Farmers' Fire Insurance & Loan Co. v. Edwards

ment for a sale the court of chancery would have enforced against the vendors, is a sale of the premises within the intent and meaning of the statute chartering this company.

that contract had been made, and part of the purchase money had been received, the lands no longer remained in the hands of the corporation unsold, so as to authorize the mortgagee to redeem; and Secondly. That the tender of the mortgage money after there has been a default of the payment of it at the day, cannot have the legal effect of depriving the mortgagee of his security, if, for any cause, he does not think proper then to receive the amount so tendered. But that, like a tender in other cases, it merely deprives him of the right to interest and costs afterwards, until there has been a subsequent demand of the money and refusal of payment, if it turns out that the amount tendered was all that was rightfully due, and that the mortgagee ought to have received the money when it was so offered to him. A decision which will compel the holder of a mortgage, at his peril, to be able at all times to decide at once what was due thereon, under the penalty of losing his security upon the land if he made a mistake and did not receive the money when it was offered, is not only contrary to the settled rule of the common law, but is inconsistent with the principles of justice and equity. . So it would be equally unjust to deprive a mortgagee of his security, without actual payment of his debt, in case he should by mistake suppose the right of the owner of the equity of redemption had been legally foreclosed, and should for that reason refuse to receive the money when it was tendered to him. On the other hand, no injustice would be done to the owner of the equity of redemption, by holding the mortgage to be still a valid lien upon the land, notwithstanding the tender and refusal of the money; for, if the mortgagee should, without a sufficient cause, refuse to receive his money and discharge the land from the lien of the mortgage, the court of chancery would compel him to pay the costs of a bill to redeem,

when the mortgagee was in possession so as to render the filing of such a bill necessary.

The learning of this important case has been so completely exhausted by Judge Cowen, (with all whose conclusions I fully concur,) that any detailed examination of authorities has seemed to me to be superfluous. Indeed, had I not found during the argument that a different view of the case was taken by a distinguished law member of this court, I should have been contented to have voted upon the opinion of the majority of the supreme court, without assigning any farther reasons; nor shall I now attempt anything more than a general outline of the course of thought and reasoning which has led me to support that decision.

The first question, in the order of consideration in which the case presents itself to my mind, is this: Granting the mortgaged land to have been held by the company in such wise that according to the peculiar provisions of its charter the original mortgagor has “ the right of redemption ” of such property, does the unaccepted tender of the debt, after forfeiture, discharge the lien upon the land, so as to cause the legal title to revert to the mortgagor, and thus enable him to maintain his action of ejectment 1

The ancient common law doctrine is undoubtedly stated with precision by the Chancellor, in the case of Merritt v. Lambert, 7 Paige 344 , which grew out of the same transaction, and involves the same legal points with the suit now before us. “ The correct principle as intended to be laid down by Littleton and Cok?, is that if there is a tender of the mortgage money, at the time and in the manner prescribed in the condition of the mortgage, and the mortgagee refuses to receive it, the condition is complied with, and the estate reverts back to the mortgagor by the express terms of the instrument. So that if the mortgagee is so unwise as to refuse his money when it is tendered at the time and place and in the manner prescribed in the in

strument, he necessarily must lose his security upon the land which was merely collateral to the debt, although the mortgagor may be still liable for the money where there is an existing indebtedness. But if the money is not paid by the day, the condition on which the land was to revert to the mortgagor has not been complied with; and the interest of the mortgagor in the land is then reduced to a mere equity of redemption, and an actual payment not a mere tender, then becomes necessary to discharge the legal and equitable lien of the mortgagee upon the land.” But the rule, as here laid down, sprang directly from, and depended upon the strict common law view of the nature of a mortgage, as being the creation of a determinable fee with a right of reverter, the estate becoming absolute in the mortgagee upon forfeiture of the condition of payment. Thence it consistently and necessarily followed that the actual payment and receipt of the debt after the law day, was not sufficient to re-vest the legal title in the mortgagor, but that a re-conveyance was necessary. In modern days, and more especially in this state, a series of decisions, together with judicial reasonings and opinions in less authoritative forms, founded upon, following out, and gradually enlarging the equity doctrine of mortgage, as held by HardwicJce and adopted by Mansfield, has led finally to a* very different practical view of the nature of freehold mortgages, their incidents and effects. They have been considered, both in law and equity, as mere securities for money, wherein the mortgagee’s interest is a mere chattel, as instruments pledging land to secure debt, whilst the property remains for all other purposes in the mortgagor until actual foreclosure. Lord Hardwicke pronounced “ the land to be the incident attending upon the debt,” and that “ when the debt is discharged the land followed of course.” Richards v. Syms, 3 Eq.

ceived and followed out to their consequences more fully in this state than elsewhere. Mortgages have been judidaily pronounced, not to be conveyances, and to leave the freehold in the mortgagor. The mortgagee’s interest has been classed as a chattel interest merely, and it has long been regarded as settled, that an accepted payment of the debt saves the estate, and bars an action of ejectment without any deed of re-conveyance. See the several authorities collected by Judge Co wen, in his opinion delivered in this case, and also the history of our New-York law of mortgages, as succinctly stated by the late chief justice of Connecticut in Clarke v. Beach, 6 Conn. R. 144. ' In Massachusetts and elsewhere, a different view of this subject has been taken, and the original, strict, real property rule of the common law has been retained more closely; whilst in o.ther states, and in England, (though no where so rapidly and perfectly as in this state,) the doctrine of mortgages on land has exhibited that continual progression and amalgamation of law and equity which Lord Redesdale has acutely noted as a striking characteristic of our legal history, and which, I believe, may be traced in some shape or other, in every system of cultivated and scientific jurisprudence. “ Law and equity are in constant progression, and the former is continually gaining ground on the latter. A great part of what is now strict law, was formerly considered as equity, and the equitable decisions of this age will unavoidably be ranked under the strict law of the next.” When the debt thus became, in the eye of the law, the principal, and the landed security merely appurtenant and secondary, the rights and interests of the parties must naturally be governed by those legal rules that form the law of the principal, except when the accessory security is directly resorted to. Acceptance of payment at any time before foreclosure, was therefore held to discharge the incumbrance upon land, just as it would upon goods. Then the next step of the application of the law of tender in personal contracts, followed of necessity. The analogy

and authority of these decisions would apply to mortgages after they become due and until actual foreclosure, the rule °f tender and refusal held in other cases. That rule is broadly laid down: “ Tender and performance are equivalent to performance.” 10 Wendell 374 . This, however, is not to be taken literally in the full extent of those words, but means that such rejected tender, at or after the stipulated time of payment or performance, is equivalent to performance, so far as to discharge the party thus making tender, from all the contingent, consequential, or accessory responsibilities and incidents of his contract, but without releasing his prior debt or debts. Coit v. Houston, 3 Johns. Cas. 243 . Thus the tender of money and refusal, will excuse interest and costs, but leave the prior debt. Tender of performance discharges damages; that of rent due discharges the legal lien of distress upon goods on the premises. 12 Johns. R. 274. 6 Wendell 22 . 10 Id. 374. 6 Cowen 720. A still closer analogy to the present question is presented by the law of tender, as to the lien on goods pledged. “ Upon tender of the money for which the articles were pawned,” says Chief Justice Holt, in the justly celebrated leading case on the law of bailment, Coggs v. Barnard, 2 Lord Raymond’s R. 916, “ the pawnee by detaining them after the tender is a wrong doer, and it is a wrongful detainer of the goods, and the special property is determined.” So also, Comyn: “ By tender of the money the property in the goods is determined, and the pledge ought to be returned. But if the pawnee refuse to restore the pledge upon tender, trover lies against him.” Comyn’s Dig., tit. Mortgage A, and authorities there cited.

Thus it seems to me, that irrespectively of any former decision upon this very point we are led by the spirit and analogy of our own somewhat peculiar law of mortgages to the conclusion now maintained by the supreme court: that “the mortgagor’s tender of his debt produced the ' same result after the law-day, as before it, and discharged the incumbrance on the land without discharging the debt.”

This is not a necessary conclusion, since it does not involve any fundamental principle of justice or law, and is derived from positive and arbitrary rules, so that courts in other states, as Virginia and Massachusetts, where the current of authorities has flowed in a different direction, might well hold an opposite rule; but it is in harmony with our own state decisions, and with those leading authorities which our decisions have followed. Besides all this, we have the decision of our supreme court in the case of Jackson v. Crafts, 18 Johns. R. 115, in which the rule of Lord Coke, that “ if the mortgagor tender the money to the mortgagee and he refuseth, the land is freed for ever from the condition, but yet the debt remaineth,” was adopted as applying not only to a tender at the law-day, but to any subsequent time until actual foreclosure. That decision has remained uncontradicted for twenty-one years. It has (as we learn from Judge Cowen) been recognized as law in our court, as in Astor v. Hoyt, 5 Wend. 615 , and in Titus v. Myers, 11 Id. 538, and probably in other cases where it may have influenced the opinion of the court, though it did not directly govern the decision. It is true, as indicated by the chancellor, that the decision itself was originally supported by the judge who delivered the opinion of the court, by an inaccurate application of the rule of Littleton and Coke, and by the erroneous statement of that rule in the ordinarily faithful and laborious compilation of Bacon. Bacon's Abr. Tender A. Litt. 338. Coke Litt. 206, a, 209, b. Yet this erroneous statement or application of authorities does not, of course, overthrow the authority of the case itself, if it be otherwise in congruity with the doctrine generally held by the court on this head of law. Those more general views of the principle and policy of the law must have governed to some extent the opinions of the other judges, and of Judge Woodworth himself, independently of the authorities cited. The decision itself appears to have been but another step in the gradual departure of our mortgage law from that of the

ancient learning. The length of time during which it has stood uncontradicted, relating as it does to a matter arising out of ordinary and frequent transactions, adds no small weight of authority to the case, such as we are hardly warrantable in rejecting, unless it clashed with some great principle of justice or settled legal policy, and not merely (as it does) with the ancient authorities. In a former decision in this court, Pell v. Lovett, 22 Wend. 377 , whilst maintaining the right and duty of a court of last resort, to disregard old and uncontradicted authority where a reversal was required by the substantial interests of justice, and the avowed policy of our statute law, whilst the point itself was one. falling within the judicial discretion of courts, and unconnected with other rules of decision, or the ordinary transactions of business—I still felt it incumbent upon me to protest against the authority of such a reversal being thereafter used for the arbitrary exercise of appellate power, It was there said, that the principle then applied would not warrant us in disregarding former decisions of other courts, “ where they go to establish any rule of property or to regulate personal rights, though they should be judged to be founded on arbitrary or artificial reasons. Such decisions enter largely into the concerns of men. They become interwoven with the whole body of the law and are silently recognized in the management of affairs by citizens of all classes, as well as by lawyers and courts— not so with a pure question of pleading,” See. The case of Jackson v. Crafts strikes me as being of this character. It is interwoven with our legal and equitable system of mortgages. It has been recognized during a whole generation in the management of business, and by lawyers and judges. If we now retrace our steps here, in obedience to the authority of Littleton and C'oke¿ we may, for precisely the same reason,be called upon to do the same in reference to the effect of accepted payment upon the discharge of the incumbrance without deed of reconveyance or the aid of a bill of redemption, and thus to overthrow a rule be

come familiar by frequent application for years, and upon which immense amounts of property may depend. The same doubt would arise as to the doctrine of Runyan v. Mersereau, 11 Johns. R. 534. Jackson ex dem. Norton v. Willard, 4 Id. 41, and similar cases in our reports, which are now regarded as settled law.

If, then, the rule of our supreme court on the effect of tender after the law-day remains undisturbed, that right of the mortgagor in the present case is still further extended by the act of incorporation of the mortgagees, u so long as the lands remain in their hands unsold.” Was the land then remaining in their hands, or had they become purchasers of it, when on a foreclosure sale it had been bought in by the president of the company for their use and benefit and with their funds, but in his own name as grantee of the deed 1 What was the legal effect of such a purchase 1 The president took the conveyance in his own name either with or without the knowledge and consent of the company for whom he acted. In the absence of any evidence to the contrary, the taking the deed in his own name may be presumed to have been done erroneously and without their knowledge. In that case, by 2 R. S. 722, § 53, the provisions of the statute inhibiting any resulting trust in a grant to one person upon consideration paid by another, and vesting the estate absolutely in the grantee named in the deed, does not apply, and Tibbits held in trust for the benefit of the corporation, as his intent actually was. Thus the company, through him, u became purchasers of real estate upon which they had made loans.” On the other hand, if he took the deed with the same intent and with the actual or implied knowledge and consent of the company, what was that but an evasion of the limitation imposed in their charter and in derogation of the rights of the mortgagor 1 If so, it falls within the express provision of 2 R. S. 137, § 1. “ Every conveyance or assignment of any estate or interest in lands or in goods, or things in action, made with the intent to hinder, delay, or

defraud • creditors or other persons of their lawful suits, damages, forfeitures, debts' or demands, shall be void.” ^he mortgagor, here, if not in strict legal language a creditor, is not only within the equitable intent of that term, but literally within the words, “ other person ” who has a legal right of “ demand” of redemption of his legal estate and of “ a lawful suit ” to enforce it. In either view the right of redemption still remains. The fair legal presumption, as the case appears in evidence, is the other way, that as the directors of this corporation intended that the land should be bought in by their agent, for their benefit and on their account, to prevent a sacrifice of their interests, it is to be presumed that they also intended that the conveyance should be so made as neither to hazard their own rights, or to avoid or delay the just claims of the mortgagor. The company having then, become the purchasers of the land “ on which they had made a loan,” did it continue to “ remain in their hands unsold ” after it had been contracted to be sold, and a part of .the price had been received 1

There is a marked distinction, both in the familiar language of business and in that of the courts and statute-book between a contract for a sale of land and an actual sale—between an executory and personal contract, and one acting upon the thing itself—between the perfected contract of sale, and the contract for a sale hereafter. The distinction between lands sold, and lands under contract, is so familiar in common use, that were the strict and technical usage of the words contradictory or uncertain, there would be strong reasons for holding that the more familiar understanding should prevail, in an act expressly directed “ to be construed in all courts benignly and favorably to effect the ends and purposes intended;” and when one of those main ends in the section under examination is clearly the protection and relief of the mortgagor, against hasty and rigorous sales of his property, by extending to him his legal period of redemption. But our statute-book gives us its own use and interpretation of such language in these

provisions, which both before and since the revision regulated and gave effect to agreements such as that now claimed to be a sale. In requiring that they should be in writing, they are called “ contracts for the sale of land.” Judicial use and decision mark the same distinction, as in the case of Bull v. Price, 5 Moore & Payne, 2, pointed out by Judge Cowen, where the non-suit was granted and sustained, because a negotiated and stipulated sale, requiring future conveyances, was held by Chief Justice Tindal not to be ÍC a sale,” which he defined to be a sale consummated and conveyance executed. Thus, also, when prior interests in lands come into collision with the legal title acquired by a subsequent fair purchase, the party claiming under the executory, or partly executed but unperfected contract, is subject to have that interest defeated, and to be compelled to look to the personal responsibility of him with whom he contracted, unless so far as he entitles himself to relief by actual notice, or what is equivalent to it in effect, so as to prove or to raise a presumption that the legal purchase was not in good faith, and therefore as against him, was void. The contract for land is an equitable right, which, as such, gives way to a subsequent sale, when that legal right has also equal equity. Relief is given not because the contract and the sale are the same in the eye of equity, and the prior has the stronger right, but because the latter, after notice, to use Chancellor Kent’s phrase, “ is held to be in fraud of the equitable incumbrance.” 1 Johns. Ch. R. 298. Thus here, the contract to sell gave the Merritts an equitable interest and rights as against the company, but the land remaining unsold those rights cannot exclude the prior right of Edwards to reinvest himself in good faith with his legal estate as secured by the act of incorporation.

It also appears to me that the judge was not correct in refusing the non-suit in the state of the evidence at the time when the motion was made, because the plaintiff had not shewn that the lands were unoccupied; since, accord

ing to our statute, a suit in ejectment can only be brought against the'actual1 occupant when there is one, 2 R. S. 230, an<! ^ is only when the land is not occupied that “ persons cláinling title or some interest therein ” can be made defendants; but the after evidence supplied this deficiency by Ford’s testimony; that “ the lands had continued from his earliest recollection as part of the public common; that no part had beén entered at any time, or any portion of them in anyway occupied or improved by any one.” The acts of ownership by the Mérritts, if ' such they were, might also, perhaps, have made them proper defendants, as “ claiming some interest in the land,”' but did not make them actual occupants^ "so 'as to render them the only proper parties against whom ejectment could be brought for the land. An incidental error" of this' sort, which would not have been such upon the whole "testimony as afterwards presented, has no bearing on the merits of the cause, and should not now be regarded. The judgment should be affirmed.

On the question being put, shall this judgment he revers ed? the members of the court divided as follows:

In the affirmative: The Chancellor, and Senators Dixon, Hopkins, Hunter, H. A. Livingston, Nicholas, Peck, and Platt—8.

In the negative: The President of the Senate, and Senators Denniston, Ely, Furman, Hull, Humphrey, Hunt, Johnson, Scott, Verplanck, and Works—11.

Whereupon the judgment of the supreme court was affirmed.