National Bank of North America v. Norwich Savings Society ( 1870 )

Seymour, J.

This is a bill in equity to open the foreclosure of a mortgage. The Norwich Savings Society held the first mortgage upon a manufacturing establishment in Glastonbury. The Bank of North America, the present petitioner, held a second mortgage and had foreclosed the mortgagors and all subsequent parties. Then the Savings Society obtained the decree of foreclosure against the Bank of North America, which decree is now sought to be opened. In the petition on which this last mentioned foreclosure was obtained an order of notice was duly made and duly complied with, ordering notice to the respondents in that case (the petitioners in this) by letter through the post office. The letter was not received, and the Bank of North America had no knowledge of the proceedings against them or of the decree until a few days after the time limited for them to redeem had expired. They thereupon immediately filed the present petition to open the foreclosure.

Upon these facts the case is a clear one. The failure of the notice to reach the Bank of North America is an accident which is to be relieved against upon the familiar principles of a court of equity, unless there are special reasons against such relief being granted. The respondents claim that such special reasons exist in this case. Shortly before the time limited in the decree for redemption one Thomas J. Yail entered into a contract with the Savings Society to purchase from it its right, title and interest in the mortgaged premises, provided the redemption should not take place. No redemption being made Mr. Yail paid $500 on the contract. No further execution of the contract occurred before the bringing of the present petition and the granting of a temporary injunction against completing the agreement. The pending petition was brought October 17th, 1869. On the 22d of December, 1869, Mr. Yail entered into an agreement with Storrs Brothers of New -York, transferring to them all his rights under the contract between himself and the Savings Society as security for $15,000 lent to him by Storrs Brothers on the faith of the transfer as security. Storrs Brothers were ignorant of the pendency of the petition and injunction, and supposed that the title of Yail and the Savings Society was perfect. Mr. Yail knew of tlie petition and injunction soon after they were brought, but did not communicate his knowledge to Storrs Brothers, and he had procured of the town clerk of Glastonbury an abstract of the title which showed the property to be freed by the foreclosure from its incumbrances ; which abstract was' examined by Storrs Brothers before they made their advance of money to Mr. Yail. The debt of the Savings Society is about $15,000; the value of the premises about $75,000. Mr. Yail had been connected with the property for many years and was. acquainted with the claim of the present petitioners upon it, and he knew that the value of the property exceeded the amount of both mortgages. As late as July 31st, 1869, he had a conversation with the president of the Bank of North America, in which the president remarked that he supposed the money due the savings bank would have to be paid soon; to which Mr. Yail assented. Upon these facts we think it clear that Mr. Yail is in no better condition to resist the opening of the foreclosure than the savings bank is. He had reason to know that the failure to redeem was an accident, and he has done nothing in execution of his agreement with .the savings bank except to pay $500, wliicli he can recover back if he paid it in good faith and under an innocent mistake.

But in behalf of Storrs Brothers it is strenuously insisted that they have advanced $15,000 on the faith of a title apparently good, and vouched by the town clerk to be a good title so far as appeared on the town records. Storrs Brothers claim that the legal title is in the savings bank, and that by virtue of the assignment to them of the contract between that bank and Yail, they acting in good faith have an equitable title equal to, and indeed superior to, the equitable rights of the Bank of North America.

We are called on then to examine with care the comparative equities of these two parties.

The Bank of North America had a valid mortgage on the premises. No neglect or fault of any kind is imputable to them. By mere accident a decree of foreclosure has been obtained of their mortgage without notice. Their title is prior in point of time to that of Storrs Brothers.

In respect to Storrs Brothers, — 1st. Their title is by, un.der,-and through Mr. Yail, and we have already seen that he has no equitable rights which can prevail against the petitioners.. 2d. It does not appear that Yail is insolvent. 3d. Although no bad faith is imputable to Storrs Brothers, yet the contract which was transferred to them was somewhat extraordinary in its nature. It must have been apparent to them that the property foreclosed greatly exceeded in value the amount of the debt of the savings bank, and this fact and other facts in the case would naturally suggest to every careful man the idea that the failure of the Bank of North America to redeem must have been the result of some accident or mistake.

We are then of the opinion that the equitable rights of the Bank of North America are prior in time and superior in merit to those of Storrs Brothers.

The original claim of the Bank of North America is as mortgagee, and if them mortgage debt is paid they ought to be satisfied; and it is agreed by the parties that Mr. Yail and Storrs Brothers may take the premises upon the payment to them of their debt and upon payment also to the Savings Society according to the contract between the latter and Mr. Vail.

The Superior Court is advised to make its decree accordingly.

The court has been consulted by the parties and has advised informally in relation to several minor points arising in the case touching the account for rents and profits by Mr. Vail while in possession, but the questions involved are not of an interest sufficiently general to be reported.

In this opinion the other judges concurred.