Mead v. York

Mead v. York. Satisfaction of mortgage. A mortgage, after being once paid, cannot be kept alive, by a paroi agreement, as a security for a new liability incurred for the mortgagor, as against the latter’s subsequent judgment-creditors. Appeal from the general term of the Supreme Court, in the sixth district, where a decree in equity, made at special term, dismissing the plaintiff’s bill, had been reversed. , This was a bill in equity, filed in the late court of chancery, for a decree for the cancellation of a mortgage, given by Smith and wife to one Snow, and by him assigned to York, the defendant. The mortgage in question was given by Smith and wife to Snow, on the 16th May 1827, upon a village lot, in Norwich, Chenango county, to secure the payment of $1000, a part of the purchase-money thereof. It was duly acknowledged, and recorded on the same day. In March 1837, the principal, and a small amount of interest being unpaid, York, the defendant, indorsed Smith’s note to W. C. Wait, for $1000, to enable Smith to raise money to take up the mortgage, with the understanding that the mortgage should be assigned to York, as an indemnity for his indorsement. This was effected; the assignment being in terms absolute, and purporting to be in consideration of the full amount of the mortgage-debt, paid by the assignee. A year or two after-wards, Smith paid the note to Wait. After this, the defendant continued to indorse for Smith, but never to an amount exceeding the mortgage, with a verbal understanding that he should hold the mortgage as a security for the liabilities thus assumed. There were times, prior to the last indorsement for Smith’s accommodation, when York was under no responsibilities for him. *At the time when York made his last indorsement for Smith’s accommodation, the [*450 parties reckoned up the amount of the outstanding indorsements, to ascertain that the aggregate did not exceed the amount of the mortgage. Smith failed in 1841, and in that year and 1842, the defendant paid the amount of his indorsements to an amount exceeding the mortgage. In May 1841, after the last of York’s indorsements, the Albany City Bank recovered a judgment against Smith; and in October following, the mortgaged premises were sold by the sheriff, under an execution issued on that judgment; and the purchaser, in February 1843, assigned his certificate to the plaintiff, to whom the sheriff duly conveyed the premises by deed. After a refusal to discharge the mortgage, this bill was filed. The cause came on to be heard at special term, before Mason, J., when a decree was made dismissing the plaintiff’s bill, with costs. On a rehearing, at general term, that decree was reversed, and a decree was made in accordance with the prayer of the bill; Shaneland, "J., delivering the following opinion: “The bond and mortgage, which forms the subject-matter of this litigation, was executed by Smith and wife, to secure to Snow the payment of $1000, due and owing *to the mortgagee. The object of the parties was to secure the payment of that specific debt; future advances, or indorsements or liabilities, to be made or incurred by the mortgagee, or any other person, for the mortgagor, were not within the contemplation of the parties, at that time; the pleadings and proofs all concur on this point. In March 1837, Snow [*451 assigned the bond and mortgage to the defendant, York, with the assent, and at the request of Smith, the mortgagor; and it is in relation to the true consideration and agreement in respect to this assignment, that the parties differ. The plaintiff contends, that the mortgage was assigned to secure York against his liability for indorsing the Wait note, the proceeds of which were' paid to Snow, and for no other purpose. The defendant contends, that said assignment was made to secure not only his liability on that note, but also any other, liability he might assume for Smith, of the like character. “I do not deem it important, to inquire how the question of fact should be decided, in respect to this agreement, subsequent to the execution of the mortgage. Whether the assignment was made to secure the defend-' ant against the payment of the note to Wait only, or to secure him for other and future liabilities, by him in- • curred for Smith, in addition thereto, cannot, in my opinion, vary the judgment we should pronounce in this cause. The rule seems to be well settled, that a mortgage of real, estate, to secure future advances to the mortgagor; or to indemnify against future liabilities to be incurred for him, is valid, not only as against the mortgagor, but also against all other persons, whose rights accrue, subsequent in time to the making of the advancement, or the; assumption of the liability by the mortgagee, and perhaps, in some cases from the date of the mortgage. (3 Barb. Ch. 302; 7 Cranch 34; 2 Johns. Ch. 283; 2 Cowen 246; 2 Sandf. Ch. 78, and cases there cited.) It seems to be equally well settled, that the true object of the parties in respect to the debts or liabilities which the mortgage is intended to secure, may be demonstrated by paroi evidence, if it is not expressed in the mortgage itself. “ But I am unable to find it anywhere affirmed as law, that where the original object for *which ^ the mortgage was given, has been fully accom- *- plished and satisfied, it can be revived or kept on foot, by a paroi agreement, subsequent to its creation, for other objects than those agreed upon at the time of its execution. It would be contrary to the first principles applicable to the law of mortgages, so to hold. The debt is the principal thing, and the mortgage a mere incident; the first is the substance, the latter, its shadow; when the first is destroyed by payment, the latter vanishes; it cannot become the incident to another principal, nor the shadow of another substance. “ In the case Ex parte Hooper (1 Merivale 7), it was decided by Lord Eldon, that the holder of a mortgage for 400?. could not, in pursuance of a paroi agreement, made long afterwards, that it should stand as security for a further balance of 400?. on account, tack the last sum to the first, and hold the mortgage as a lien for 800?., as against other creditors. In James v. Morey (2 Cowen 246), it was held, that the mortgagee cannot hold the mortgage as security for any claim which he has against the mortgagor, beyond the sum specifically secured by the mortgage, when objections are interposed by bond fide judgment-creditors. In the last-mentioned case, it did not appear, that there was a contemporaneous or subsequent agreement that the mortgage should stand as security for other demands, and in that respect it differs from the case in hand. “As between the mortgagor and mortgagee, it is possible, the courts would allow the parties to keep the mortgage alive, by virtue of a subsequent agreement) as security for other objects than those contemplated at the time of its creation; but not when the rights of third persons come in collision with such arrangement. My impression is, it could not be done in any case. If the agreement of the parties could, in any case, be allowed to revive a paid mortgage, and impart to it vitality as security for an object not in the contemplation of the parties originally, the circumstances of this case give it strong claim to our regard. For, I have no doubt, that Mr. York became security for Smith on the several notes mentioned in his answer, on the implied, if not express, agreement with Smith, that the mortgage * 453 1 *sb°ul<l stand as his indemnity against loss on -* those indorsements. Those indorsements were made prior to the rendition of the judgment in favor of the bank, under which the plaintiff claims, although Mr. York paid the money, or most of it, after the date of that judgment. But understanding the rule of law on this subject, as above expressed, I must advise a reversal of the decree entered in this cause, and that a decree be entered in accordance with the prayer of the bill, with costs. A decree having been entered, in accordance with this opinion, the defendant appealed to this court. Cook, for the appellant. Rexford, for the respondent. [MAJORITY — Gridley, J.] Gridley, J. — The principle of this case is entirely covered by the doctrine established in Truscott v. King (ante 147), decided in this court, at the present term. It appears, that the original mortgage was long since paid up and extinguished, and though, it is probable, that the defendant relied on the assignment of the mortgage to him as security for such indorsements as he should make for the mortgagor, I do not find evidence of any explicit agreement between him and the mortgagor, Smith, that, after it was satisfied, it should be revived, and stand as security for such indorsements. And if there was evidence of such an agreement, it would not have the effect to revive the mortgage, under the decision in Truscott v. King. The judgment must, therefore, be affirmed. Judgment affirmed. See Champney v. Coope, 32 N. Y. 543 ; Hubbell v. Blakeslee, 71 Ibid. 63.