Farmers & Mechanics' Bank of Michigan v. Bronson

• Decision Date: 11 July 1866
• Citation: 14 Mich. 361
• Court: Michigan Supreme Court
• Parties: Farmers & Mechanics' Bank of Michigan v. Oliver Bronson and others

14 Mich. 361

Farmers & Mechanics' Bank of Michigan v. Oliver Bronson and others

Supreme Court of Michigan

July 11, 1866

Heard May 3, 1866; May 4, 1866 [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material]

Appeal from Wayne circuit in chancery.

The bill in this cause was filed by complainant to redeem certain premises in the village of Niles, Berrien county, from the effect of a certain mortgage, and to charge defendants with certain rents and profits as mortgagees in possession. Decree was rendered for complainants in the court below, allowing them to redeem, and compelling defendants to apply in payment of said mortgage the rents received during their occupancy. The facts are fully stated in the opinion.

Decree affirmed, with costs of this court.

Walker & Kent, for complainants:

1. Harris, who made the mortgage, had the right to redeem it. He conveyed the property subject to the mortgage to Green. Green must have had all of Harris's right to redeem.

All of Green's rights at the time he made the mortgage to complainants were conveyed to them by the sale under their foreclosure. Complainants, therefore, have a lien upon the lot in question, subsequent to the mortgage made by Harris, and derived from the mortgagor. Hence, they have the right to redeem: Washb. on Real Prop., vol. 1, 553; 9 Mich. 465.

2. Complainants are entitled to require defendants to apply the rents received by them since they have been in possession, in extinguishment of the mortgage.

There is no doubt of the general principle that a mortgagee in possession must apply the rents and profits to the reduction of the mortgage debt. And if there be a surplus after the debt is paid he must account for the surplus: 1 Washb. on Real Prop., pp. 557, 582 and 588.

It makes no difference that defendants are assignees of the mortgage, and complainants' grantees of the equity of redemption.

3. Defendants claim that the rents they have received should be applied in payment of what they call an equitable mortgage from Green to them, made prior to the mortgage to complainants.

They do not claim that complainants took their mortgage with any knowledge of the prior equity, but that the evidence shows that the mortgage to complainants was without seals, and so of itself merely an equity, and so should be postponed to their prior equity.

a. The only evidence of an equitable mortgage is an executory agreement for a mortgage, to be made at a future time.

b. There is no proper evidence that the mortgage to complainants was unsealed. The only evidence is the certificate of the register of Berrien county, where the mortgage was recorded. But if the mortgage was unsealed, then it was not entitled to record, and the statute does not make a copy of the record, certified to by the register, evidence: Laws of 1840, p. 167.

But if the certificate is evidence of anything it certainly cannot be evidence that the words "not sealed," found in pencil mark on the record of said mortgage, are in the handwriting of a former register, now deceased; and if they were in his handwriting this is but his unsworn statement, and so not evidence of the fact. If it were proven that the mortgage had no seals when recorded it might still have had when executed more than a month before. They might have fallen off.

c. The question as to the prior equitable mortgage was settled in the prior suit, and is now res judicata.

4. The defendants claim to be in possession of the lot in controversy by virtue of a title superior to that of Green, and claim that he had no title. The title they claim is also superior to that of Harris, the mortgagor.

The general principle that a mortgagee in possession cannot set up an adverse title against the mortgagor, on a bill to redeem, is founded on the plainest justice, and settled by authority: 2 Sumner 143-401; 3 Mich. 11.

5. The decree of the court below gives costs to neither party. We submit that the circumstances of this case make it equitable that defendants should pay the costs: Chancery Rules, 90; 2 Barb. Ch. Pr., 199; 5 Pick. 271.

G. V. N. Lothrop, for defendants:

1. As to the effect of the foreclosure decree and the dismissal of the cross-bill.

a. The office of a cross-bill is only to procure discovery, or to enable the court to give relief to all the parties on the matters of the original bill. It is always a mode of defense. It can be sustained only on matters growing out of the original bill: 3 Danl. Ch. Pr., 1742 (Perkins's ed.); Story's Eq. Pl., §§ 389-393; 8 Cow. 361; 4 Sandf. Ch., 219.

A bill to foreclose a mortgage can only bring in the mortgagor's title or interests subsequently acquired under that title. A defendant cannot set up and litigate a prior title or lien by answer or cross-bill. Should he attempt it by cross-bill, it would be dismissed on that ground. Hence the dismissal of the cross-bill could not operate as a bar to his prior lien, because it was not properly in litigation.

A judgment or decree is conclusive only where it has been rendered on the merits. It will never be presumed that the merits were passed on where the proceeding was one which does not require or permit a decision on the merits: 1 Pet. C. C., 193; 6 Hill 114; 12 Barb. 168.

A cross-bill, which seeks no discovery and is not good as a defense, must be dismissed: 3 Sandf. Ch., 273. Such was the nature of the cross-bill in question, and hence must have been dismissed for that reason.

The Bronsons are therefore not precluded by the dismissal of the cross-bill from setting up their equitable mortgage.

b. The question then arises whether the equitable mortgage could be set up against the title of complainants. We insist that it can, on the ground, that the mortgage under which complainants get their title was only an equitable mortgage. For we concede that if the bank mortgage was a legal mortgage, entitled to registry, it must prevail against a mere equitable mortgage.

The evidence shows a certified mortgage, but without seals. This is not a legal mortgage, and was not entitled to registry. Between equal equities the prior one has precedence: 1 Story Eq. Jur., § 64, d; 2 Lead. Cases in Eq., 67.

2. There is another principle. The Bronsons had the prior equity. When, by the fraud of Green in giving the bank mortgage, they found their rights threatened, they had a right to get in the legal title for the protection of their equity. This they had a right to do, and a court of equity will support the advantage which this gives them: 1 Story Eq. Jur., § 64, c; 2 Lead. Cases in Eq., 68.

3. The Bronsons claim possession, as owners, by title paramount to the mortgage title and not as mortgagees under the Harris mortgage; and this title cannot be litigated in equity on a bill to redeem.

The complainants have an unquestionable right to redeem the Harris mortgage. But in a suit for redemption, they can have rents and profits applied only where the defendants are in possession merely as mortgagees. A person in possession as a mortgagee has no title to the rents except to satisfy his debt. This is so from the very nature of the case. This is the ground and the only ground, on which this right is founded. And where this ground is wanting, the right does not exist.

If the possession is not as mortgagee, but by claim of paramount title, the validity of this title cannot be litigated in this proceeding. Another class of questions arises. They are questions of adverse legal title. These are wholly of legal cognizance. A court of equity will not entertain them. The complainant's right in such a case to the rents and profits are such rights as they may have to recover them at law; and the limits of this right are very different from those in a bill against a mortgagee in possession.

In one word, in mortgage suits adverse legal rights cannot be litigated: 3 Mich. 448; 6 N. Y., 83; 9 Id. 502.

I therefore claim, in conclusion, that the decree in this case is wholly erroneous in directing any accounts of rents and profits. And, further, that even if an account can be taken at all in a case like this, the complainants have a right to only one-half of such rents and profits, because their title is good only to an undivided half of the lot.

OPINION

Cooley, J.

The bill in this case was filed to redeem certain premises from the lien of a mortgage. These premises consist of a village lot in Niles. It appears that in 1838 Nathaniel Bacon, having previously been in possession and erected a building upon the lot, conveyed it to one Harris, who gave back a mortgage for $ 4,000. Harris soon after gave Cogswell K. Green a deed of the lot, and Green took possession. October 15, 1839, Green gave a mortgage of the lot to complainants, who have since foreclosed it and obtained the usual deed. Proceedings were also taken to foreclose in chancery the mortgage from Harris to Bacon, and decree was obtained in June, 1840, which was soon after assigned to defendants Bronson, and is still held by them. May 1st, 1845, Green quit-claimed the lot to the Bronsons, who then went into possession and have continued to occupy ever since. No sale has ever taken place under the decree in the Bacon foreclosure suit, and complainants now seek to redeem from it and to have the Bronsons required to apply upon it the rents and profits of the premises since they have been in possession.

If these were all the facts in the case there could be no doubt of the right of complainants to the relief prayed. But several defenses are set up, based upon other facts which we shall proceed to notice.

I. It is alleged that Green had no title at the time he mortgaged to complainants, and that the Bronsons are now occupying and claiming the land by title paramount to that...