Summary
In Hill v. Beebe (13 N.Y. 556) the court says: "The proposition is indeed quite elementary that the mere act of taking a new security from the same party, and upon the same property, does not merge or extinguish a prior one, where both are of the same quality and degree."
Summary of this case from Metropolitan Commercial Corp. v. Larkin Co.Opinion
March Term, 1856
John Wait, for the appellant.
Henry R. Mygatt, for the respondent.
The plaintiff claims the property in question under a mortgage from Marvin, dated May 10, 1852, which by its terms was subject to a prior one given to Seneca Beebe, dated August 12, 1851. Beebe, afterwards, on the 19th of August, 1852, took another mortgage from Marvin to secure the same debt included in his first one, and a few dollars of book account in addition. The defendant, at the commencement of the suit was in possession of the property under a title derived from Seneca Beebe. If he can stand on the first mortgage his title is prior to the plaintiff's and must prevail. If he cannot, he has no defence under the last one, for that is junior to the mortgage given to the plaintiff.
The question principally litigated on the trial was whether the first mortgage given to Beebe was extinguished by taking the last one; and the jury were directed to find from the evidence whether such was the agreement between the parties at the time the last mortgage was taken. But it appeared, or the fact was assumed, that Beebe had not renewed his first mortgage by filing a copy and statement of the amount due before the expiration of a year, as required by the statute concerning personal mortgages ( Statute of 1833, p. 402, § 3); and the judge was requested to instruct the jury that the omission to do so only rendered the mortgage inoperative as against subsequent purchasers or mortgagees in good faith, but did not affect the rights of the plaintiff. The judge refused so to charge on the ground that the facts of the case did not present such a question. This was erroneous.
The plaintiff was not a bona fide mortgagee, and therefore not within the protection of the statute referred to. He had notice of the prior mortgage to Beebe, and took his own in terms subject to it. Beebe's mortgage was therefore a charge on the property, and so remained until it should be paid or extinguished by some act of the parties. The omission to renew it did not impair its force as against a person standing in the situation of the plaintiff. ( Sanger v. Eastwood, 19 Wend., 515.) This is extremely plain, and the contrary was not held at the trial; but the judge said the question did not arise, and therefore refused to inform the jury that such was the law. If Beebe's first mortgage was extinguished by taking the second, then it is true the question did not arise. But that was the point which the jury were told to determine from the conflicting evidence. They might well have found it not extinguished, in which case the question would arise directly whether the lien was lost by the omission to renew as the statute required. The refusal to charge as requested implied at least a doubt as to the law upon this point, and for aught that appears the general verdict of the jury may have been given against Beebe's title, on the ground that he had lost the benefit of his mortgage by failing to renew it, and not on the ground that it was extinguished.
It is unnecessary to say more in order to reverse the judgment; but as the question of extinguishment must arise on another trial, it is proper now to dispose of it upon the facts, as they appear. According to the testimony of Seneca Beebe, it was expressly agreed when he took the second mortgage that the first one should be kept alive; according to the testimony of Marvin, the mortgagor, nothing was said on the subject; both agree that the note secured by the first mortgage, was given up and the amount, included in a new note, secured in the second; both also agree that the first mortgage, although present at the time, was not given up or canceled in fact. The judge refused to hold that upon these facts there was no extinguishment, and declining also to charge that an express agreement must be found to relinquish the mortgage, told the jury to find whether there was an agreement, leaving them at liberty, as I understand it, to infer one from the circumstances stated.
I think there was no question for the jury taking the version of the facts most favorable to the plaintiff. It is perhaps material to state that the debt due from Marvin to Beebe was for medical services and rent. The note, therefore, was the evidence merely of that debt, and not the debt itself. It is extremely well settled in this state, that the taking of a debtor's note does not merge or extinguish the demand for which it is taken. ( Gregory v. Thomas, 20 Wend., 17; Waydell v. Luer, 5 Hill, 448; Cole v. Sackett, 1 Hill, 516.) In Cole v. Sackett it was held that the original demand is not extinguished, although it is expressly agreed to take the note in satisfaction, and the doctrine was reiterated and approved in Waydell v. Luer, supra; see also Hawley v. Foote (19 Wend., 516); Frisbic v. Larned (21 Wend., 450, 452). Now, if the first note which Marvin gave to Beebe did not extinguish the demand which he owed him, it is still more clear that giving up that note and taking another in its place could not work such a result. The debt itself, therefore, remained totally unaffected by either of the notes. Thus far there can be no doubt.
We are next to contemplate the mortgage. That, it is truly said, was but an incident to the debt, so that when the debt is gone that is gone also. This was a view of the matter taken at the circuit, and expressed in the charge to the jury. But the error was in considering the mortgage as incidental to the note instead of the demand. Accurately speaking, a note is not a debt at all, any more than any other mere promise. Unless founded on a consideration, it is good for nothing between the original parties. Here the note was the evidence merely of a debt, and the mortgage was simply the security for it; and I think the conclusion inevitable that the security stands until in some way separately canceled or the debt itself is discharged. Taking the substituted note, as we have seen, did not affect the debt, and consequently it could not affect the security. It is even more clear that the mortgage remained unaffected. Instead of taking a new note, a judgment might have been recovered on the first one or on the original demand. In that case the debt would have been gone in the sense of being merged in a higher security. Yet it is quite clear that a suit and judgment against the debtor do no disturb any collateral security which the creditor may hold. So the doctrine was laid down in this court, by Johnson, J., in Butler v. Miller (1 Comst., 500), and I think upon grounds altogether unanswerable.
As renewing the note, therefore, had no tendency towards extinguishing the collateral security, it only remains to inquire whether the giving and acceptance of the second mortgage could produce such a result. This inquiry seems to be already solved. In Gregory v. Thomas (20 Wend., 17), it was adjudged that a second mortgage for the same debt does not extinguish the first. That case contains so thorough an exposition of the doctrine, both upon principle and authority, that it would be useless now to enlarge upon it. The proposition is indeed quite elementary that the mere act of taking a new security from the same party, and upon the same property, does not merge or extinguish a prior one, where both are of the same quality and degree.
It is unnecessary, perhaps, to add that the principle remains the same, although a small additional account was included in the renewal note and the second mortgage. This may tend to show a motive for the transaction, but it has no tendency to show that the prior security was extinguished.
It was erroneous, therefore, to leave the question to the jury. It may be conceded that if the acts of the parties had been attended by an express agreement to receive the second mortgage in satisfaction of the first one, the law would give that effect to the transaction. But as the law does not give such a construction to the simple acts themselves, it was improper to leave it to the jury to infer an agreement and so find an extinguishment. The inference would be against the rule, and the rule itself would have to be surrendered.
The judgment should be reversed and a new trial granted.
The property in dispute was mortgaged to one Seneca Beebe, in August, 1851. In May, 1852, the plaintiff took a chattel mortgage on it, the instrument stating, in terms, that it was given subject to the claim of Beebe. Beebe did not, within the year, re-file a copy of his mortgage; but in August, 1852, took another mortgage on the same property to secure the same debt. It is not pretended that at this time the debt, to secure which the first mortgage was given, was actually paid. In April, 1853, the plaintiff re-filed a copy of his mortgage with a statement of the amount due thereon. Some two months afterwards Beebe sold the property, and, after demand, the plaintiff brought this action against the bailee of the purchaser, claiming title thereto under and in pursuance of his mortgage. Had he acquired a title superior to that of Beebe?
A chattel mortgage is something more than a mere security. It is a conditional sale of the thing mortgaged, and operates to transfer the legal title to the mortgagee, to be defeated only by a full performance of the condition. Nothing short of actual payment, in case of a breach of the condition, before foreclosure or sale, or voluntary waiver or surrender, can re-vest the legal title in the mortgagor. At the time the plaintiff's mortgage was given the legal title to the property had become absolute in Beebe; and the mortgagor had no interest therein except a mere equity of redemption. ( Patchin v. Pierce, 12 Wend., 61; Burdick v. McVanner, 2 Denio, 170; Charter v. Stevens, 3 id., 33.) The tender of the debt would not have re-vested the title in him. ( Thomas v. Gregory, 20 Wend., 17; Mattison v. Baucus, 1 Comst., 295; Otis v. Wood, 3 Wend., 498.) Nor did the omission to re-file the Beebe mortgage avoid it as against the plaintiff or enure to the benefit of the latter. The plaintiff had actual notice of the Beebe mortgage, for it was mentioned in his own, and the latter was given subject to it. He was not a subsequent mortgagee in good faith, against whom, on account of an omission to re-file, the Beebe mortgage ceased to be valid. (2 R.S., 3 d ed., 136, §§ 9, 10, 11; Sanger v. Eastwood, 19 Wend., 515; Gregory v. Thomas, 20 Wend., 17.) He acquired no legal title to the chattels by his mortgage, as the mortgagor could transfer none. He was without such title when this suit was brought, unless there had been a payment of the Beebe debt, or a waiver or surrender of his mortgage, re-vesting the title in the mortgagor, and by relation, or in some other way, in the plaintiff. It is difficult to perceive how this could be, or how, admitting that there had been a satisfaction by or surrender to the mortgagor of the Beebe mortgage, it would enure to the benefit of the plaintiff. All the interest which he had in the chattels was acquired by a mortgage, given subject to or in subordination to that of Beebe. The subsequent acquisition of title by the mortgagor, or even a re-conveyance or release to him by Beebe, could not enlarge the operation or effect of the plaintiff's mortgage, or reform the instrument, so that his interest in the property should not be subordinate to, but independent of the Beebe mortgage. The plaintiff had no other or different title or right to the property, when he demanded it, than at the execution of the instrument, which was a right acknowledged by the instrument to be given and exist in subordination to the Beebe claim. Yet in a controversy, not between the mortgagor and Beebe, but between the plaintiff and one defending under the Beebe title, the court submitted to the jury the determination of the question whether, when the second mortgage was given, it was the understanding between Beebe and the mortgagor, that the first should be extinguished and given up; and substantially instructed them, that if they found that the parties intended that the first mortgage should be relinquished and extinguished, their verdict should be for the plaintiff. The judge did not inform the jury how the annihilation of the security, with or without payment or satisfaction of the debt, would invest the plaintiff with the legal title to the property, transform his mortgage into one not given subject to such security, and enlarge his interest in the property in question, beyond that given by the terms of the original transfer. In any view, the submission and instruction, it seems to me, were erroneous. Conceding that the plaintiff's mortgage gave him an interest in the property beyond the surplus remaining after payment of the debt secured by Beebe's first mortgage, and that an agreement to relinquish and cancel the latter security would operate to invest him with the legal title (without which he could not maintain the action), the case was barren of proof of any express parol agreement to give up or extinguish Beebe's first mortgage. On this point there was no conflict in the evidence, and it was full upon the question that there was no such agreement. Indeed, it established (and it was all drawn out on the part of the plaintiff) the reverse of the proposition submitted by the judge; and this, though in effect he erroneously instructed the jury that they were at liberty to imply an agreement to cancel and extinguish the mortgage, from the act of giving a new one and the surrender of a note mentioned in the first. Whether there had been an agreement for cancellation was, on the undisputed evidence, a question of law and not of fact. It did not belong to the jury; and they were probably misled by the charge of the judge. It was calculated to convey the impression that the Beebe mortgage was given to secure the note instead of the debt, of which the note was merely the evidence; that the mortgage must stand or fall with the note; and that whatever extinguished the note (even though renewed by another) would necessarily extinguish the mortgage, although the debt remained unpaid.
But it required something more than an understanding or agreement to be inferred from the acts of the parties, to satisfy and extinguish the mortgage. The taking of a new mortgage to secure the same debt and a surrender of the old note was no satisfaction or extinguishment of the original debt; nor by a surrender of the note was the first mortgage annihilated. The mortgages were but collateral securities for the debt. The debt was not paid, and until that was done all collateral securities should stand. ( Butler v. Miller, 1 Comst., 500; Gregory v. Thomas, 20 Wend., 17.) A subsequent security for a debt of equal degree with a former, for the same debt, will not by operation of law extinguish it. ( Manhood v. Cuch, Cro. Eliz., 716; Higgins' Case, 6 Rep., 45; Gregory v. Thomas, 20 Wend., 17; Phelps v. Johnson, 8 Johns. R., 54; Preston v. Preston, Cro. Eliz., 817; Mumford v. Stocker, 1 Cow. R., 178; Cornell v. Lamb, 20 Johns. R., 407; Enis' case, Lit. R., 58.) In this case it was not pretended that the debt was paid by the giving of the second mortgage. The most that is claimed from the transaction is, that it was equivalent to a payment of the first note, and that being satisfied and surrendered up, the mortgage, which was but an accessory or incident to the debt, was annihilated by such payment. But the difficulty is, that the mortgage was a security for the debt and not for the note, which was merely evidence of the debt and not the debt itself. Surrendering the old note and taking a new one could not be a satisfaction or payment of the debt, and the mortgage, being a security for the latter, would not be extinguished short of such payment. The debt was not merged in the first note, so that, by operation of law, the note being surrendered and a new one substituted, the debt was satisfied. The transaction was but taking another security, of equal degree with a former one, for the same debt, which had not the legal effect to extinguish the first. Nor would an express parol agreement at the time of giving and receiving the second mortgage, that the first should be deemed satisfied, have operated to extinguish the first mortgage. To constitute the second mortgage a bar to the first, there must have been an express release, or an implied, or one arising out of a covenant not to sue. This rule rests on adjudged cases, and, I think, on principle. ( Gregory v. Thomas, 20 Wend., 17; Phelps v. Johnson, 8 Johns. R., 54.) In Day v. Leal (14 Johns. R., 404) it was held that even a security of a higher nature, if it be taken expressly as collateral security, will not extinguish the inferior; and in Higgins' case it was said that, where the securities are of equal degree, they shall be intended and held to be distinct and independent, although both are liens upon property. Had an express parol agreement been shown that Beebe's first mortgage should be satisfied by the second, the transaction in legal effect would not have been a satisfaction or extinguishment of the prior security. But it is unnecessary to hold that Beebe's first mortgage could only be extinguished by an express release, or one to be implied from a covenant not to sue, as there was no express parol agreement shown that it should be satisfied by the second mortgage, and no evidence to go to the jury upon which such a question could be properly predicated. In legal effect the first security was not merged in the second; nor was a former security satisfied by the act of receiving a subsequent one for the same debt. The judge, therefore, erred in leaving to the jury to imply an agreement from the transaction of the 19th August, 1852, and virtually instructing them that if they should find that the parties intended that the first mortgage should be relinquished and extinguished the respondent was entitled to recover.
The judgment should be reversed and a new trial ordered.
Judgment accordingly.