The only issue in this action was, whether the plaintiffs or defendant owned the property in question at the time of the alleged conversion. The defendant has set out in his answer the evidence of his title, which was quite unnecessary, for after all the plaintiffs must show a good title or possession before they can recover; and a general denial of property in the plaintiffs was all that was necessary, inasmuch as the defendant had the possession, unless he intended to show that the plaintiffs' title was colorable and fraudulent as against creditors, and then he should have raised that question by his pleadings. The trial, however, seems to have proceeded upon the theory that such a question was in the case; and the verdict of the jury must be deemed to have disposed of it in favor of the plaintiffs, so that it is not now one of the questions of law to be disposed of by this court.
J. and O. Collins were the original owners of the property, and on the first of September, 1857, mortgaged it, together with other property, to Oliver Bascom, Theodore T. Vaughn and Henry T. Gaylord, to secure their liability as accommodation endorsers of three several notes of the mortgagors payable at the Commercial Bank of Whitehall; one of which became due in three months from August 28, 1857, one in fifty-five days from September 1, 1857, and the other in three months from September 1, 1857. The mortgage contained a condition that in case of non-payment of said notes, the mortgagees might take possession of the property and dispose of it. So they were at liberty to take possession, in case they should at any time deem themselves unsafe.
On the 10th of October, before either of the notes became due, a creditor of J. and O. Collins attached the property in question, and subsequently the constable sold the same to the defendant under an execution issued upon a judgment in the attached suit. On the 19th of October, nine days after the attachment suit, the mortgagors, J. and O. Collins, negotiated a sale of all the mortgaged property to the mortgagees and one Alwyn Martin, and covenanted to defend the title except as against the mortgage in question, "which *Page 326 mortgage (say they) is hereby confirmed, and this sale is subject thereto."
It appeared upon the trial that the purchasers assumed to pay the notes as part consideration of this sale.
The property was delivered to the purchasers under this sale on the same day, except two horses, the property in question in this suit, and three horses at Fort Edward, which they afterwards obtained by a replevin suit.
It does not appear that the notes were paid when the plaintiff demanded the property in question of the defendant on the 23d day of November, 1857; nor is there any evidence that the mortgage was satisfied, unless it was extinguished by virtue of the sale of the property to the mortgagee and Alwyn Martin, for a sum sufficient to pay the notes, exclusive of the property in question.
There is no objection made that Alwyn Martin is not a party plaintiff in this action, although it is very evident that he was a part owner of the property when the demand was made.
The rights of the parties may, I think, be determined without reference to the objection taken to the attachment proceedings.
Assuming that the attachment was regular and the judgment conclusive as against the plaintiffs in this action, the defendant only obtained the mortgagor's title to the property in question, which was reduced to a mere equity of redemption, after forfeiture of the mortgage. If there had been no subsequent arrangement between the mortgagors and mortgagees, the title would have vested absolutely in the mortgagees on the failure of the mortgagor to pay the notes. It will be seen that one of the notes became due before the plaintiffs demanded the property, and this fact, I think, was sufficient to divest the mortgagors of their legal title, as well as those claiming title through them subsequent to the mortgage.
This result, I think, follows in the absence of fraud, which, as I have already observed, must be deemed to be out of the case *Page 327
The effect of the agreement made between the mortgagors and mortgagees on the 19th of October, is one of some novelty, though I think not of much difficulty.
The property in question consisted of two horses, of the value of one hundred dollars, as found by the verdict of the jury. The liability of the mortgagees did not exceed five thousand dollars, while it appears that the mortgaged property, if its value is estimated by the price which the purchasers agreed to pay for it, would exceed that sum by several thousand dollars.
It may, therefore, be assumed that the property mortgaged was worth a great deal more than was necessary to secure the mortgagees for their indorsements.
But in the absence of the agreement of the 19th of October, the mortgagees would be entitled, after forfeiture, to take all the property that is claimed by the defendant as well as the rest; and it would be no answer to say that there was other property sufficient to discharge the debt without taking the two houses in question. The mortgagees are entitled to it even without a foreclosure; but if they neglect to sell under the power of sale contained in the mortgage, they may be treated as purchasers of the property, and be made to account for the same at its fair value to the mortgagor or his assignees; or the mortgagor and those claiming under him subsequent to the mortgage, may redeem the property by payment of the mortgage debt. In case of a redemption, however, they cannot, I think, redeem in parcels.
Now what is there in the agreement of the 19th of October which changes the rights of the parties? If the obligation of the mortgagors was satisfied as to the mortgagees, it was satisfied by a sale to them of the very property in question. The sale was in bulk, and the title to the two horses passed to the purchasers as well as the title to the balance of the property. The purchasers never agreed to take a part of the property at any particular price and satisfy the mortgage.
But, in fact, the mortgagors had nothing to sell except their equity of redemption. That was, however, a sufficient *Page 328 consideration to support a contract by which the mortgagees undertook to allow them a certain price for the property, out of which they were to pay the mortgagors' notes. This, doubtless, left a large surplus in their hands for other creditors; and those having a lien upon the property prior to the sale, are, perhaps, entitled to be paid out of this surplus to the extent of their liens, until it is exhausted.
Now it may be admitted that the parties to the mortgage could not by any agreement cut off the defendant's equity of redemption, nor did the agreement in question undertake to cut it off. If he does not, however, desire to redeem, let him make his claim upon the surplus. That arrangement was for his benefit if he elects to take advantage of it; but if he takes the benefit of it, he cannot, at the same time, repudiate it.
The mortgage itself was a conditional sale of all the property anterior and superior to all subsequent liens or claims upon the title. It is absurd to contend that such a sale is defeated by a subsequent agreement, which releases the equity of redemption to the mortgagors, and fixes the gross sum which the mortgagees are to allow for the property, without the formality of a foreclosure sale. While such an agreement does not impair the right of junior creditors, having a lien upon the property, to redeem it, neither does it operate to divest the legal title of the mortgagees. Let us suppose that the parties had stipulated in the mortgage itself that the mortgagees should allow a gross sum for the mortgage property in case of forfeiture, under what rule of law, in the absence of fraud, could an execution creditor seize upon a parcel of it and hold on to it after forfeiture, merely because he was able to show that the balance was worth enough to satisfy the mortgage debt? Such a claim would not differ in principle from a claim to hold on to a parcel of the mortgaged property after forfeiture, where there was no such stipulation in the mortgage, although it would, perhaps, be as easy to show in the one case as in the other, that the balance of the property was worth enough to pay the mortgage debt. *Page 329
There is nothing in the doctrine of merger which can be invoked to discharge the property from the lien of the mortgage. The mortgagees are considered as holding the legal title after forfeiture, and the effect of the merger would be to unite to the prior mortgage the equity of redemption, without prejudice, however, to the equitable claim of the defendant to redeem.
Such is the effect upon the title of a mortgagee of real estate, who purchases in an equity of redemption (Jones v.Mooney, 2 Cow., 246), and I do not perceive any difference in principle between that case and this.
It is, perhaps, of no importance in this case, if it should be conceded that the mortgage debt was extinguished by the agreement of October 19, 1857. So it would be extinguished if the mortgagee had taken the property without any agreement as to the price. In both cases the mortgage is extinguished as a security, but is executed as a sale of the property as between the parties to it and those claiming under them.
The judgment should be affirmed.
All the judges concurring,
Judgment affirmed. *Page 330