Cobb v. Dyer

Virgin, J.

On September 28, 1867, one J. W. Dyer, husband of the female defendant, agreed in writing with the defendant Wallace — who had been brought up in the Dyer family — to convey to him a certain vacant lot of land described therein, “ as soon as said Wallace shall erect thereon a tenement for his own use.” Thereupon Wallace took possession of the lot, and having-some $600 in money belonging to himself and wife, commenced the building of a “ story and a half frame house ” upon it. Having finished the house as originally intended — with a few rooms left unfinished — Dyer, pursuant to his agreement, by his deed of warranty, dated November 7, 1867, but acknowledged November 18, and duly recorded, conveyed the lot to Wallace.

On November 19, 1867, Wallace conveyed the premises in mortgage to the city of Portland, to secure his note of the same date for the sum of $300, money hired and applied to the construction of the house; which mortgage was duly recorded November 30, 1867.

On November 18, 1867, Wallace, by his deed of warranty bearing this date and acknowledged the same day, but not recorded until the sixth of the following January, “ in consideration of one dollar,” conveyed the same premises to Catherine P. Dyer, the female defendant, “ subject to ” the mortgage to the city.

In January, 1868, the house was completed, and Wallace occupied it until the death of his wife, in June, 1872, when he rented it, and received the rents and made repairs until the fall of 1877, when Mrs. Dyer took possession to collect the rents.

On January 24, 1868, Wallace, having previously hired $300 of the plaintiff — $275 of which were paid in October and November before to the builders — conveyed the premises in mortgage, with the usual covenants of warranty, to the plaintiff, to secure the payment of the money hired.

On January 23, 1871, the plaintiff, at the request of Wallace, as the plaintiff testifies, and having no knowledge of the deed to Mrs. Dyer, paid to the city $326.99 — the amount due on the city mortgage — and, instead of taking an assignment thereof, received the note thereby secured with the sum paid by him indorsed *497 thereon by the city treasurer, but allowed the mortgage to be discharged on the record.

On the next day Wallace mortgaged the same premises, with like covenants, to the plaintiff, to secure the sum of $373.16, which included the sum paid on the city mortgage.

The plaintiff prays, among other things, that, in view of his mistake in relation to the existence of Wallace’s deed to Mrs. Dyer, the city mortgage be decreed as subsisting for his benefit, and that the sum paid on that mortgage, and interest thereon, be decreed a subsisting charge upon the real estate in question.

Mistake is one of the fundamental grounds of equity jurisdiction. “No one is more appropriate. Human sagacity is inadequate to the attainment of a perfect knowledge and comprehension of every combination of circumstances under which it may become necessary to act, and especially when the influence of the acts and wiles of the designing and knavish are superadded.” Shepley, C. J., in Robinson v. Sampson, 23 Maine, 388.

Ordinarily the mistake from which relief will be given must be one of fact and not of law. Freeman v. Curtis, 51 Maine, 140. Jordan v. Stevens, 51 Maine, 78. And it must not be imputable to the plaintiff’s culpable negligence. Western R. R. v. Babcock, 6 Met. 352 . 1 Story’s Eq., § 146. And it must appear that his conduct was determined by the mistake; but this need not be established by direct evidence when the facts can be fairly implied from the nature of the transaction. 1 Story’s Eq., § 162. Bruce v. Nelson, 35 Iowa, 157 . .

The cases are numerous wherein courts of equity have corrected the cancellation and discharge of mortgages on the record, when done by mistake, and protected parties from the consequences thereof, especially when such relief would not result prejudicially to third persons. Kinnear v. Lowell, 34 Maine, 303. Bruce v. Bonney, 12 Gray, 107 .

In Robinson v. Sampson, supra, this court as then constituted assented to the proposition, and adopted the language of the learned chancellor of New Jersey (in Trenton Banking Co. v. Woodruff, 2 N. J. Eq. 1 Green, 117), “ that the cancellation of a mortgage on the record is only prima facie evidence of its dis *498 charge, and leaves it open to the party making such objection to prove that it was made by accident, mistake or fraud. On such proof being made, the mortgage will be established, even against subsequent mortgagees, without notice,” who became such anterior to the cancellation. Illustrating the first part of the same proposition, the court in New Jersey subsequently held that, where a mortgagee who was an aged man and ignorant of business, under a mistaken impression that the mortgage was satisfied, consented to its cancellation, it should be upheld — the case not falling within the principle of culpable negligence, against which equity does not relieve. Banta v. Vreeland, l5 N. J. Eq. 107.

So in Bruce v. Nelson, 35 Iowa, 157 , a senior mortgagee, in ignorance of a junior mortgage, released his mortgage, consented to its discharge on the record, and took a new one to secure the original notes and a small additional sum loaned ; and the court restored the lien of the first mortgage.

It is a familiar principle that a junior incumbrancer has a right to redeem a prior incumbrance ; and when he does so, he thereby acquires the right to the security held by the other. 1 Jones Mort., § 874, and cases there cited. Moreover, his title need not necessarily be a legal one. On the contrary, if the junior mortgage is received for money loaned and put into the property mortgaged under the full belief that the mortgagor had the title, and the transaction was bona fide in all respects and without negligence on the part of the second mortgagee, and under that state of facts he purchases the prior mortgage to sustain and protect his supposed title, he has such a colorable title as will in equity authorize the mortgage thus purchased to be kept on foot, when such a result will not prove prejudicial to subsequent parties.

This view is substantially entertained by the court in Indiana. In Muir v. Berkshire, 52 Ind. 149 , Biddle, C. J., says: a Subrogation generally takes place between co-creditors, where the junior pays the debt due to the senior to secure his own claim. . . It is not allowed to volunteer purchasers or strangers, unless there is some peculiar equitable relation in the transaction, and never to mere meddlers. But, while this is true generally, we think that a *499 person who has paid a debt under a colorable obligation to do so, that he may protect his own claim, should be subrogated to the rights of the creditor.” See the cases cited in that opinion.

Applying these principles to‘the facts in the case at bar, the city mortgage must be upheld, unless the constructive knowledge contained in the registry of deeds prevents. For the deed to Mrs. Dyer being expressly made “ subject, to the mortgage,” the land thereby became charged with the mortgage debt (1 Jones Mort., § 736, and cases); and by sustaining this mortgage she is deprived of nothing to which she is justly entitled. The plaintiff, relying upon the validity of his own mortgage, had a color-able right to and did pay the city mortgage debt, for his own benefit and not for hers; and, as she loses nothing by the transaction, she has no equitable right to be benefited by its payment. Lambert v. Leland, 2 Sweeny (N. Y.), 218. He did it in ignorance of the very material fact of the intervening deed to Mrs. Dyer, taken after the record of city mortgage and expressly subject to it. Who can doubt that, if the plaintiff had known of the existence of that deed, lie would not have consented to the discharge of that mortgage and taken a subsequent one. Bruce v. Nelson, supra.

But it is said be had constructive knowledge thereof through the registry of deeds, and cannot obtain the relief sought. To be sure, he might have learned the fact of the existence of the deed had he exercised the prudence of a man of business dealing with a stranger in relation to land the title of which he knew nothing. But a searching of the record is not indispensable. Grimes v. Kimball, 3 Allen, 518 , 522. And be was dealing with his cousin — both old men. He knew of the deed from Dyer to Wallace, and of the mortgage from Wallace to the city ; saw Wallace in possession, building a bouse to live in. Instead of being put on inquiry, every fact within bis knowledge served to inspire the belief that Wallace had the title, and he never suspected that so material a fact as the existence of the deed would be suppressed. We do not think bis ignorance of that fact, under the circumstances, was the result of negligence.

In Iowa, where the holder of a first mortgage, in ignorance of *500 the existence of a subsequent recorded one on the premises, released his mortgage and took a new one, the court held that the party was entitled to have the mortgage restored and given its original priority. In answer to the point of constructive knowledge afforded by the registry, Day, J., said: “ This position proves too much. In order that a debt may attach as a lien prior to a mortgage, it must always, in some way, appear of record; so that, in every case in which the claim is in a condition to be asserted in preference to the mortgage, the mortgagee has the means of ascertaining its existence. The argument then would amount to this: that a mortgage released in mistake could never be restored against a prior claim which was in a condition to become a lien. In other words, that the lien of a mortgage could never be restored except when the restoration is unnecessary and unimportant.”

In relation to the mortgage of January 21, 1868, from Wallace to the plaintiff, taken after the record of the deed to Mrs. Dyer, whatever may be our opinion of the moral right or of what is just and equal, we know of no rule in equity by which the premises in question can be charged with that debt.

Our conclusion, therefore, is that the discharge on the record be declared void ; that the premises be charged with the sum paid on said mortgage, with interest thereon until paid; and that, if the same, with the costs of this suit, be not paid within sixty days from final decree in this suit, that the premises be sold according to the provisions in said mortgage.

Decree accordingly.

Appleton, O. J., Walton, Barrows and Libbey, JJ., concurred.