Andreas v. Hubbard

Park, C. J.

This case presents a nice question of equity law, and one somewhat difficult of solution.

Albert Seeley in 1857 mortgaged to Heth Stevens three pieces of land to secure a note of one thousand dollars. One of these pieces, the only one as to which the question in the case arises, was called the salt meadow; the other two pieces we will call A and B. The plaintiff has become vested with all the interest of Stevens in this mortgage and its security.

In 1866 Seeley mortgaged to Alexander Hubbard the lot known as the salt meadow, and several other parcels of land not included in the Stevens mortgage, to secure a note of eight thousand dollars; and in 1868 made a second mortgage of the same real estate to secure two other notes of twenty-six hundred and one thousand dollars. These two mortgages may for convenience be spoken of as one mortgage for eleven thousand six hundred dollars.

The only conflict between the Stevens mortgage and that of Hubbard is in their both covering the salt meadow. Until further facts came in to affect the case Hubbard could not have redeemed the salt meadow without paying the whole of the Stevens mortgage, as the holder of that mortgage was not bound to submit to an apportionment. Upon such” redemption Hubbard would have become owner of the Avhole Stevens mortgage, and could then have foreclosed Seeley the mortgagor, or any other person holding the equity of redemption in A and B, if they had not paid *364 such portion of the mortgage debt as the court should find to be proper upon a just apportionment. Gibson v. Crehore, 5 Pick., 152 ; Allen v. Clark, 17 Pick., 47 ; Chase v. Woodbury, 6 Cush., 146 ; Smith v. Kelley, 27 Maine, 237; Tillinghast v. Frye, 1 R. Isl., 53; Lyon v. Robbins, 45 Conn., 513 ; 2 Jones on Mortgages, § 1072.

' ‘But there are further facts in the case, the effect of which is to be considered. Seeley in 1874 made a mortgage to the petitioner, Andreas, (who had not then become the owner of the Stevens mortgage,) of the two lots A and B, to secure a note of $20,000. This presented the case of a prior mortgage covering three pieces of land, and of a later mortgage covering only two of them, and if Stevens and Andreas had been the only parties interested as mortgagees, Andreas would have had the right to require that the whole of the salt meadow, (not included in his mortgage,) should be applied first to the prior mortgage, so as to leave as much as possible of A and B for his own security, the whole security being inadequate to the payment of both debts in full. The rule as one of equity is well settled, and is easy of application where mortgaged property is sold on foreclosure, as is done in most of our sister states, but the same result would be reached more circuitously under our own law. Delaware & Hudson Canal Co.’s Appeal, 38 Penn. St., 516; 1 Hilliard on Mortgages, ch. 13, § 69.

This we say would be the equitable right of Andreas if he and the holder of the Stevens mortgage were the only parties interested as mortgagees. But here comes in the further fact that Hubbard had already (in 1866, eight years before,) taken his mortgage upon the salt meadow and several other parcels of land not included in the Stevens mortgage. We find therefore that when Andreas would crowd the Stevens mortgage over upon the salt meadow, so as to leave for his own mortgage as much as possible of the lots A and B, that mortgage encounters another mortgage resting on the salt meadow, that is, the Hubbard mortgage; and that too a mortgage which is prior in date and of course in right to his own, Andreas’s, mortgage. Andreas has now *365 become the owner of the Stevens mortgage, but we do not see that that fact affects the application of the principle involved. So long as he was not the owner of that mortgage it was a question of how far he could crowd that mortgage over upon the salt meadow. Since he has become the owner of it the question is how far he can carry that mortgage over upon the salt meadow, and thus protect his later mortgage on A and B. It is .merely the same question in another form. This is a question of much interest and of some difficulty. We will postpone its consideration for the purpose of considering another that grows out of this relation of the mortgages.

The petitioner contends that as a holder of the second mortgage on A and B he had acquired such an equitable interest' in the salt meadow as gave him a right in some way to reach it, and if in no other way by redeeming the Hubbard mortgage pro tanto ; and that, as he was not made a party respondent to the Hubbard foreclosure this right of redemption has not been cut off; and he cites Lyon v. San ford, 5 Conn., 544 , to the point that every party having an equitable interest in mortgaged property has a right of redemption, and must be made a party to a bill for the foreclosure of the mortgage.

But, in the first place, it is very doubtful whether an interest so remote and uncertain as this can be regarded as an equity. It is rather like those cases, of which there are many, where a court of equity will, on a state of facts that makes it equitable, establish in a party’s favor an equity which had no existence before. An illustration of this is to be found in Jones v. Quinnipiac Bank, 29 Conn., 25 , where it is held that security given to an endorser for his personal protection does not draw to itself any equitable interest on the part of the creditor; so that, if the endorser parts with the security he has done no wrong to the creditor, but only whát he had a right to do; but that if the endorser becomes insolvent and the creditor has no other means of collecting the debt, he may go into equity and obtain a decree establishing in his favor an equitable right *366 to the security given the endorser. But this equitable right when thus established takes date from that time, and is of course subject to all then existing rights in other parties, so that if the security has been released, or sold, or encumbered in the meantime, the creditor’s equity is postponed to the rights so created. In the present case the right of redemption in Andreas, if a court of equity should think it a proper case for the establishment of such an equity in his favor, would be founded wholly on a circumstance not disclosed by the public records, and not to be presumed, namely, that the lots A and B were insufficient to secure his debt, and that it was necessary for him on that account to resort to salt meadow. It would therefore be a case where the court, in the peculiar circumstances, holds it equitable that he should have this right of redemption, and not a case where he had from the first a fixed equity. This being so, he would take that equity subject to all rights existing at the time he brought his petition. But before he brought his petition the Hubbard mortgage had been foreclosed and the title had become absolute in the present defendants.

Upon the question whether Hubbard in taking his foreclosure was bound to make Andreas a party respondent, because of his remote and possible right to redeem, it is to be considered that there may always be parties who by some extraneous facts, not shown by the public records, may be entitled to equitable aid in establishing a right to redeem. If we go outside of those whose right is manifest upon the public records, there is no knowing where one may stop. The mortgage of Andreas in this case did not touch this property, but only had a right in certain circumstances to crowd over a prior mortgage upon it. There might also be some other mortgage resting on some other piece of land covered by the Andreas mortgage and which had certain equitable rights with regard to that mortgage; and still another, more remote, which pressed in the same way on the mortgage last mentioned; all having a remote, but yet an equitable interest in the application of the salt meadow lot. If Hubbard in looking up the parties whom he was to *367 foreclose would be bound to ascertain the rights of all these remote and still remoter parties, it would seem impossible to secure a final and sure foreclosure in such a case. In Osborn v. Carr, 12 Conn., 195 , it is held that a party purchasing is not bound to search the records of another town for lands that may have been mortgaged with a lot in a particular town, to see whether any such conveyance has been made of the former land as would throw a special burden upon the latter. But in Hunt v. Mansfield, 31 Conn., 488 , it is held that a purchaser of a piece of land mortgaged with others is bound to take notice from the public records that a conveyance of that other land has been made which throws the burden of the mortgage on the land he is purchasing. Upon that principle, if Hubbard had been buying the salt meadow he would have been bound to take notice that Andreas had a mortgage of A and B which threw the Stevens mortgage over upon the' salt meadow. But does' the same rule apply to a mortgagee who already has his mortgage title, and compel him to notice the same conveyance? "VVe think it does not, and for the reason that no conveyance, made after he has taken his mortgage, can increase the incumbrance that lies on the property above his own. The right of Andreas here, regarded as a right of redemption, comes in after, and subject to, the right of Hubbard, and approaches the land in question in a manner entirely indirect and consequential, and by reason wholly of facts not disclosed by the records and which may not exist. He could at any time have gone into a court of equity and had his equity established by a decree. Or he could have given notice to the owners of the Hubbard mortgage of his claim to such an equity. In the absence of anything on the public records which gave notice of the facts on which his claim is based, and of all proceedings on his part to secure his possible rights, we can not regard the owners of the Hubbard mortgage as bound to take notice of .his equity and make him a party to their bill of foreclosure.

But, even if this were not so, there is a consideration which practically disposes of this question. The plaintiff claims this right of redemption as a right to redeem the *368 salt meadow, by itself, paying tbe defendants only a proportionate share of their mortgage debt. But it is a well-settled principle, as we have already seen, that a party having a second mortgage upon a part of lands covered by a first mortgage, can redeem only by paying the whole mortgage debt. Here the whole amount of the defendants’ incumbrances on the property mortgaged to them is found to be $90,000, and the whole property worth $97,500. Now on what ground could the plaintiff claim to redeem the salt meadow on paying a small fraction of this incumbrance ? So far as we can see, it is on the ground that the defendants have foreclosed their entire mortgage interest in all the lands. But if the plaintiff’s supposed right of redemption is not barred by reason of hjs not having been made a party to the foreclosure, then the foreclosure fails as to him wholly, and not merely as to the salt meadow; and his right of redemption, and his duty in the exercise of that right, remain precisely what they would have been if no foreclosure had been brought. Now he does not offer to pay the whole $90,000 debt; it would be idle to pass a decree giving him the right to redeem on making such a payment. Indeed we may assume that there would be no need of coming into a court of equity to get such a right; the defendants would probably be only too glad to assent to such a redemption. A debt of $90,000 secured by property of the value of $97,500, is not so well secured but that it may safely be assumed that the creditor would much rather have his money than to take his chance with the security. The accumulating interest on such a sum would, even if the real estate security was fairly productive, very soon consume all the excess of value in the security.

We therefore lay out of the case all consideration of the right of the plaintiff to approach the salt meadow through any equity of redemption.

We come back therefore to the question, the consideration of which we postponed, whether the plaintiff, as owner of the Stevens mortgage, may, for his protection as a second mortgagee, reach over and appropriate to himself the whole or any part of the salt meadow.

*369 He claims that he can, on the ground that the security held by the defendants for their entire debt of $90,000 is of the value of $97,500, leaving a surplus in their hands of $7,500—while the salt meadow'is found to be worth only $500; so that they are paid in full, and more than paid, without touching the salt meadow.

This claim is not without plausibility, and perhaps not wholly free from difficulty. There would seem to be a certain degree of justice in it. We think however that when the Hubbard mortgage was foreclosed, and the mortgage title became absolute by the failure of all parties interested to redeem, the question of the value of the premises above the debt was foreclosed with the rest. That value could have been enquired into for the purpose of ascertaining whether it was sufficient to pay and consequently did pay and extinguish the debt; but if a foreclosing creditor gets more than enough to satisfy his debt it is the debtor’s loss and his gain. The debtor and those who held under him have had their day in court and can not have another. There must be a quieting of the title somewhere and an end of controversy over the whole matter; and that end is reached when the last day of redemption has gone by and no party has redeemed. We think therefore that this excess of value must be wholly laid out of the case.

When therefore the plaintiff, standing on the Stevens mortgage, endeavors to crowd the Hubbard mortgage off from the salt meadow, it encounters a fixed and not a yielding barrier; a line clearly drawn over which it can not pass; a title absolute and impregnable, subject only to such portion of the Stevens mortgage as may be regarded as equitably resting, upon it. If it were not so it is not easy to see why the plaintiff might not take the whole of the salt meadow, and not a mere fraction of it, as the fact of the defendants being overpaid, if a reason for their yielding anything, would be a reason for their being required to give up the whole, since the whole might be taken from, them and still leave their debt paid.

The case then becomes simply a question of apportion *370 ment between tbe defendants as owners of the salt meadow, and the plaintiff as owner of the Stevens mortgage. Every other fact may be laid out of the case.

It is very clear that if the Stevens mortgage stood by itself, with the equity of redemption in another party, the defendants could not redeem the salt meadow by paying an apportioned part of the Stevens mortgage. The principle we have before referred to would compel them to pay the whole of it. But the plaintiff is now the owner of that mortgage, of his own original second mortgage, and of the equity of redemption in the lots A and B. The equity of redemption and the mortgage interest thus became merged. It is true that those interests could have been kept distinct if the plaintiff had chosen to keep them so, and would have been so regarded in equity if it was clearly his interest and ¡desire to keep them so. But this question is disposed of by ¡the petitioner’s own action in seeking a foreclosure of the ■salt meadow by'itself and asking only for an apportioned part of the mortgage debt. A first mortgagee can never be required to submit to an apportionment of his debt, but can Always have one where he consents to or requests it, the rule that requires an entire redemption being founded wholly on his rights in the matter. We have then a simple case of an apportionment of a mortgage debt between two parties who ¡stand in the relation of first mortgagee of several tracts of land, and owner, subject to the mortgage, of one of .the tracts, with the first mortgagee assenting to the apportionment and the rights of no other parties intervening. What is the rule of apportionment in such a case ? It is -clearly that of applying the security to the debt according to its value. Here the whole land covered by the Stevens mortgage is found to be of the value of $15,500; the salt meadow lot of the value of $500; the debt $1,454.33. The problem is wholly one of mathematics. As the value of the whole, ($15,500,) is to the value of the salt meadow, ($500,) so is the whole debt, ($1,454.33,) to the fraction of the debt which is to be set to the .salt meadow. That amount is $46.91; and this is the amount which the defendants should be required to pay on redemp *371 tion, with interest from the date of the committee’s report, December 15th, 1881. The rule here applied is a universal one, and will be found to work no wrong to the prior mortgagee even where the security is unequal to the debt, since the sum set to the particular part to be redeemed will be found in that case to be greater than the value of that part of the security.

The case of Osborn v. Carr , before referred to, has been cited by both parties as having a bearing upon the present case. That case was one of great complication and involved a discussion of some of the principles which we have applied in the present case, but the facts in the two cases have too little similarity to enable us to reason from one to the other.

We have spoken of the incumbrances on the property held by the defendants as amounting to $90,000. This fact is found only in general terms in the report of the committee, and we have no means of knowing when the other mortgages constituting this incumbrance were given. The finding is in these words: “The premises of which the defendants obtained title by foreclosure, exclusive of the salt meadow, were worth, at the time they obtained title to them the sum of $97,000, and the claims for which they held this property as security amounted to $90,000.” As the foreclosure was obtained in 1876, and the plaintiff had obtained his mortgage on the lots A and B only two years before, it is reasonable to suppose that this indebtedness had accrued and the security had been obtained upon it before he took that mortgage. At any rate in the absence of any direct finding on the subject we can not assume the contrary. It is perhaps, in the circumstances, a matter of no importance. If the Hubbard mortgage which the plaintiff would have to redeem is to be regarded as only $11,600 instead of $90,000, yet it is manifest that the lands, if redeemed from that mortgage, would still be subject to the rest of the $90,000 incumbrance, making a final redemption of the whole property necessary.

There is error in the judgment complained of.

In this opinion the other judges concurred.