Opinion
04-07-1897
LONGSTREET v. BROWN et al.
W. H. Vredenburgh, for complainant. John S. Applegate, for defendants.
Bill by Henry H. Longstreet, as administrator de bonis non of the estate of Emeline Smock, deceased, against Warren Brown and others, to foreclose a mortgage. Heard on bill, answers, replication, and oral proofs. Decree for complainant.
W. H. Vredenburgh, for complainant.
John S. Applegate, for defendants.
EMERY, V. C. The mortgage sought to be foreclosed in this suit was given by Warren Brown and wife to the defendant Henry S. Little, upon a tract of land in Matawan township, Monmouth county, containing about 12 acres, and to secure payment of $2,793.88 in five years from date, with interest, payable annually on April 1st of each year. The mortgage and accompanying bond are dated January 27, 1868, and by a written guaranty under seal indorsed on the bond Dr. Alfred B. Dayton guarantied its payment. The mortgage was given to secure the purchase money of the premises which were conveyed to Brown by Mr. Little, and Dr. Dayton, the guarantor, was, as appears by the evidence, interested with Brown in the purchase. The purchase of the tract was made for the purpose of division into parcels for sale as building lots. Several lots were sold before the mortgage became due; and after it became due, and on June 19, 1873, Brown and wife conveyed to the New York & Long Branch Railroad Company a portion of the premises, containing about two acres, and this portion has since shortly after that time been occupied by this company and its lessee, the Central Railroad Company, for the purposes of their railroad and station. No release from the mortgage was given at the time, or has since been executed; and at the time of this conveyance the amount due upon the mortgage was $2,680.96 of principal, besides interest from April 1,1872. On April 1, 1874, Warren Brown, being still the owner of the remainder of the property, paid the interest due to that date, $377.72, besides $860 on account of the principal. This payment of April 1, 1874, was the last payment of interest or principal made directly by Brown. In the meantime, and in 1870, before the bond became due, Dr. Alfred B. Dayton, the guarantor, had died, and his son, R. W. Dayton, Esq., with two others, were appointed his executors. On April 15, 1879, Mr. R. W. Dayton received a sheriff's deed for Warren Brown's interest in the mortgaged premises, the sale being made by virtue of a judgment obtained against Brown, April 6, 1877, and levied upon the premises. After this conveyance, and on about April 15, 1879, Mr. R. W. Dayton conveyed to one Lichenstein a portion of the premises conveyed to him by the sheriff's deed, and containing about one acre, at the price of $325. Warren Brown and wife, for the purpose of perfecting title to this lot, executed a deed to Lichenstein for the nominal consideration of one dollar, but the whole consideration received for the purchase was, by agreement of the parties, paid over to Mr. Dayton, to be applied on the mortgage, which was thereupon to be released. Mr. Little still held the legal title to the mortgage, but it was in fact held by him in trust for the testatrix, Emeline Smock, under a written deed of trust; and Mr. Little, as Mrs. Smock's trustee and agent, collected the interest and principal of the mortgage. The $325 was paid to Mr. Little, who afterwards paid it to Mrs. Smock, and she released from her mortgage the premises sold to Lichenstein for the consideration of $325, stated in the release, which is dated April 1, 1879. The release recites the description of the lands released, and in the description the lands of the New York & Long Branch Railroad Company are referred to as having been conveyed by Brown to the company on June 19, 1873. Mr. Little did not execute any release, and a formal assignment by him of the bond and mortgage was not made until after the death of Mrs. Smock, and until April 6, 1889, when he formally assigned it to her executor. After this payment upon the mortgage, made April 1, 1879, by Mr. R. W. Dayton, as the full proceeds of sale of the portion released by the equitable owner of the mortgage, further payments of interest were made; all of these payments being made by Mr. Dayton, who at the time still appears to have been the owner of a portion of the premises covered by the mortgage, as well as executor of his father, Dr. Dayton, the guarantor of the bond. No indorsement upon the bond was made of any of these subsequent payments or of the payment of $325 made on the sale to Lichenstein, the indorsement being withheld by Mr. Little at the request of Mr. Dayton. The precise date of these subsequent payments is, on this account, only approximately fixed, and is as follows: $741.39 interest to the year ending April 1, 1884, paid between April 1 and November 29, 1884; $329.55 interest on April 1, 1886, paid after that date, and before April 1, 1887. These pay ments were all made to Mr. Little by Mr. Dayton, and either from his own property or the property of his father's estate. Brown made no payments directly on the mortgage after April 1, 1874, the date of the last indorsement on the bond. The bill to foreclose was filed by Mrs. Smock's executor on April 8, 1896.
The substantial defenses are raised by the answer of the New York & Long Branch Railroad Company and its lessee, the Central Railroad Company, viz.: First. Adverse possession of the premises conveyed to them for over 20 years before the filing of the bill, without any payment on account of either principal or interest by them, or any one claiming under them, or any acknowledgment of the mortgage, and the statute of limitations is formally pleaded. The second defense is that the release of the Lichenstein lot was made with notice of their conveyance; and, if the mortgage is a lien at all, the complainant is chargeable with the value of that lot, to be credited on the bond; and that this value exceeded $325, the price at which it was sold.
As to the second ground, my opinion on the facts is that the sale seems to have been made at a fair price, considering the circumstances of the case; and that the defendant has failed to show that the complainant, on account of the release, is to be charged with more than was received. The release of Mrs. Smock recites the company's deed as previously made, and is, therefore, sufficient proof of actual notice of that deed at the time of executing the release; and therefore she was, upon the release, chargeable, in equity, with the value of this lot in reduction of the liability on the mortgage. But this application of the value of the lot to the reduction of the mortgage, is the only equity the defendant had, or now has; and, inasmuch as the whole price of the lot was in fact applied by the mortgagor as a payment on the mortgage, the entire equity of the defendant was, therefore, satisfied. If this price had not been paid on the mortgage, it would now be credited; but there is no basis of equity for crediting it twice. Vanorden v. Johnson, 14 N. J. Eq. 376 (Green, Ch.; 1862); Patty v. Pease, 8 Paige, 277, 284 (Walworth, Ch.; 1840).
Second. Nor do I think that the defense of the statute of limitations can be sustained. Whether the possession of a mortgagor or his grantees for 20 years after default is to be considered a possession adverse to the mortgagee, so as to deprive the latter of the equitable remedy of foreclosure, has not been decided by our courts. Under the English statute from which the sixteenth section of our statute limiting the right of entry to 20 years was substantially taken, it was held by the English courts, both at law and in equity, that the possession of the mortgagor was the possession of the mortgagee, and therefore thestatute did not run against the mortgagee. See cases cited. Heath v. Pugh, 6 Q. B. Div. 359; Lehman v. Newnham, 1 Ves. Sr. 51. The mortgagor was considered a tenant at will to the mortgagee, so long as the latter permitted him to remain in possession, and did not elect to treat him as a trespasser by bringing ejectment. And in our courts the mortgagor, in actions of ejectment, is treated as a tenant at sufferance, entitled to remain after default, so long as the mortgagee chooses, but, not entitled, as against the mortgagee, to lease the premises, or to receive notice to quit. Deu v. Stockton (1831) 12 N. J. Law, 322; Den v. Wade (1844) 20 N. J. Law, 291; Howell v. Schenck (1853) 24 N. J. Law, 89, 91, 94. Section 17 of the statute of limitations limits the action of ejectment to 20 years, but I have not been referred to any decisions of the courts of law as to the application of this statute to actions upon mortgages. Mortgagees in possession for 20 years are expressly protected by a subsequent section (section 18). I shall not pass on the question of the application of the statute, as, in my judgment, if the statute is applicable to foreclosure bills, the payment on the mortgage made in 1879— less than 20 years previous to the filing of the bill— stopped the running of the statute up to that time. This payment was made by the owner of the equity of redemption of a portion of the mortgaged premises, and inured to the benefit of all the mortgaged premises still subject to the mortgage. So far as the mortgagee is concerned, the whole mortgage debt is charged in equity on all the mortgaged lands; and, while conveyances by the owner, subsequent to the mortgage, may give rise to equities relating to the order of application of the lands for payment, yet the whole mortgage debt still continues, until payment, a debt chargeable upon all the lands. All the lands being therefore chargeable with the debt, in their proper equitable order, the lands of the owners of the equity of redemption in different portions of the premises subject to the debt are to be treated, so far as the mortgagee is concerned, as jointly liable to the equitable charge, and the payment to the mortgagee by any one of such owners should be considered as a payment made on account of this joint equitable liability. And if, in addition, the owner of the portion of the mortgaged premises who paid the interest was, as between him and a previous grantee, under an equitable obligation to pay the mortgage, I think there can be no doubt that this owner, in making the payment, must be considered as making it for the benefit of and as the agent of all the owners of the equity as to whom his land is primarily liable to the entire charge. In this respect the case is analogous to the payment on account of a joint liability made by one of two joint debtors. Such payment is, by reason of the existence of the joint obligation at the time of payment, held to be made at the request and by the authority of all the joint debtors, and to prevent the running of the statute against all. Merritt v. Day (Sup. Ct.; 1875) 38 N. J. Law, 32, 37, approved. Casebolt v. Ackerman (Err. & App.; 1884) 46 N. J. Law, 169. An assignee of the equity of redemption, who has covenanted to pay interest on a mortgage, is an agent of the mortgagor, within the meaning of the statute of limitations requiring payment by the party liable, or his agent. Forsyth v. Bristowe (1853) 8 Exch. 715, 722. In Murphy v. Coates, 33 N. J. Eq. 424, an acknowledgment of the first mortgage by the mortgagor was held to be sufficient to prevent the running of the statute against a second mortgagee. The equitable liability of Mr. Dayton's lands to relieve the defendant company's lands should, therefore, be considered as sufficient in equity to make the payment by Mr. Dayton to the mortgagee in 1879 a payment for the benefit and on account of the defendant, and at its request, and one which the mortgagee was entitled to receive as protecting her lien up to that time upon all the lands subject to her mortgage. So far as this payment is concerned, the defendant company has no right to insist that, as against the mortgagee, its lands shall be considered in equity, as if the payment had not been made, and as if its lands were at the time of the payment held adversely to the mortgagee. The subsequent purchaser's discharge of his equitable obligations to the defendant to pay the mortgagee, and thus relieve the defendant's lands, cannot, on any equitable ground, be made the basis of barring the mortgagee's rights against defendant's lands on the theory that the payment was not made in relief of defendant's lands; for defendant's equitable right to require the primary payment of the lien by the subsequent purchaser carried with it all obligations and admissions necessarily arising from the payment by him as a payment made pursuant to an equitable status created by defendant's consent, and therefore it must be treated as an acknowledgment of the debt on the part of all these for whom or for whose benefit it was, in equity, to be considered a payment by reason of this equitable status. See 2 Jones, Mortg. § 1198, and cases cited. As to the payments made in 1884, I have some doubt as to their effect, because it does not clearly appear whether these were made by Mr. Dayton as owner of the equity, or as executor of the guarantor. Payment by a guarantor to the obligee is, or may be, different in its effect on the lands, for the reason that the guarantor, upon payment by him, is generally entitled in equity to be subrogated to the securities of the obligee, and it is a question, therefore, whether the lands are relieved from the debt by the payment, and whether the guarantor is not, by the payment, subrogated to a Hen of the obligee against the lands to the extent of his p yment. Gedye v. Matson (1858) 25 Beav. 310; notes to Dering v. Earl of Winchelsea, 1 White & T. Lead. Cas. Eq. (4th Am. Ed.) 127; Pennsylvania R. Co. v. Pemberton & N. Y. R. Co., 28 N. J. Eq. 338.344; New Jersey Building, Loan & investment Co. v. Cumberland Land & Improvement Co., 53 N. J. Eq. 644, 33 Atl. 964. If he is so subrogated, then the payment by the guarantor may not be considered as a payment made by the assignee of the equity of redemption, or in relief of his lands, or at his request. The assignee's rights are rather adverse to the payment, and, so far as the assignee of the principal is concerned, the guarantor may stand only as the obligor would without his payment; that is, as subject to the statute. It is manifest that, as between the guarantor of the bond and subsequent purchasers of the equity of redemption, the circumstances of each case might vary the equities; and in the present case I shall not undertake to decide as to the effect of this payment upon the running of the statute of limitations. Such decision is not necessary, inasmuch as, in my view, the payment of April 1, 1879, was a payment effective against the defendant to stop the running of the statute. Being made within 20 years before the filing of the bill, the statute runs only from that time of payment. Barned v. Barned, 21 N. J. Eq. 245. No further equities are set up on the record in relation to these payments, and, inasmuch as the complainant has proved and given credit for the payments made up to April 1, 1887, by Mr. Dayton, and no reason has been alleged or shown for treating them otherwise than as payments for the benefit of all the lands, decree will therefore go for the principal unpaid, with interest from that date.