Opinion
May Term, 1902.
Judgment affirmed on the opinion of Marean, J., at Special Term, with costs. All concurred.
The following is the opinion of Marean, J., delivered at Special Term:
The plaintiff's promise to allow Fowler when the houses were finished to place a first mortgage of $3,000 on lot No. 1 (the lot now covered by defendant Calvert's $2,500 mortgage) and to himself take a $1,000 second mortgage thereon, provided the balance due plaintiff should be paid in cash, was a promise to Fowler for Fowler's own convenience and not for the benefit of defendant Calvert or any other mortgagee, and defendant Calvert has no standing to enforce it or claim the benefit of it in any manner. Besides, the balance, $600, has not been paid in cash, nor tendered. Any right which defendant Calvert may have to be preferred over the plaintiff grows out of his release of lots 1 to 9 without actual knowledge that plaintiff's mortgage covered lot No. 1. At that time there was due Calvert on his blanket mortgage covering the whole thirteen lots $31,200, which, distributed equally over the thirteen lots, amounted to $2,400 per lot. In releasing lots 1 to 9 Calvert acknowledged payment of nine-thirteenths of the mortgage debt, thus leaving four-thirteenths on the lots not released. Calvert knew of plaintiff's mortgage, but thought it covered only lots 10, 11, 12 and 13. Each of the thirteen houses were then of the same value, and as each of the first nine were then sold to McMahon at $2,250 ($20,250), it is pretty clear that there was no equity above $2,400 each in the last four. The fact that plaintiff's mortgage covered those four lots was probably the reason they were not included in the sale to McMahon. Calvert scaled his claim on the first nine lots down to $20,250 ($2,250 per lot), and forgave the balance. He thereupon took mortgages on each of the lots 1 to 9 for $2,850 to secure the said amount of $20,250 and $5,400 in addition, which he agreed to loan McMahon, and which I assume he did thereafter advance. McMahon finished the houses on the lots conveyed to him. Surely defendant Calvert has no equity to be preferred to the plaintiff except as to the sum of $20,250. One who simply makes a loan on property which he supposes to be unincumbered cannot, when he finds a prior mortgage, successfully demand to be preferred to it even though the money has been used by the borrower in improving the property. Calvert afterward took title to lots 2 to 9 in satisfaction of $22,800, the amount of his eight mortgages thereon. He was bound in equity to get the whole of the $20,250 as to which he had a right to be preferred over the plaintiff, out of those eight lots if he could, in order to relieve lot 1 for the plaintiff's benefit, and the $22,800 which he did get out of them (he actually got $24,000, for he testified that they were worth $3,000 apiece), must be deemed to include the $20,250. Thus the whole debt as to which he was ever entitled to be preferred over plaintiff has been extinguished. It is pretty plain that he did not take title to No. 1, but continued to hold his mortgage for $2,850 thereon, in order to be in a position, as he thought, to claim the preference which he seeks to enforce. This mortgage defendant Calvert scaled down to $2,500. It represents altogether moneys loaned to McMahon which were never a lien prior to plaintiff's mortgage. More than this, it is not by any means clear that Calvert's ignorance, which was the result of inexcusable negligence, for plaintiff's mortgage was recorded, would entitle him to relief even if his present mortgage did equitable, as between him and plaintiff, represent a part of the old mortgage debt which was formerly a prior lien. Judgment for plaintiff.