Peters v. Goodrich

3 Conn. 146

• Court: Supreme Court of Connecticut
• Decided: October 16, 1819
• Status: Published

Opinion

Hosmer, Ch. J.

1. Whether the subject matter of the bill was within the cognizance of the county court, is the firsl point of enquiry.

The jurisdiction of the court is tested, by the value of the mortgaged premises. From the bill it appears, that it did not exceed the sum of three hundred thirty-five dollars; and to this limit, the authority of the county court extends.

The plea to the jurisdiction was correctly overruled, as it averred no fact in an issuable shape. The value of the property mortgaged should have been specifically alleged, that the adverse party might know the matter relied on by the defendants. If less certainty were sufficient, the party might be surprized, by the proving of material facts, to disprove which he could have no timely notice to be prepared. 1 Chitt. Plead. 235. Now, by the expression “ the matter in demand” contained in the plea, neither the court nor party was apprized, what were the controverted facts ; and an issue formed on a traverse taken, would have presented law and fact so intermingled, that the real point of dispute could not be known until the trial, and npver would appear on the record.

2. The next question raised is, whether it was competent for the court to correct the mistake, which took place, in the condition of the mortgage deed.

As between the parties, it is unquestionably clear, that the misdescription of the date of the note, and of the promisee, admitted of correction, on the common principles applied by chancery in similar cases ; (1 Madd. Chan. 41. & seq.) and the second mortgagees had such constructive notice of the fact from the recorded deed, as placed them in no better condition than their mortgagor. Whatever is sufficient to put a person on enquiry, is considered in equity to convey notice ; for the law imputes to a person the knowledge of a fact, of which the exercise of common prudence and ordinary diligence must have apprized him. Newl. on Cont. 510. Had the second mortgagees applied to Goodrich for information, as it was his interest to represent the facts correctly relative to the mistake, they would have had a communication of all the knowledge they now possess.

3. The question next arising is, whether the condition of the mortgage deed comprises a contract of indemnity, against the indorsement of the note by Goodrich, made on the 6th of September, 1814.

On the 15th of September, 1813, the mortgage deed to Goodrich was executed. The condition recited, that, for the accommodation of Curtiss, he had indorsed a note, dated the 27th day of August, [July] 1813, payable in ninety days from date, at the Middletown bank; and it then provided, that “ if the said Curtiss should pay the said note, and should, in all respects, indemnify and save harmless the said Goodrich from his said indorsement, the deed should be void.” It was correctly said, by Sir William Blackstone, (3 Comm. 435.) “neither a court of equity nor of law can vary men’s wills or agreements, or (in other words) make wills or agreements for them. Both are to understand them truly; and therefore, both of them uniformly. One court ought not to extend, nor the other to abridge, a lawful provision, deliberately settled by the parties, contrary to its just intent.” If the words contained in the above condition arc regarded, the specific contract referred alone, and exclusively, to a note dated the 27th of July, 1813. By the non-payment of this note, Goodrich might be damnified; and precisely co-extensive with this possible damage, was the contract of indemnity. The debt he never guarantied, except through the medium of his indorsement: which contract, of consequence, would be extinguished, so soon as the note was paid, or another, with the consent of the holder, Was substituted for it. When Goodrich indorsed the above note, he had no idea of indorsing another, or of continuing his responsibility beyond his actual contract. If his intention had been different, the condition of the deed would have recited the agreement, and the contract of indemnity would have been commensurate with it. There is no foundation of pre-tence, that Goodrich was under the obligation of contract to repeat his indorsement on notes for the renewal of the former; because the agreement to indemnify was exclusively limited to the original note. The condition of the deed, which contains all we know of the contract, is silent on this subject; and it would be a very strange assertion, that the person, who has indorsed a specific note, payable at the bank, is, of consequence, under the obligation of an agreement to indorse other notes for the same debt, so long as the rules of the bank authorise a renewal. On the contrary, he is bound by no contract to this extent, unless he has made one ; and whether this is the fact, must depend on the proof. The indorsement of the subsequent notes, therefore, was the result of a subsequent contract. By indorsing the latter note, he voluntarily assumed a new responsibility; a responsibility not contemplated, when the mortgage deed was executed. The usual form of conditions, when successive indorsements are intended, which comprise a precise engagement to indorse subsequent notes, shows the common understanding on this subject. The United States v. Hooe, & al. 3 Cranch 73. “ If a clause be contained in the first mortgage deed, making it security for further sums borrowed, subsequent loans will have relation to, and be taken as part of, the original transaction ; and they must be paid before a second mortgage intervening, although the first mortgagee had notice of it, at the time of advancing more money, if the second mortgagee had notice of the clause in the first mortgage.” Gordon v. Graham, 7 Vin. Mr. 52. pl. 3. cited 1 Pow. on Mort. 544. The converse of this proposition is equally true ; that if there be no clause in the condition, making it a security for future contracts, they are no part of the original transaction ; and a second mortgagee must be paid before the- subsequent debt of the prior mortgagee. The lien in behalf of Goodrich terminated with the ex-tinguishment of the first note; and the court cannot resuscitate a right, which expired, when that note was taken up. The , . , _ 7 . - , error on this head consists m considering Goodrich as having guarantied the debt, until it should be actually paid, without regard to the form in which it is evidenced. But the condition of the mortgage warrants no such construction. So long as the specific note indorsed by him was collectible, his liabil. ity as indorser continued; and so soon as the note was without force, the liability ceased; and, of consequence, the mortgage, which was an indemnity on that specific account. The right of the second mortgagees, being alone posterior to the prior incumbrance of Goodrich, the removal of that incum-brance gave full effect to their lien, and virtually rendered them, except as to the damage arisen, sole mortgagees.

It has been said, that as Goodrich has the legal title to the land mortgaged, the court will not coerce it from him, but wiU consider him as though he were a mortgagee, until the sums advanced for Curtis have been fully paid. This is unquestionably true, if he stands in equal equity with the subsequent mortgagees. But he does not stand in equal equity. The in-dorsement of the note, against which indemnity is now demanded, was made by him three days after he had constructive notice, by the record of the mortgage to the second mortgagees. That the record is notice, has been always considered in this state as an indisputable truth ; and in Ireland, where their deeds are registered, the point has been explicitly adjudged by Lord Redesdale. Latouche v. Lord Dunsany, 1 Schoales & Lefroy, 157. So far as relates to the indorsement of the last note, Goodrich can be viewed only as a general creditor.

The following propositions have been frequently admitted, and are incontrovertibly éstablished. First, That general creditors are, in all cases, bound by a particular equity. 1 Pow. on Mort. 459. Burn v. Burn, 3 Ves. jun. 576, 582. Brace v. Duchess of Marlborough, 2 Peere Wms. 491, 493. Hence, the lien of the second mortgagees on the estate mortgaged, gives them superior equity to the first mortgagee, after his incumbrance is raised. Secondly, That an heir, or the devisee of the mortgaged premises, cannot redeem a mortgage, without paying a bond, though there is no judgment; and this to prevent circuity of action; but that equity does not prevail against a purchaser, a mortgagee, for instance, the bond creditor having no lien on the land. 1 Madd. Chan. 424. 2 Swifts Syst. 430, 1. Powis v. Corbet, 3 Atk. 556. Thirdly, That the advancement of money, by the first mortgagee, to the mortgagor, or even the purchasing in a prior legal title, will be of no avail, if the person loaning the money, or purchasing the title, at the time of the transaction, had notice of a mesne incumbrance ; “ for it is the [lending and] purchasing -without notice, that gives him equal equity.” 1 Pow. on Mort. 536, 537. Brace v. Duchess of Marlborough, 2 Peere Wms. 494, 5. 1 Madd. Chan. 422. 424. On the contrary, he that has the legal title shall be disarmed, in favour of the person who has superior equity. 1 Pow. on Mort. 479. 544, 5.

All the above principles apply strongly in behalf of the second mortgagees. Goodrich was only a general creditor, with, out lien on the estate. From the record of his deed, the second mortgagees had a right to consider the property as solely pledged to indemnify him from his first engagement. And having notice of the second mortgage, Goodrich could do no act to give himself equal equity with the second mortgagees. A different doctrine were absurd. It must go the lepgth of asserting, that the first mortgagee, with notice of subsequent incumbrances, created by the loan of money, or in any other mode, may enlarge his lien, and defeat the subsequent mortgagees.

The foreclosure is, therefore, good, only as to the sum of 83 dollars, 42 cents, paid by virtue of the indorsement of the first note.

Bristol, J. was of the same opinion.

Chatman, J.

When application is made to a court of equity, to take from another a legal right, it is essential for the applicant to shew, that no injustice will thereby be done to him, who is possessed of such legal right. He must do equity, before he has a right to ask it. It is one of the excellencies of a ■ court of equity, that it may deny its aid, whenever justice requires it; or may lend it, on such terms, as it may think proper to prescribe.

On marriage, the husband is, at law, entitled to all the personal property of the wife ; but if the legal title to it is in her trustees, so that the husband cannot reach it at law, a court of equity will refuse its aid, until a suitable settlement, if reasonable, is made on the wife. Courts of law are, in consequence of the rigidness, as well as generality of their rules, of-teii obliged to do injustice ;—courts of equity, never. The flexibility of their rules enables them to follow fraud and injustice into, and drag them from, all their lurking places.

The mortgagee, after forfeiture, though the mortgage money be paid, can support ejectment against the mortgagor; though manifestly unjust. A court of equity only can give him relief. Indeed, courts of equity owe their existence to the inability of courts of law to do justice in all cases.

In the present case, the plaintiff seeks to dispossess the defendant of a legal right; and the aid of this Court is sought, to effectuate the object. This aid, however, this Court ought not to lend, so long as the legal possessor has any just claim to retain it. Since the defendant has the legal estate, he is not to be dispossessed of it, till his equitable claims are satisfied* His equity is equal to that of the plaintiff; and it is a rule in equity, that where the parties stand on equal ground, he who has the legal estate shall prevail.

The defendant, in this case, has the legal estate ; and the only enquiry necessary to be made, is, whether all the equitable claims of the defendant have been satisfied ; for until that is done, the plaintiff does not bring himself within the maxim, “ that he who seeks equity, must do equity.”

The condition of the mortgage deed is, (after stating, that the plaintiff had, for.the accommodation of said Curtiss, and at his request, indorsed a promissory note, made by him, for the sum of 400 dollars, dated the 27th day of August, 1313, payable in 90 days from date, at the Middletown bank,) that if the said Curtiss, (mortgagor,) should pay the said note, when the same should fall due, and should, in all respects, indemnify, and save harmless, the plaintiff from his indorsement, the deed should be void.

Nothing but a strict performance of this condition could prevent the legal estate in the mortgaged premises from vesting in the defendant. It is admitted, that the condition was not performed ; and the plaintiff proceeds upon that ground. The legal title is in the defendant; and the object of this bill is, to divest him of it.

This, the plaintiff is entitled to do, though the condition was not strictly performed ; and though, by forfeiture, the legal estate was vested in the defendant; provided he can show, that he (the defendant,) has been indemnified. It is important to observe, that the mortgagor agrees, not only to pay the note, but to indemnify the defendant in all respects. Do not the facts disclosed, most manifestly shew, that this has never been done? The defendant has been obliged to pay 110 dollars, which was part and parcel of the original note of 400 dollars. But it is said, that the lien on the land for this sum is lost, because, the original note counted on in the mortgage, was taken up ; and, subsequent to the second mortgage, the note of 110 dollars was given for the balance due thereon.— But has the mortgagor ever paid the note of 400 dollars ? No. Has he indemnified the first mortgagee ? No. But he (the first mortgagee,) has indorsed a second note, which was given for a part of the original note of 400 dollars ; and therefore, in equity, he has lost his lien on the mortgaged premises.

The whole argument proceeds upon a falacy. The note and the debt are considered as the same thing ; whereas, the note is but evidence of the debt. Courts of law, mole-blind as they sometimes necessarily must be, will take notice, that the renewal of a note, is no payment of the debt. A usurious note renewed, is still usurious. It would, then, seem strange, that a court of equity, which is not, like courts of law, entangled with forms, could not see from the facts disclosed, that the mortgagor had never paid the note, though he had renewed it; and that he had not indemnified the mortgagee ; and that the mortgagee should be divested of a legal estate, though he had been obliged to pay 110 dollars of the original debt of 400 dollars, in favor of one who had a more equitable claim.

In England, the first mortgagee, who has bought in a subsequent incumbrance, without notice, may protect himself against a mesne incuhibrancer, until he has been paid the in-cumbrance he has bought in, and his own. Though this doctrine is not applicable to this state, as mortgage deeds must here be recorded, and of course, a purchaser must always have constructive notice ; yet the principle is in full force, ft is an unvarying rule in a court of chancery, never to divest one of a legal estate, so long as he can shew an equitable lien on it. Form is wholly disregarded. Should the first mortgagee, after forfeiture, receive payment in counterfeit money, and give a receipt in full for it, the second mortgagee could not redeem, without paying the whole debt, unless the first mortgagee had released, so as to have divested himself of the legal title. The same rule applies to any mistakes, which may have intervened in a settlement between the mortgagor and mortgagee in relation to the sum due. A court of equity has always a discretion, and will never interfere, unless he “ who asks equity, will first do equity.” Otherwise, parties will be left to their remedy at few ; not that courts of equity proceed, without rules; but these rules are made subservient to the great ends of justice. If they were not, courts of equity would be worse than useless.

The question, then, recurs—Has the first mortgagee, in this case, been indemnified? It is admitted, he has not,. Was not that one of the conditions in the mortgage deed ? It manifestly was. It is, then, beyond my comprehension to imagine how a court of equity could compel him to relinquish his legal estate, until he was indemnified. It is said, indeed, that the giving a new note is an extinguishment of the old one. However this may be at few, it is not so in equity, when one seeks to divest another of a legal estate, while the holder has an equitable lien on it. Can the mortgagor say to the mortgagee—“ You indorsed for me a note of 400 dollars, payable at the Middletown bank, in ninety days; and to secure you, I gave you a mortgage, the condition of which was, that the legal title should vest in you, if I' did not pay the note, when due, and also save you harmless in all respects. The note has not, indeed, been paid ; but it has been taken up, and a new one given for the balance :—therefore, the debt of 400 dollars has been extinguished; and though you indorsed the note, and have been obliged to pay it, still you are indemnified, and the lien on the mortgaged premises is extinguished,• and I am entitled, in a court of equity, (which, indeed, never interferes, to divest one of a legal title, until perfect equity has been done him,) to have a re-conveyance of the premises !”

The second mortgagee has no equity, which did not belong to the mortgagor. I am, therefore, clearly of opinion, that the decree of the superior court was correct throughout, and ought to be affirmed.

Brainard, J. was of the same opinion. Peters, J. being a party in the suit, gave no opinion.

The decree to be affirmed as to the sum paid on the first note ; and reversed as to the residue.