Fitzhugh v. McPherson , 3 Gill 408 ( 1845 )

Martin, J.

delivered the opinion of this court.

This case comes before us on an appeal from the Chancery court, and presents for our consideration the correctness of the decree of the Chancellor, of the 8th March 1843, adopting and ratifying the auditor’s statement, No. 5.

The amount reported to be due to the complainant, by the auditor in this account, was ascertained, by treating Lewis Neth as the assignee of both of the debts embraced by the mortgage, of the 27th April 1805; and by compounding the principal and interest due on those debts, at the period of the assignment, from Rebecca Dulany to Judge Buchanan, and, again, at the time of their assignment from Buchanan to Neth.

These being the principles by which the auditor was regulated in the adjustment of the account, two questions are presented for the consideration of this court.

First. Whether Lewis Neth is to be regarded as the assignee of both of the debts described in the mortgaged deed, already adverted to ? and

Secondly. If the auditor was correct in compounding the principal and interest, at the periods of the assignment from Mrs. Dulany to Mr. Buchanan, and from Buchanan to Neth9

Although many propositions were discussed in the course of the argument, the accuracy of the auditor’s report, and the correctness of the Chancellor’s decree, turn on the questions, as above stated.

When this case was before the court, in 1837, 9 G. & J., 56, the counsel for the appellants raised the following points, in reference to the assignment of these debts:

“That there was no evidence, that William Cooke, who signed the assignment to Thomas Buchanan, as the attorney for Rebecca Dulany, was the attorney of Rebecca Dulany and “that the decree is for the sale of all the lands mentioned in the proceedings, for the payment of the two debts, of o£230, and JS4QQ, added together, and interest compounded thereon, when complainants, exhibits A and B, shew, that the life estate of George Fitzhugh, Sen., in five hundred acres, and his fee-simple estate in one hundred and eighty-eight acres, never were charged or chargeable with the debt of JAOO.” Upon this subject, the court declare:

“Such an objection, comes with an ill grace from the defendants, under the circumstances of this case. The assignment was made in 1806. It has been acquiesced in, and recognized by the appellants, from that time, until the filing of their notes in this court, a period of more than thirty years. They have for about twenty-five years, continued, from time to time, to pay to the said assignee, and those claiming under him, interest due on the debts assigned. Daniel D. Fitzhugh, one of the appellants, in his answer, in express terms, admits the assignment of the debts due to the said Rebecca Dulany, to Thomas Buchanan; and three, of the four appellants, by a bond and agreement, under their hands and seals, the first dated in 1822, the second in 1825, by necessary implication, and also in the said agreement, in express terms, admit the assignment and its validity, and in like manner make the same admission in 1835, in their instructions to the auditor to state the accounts.”

It is seen, then, that the objection raised by the counsel for the appellants, on this question, presupposed, that Neth was the assignee of both the debts; and that such was the extent and character of the assignment, was held by the court as an unquestionable proposition. It is manifest, indeed, that Rebecca Dulany became, by force of the mortgage deed of the 27th April 1805, the holder of the two debts; and it is equally clear, we think, that the entire interest of Mrs. Dulany, passed to Judge Buchanan, by the assignment of tire 11th December 1806; and that all the interest of Buchanan, was communicated to Neth, by the assignment of the 2nd March 1812.

The next question presented for our consideration, is that which respects the computation of interest, by converting it into principal, at the dates of the assignments, already referred to.

The right of the appellee’s intestate to the interest, as compounded by the auditor, stands on the settlement of the 22nd April 1822, the bond of 1822, and the agreement of the 26th January 1825.

It is perfectly clear, as a legal proposition, that the holder of the mortgaged debt, was entitled to compound interest, on the principles adopted by the auditor, as against those parties who executed or assented to the papers, to which we have just adverted.

Coote, in his work on mortgages, 438, says:

“When interest has once accrued, it becomes a debt. There is no longer, therefore, any objection to an agreement inter partes, that it shall be considered principal, and, therefore, carry interest. Indeed, it would be injurious to the mortgagor to establish the contrary, as it would remove an inducement to the mortgagee’s permitting his principal to remain, and, consequently, equity has recognised such agreements; but there must be no extortion on the part of the mortgagee, or, otherwise equity will interpose to the relief of the mortgagor.” The same proposition is maintained in Brown vs. Barkham, 1 P. W., 654. Mowry vs. Bishop, 5 Paig., 98. 1 Johns. Ch. Rep., 13. 3 Ohio R., 17.

But, the doctrine announced by the Court of Appeals, on this question, renders the production.of authorities unnecessary. They say :•

“The 9th ground which is relied on by the appellants, for reversing the decree, is thus stated, because the mortgagors cannot, by any agreement, compound the interest on the principal debt, and render the whole a charge upon the lands, to the prejudice of those whose debts are secured by the same mortgage, and of the Bank of Maryland, a subsequent mortgagee. The first branch of this proposition has not been, and cannot be contended for; if by debts, secured by the same mortgage, is meant debts which are subsisting liens upon the mortgaged premises, and are obnoxious on the part of the plaintiff, if otherwise conflicting with his claim, to no other bar to their recovery, than that arising from the compounding of interest.” And again they say :

“The point raised by the appellant’s seventh ground, under the insufficient proofs in the cause, cannot be resisted. To bind the interest of George Fitzhugh, Jr., in the mortgaged premises, for the interest compounded at the dates of the assignments of the mortgage debts to Buchanan and Neth, his concurrence in the making of such assignments, must be proved, or his subsequent ratification of, or assent to such compounding, must be shewn.”

An examination of the record will show, that tho defendants, Mary and Daniel D. Fitzhugh, admit by their answers, the execution of the instruments of 1822 and 1825, and as the defensive averments advanced by those defendants, for the purpose of extricating themselves from the operation of those papers, are not responsive to the bill, and are entirely unsupported by proof, they must be disregarded.

The position occupied by George Fitzhugh, Jr., is different from that held by his co-defendants. The decree was taken against him pro confesso, and this being so, it is an established principle, that the allegations of the bill are to be received as true, so far as he is concerned. 10 G. &. J., 65. 1 Hop. R., 476.

As the bill charges, that Lewis Neth was the assignee of both of the debts in controversy, and that the agreement and bond of 1822 and 1825, were executed with the knowledge and consent of George Fitzhugh, Jr., those facts must be considered as proved against him.

A point was raised by the counsel for the appellants, preliminary in its character: “That there is no averment in either of the complainant’s bills, of an agreement or agreements, to compound between the complainant, or those whom he represents, and the defendants, or those whom they represent, and that, therefore, all evidence tending to show a compounding in point of fact, was inadmissible; the want of the proper averment in the bill having been excepted to.”

The bill charges, that the complainant’s intestate was entitled to the mortgage debt, with interest thereon; and it was contended by the counsel for the appellants, that this averment did not authorise the introduction of the testimony, on which the appellee relies, as authorising his claim to compound interest.

To this proposition we cannot consent. Under the averment, to be found in the bill upon this subject, the complainant was entitled to recover his debt, either with simple or compound interest, as might appear to be lawful and just upon all the circumstances of the case.

It follows from the views thus expressed, that we concur in opinion with the Chancellor, and think that his decree must be affirmed.

decree affirmed with costs.