Fassett v. Mulock

• Decision Date: 01 December 1880
• Citation: 5 Colo. 466
• Parties: FASSETT ET AL. v. MULOCK.
• Court: Colorado Supreme Court

5 Colo. 466

FASSETT ET AL. v. MULOCK.

Supreme Court of Colorado

December, 1880

Appeal from District Court of Fremont County.

THE case is stated in the opinion.

Messrs WELLS, SMITH and MACON, for appellant.

Mr. WM M. LOCK, and Messrs. RICHMOND & STANTON, for appellee.

ELBERT C. J.

June 15, 1871, William H. McClure executed and delivered to the appellant, Elisha Fassett, his promissory note for the sum of $2,000, and secured the same by a mortgage of even date on lots thirteen, fourteen, fifteen and sixteen, in block nine in Cañon City. April 27, 1875, Fassett assigned this note to one Reynolds. July 14, 1875, Fassett entered of record satisfaction of the mortgage. August 4, 1875, Reynolds in turn transferred the note to Mulock, the appellee, but without indorsement. April 25, 1873, McClure executed a second mortgage to Fassett on lot thirteen, to secure the payment of $2,100, and April 24, 1875, a third mortgage on the same lot, to secure the payment of $1,662.50. October 31 1876, McClure, at the instance of Fassett, and in satisfaction of the two last named mortgage debts, conveyed by deed lot thirteen to Mrs. Phelps, Fassett's daughter. June 13, 1876, McClure gave another mortgage on lots fifteen and sixteen, to his brother, James McClure, to secure the payment of $2,500. December 22, 1875, McClure executed a mortgage to Mulock, the appellee, on lot fourteen, to secure the payment of $3,000. February 24, 1877, McClure conveyed by deed lot fourteen to Mulock, in satisfaction of this last mortgage. All of these several mortgages and deeds were duly recorded at or about the time of their execution. May 29, 1877, Mulock filed his bill against Fassett, Mrs. Phelps, William and James McClure, praying, inter alia, the cancellation of the release made by Fassett of the first mortgage, and its foreclosure.

By stipulation of the attorneys of the complaint and James McClaure, the suit was dismissed as to the latter.

Upon final hearing the court decreed: 'That the deed of conveyance bearing date October 31, 1876, made and executed by Wm. H. McClure and Elizabeth McClure to Rozilla Phelps, for lot thirteen, in block nine, in the town of Cañon City, etc., be, and the same is hereby set aside, vacated and declared null and void, and of no effect whatsoever against the plaintiff; that the entry of the release made by defendant aforesaid, on the margin of book A, folio 260, of the records of Fremont county, releasing the premises described in the mortgage therein recorded and described in the said bill of complaint, be, and hereby is canceled and declared null and void, so far as the same applies to or affects lot thirteen, in block nine, and as against the rights of plaintiff under said mortgage deed; that this cause be referred to John Wilson, to compute the amount due from Wm. H. McClure to the plaintiff upon the note and mortgage, and report the same to the court for further order.'

Upon the incoming of the master's report, showing $3,631.95 due on the note and mortgage, the court decreed: 'That Wm. H. McClure, within sixty days from the date aforesaid, November 9, 1878, pay to the plaintiff the said sum of money, with interest at ten per cent. per annum, until paid, and costs, and in default, all the premises mentioned in the bill, to wit: lot thirteen, in block nine, in Cañon City, or so much thereof as may be necessary, be sold for cash in hand, at, etc.; that the sheriff make said sale upon public notice first given, etc.'

From this decree Fassett and Mrs. Phelps appeal.

It is a familiar principle that a mortgage is but an incident of the debt it secures, and an assignment of the debt carries the mortgage with it. 1 Hilliard on Mort., 238 et seq.

The indorsement on the note by Fassett to Reynolds is in terms an assignment, and there is nothing in the evidence that would warrant us in saying, as claimed by the appellants, that the parties intended a payment instead. It carried with it the mortgage by which it was secured, as did also Reynolds' transfer to Mulock, notwithstanding the note was not indorsed by Reynolds.

Respecting the transfer by Reynolds to Mulock, there is little, if anything, to justify the strictures of counsel in any fair treatment of the evidence. It appears to have been the ordinary case of a person with money to loan investing in a first mortgage security.

After assigning the note, Fassett's power over the mortgage ceased, and his release of record was a nullity. 1 Hilliard on Mort. 241, 250, 251; Ex. of Swartz v. Lerst, 13 O. St. 420; Cutter v. Havan, 8 Pick. 490; Phelan v. Olney, 6 Cal. 478.

It was in effect a fraud, and the fact that he held two prior mortgages on a part of the property released, together with the fact that the release was not made until several months after the assignment, would warrant us in treating it as a fraud in fact. The evidence called for and justified the decree of cancellation.

The cancellation, however, should have been entire and unqualified, as prayed for in the bill, and not limited to lot thirteen. He who seeks equity, must do equity, and it is manifestly inequitable to allow the complainant to repudiate the fraud in part, and adopt it in part, as it may chance to work an injury or secure a benefit.

The restored mortgage which the plaintiff sought to foreclose covered lots thirteen, fourteen, fifteen and sixteen, and was foreclosed only as to thirteen.

Against this feature of the decree counsel for the appellants make two points: 1. That lots fourteen, fifteen and sixteen, should have been first sold to satisfy the mortgage. 2. That if James McClure sustains the character of a bona fide purchaser of lots fifteen and sixteen, then lot fourteen should have been first sold to satisfy the mortgage.

These objections are founded on the rule that where an estate is subject to a mortgage, and is sold by the mortgagor in parcels at different times, the mortgage shall be satisfied first out of that portion of the estate still in the hands of the mortgagor, and then out of the parcels aliened, in the inverse order of alienation.

Touching this rule, there is some conflict of authority.

Kentucky and Iowa hold to the principle of equality of contribution among all the purchasers of the mortgaged premises, based on the value of the several parcels. Dickey v. Thompson, 8 B. Monroe, 312; Bates v. Ruddick, 2 Iowa, 430 (Cole's edition); Griffith v. Lovell, 26 Iowa, 226; Barney v. Myers et al. 28 Iowa, 472.

In Ohio and Massachusetts there is a conflict of authority. Com. Bank, etc., v. W. B. Bank, 11 Ohio, 444; Green v. Ramage, 18 Ohio, 428; Allen v. Clarke, 17 Pick. 47; Chase v. Woodbury, 6 Cush. 143; Parkman v. Welch, 19 Pick. 231.

New York, Vermont, New Jersey, Virginia, New Hampshire, Maine and Illinois, hold to the rule that mortgaged premises are to be subjected to the liens in the inverse order of their alienation. James v. Hubbard, 1 Piage, 234; Jenkins v. Freyer, 4 Paige, 53; Guion v. Knapp, 6 Paige, 35; Patty v. Pease, 8 Piage, 277; Skeil v. Sparkes, 8 Paige, 182; Lyman v. Lyman, 32 St. 79; Shanon v. Marsells, 1 Saxton, 413; Wickoff v. Davis, 3 Green Ch. 224; Henkle v. Alslatt, 4 Gratt. 284; Jones v. Myreck, 8 Gratt. 179; Brown v. Simms, 44 N.H. 475; Holden v. Pike, 24 Maine, 427; Shepherd v. Adams, 32 Maine, 63; Iglehart v. Crain, 42 Ill. 267.

The reason of the rule is clearly and forcibly stated by Mr. Justice Lawrence, in Iglehart et al. v. Crain & Wesson, supra:

'If a mortgagor conveys a portion of the mortgaged premises retaining a portion himself, it is familiar law, and admitted by all the cases, that, as between the mortgagor and his grantor, that portion retained by the mortgagor should be first applied to the payment of the mortgage. An equitable lien attaches for this purpose in favor of the grantee, as against the parcel held by the mortgagor. The equity of this rule is apparent, and the plain ground that a man's own property should be first applied to the payment of his own debts, and when a court of chancery requires a mortgagor first to exhaust that part of the mortgaged property still held by the mortgagor, it is only another application of the principle so long and so firmly settled by courts of equity-that where there are two creditors standing in equal equity, one of whom has security upon two funds, and the other upon only one of the two, the former is required to proceed primarily against the fund upon which the latter has no claim. The justice of first subjecting to the payment of the mortgage so much of the mortgaged property as may still remain in the hands of the...