Slee v. President & Directors of the Manhattan Co.

1 Paige Ch. 48, 1828 N.Y. LEXIS 390, 1828 N.Y. Misc. LEXIS 17

Opinion

The Chancellor: In the opinion of Judge Emott, which is sent up with the other proceedings, agreeably to the rule of this court, he has examined the several questions raised before him with much learning and ability, and at great length. I regret that the business of this court will not allow me as much time to examine some of these questions as I could wish, especially as on the merits of this case, he has come to a conclusion directly contrary to that of his predecessor, whose opinions are also entitled to great respect, particularly on a question of Chancery law.

One objection, which from the opinions of the judges appears to have been made in the court below, it is not necessary to examine here, as it is now admitted by the defendant’s counsel, that the assignment to them from Slee is, on its face, nothing but a mortgage. Even if the instrument itself was an absolute assignment of bis whole interest in the bond and mortgage, this court, from the facts stated in the hill and established in the testimony of Gen. Tallmadge, would be bound to consider it nothing more than a security for the payment of the debt due to the Manhattan Company. From the uniform decisions of this court, many of which have been sanctioned by the court of dernier resort, there can be no doubt' at this day that paroi evidence is admissible to show that a deed or conveyance, absolute on its face, was intended by the parties only as a mortgage or security for the payment of money.

Footnotes

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[1] (Clark v. Henry, 2 Cowen, 324; Ross v. Newell, 1 Wash. R. 19.) Of the various questions raised by the counsel on the argument, I consider it necessary to examine a few particularly.

*It is insisted by the appellant’s counsel, that the assignment -to the defendants gave no authority to them to foreclose the mortgage under the statute, or to give a conveyance on the sale which would bar his equitable right to redeem the lands in the hands of the purchaser. On this question I perfectly agree with the learned judge whose decree is appealed from. It was undoubtedly the intention of the parties that the defendants should have the right to foreclose and sell the mortgaged premises under the statute, for the purpose of barring the equity of redemption which existed in Frear and Hallowell, if they thought proper to pursue that course, instead of resorting to a court of equity.

The assignment was a mortgage of the power of sale, as well as a mortgage of the debt. The authority to execute the power was vested in the defendants by the mere act of assigning the legal interest in the mortgage. It always passes with the legal estate and debt, unless there are some words of restriction. If the defendants, in the fair execution of the power, had sold and conveyed the premises to a stranger for one half the amount of their debt, Slee would have been bound to pay them the balance, and would have had no claim to redeem the mortgaged premises from such purchaser. He must have understood that the defendants had a right to foreclose under the statute. The premises were advertised and sold with his full knowledge of the facts, and he made no objection that they were not authorized thus to proceed.

The defendants, being the holders of the legal estate, if they sold and conveyed the equity of redemption of Frear and Hallowell to a third person under the statute, it necessarily follows that the legal title would also pass with it by the conveyance to the purchaser, and the whole estate which existed in Frear and Hallowell, previous to the giving of the mortgage, would again become united in such purchaser.

The same effect would be produced by a foreclosure of Frear and Hallowell’s equity of redemption by a sale under a decree of this court, to which Slee was not made a party. A stranger purchasing under the decree, would unite the legal estate which is in the defendants with the equity of *redemption of Frear and Hallowell sold under the decree, and thus acquire the whole estate which existed in the mortgagors previous to the giving of their mortgage. Tn either case, Slee’s claim upon the land would be divested by the sale, and the purchaser would hold it clear of all incumbrance. In neither case, however, would there be any foreclosure of the second mortgage which was created by the assignment. That would still be open to redemption by him; but his equity of redemption would then attach itself to the money for which the land was sold, instead of the land itself. But the effect of a sale either under the statute, or under such a decree, where the mortgagees of the bond and mortgage became themselves the purchasers, is entirely different. In that case, they only purchase the .equity of redemption which existed in the original mortgagors, and the equity of redemption of the assignor still continues to attach itself to the legal estate, which remains unchanged in the purchasers, except that it is discharged of the equity of redemption of the original mortgagors, which, by the foreclosure, becomes merged in the legal estate. Thus, in Jackson v. Colden, (4 Cowen, 266,) under a statute foreclosure, where the holder of the legal estate or mortgagee himself became the purchaser of the equity of redemption, it was held that no deed was necessary to make his title to the premises perfect.

In this case, the equity of redemption of Frear and Hallowell was all that was or could be foreclosed by the sale under the power contained in the mortgage. That equity of redemption being purchased in by the defendants, the legal estate was in their hands, and Slee’s equitable claim thereon remained untouched by that foreclosure. And it makes no difference, that the purchase of Frear and Hallowell’s equity of redemption was made through the intervention of a third person; for by the operation of a result ing trust, the defendants never have been divested of the legal estate. No interest or estate whatever vested in Gen. Tallmadge, even for an instant. The plaintiff’s equity of redemption was therefore never separated from the legal estate, which has remained untouched in the hands of the defendants ever since the assignment of the mortgage to them in August, 1819. But even if the legal effect of this purchase by the defendant’s *attorney were otherwise, this court would never permit such a circumstance, whether the same was accidental or intentional, to defeat the natural and equitable effect of a purchase by the defendants of that outstanding equity of Frear and Hallowell.

In this view of the case, it becomes necessary for me to examine many questions which have been raised, and particularly the one as to the admissibility of the evidence of Gen. Tallmadge respecting the agreement made a short time previous to the sale. The parol agreement made by him on behalf of the defendants, at that time, with the exception of the promise on his part to bid to the amount of their debt, if necessary, was precisely what I have found to be the legal effect of the assignment and foreclosure, and the rights of the respective parties, if that agreement had not been made.

Again, the purchase of Erear and Hallowell’s equity of redemption accrued to the benefit of Slee on the well known principle of equity, that where the mortgagee has gotten a reversal of a lease, or obtained any other advantage, in consequence of his situation as such mortgagee, the mortgagor coming to redeem is entitled to the benefit thereof.

The assignment of the bond and mortgage, being a subsisting mortgage, and the appellant’s equity of redemption not being divested by the statute foreclosure, the question of waiver on account of the lapse of time, does not arise. This assignment by way of mortgage bears no analogy to a pledge of stocks or of personal property, for the purpose of securing a debt. The original mortgage was a 'specific lien on the land, and the assignment carried even the legal estate itself to the defendants. It must, therefore, be governed by those rules which are applicable to other mortgages of a legal or equitable interest in real estate. This was so considered by this court and the Court of Errors in the case of Clark v. Henry, before referred to. In such cases twenty years at least is required to bar the equity of redemption.

Law and justice both concur in this case in enabling me to declare, that Slee’s equity of redemption in the premises is neither barred by the sale under the statute nor by the lapse of time; and the decree of the circuit judge dismissing *the complainant’s bill is therefore erroneous, and must be reversed.

As the defendants admit in their answer, that they have been in possession of the premises by themselves or their tenants ever since the sale on the 10th of November, 1817, they must account for the rents and profits which they have or might have received. But under the peculiar circumstances of this case, I think they are entitled to an allowance for the insurance which was bona fide effected by them on the property, previous to Klee’s application to them to redeem in January, 1825, and for all sums expended for taxes or repairs of the premises. They are also entitled to the costs of foreclosing the equity of redemption of Frear and Hallowell.

As to the costs, the general rule is, that on a bill to redeem, the plaintiff pays costs to the mortgagee, although he succeeds in obtaining the relief claimed. There are, ‘however, exceptions to this rule ; and where the mortgagee has set up an unconscientious defence, he has not only been refused his costs, but has been compelled to pay costs to the other party. (Shuttleworth v. Lowther, 7 Ves. Rep. 587. Harvey v. Tebbut, 2 Jac. & Walk. 197.) The case of Henry v. Davis & Clarke, (7 John. Ch. Rep. 40,) in this court, the decree in which case was afterwards affirmed in the Court of Errors, is one of this description.

In this case, the defendants have refused to permit the appellant to redeem, notwithstanding the directors were informed of the positive promise of their attorney and agent that he should have that liberty, and have compelled him to resort to this expensive litigation. I shall therefore allow him the costs of the proceedings in the equity court, and give to neither party any costs as against the other on the appeal in this court, or of the subsequent proceedings here.

As to the general doctrine, see 2 Cowen & Hill's notes to Phil. Ev. 574—579. In England Maxwell v. Montacute, 1 Prec. in Ch. 526; Walker v. Walker, 2 Atk. 99; Joynes v. Stratham, 3 id. 389; Vernon v. Bethel, 2 Eden, 113; Harris v. Horwell, Gilb. Eq. Ca. 11; Dixon v. Parker, 2 Ves. Sen. 219. In the United States Court, Hughes v. Edwards, 9 Wheat. 489; Hunt v. Admrs. of Rausmanier, 1 Pet. 1. New York, Brown v. Dewey, 1 Sanf. Ch. 57; Marks v. Pell, 1 John. Ch. 594; Strong v. Stewart, 4 id. 167; James v. Johnson, 6 id. 417; Whittick v. Kane, post. 206; McIntyre v. Humphries, 1 Hoff. Ch. 31. Connecticut, Washburn v. Merrils, 1 Day, 139; Reading v. Weston, 8 Conn. 117, 120, 121, 122; Dean v. Dean, 6 id. 285. Tennessee, Brown v. Wright, 4 Yerg. 57. Ohio, Miama Exporting Co. v. U. S. Bank, 1 Wright, 249. In Kentucky, Mercer v. Blair, Lit. Sel. Ca. 412; Thompson v. Patton, 5 Lit. R. 74; Lewis v. Roberts, 3 Munroe, 409; Murphy v. Trigg, 1 id. 72. South Carolina, Irby v. Little's Adm'r, 4 Des. Eq. R. 422; Todd v. Rivers' Ex’rs, 1 id. 155; Stinson y. McKeown, 1 Hill S. C. 387. Virginia, Ross v. Norvell, 1 Wash. 14; King v. Newman, 2 Mumf. 40. North Carolina, Streator v. Jones, 3 Hawks. 423; 1 Murph. 449; Dickenson v. Dickenson, 2 id. 279; S. C. 1 N. Car. Law Rep. 262; Jackson v. Blount, 2 Dev. Eq. R. 555. Maryland, Watkins v. Stockett’s Lessee, 6 Har. & J. 435; Wesley v. Thomas, id. 24; Jones v. Leeby, 5 id. 372. Alabama, Hudson v. Isbell, 5 Stew. & P. 67; English v. Lane, 1 Port. 328. Indiana, Aborn v. Bennett, 2 Blackf. 101. Pennsylvania, Wharf v. Howell, 5 Binn, 499; Thompson v. White, 1 Dall. 426, 427.

In New York it was decided, contrary to the doctrine which prevails elsewhere, that a deed or conveyance of personal property, apparently absolute on its face, may, at law, be shown by paroi evidence, to be intended as a mortgage; not only between the parties, but even in favor of one party against a stranger, if the latter has not acted on the instrument, under the opinion that it is a deed, &c., as it purports to be. Walton v. Cronly's Admrs., 14 Wen. 63; Gilchrist v. Cunningham, 8 id. 641; Ring v. Franklin, 2 Hall’s N. Y. S. C. 1. But see per Nelson, J., in Patchen v. Pierce, 12 Wen. 61, 64, who seems to have thought that such proof was proper in equity only, and upon the assumption of fraud in the grantee, &c. This opinion was sustained by the Court of Errors in Webb v. Rice, 6 Hill, 219, and followed by the Supreme Court in Bishop v. Bishop, 4 Barb. S. C. R. 138. These decisions overrule all previous ones, and assimilate the rule in Mew York to that in England, and to most of the other states. As equity powers are now vested in courts of law in this state, and the Court of Chancery abolished, the powers incident to both may be exercised by the Supreme Court, according to circumstances, as in Pennsylvania. Whether this will give to the Pennsylvania decisions on this subject greater weight in this state remains to be seen. Heretofore the Pennsylvania decisions were, as Judge Cowen remarks, (2 Cowen & Hill’s notes to Phil. Ev. 578,) not always safe guides on the subject of oral evidence, in respect to written instruments, when the inquiry is simply as to the rule at law. In the main, they agree with the decisions in equity; but to one accustomed to see the distinction between Chancery and strict legal powers preserved in some way, they require to be read and used with more than ordinary caution, from the fact, that while the proceedings present all the external appearance of a suit at law, the judgment, in many instances, involves principles peculiar to a court of equity. Thus, judgment will sometimes be rendered for the plaintiff in an action of ejectment, when a Chancellor would enforce a performance for an agreement of the land, or decree a conveyance.