Chase v. M'Donald

Stephen, J.

at this term delivered the opinion of the Court. [After stating the allegations in the bill, answers and plea, he proceeded as follows:]

In this case several important principles of equitable jurisprudence present themselves for the consideration and decision of this court. Among them will be found the doctrine of tacking, as it is termed by the writers on chancery law, which gives a mortgagee or incumbrancer, under certain circumstances, the right, not only to have the debt, secui’ed by a mortgage, satisfied out of the mortgaged property, but also other claims or demands which the mortgagee may have against the mortgagor, although the property mortgaged is in nowise made expressly responsible therefor. To what extent this principle is to operate upon the rights of the parties now before this court, is a question of considerable interest and importance to them. By the decree of the chancellor, from which they have appealed, the doctrine has been recognized as bearing upon this case, and applied in its fullest latitude. And the duty now devolves upon this court of reviewing that decree, and of determining whether the extent, to which it has been carried, be justifiable upon authority, and the special circumstances of this case.

It is indisputably true, that the right of tacking is not founded upon contract or express stipulation, but has its foundation principally, if not exclusively, in the policy of the law, which is ever solicitous to prevent a multiplicity of suits, and avoid a *193circuity of action. By the civil law, the mortgage is properly a security only for the debt itself for which it was given, and the consequences of it, as the principal sum and interest, and the costs and damages laid out in preserving it. But according to the equitable jurisprudence of the English law, the rule is, that he who will have equity to help him, where the law cannot, shall do equity to the party against whom he seeks to bo relieved. 2 Fonbl. 272.

According to the principles which will govern the decision of this ease, it is not indispensably necessary to decide upon the truth of the much controverted fact, whether T. Chase participated in the loans obtained from the Union and City Banks or not; as the result of this cause, according to the view which has been taken of it by this tribunal, will not essentially depend upon that feet. Even if ho did so participate, can his moiety of the property mortgaged by his father to N. G. Ridgely, which was subsequently conveyed to him, and by him conveyed to R. M. Chase, be made responsible for more than the sum secured by the mortgage of .the 21st of October 1809? That deed of mortgage was executed to N. G. Ridgely as an indemnity to him against any loss which he might sustain in consequence of his endorsements for his (the mortgagor’s) two sons, S. and T. Chase, to an amount not exceeding the sum of $10,000. If S. Chase, the mortgagor, were now living, and this proceeding had been instituted against him to make the mortgaged property responsible to a larger amount than that stipulated by the deed, can it he believed that the attempt would eventually prove to be successful? As against a surety the contract cannot be carried beyond the strict letter of it. It cannot be extended by equitable construction. Straton vs. Rastall, 2 T. R. 370. In support of the same doctrine, that a surety is not liable beyond the letter of his engagement, see Wright vs. Russell, 3 Wils. Rep. 539. A surety, who becomes bound for the good conduct of a clerk to A, is not bound to him and a partner subsequently taken into partnership. In this last caso the court say, courts of equity are favourable to sureties, ior where they are not strictly bound at law, a court of equity will not bind them. That the undertaking of a surety shall be construed strictly — see also Melville vs. Hayden, 5 Serg. & *194Lowb. 389. By the express agreement of the parties, the mortgagor’s liability Was not to exceed the sum of $10,000; and N. G. Ridgely would have no right to look to the land, mortgaged as his security, for any responsibilities which he might incur over and beyond that ¿mount. The rule “expressum facit cessare taciturn” would be strictly applicable to such a case, and would effectually exclude any claim founded upon the principle of tacking.

If then S. Chase, the mortgagor, would not be responsible for more than the súm secured by his deed of indemnity, what is there in the case, which so peculiarly affects his assignees ip point of equity, as to subject' them to a greater liability? S. Chase, one of the defendants, it is true, by his deed of the 1st of February 1819, mortgaged his part of the wharf property conveyed to him by his father, and a part of a tract of land called Elizabeth’s Diligence, to M‘Donald & Ridgely, and N. G. Ridgely, to secure them for their endorsements on his behalf. So far then as respects him, the case is clear that he has made his property liable beyond the sum expressed in the original mortgage, by express contract. It is not necessary then to call in aid the principle oí tacking to make his property answerable to the complainants for the extinguishment of their claim. The decree of the court below, therefore, as respects him, is perfectly correct, and consistent with the principles of law, equity and justice. But so far as it has reference to the case of T. Chase, it presents to this court a very different aspect. He has encumbered his property by no express contract or stipulation with the complainants, or either of them; and if it is to be charged at all with the payment of their demands, it must be by resorting to the doctrine of tacking, according to the principles which prevail in courts of equitable jurisdiction. Can his moiety of the property mortgaged by the deed of his father in 1809, to N. G. Ridgely, under the circumstances of this case, and according to those principles, be made responsible in the hands of R. M. Chase, his trustee, for a greater amount than the sum of $10,000, secured by that mortgage, with interest? In order to solve this question, and arrive at a just conclusion upon this part of the case, it is essentially important to ascertain whether or notM G. Ridgely, or M‘Donald and Ridgelyr *195when they endorsed the notes of S’. Chase with T. Chase, looked to the land mortgaged by S'. Chase in his lifetime to N. G. Ridgely, as a security or indemnity to them, beyond the amount specified in that mortgage? If they did not, it would seem to follow as a necessary consequence from the established principles of chancery jurisprudence, that the doctrine of tacking cannot be brought to bear upon their case. That they did not incur such responsibilities upon the immediate credit of the land mortgaged, it is only necessary to advert to some of the facts and circumstances proved in the cause. In a letter addressed by McDonald and Ridgely, and written by N. G. Ridgely, to S. Chase, the writer, (N. G. Ridgely,) expressly states, that he had entirely forgotten that a mortgage had ever been executed to him by S. Chase, deceased, until he had been reminded of that fact by the letter of S. Chase, one of the defendants. In this letter are likewise the following strong expressions: “Indeed, so unbounded was ouf confidence, that we never had looked into the papers which you had given us as security, until the day we showed them to Mr. Moale." In the same letter are also to be found the following expressions: “As the security now stands, the $10,000, endorsed by our N. G. R. is amply secured. The balance of $28,000 might have been amply secured, as the property would have sold two years ago; but as it may sell, (excluding Tommy's house as you propose,) 1, 2, 3 or 4 years hence, it may be very far short of ample security.” Again, if they endorsed upon the credit of the property mortgaged by the deed of 1809, and considered that to be liable, why on the 1st of February 1819 take a mortgage from SI Chase of his moiety of the same property? And why, in the deed of the 1st of March 1820, agree to secure to T. Chase, in the first instance, $15,000 out of the proceeds of sale of his part of the wharf property, before any part thereof should be applied to the exoneration of McDonald and Ridgely, or either of them, from their responsibilities? These circumstances are strongly indicative of the fact, that they never did rely upon or look to the land as the means of their indemnity, when the endorsements exceeded the sum of $10,000, secured by the Original deed of mortgage.

In Brace vs. Duchess of Marlborough, 2 P. Wms. 491, *196upon the subject of tacking, we find the law stated to be, if a judgment creditor buys in the first mortgage, he shall not tack or unite this to his judgment, and thereby gain a preference, because the j’udgment creditor does not lend his money upon the immediate view or contemplation of the real estate. In the same case there is stated to be a difference in the law, where a third mortgagee buys in a statute which is the first incumbrance, and where a statute creditor, being the third incumbrance, buys in the first mortgage; in the latter case the statute or judgment creditor, because he did not lend his money on the credit of the land, shall not unite the first mortgage to his statute or judgment; but in the former, as the land was in the view and contemplation of the lender, he shall be allowed to unite the statute to his third mortgage. If a first mortgagee lends a further sum to the mortgagor upon a statute or judgment, he shall retain against a mesne mortgagee till both the mortgage and statute or judgment be paid; because it is to be presumed that he lent his money upon the statute or judgment, as knowing he had hold of the land by the mortgage, and in confidence ventured a further sum on a security, which, though it past no present interest in the land, yet must be admitted to be a lien thereon. Brace vs. Duchess of Marlborough, 2 P. Wms. 493. Shepherd vs. Tilley, 2 Atkyns, 351. But where a prior incumbrancer has a bond likewise, he cannot insist upon being paid both, which would be a prejudice to the puisne incumbrancer; but his bond shall be postponed to all other incumbrancers, whether by mortgage, judgment or statute staple, for he has not the same equity against a puisne incumbrancer, as against an heir at law, who is liable in respect of assets. These cases are cited, and the principles therein referred to, for the purpose of showing, that one of the grounds upon which the doctrine of tacking materially rests, is that the party, when he advances his money, does it upon the credit of the real security, and looks to that for payment or reimbursement. Instances or examples in furthei illustration of this principle, might be multiplied to a considerable extent; but the limits to which this opinion has already swelled, admonish me that it is time to draw to a conclusion.

But put the claim of the complainants upon the most favourable footing, and suppose the bill in this case to be filed by them *197against T. Chase, as mortgagor, to foreclose themortgage,can it be .contended that they would have a right to tack their claims, to the prejudice of other creditors; that they would not, see Lowthian vs. Hasel, 3 Brown’s Chan. Rep. 162, where Lord Chancellor Thurlow said, “the only reason why the mortgagee can tack his bond to his mortgage is to prevent a circuity of suits; it is solely matter of arrangement for that purpose, for in natural justice the right has no foundation. The principle explains the rule; and therefore it can go no further; the creditor having another specific security, cannot give him, in justice, any priority. There being no foundation in justice, the only question is, whether the court is in the practice of doing it; and it has not done it in any case but that of the heir at law, and merely 1o prevent circuity.” So also in Hamerton vs. Rogers, 1 Ves. jr. 513, a bill of foreclosure was dismissed, with costs, so far as it sought to tack a bond to a mortgage against creditors. The principle was considered to be too clear to admit of argument.

But is the right of tacking admissible in this case upon another ground? In 1 Madd. Chan. 525, the principle is stated to be, that a distinction prevails between a bill to redeem, and a bill to foreclose; for in the latter case the mortgagee cannot insist on tacking his subsequent debt, as he may do on a bill for a redemption. See also the Note to Coleman vs. Winch, 1 P. Wms. 776. The rule in the latter case is, that he who seeks equity must do equity; for he who will have equity to help him, where the law cannot, shall do equity to the party against whom he seeks to be relieved. 2 Fonbl. 272.

The only remaining point relied upon in the discussion of this cause, which it is proper to consider and decide, is the plea in bar founded upon the deed of the 1st of March 1820. In the case of Thompson vs. M'Kim, 6 Harr. & Johns. 332, this court have said, “the constitution and principles of the court of chancery in this state, as in New York, originally emanated from the court of chancery in England, from which source, we derive our principal stock of information in chancery jurisprudence; and the general rules governing the court of chancery there, so far as they are applicable, have been adopted here, and are constantly practised upon.” Pleas are a species *198of defence in equity, not so frequently relied upon in this state as in England; but when resorted to by a defendant, the rules which have been adopted in that country, in relation to them, must be considered as applicable here. In Mitford’s Plead. 15, he says, “a plea is also intended to present further proceeding at large, by resting on some point founded on matter stated in the plea; and as it rests on that point merely, it admits, for the purposes of the plea, the truth of the facts contained in the bill, so far as they are not controverted by facts stated in the plea. Upon the sufficiency of this defence the court will also give immediate judgment, supposing the facts Stated in it to be true; but the judgment, if favourable to the defendant, is not definitive; for the truth of the plea may be denied by the plaintiff by a replication, and the parties may then proceed to examine witnesses, the one to prove and the other to disprove the facts stated in the plea.” 2 Madd. Chan. 295. Although the books say, that where a plea is set down for argument, the facts stated in it are admitted to be true, (Mitford 198,) yet such admission is not conclusive upon the plaintiff, but is presumed to be made for the purpose of testing the validity of the- plea in point of law, founded upon such facts, supposing them to be true. If the plaintiff replies, and takes issue upon the facts of the plea, he admits its legal sufficiency; and if the facts are found to be true, the complainants’ bill must be dismissed, with costs. Mitford, 241. 2 Madd. ch. 295. In this case the plea was not set down for hearing, and consequently no judgment of the court was had upon its sufficiency; nor does it appear that any replication was ever filed, by which its sufficiency would be admitted. If in England the defendant does not set down his plea to be argued within eight days after it is filed, it is considered as abandoned, and the plaintiff is entitled to costs. 2 Madd. Chan. 295. Jordan vs. Sawkins, 3 Bro. Chan. Rep. 372. But in adverting to the rule established in this case, it is not intended to adopt it as aoplicable to the practice of the court of chancery in this state.

From these principles, and the authorities cited in support of them, it follows, as a necessary consequence, that the plea filed in this case did not operate to bar the plaintiffs’ suit. — Decreed, That the decree of the court of chancery, except as hereinafter *199excepted, be reversed, with costs to the appellants by them incurred in this court. Decreed also, that there is now due to the appellees, the sum ascertained to be due by the said decree, together with legal interest thereon from the date of the said decree; and that for #10,000, a part of the said sum, together with legal interest upon the said #10,000 from the 2,9th of August 1819, the whole of the property and estate mentioned and contained in the deed of mortgage from Samuel Chase, deceased, to Nicholas G. Ridgely, one of the appellees, of the 21st of October 1809, is first responsible and hound for; and that for the balance of the said sum, with interest as aforesaid, the moiety of the said property and estate in the said deed of mortgage of 1809, which belonged to, and was the right of Samuel Chase, one of the appellants, as also all the property to which the said Samuel Chase was entitled, and by him conveyed to the appellees, by his deed of the 1st of February 1819, except such parts of the said last mentioned property as is contained in another deed from the said Samuel Chase to Richard M, Chase, one of the appellants, of the 30th of August 1817, is also first responsible and bound for. Decreed also, that the chancellor pass all and every such order and decree in the premises as may he necessary to carry into effect the present decree; and that nothing herein contained shall be held or construed to affect, or in any way impair, any right which any purchaser or purchasers may have acquired to any part of the property decreed to be sold by the decree of the court of chancery in this case, under any sale or sales which may have been made of such property under or by virtue of the said decree, and under the authority of the said court of chancery; but that any such right shall he, and is hereby decreed to be, as good and valid as the same would have been, in case the said decree of the court of chancery had been in all things well and truly affirmed by the present decree of this court, or as it would have been if the said decree had not been appealed from. Nor shall the present decree be construed to affect, or in any way impair, any distribution of the proceeds of any such sale or sales, which may have been made in the court of chancery, and which may ;iot be. inconsistent with the provisions of the present decree.

DECREE REVERSED, &C.