the extent of so much of the $25,000, and interest, as W. B. Lawrence’s lots ought to have paid, and which is collected out of the lots of McYickar. It will further direct that the cross bill stand over, with leave to the complainant, therein to add parties, and reserving all the other questions and directions growing out of the cross suit; with liberty to apply &c., and for any party to set it down as upon the equity reserved, on the complainants’ omission to proceed. On amending the cross bill, the complainant must pay the defendant’s costs of the hearing.

As the suit is to stand over, it is not proper in this stage of it, to make a final disposal of the case between the administrator and W. B. Lawrence.

Decree accordingly.