Knowles v. Lawton , 18 Ga. 476 ( 1855 )

By the Court.

Benning, J.

delivering the opinion.

The first question in this case is, whether the equity of redemption, in any of the lots of land, became merged in the legal estate ?

It is alleged in the bill, that with respect to a number of the lots, these two estates met in Lawton and Oheever j and this allegation, it is insisted by the Counsel for the plaintiff, has not been fully denied by .the answer. And they argue, that when the equity of redemption and the legal estate meet In the same person or persons, the law makes the former estate merge in the latter.

Whether this allegation has been denied by the answer or not, we do not find it necessary to inquire. Let us admit that it has not been.

Considering, then, the fact to be, that the'two estates did, in some of the lots, meet in Lawton and Oheever, the question ' is, did the equity of redemption become, in such lots, merged in the legal estate ?

• Whether a merger shall take place or not, depends, as a general rule, upon this: whether the person in whom the two estates meet intends that it shall take place. In Forbes vs. 3£offati, the Master of the Rolls says: “ It is very clear, that a person becoming entitled to an estate,- subject-to a charge for his own benefit, may,'if he chooses, at once take the estate and keep up the charge. Upon this subject a Court of Equity is not guided by the rules of Law. It will sometimes hold a charge extinguished, where it would subsist at Law; and sometimes preserve it, whore, at Law, it would bo merged. The question is, upon the intention, actual or presumed, of the person in whom the interests are united. In most instances, it is, in reference to the party himself, of no sort of use to have a charge on his own estate; and where that is the case, it will be held to sink, unless something shall have been done by him to keep it on foot.”

“ The first question, therefore, is, whether John Moffatt 'has done any thing to determine that election — which .ho undoubtedly had — if not, the question will be, upon the presumption of Law, under the circumstances of the case.” (18 Ves. 390.)

This statement of the Master of the Rolls is supported by several cases which he cites, and also by some cases which have been decided since the decision in the case in which the statement was made, as these: (Wigsell vs. Wigsell, 2 Sim. & S. Ld. Clarendon vs. Barham, 1 Y. & Coll. C. C. 688, (astated in Chittg’s Eq. Dig. 788, 14.) Reddington vs. Reddington, 1 Ball & B. 131, (as stated in same.) Pitt vs. Pitt, 1 Turn. & R. 184.)

And with this statement accords a'decision of this Court— the decision in Jackson vs Tift, (15 Ga. R. 557.) In that case, Jackson, the mortgagee, became the purchaser of the equity of redemption in the two halves of the mortgaged lot of land. The facts were such as to require the presumption, that he intended the equity of redemption, in one of the halves, to merge; but the equity of redemption, in the other, not to merge. The decision was, that as to the first mentioned half, there was a merger; as to the other half, none.

[1.] We think it therefore safe to say, that as a general rule, merger does not take place, if the person in whom the two estates meet intends that it shall not take place.

That being so, the question becomes this: did Lawton and Cheever intend, in this case, that their equity of redemption should merge in their legal estate ?

[2.] [3.] And the answer to that question must be, no; for they took from the mortgagee, Thomas, not a conveyance to the land, but an assignment of the mortgage; they stepped into the place of Thomas in the foreclosure suit; they prosecuted that suit to judgment and execution; they tried to sell under the mortgage fi. fa. all of the mortgaged lands; and they did sell a part of those lands — the very part in respect to which the bill insists, that there was a merger, viz: that part in which they, themselves, had the equity of redemption. Now the whole of this course of conduct, on their part, was inconsistent with an intention that there should be a merger. It follows, that there was i^o such intention.

And if there was no such intention, there was no merger; for as we have seen, there is no merger where the intention is, that there shall be none.

Was the judgment of foreclosure binding on the plaintiffs, as they were not parties to it ?

The only party defendant to the judgment, was Casey the mortgagor. But the plaintiffs were the purchasers from Casey, of parts of the property contained in the mortgage ; and they assert no right, except such as they derived from him by that purchase. And they 'could, by that purchase, derive from him no right as against the mortgage, which he, Casey, did not himself possess. And he did not, himself, possess the right to put the mortgaged property in a situation which would render it necessary for the mortgagee, in framing his .suit of foreclosure, under the Judiciary Act of 1799, to make, as a party defendant to the suit, any other person than the mortgagor himself. That Act says: “ The method of foreclosing mortgages on .real estate, in this State, shall be as follows: Any person applying and entitled to foreclose such mortgage,” “shall petition the Superior Court,”a“ stating the case and the amount of his, her or their demand, and describing such mortgaged property; and the Court shall grant a rule, that the principle, interest and cost shall be paid into Court,” “which rule shall be published” “or served on the-mortgagor, or his special agent,” &c. It is only the “mort-gcigor or his special agent,” that the rule is to be served on.. The mortgagor, therefore, has no right so to treat the mortgaged property as to make it necessary for the mortgagee, in' order to get a foreclosure, to serve his rule upon any pei-som except him, the mortgagor. But this right the mortgagor would have, if he could, by selling the mortgaged property, give to the vendee the right to be a party to a rule for foreclosure. The right to be a party to that rule, the mortgagor, therefore, cannot give to his vendee.

[4.] It follows, that the vendee is bound by the judgment of foreclosure, although not a party to it. He is, however, in privity with the vendor, who is a party to it.

And this is no more than what is true in analogous cases. A general judgment binds the property of the defendant to it, in whose soever hands the property may be found, if it got into those hands at any time after the lien .of the judgment had fastened itself upon it, notwithstanding that the person into whose hands it may have so got had never, in fact, heard:! of the judgment.

When the mortgagor sells parts of the mortgaged property" at different times, to different persons, can these persons compel the mortgagee to go, for his money, first, to the property remaining unsold in the hands of the mortgagor; and if that should prove insufficient, then to the parts of the sold property, in any particular order of precedence ?

The mortgagee, by the terms of his mortgage, has the legal' title, equally, to every part of the mortgaged property ; i. e. he has, if the mortgagor, himself, had that title to mortgage; and this legal title the mortgagee cannot be deprived of by any thing except some act of his own. Therefore, he cannot be deprived of it by any act of the mortgagor’s — as, a sale of the property by the mortgagor. And hence, if there be a failure to pay the mortgage debt, and therefore, a forfeiture of the mortgage, every part, equally, of the mortgaged property, even though some of it may have been sold by the mortgagor, becomes, at Law, to Mm and Ms vendee, of such part, dead. And being thus dead to them, at Law, on what terms is it to be made alive in Equity ? Only on the terms of the payment of the mortgage debt. Further than this, equity, itself, will not interfere with the legal rights of the mortgagee. (See 2 Black. Com. 158. Code on Mortgage, 513, 517.)

This is the doctrine of the old law. And what change, in-the old law, has been made by the new — by our Statute ? In respect to the right of redemption, none. Before the' mortgagor can, by the new law, redeem his land, he has pay the mortgage" debt; and that was the very thing which he had to do by the old law, before he could redeem his land.. The change made by the new law, is merely-as follows:

By the old law, the effect of foreclosure, was to vest the mortgaged property absolutely in the mortgagee; by the new, the effect of foreclosure is to vest in the mortgagee the right to sell that property and to take as much of the proceeds of its sale as shall be sufficient to pay him his debt and costs. This change does not at all enlarge the terms on which the mortgagor may redeem. Notwithstanding this-change, he must still, before he can redeem, pay the debt. Previous payment of this, the new law requires explicitly and peremptorily. Its language is: “ and the Court shall grant a rule, that the principal, interest and cost shall be paid into-Court within twelve months thereafter;” (now by the next term;) “ and unless the principal, interest and costs be so-paid, the Court shall give judgment for the amount which may be due on such mortgage, and order the property mortgaged to be sold in such manner as is prescribed in cases of execution, and the money shall be paid to the mortgagee or his .Attorney: but where there shall be any surplus, the same shall be paid over to the mortgagor or his agent.” Unless the principal, interest and costs be so paid, the Court shall give judgment for the amount due on the mortgage, and order ■ the mortgaged property to be sold in such manner as is prescribed in cases of execution.

The Statute then gives to the mortgagee the right to sell, under his judgment of foreclosure, any part of the mortgaged property, at his own election. A Court cannot interfere with a right thus given; certainly not further than to compel the mortgagee to take his money, if it should be tendered to him, and then to desist from any proceeding to sell the property.

[5.] This being so, a Court of Equity could not, at the instance of purchasers from the mortgagor of the mortgaged property, compel the mortgagee to resort, first, to the property remaining in the hands of the mortgagor; and then,, according to some order of priority, to that in the hands of those purchasers.

And this, in part, is what a Court of Equity is, in this case,, asked to do. The equity of redemption not having become merged in the legal estate, the defendants, Lawton and Cheever, as transferees of the mortgage, stand in the shoes of Thomas, the mortgagee. They, therefore, are to be considered as mortgagees. Considered as mortgagees, they are entitled to have payment of their debt before they can be required to abstain from selling, at their own election, any the lands mortgaged to them. On the other hand, the plaintiffs are the purchasers of parts of the mortgaged lands: from Casey, the mortgagor.

They, therefore, stand in the shoes of Casey, and so are to’ be considered as mortgagors. Considered as mortgagors, the’ only right which they have, as against the mortgagees, is the right to redeem their land qn payment of the mortgage debt..

Such a right as that, does not give them a title to ask a Court of Equity to compel Lawton and Cheever, considered as mortgagees, to bring the parts of the mortgaged property to sale in any particular order. • '

After Lawton and Cheever shall have been paid the amount' due on the mortgage, then those who pay that amount may raise the question, who, if any, are'to contribute to their re-imbursement; and in what order and proportion they are so to. contribute. On this question, nothing is now intended to be said.

I will, however, suggest for inquiry on this question, whether, when (e. g.) a mortgagor sells a part of the mortgaged property, the remaining part is the part which, as between vendor and vendee, is to be first applied to the payment of the mortgage, docs not depend on the intention vendor and vendee. Suppose A, having property worth $10.-000, with a mortgage on it for $5,000, sells half of it to B for $2,500; the intention of both A and B, being that the-other $2,500, which this half is worth, shall be paid by B, the purchaser, to the mortgagee, in satisfaction of half of the mortgage. In such a case, if B should pay that $2,500 to the mortgagee, ought B to be allowed to call on A to pay an equal amount to him ? And in such a case, would not the fact, that the half of the land sold, was sold for but half its unincumbered value; i. e. was sold for all its value, less its share of the incumbrance on it, be evidence of an intention, in both vendor and vendee, that that half of the land was to |>ay its half of the mortgage ? I think, in practice, it is true, in general, that when a mortgagor sells a part of the mortgaged property, he requires and obtains for it a full price— a price equal to what would be the value of the part, if it were free from incumbrance. And if, in such a case, the vendee, on losing his part by the operation of the mortgage, is entitled to contribution from the vendor, is it not because there was an intention, in both vendor and vendee, that the vendee should have contribution, an intention of which the payment of this full price is the evidence ?

The bill states that Lawton entered into a fraudulent contract with Clifton, the holder of one of the lots included in the mortgage, to prevent him from “ running the land ;” a contract by which Lawton agreed to protect Clifton’s title to that lot, against the mortgage, or to compensate him for the loss of the lot, in case it should be sold by the mortgage ; and that Clifton, who had commenced to bid for lot No. 281, in consequence of this agreement, desisted from bidding, and let the lot be knocked off to Lawton at ¡§300, yyhcn it was "worth ¡§2.500; and when he,would, himself, have given <§2.-”000 for it but foffthe agreement; and that,-by the agreement, Clifton was also made to abstain from bidding for another lot.

Now, it seems that the sale at which this agreement (as it stated in the bill to have been) took place, was a regular, public sale, after due advertisement, under the judgment of foreclosure; a judgment to which the complainants, if not parties, wore privies. It is to bo presumed, therefore, that they were present at the sale, and might,’ if they had seen fit, 'have made every piece of land fetch its full value. And it -does not appear but that, at the time of sale, they knew or -suspected, what was going on, as they say, between Lawton and Clifton.

Suppose, therefore, the allegations in the bill be taken to true; to what relief do they entitle the complainants? The most that a Court of Equity, in such a case, would do, would be to annul the purchase of the two lots by Lawton or Lawton and Cheever, and order another sale of them — a sale just like that was, at which the annulled purchase had been made. A court of Equity could not make Clifton compete for the lots ; or, indeed, make Lawton and Clifton cease from acting on their old agreement. So that, at the new sale, if one were ordered, the complainants would not, in a single respect, be any better off than they were at the old.

The equity, then, that is in this statement of the bill is not very strong. But if it were stronger, it could not be of any avail to the complainants, for the answer denies the truth of the statement.

For aught that appears then, taking both bill and answer together, the lands which were sold by the Sheriff, under the judgment of foreclosure, were fairly sold. If so, the prices they sold for, are the sums to be credited on the mortgage debt.

And this disposes of all the questions in the case that ought to be disposed of, considering what is the present state of the case.

The result of all that has been said is, that the dissolution ,of the injunction by the Court below was right.