Taylor's Executors v. Maris ( 1835 )

The opinion of the court was delivered by

Sergeant, J.

The right of the holder of a judgment binding real estate, to discharge by covenant or release, a portion of that estate from the lien, preserving it in force, against the rest, cannot, as between the creditor and debtor, be disputed. It is no more than an act of common justice, where the remaining property is sufficient to respond to the claim': and he would be thought a harsh creditor, who, under such circumstances should refuse it, when,by enabling the debtor to make a clear' title to a.purchaser, it might materially relieve him. It is in truth no more than perfecting a partial equity already existing, by which, if the debtor sells a portion of land bound by a judgment, the remaining land in the hands of the debtor or his heir or vendee, must first be proceeded against by the judgment creditor, before the land of the prior purchaser can be levied on. Sir Wm. Herbert's Case, 3 Co. 11. Nayler v. Stanley, 10 Serg. & Rawle, 450. Culp v. Fisher, 1 Watts, 494.

An act, however, which is perfectly innocent and legal in itself, may become improper, if the party has notice that the rights of third persons may be impaired by it. As if such covenantor or releasor ■is apprised beforehand that a portion of the land is bound by a subsequent mortgage in favour of another person, and that if he discharges a different portion, and reserves his lien against the part bound by such mortgage, thus loading it with a double burden,- the claim of the mortgagee will be sacrificed by his priority. It is manifest that it is unfair and inequitable that he should voluntarily do an act producing these consequences. Sic utere tuo ut alienum non Icedas. Thus in an analogous case: A person may buy a legal title free from all secret trusts: but if he has notice of a trust, though he may have paid his money, equity will make him the trustee for the party beneficially interested.

But it is essential that notice be shown. It is not sufficient to say, that by the release there is a possibility that injury may result to some one. Perhaps there is no exercise of a legal right, from which, by possibility, a loss may not result to. others, in particular cases. Whoever buys a legal title, may by possibility do injury by destroying trusts and equities of which he is not apprised. In itself the act is innocent. It becomes otherwise, when the party knows that it will occasion a loss to a third person.

Had the defendant Mrs. Maris, given Mr. Taylor notice of her mortgage and desired him to retain his lien, or at least so much of it as would cover his claim, leaving the premises mortgaged for her use, it would have been his duty to refrain. But she never did; nor is there- the least pretence that he knew 'of it. It is insisted that the recording of the mortgage was constructive notice to him; but that cannot be. A mortgage or judgment is a lien: the recording a mortgage, or docket ting a judgment, is notice of that lien to a subsequent purchaser or incumbrancer, and he is bound to search for it. But what has the holder of a prior lien to do with- hunting up subsequent liens ? The task would be endless ; and no where more so than here, where liens are various in their nature, multiplied in their number, and scattered in their registry. What with mortgages, judgments, awards, testatums, transcripts, recognizances, legacies charged on land, mechanics’ claims, registered taxes, debts of intestates, &c. &c., there is no end to them; and if a man could not do a legal act, till he hunted up these varieties of liens, traced them through all their bearings, and examined how far he would displace or shake them in the hands of'strangers, of whose concerns he is ignorant, the right to act at all would be taken away; and a judgment entered up on a bond and warrant, or otherwise obtained, and binding lands to ten times the debt, must remain unalterable, pressing the debtor down, and tying up all his property from alienation. It is well settled inequity, that a judgment is not constructive notice. Sugden, in his treatise on Vendors says, the docketting of judgments is not of itself notice to a purchaser : for, says Lord Chancellor Talbot, judgments are infinite. Sudg. Vend. 539. 2 Ch. Cas. 47. Amb. 154. 1 Ch. Cas. 37. 2 Freem. 176. 2 Eq. Cas. Ab. 682. And I see no difference in this respect between judgment and other liens. It was the duty of the defendant if she meant to gain an equity, to notify the plaintiff distinctly of her position, and to caution him not to do an act by which her security would be diminished.

The act of 2d April, 1822, in relation to the releasing of parts of mortgaged premises, has been alluded to in the argument. ■ This act enables a mortgagee in such case, to sue out a sci.fa. to recover his claim against the remaining property, but makes no provision as to the effect of the release, leaving that to be decided by established principles of law and equity. And according to these, I take it, the effect of such release must depend on the circumstances of the case. If the mortgagee has notice that by such act, he sacrifices the interest of a subsequent lien creditor, he will be bound to withhold his hand, or if he proceeds, will be held responsible for the loss incurred. He may have this knowledge in the very creation of the mortgage. As if two or more severally seised of land, join in a mortgage, they are all in-cequali jure, entitled to contribution amongst themselves; and if the mortgagee should release the land of one from the mortgage, leaving the whole sum to be levied of the remaining lands, he would be doing an act of the injustice of which he was fully conusant. So where the mortgage was originally by one, and a purchaser of part from the mortgagor intervenes, and before releasing, that fact is known to the mortgagee. See Sir Wm. Harbert’s Case. And this is the principle of the case of Stevens v. Cooper, 1 Johns. Ch. 430; where the mortgagee of six lots, released four, after he knew that a third person had become the purchaser of one of the other two: it was held rateably to reduce the power of the mortgagee over the remaining lots, because it deprived the owners of those lots of their right of contribution as against-the lots so released. But in Cheesebrough v. Millard,in the same book p. 414, the decision was the other way,' because the. mortgagee who made an arrangement by which a portion of his security was relinquished, and a subsequent judgment creditor was cut out, had no notice. The language of Chancellor Kent is apposite to the present case. “If the judgment creditor had given notice to the owner of the first mortgage, before the arrangement and discharge took place, of the equity which he claimed and expected, I might probably have been inclined to have stayed to a certain extent the operation of the second mortgage. But there is no evidence nor even ground for presumption, that either Marvin or Millard, the owners of the mortgages, knew of the existence of the judgment, when the arrangement was made and carried into effect. They were not bound to search for the judgment, and the record was no constructive notice to them: and as the rule of substitution rests on the basis of mere equity and benevolence, the creditor who has thus disabled himself from making it is not to be injured thereby, provided he acted without knowledge of the other’s rights, and with good faith and good intention, which is all that equity in such case requires. (Pothier’s Traité des Oblig. No. 520.) “ The other debtors and sureties,”.to adopt the observations of Polhier, “ might as well as the creditor, have taken care of the right of hypothecation which he has lost: they might summon him to interrupt at their risk the third purchasers, or to oppose the decrees. It is only in the case in which they may have put the creditor in default, that they may complain that he has lost his hypothecation.” ^

The principles of English Chancery are the same. I shall content myself with citing a single case decided in that court, in which the doctrine was established; Griswold v. Marshman, 2 Ch. Cases, 370. There was due to Marshman four thousand pounds upon a mortgage made to him of lands. The mortgagor after the mortgage, acknowledged three judgments, to other persons for other moneys due. Two of those persons to whom the judgments were given, gave notice tó Mr. Marshman of their judgments, and desired him to accept of his money that was due upon the mortgage, which they said they were ready to pay him, and desired him to appoint a time when, and they would pay him his money within a fortnight, to the intent that his mortgage being set aside they might take execution on their judgments, but proved not any money actually tendered. But afterwards Marshman exhibited a bill against the mortgagor and had a decree to foreclose him of redemption: and afterwards took a further absolute conveyance from the mortgagor for a considerable sum of money. And now the two creditors had a decree against Marshman to pay them their money, but Powell the third creditor had no relief, because he gave no notice in time, of his judgment.

Decree affirmed.