Swett v. Sherman , 109 Mass. 231 ( 1872 )

Morton, J.

It is generally true that the holder of a mortgage debt, there being no intervening equities, may resort to the personal liability of the mortgagor instead of the land, to collect his debt. Johnson v. Stevens, 7 Cush. 431. Thus in this case the Lowell Five Cents Savings Bank, after the note secured by their mortgage became due, undoubtedly might have sued the.mortgagor upon the note which accompanied the mortgage, and compelled him to pay the debt. But such compulsory payment by the mortgagor would not, under the circumstances of this case, be regarded in equity as extinguishing the mortgage. After Swett made this mortgage, he sold the premises to Mrs. Kidder by a deed which contains this clause: “ that they are free of all incumbrances except a certain mortgage to the Lowell Five Cents Savings Bank for $2500, which the grantee, by the acceptance of this deed, assumes and agrees to pay, and to save the grantor, his heirs, executors and representatives, forever harmless therefrom.” At the same time Mrs. Kidder and her husband gave to Swett a mortgage of the same premises for $2000, to secure the purchase money, which contained the clause that they were “ free from all incumbrances excepting a certain mortgage given to the Lowell Five Cents Savings Bank for the sum of $2500, which said mortgage the grantees agree to pay.” This mortgage also contained a general warranty “against the lawful claims and demands of all persons.” By the conveyance to Mrs. Kidder, Swett ceased to be the owner of the equity of redemption, and it was made her duty to pay the first mortgage debt. It is a settled rule that, where the purposes of justice require that the payment of a mortgage debt shall be regarded as an assignment instead of an extinguishment of the mortgage, it will be held so to operate. Mc-Cabe v. Swap, 14 Allen, 188. Butler v. Seward, 10 Allen, 466. Evans v. Kimball, 1 Allen, 240. Grover v. Thatcher, 4 Gray 526. Barker v. Parker, 4 Pick. 505. Gibson v. Crehore, 3 Pick. 475. If Swett is compelled to pay this debt, it would be manifestly unjust that it should operate to extinguish the mortgage, and thus let Mrs. Kidder into the enjoyment of the estate subject only to the second mortgage. We can have no doubts that, as against Mrs. Kidder, he would be entitled upon such payment to be subrogated to the rights of the mortgagee, and to hold the mortgage as an existing lien upon the estate. Wall v. Mason, 102 Mass. 313. But the question in this case is whether, as against the second mortgagee, Swett, upon paying the first mortgage, would be entitled to an assignment of it so as to hold it with priority over the second mortgage. We are of opinion that under the circumstances of the case he would be so entitled. As we have seen, the second mortgage contains the stipulation that Mrs. Kidder shall pay the first mortgage. Swett assigned this mortgage to Nesmith, “ subject to the conditions therein contained.” At the same time, he indorsed the note accompanying the mortgage, “ without recourse.” Thus Nesmith had full knowledge of all the facts, and of the equities between Swett and Mrs. Kidder, by virtue of which Swett would be entitled to an assignment of the first mortgage if he was called upon to pay it. Nesmith took the assignment subject to the conditions contained in the mortgage, one of which was that Mrs. Kidder was to pay the first mortgage.

The fair- inference from all the facts is that Nesmith, when he bought the second mortgage, did not rely upon any personal liability of Swett, but both parties understood that the only security he got for the price he paid was a mortgage of an equity of redemption. This being so, we do not think that his executors can, by purchasing the first mortgage and compelling Swett to pay the note, enlarge the security and make it a first mortgage upon the whole estate. To do so would be contrary to the intention of the parties, and would work great injustice to Swett. On the-other hand, if the first mortgage is first satisfied out of the estate, the defendants have precisely the security which their testator got by his contract with Swett.

Upon the whole, we are of opinion that, if Swett is compelled to pay the first mortgage note to the defendants, he would be en- . titled to an assignment of the mortgage, and it would retain its priority over the second mortgage. As the estate is worth more than the first mortgage, the defendants would then be obliged to repay him the amount they recover in order to redeem the first mortgage. To avoid this circuity of remedy, we think they should be enjoined from prosecuting their suit upon the first mortgage note.

Injumction to issue.